UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant  o
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oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
xDefinitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material Pursuant to §240.14a-12
NorthWestern Corporation
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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xNo fee required.
oFee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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This proxy statement contains information related to the solicitation of proxies by the Board of Directors (the Board) of NorthWestern Corporation d/b/a NorthWestern Energy (NorthWestern, the company, we, us, or our) in connection with our 20172018 Annual Meeting of Shareholders. See the Proxy Statement Glossary on the inside back cover for additional definitions used in this proxy statement.


   
 
IMPORTANT VOTING INFORMATION

If you owned shares of NorthWestern Corporation common stock at the close of business on February 27, 201726, 2018 (the Record Date), you are entitled to one vote per share upon each matter presented at the annual meeting of shareholders to be held on April 27, 2017.25, 2018. Shareholders whose shares are held in an account at a brokerage firm, bank, or other nominee (i.e.(i.e., in “street name”) will need to obtain a proxy from the broker, bank, or other nominee that holds their shares authorizing them to vote at the annual meeting.

Your broker is not permitted to vote on your behalf on the election of directors and other matters to be considered at this shareholders meeting, except on the ratification of our appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2017,2018, unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the internet. For your vote to be counted, you will need to communicate your voting decisions to your broker, bank, or other financial institution before the date of the annual meeting.

YOUR VOTE IS IMPORTANT

Your vote is important. Our Board strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.

ASSISTANCE

If you have any questions about the proxy voting process, please contact the broker, bank, or other financial institution where you hold your shares. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a shareholder. You also may contact our Investor Relations Department by phone at (605) 978-2945 or by email at investor.relations@northwestern.com.
 
   
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 201725, 2018

The Notice of Annual Meeting, Proxy Statement, and 20162017 Annual Report to
Shareholders are available on the internet at www.proxyvote.com.
 
   
 
ATTENDING THE ANNUAL MEETING IN PERSON OR BY WEBCAST

Only shareholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person. If you wish to attend the annual meeting and your shares are held in street name at a brokerage firm, bank, or other nominee, you will need to bring your notice or a copy of your brokerage statement or other documentation reflecting your stock ownership as of the record date. You may be asked to provide photo identification, such as a driver’s license.

The annual meeting will be webcast (audio and slides) simultaneously with the meeting. You may access the webcast from our website at NorthWesternEnergy.com under Our Company / Investor Relations / Presentations and Webcasts. A replay of the webcast will be available at the same location on our website through April 27, 2018.25, 2019.
 


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Notice of 20172018 Annual Meeting and Proxy Statement

March 16, 20177, 2018

Dear Fellow NorthWestern Corporation Shareholder:

You are cordially invited to attend the 20172018 Annual Meeting of Shareholders to be held on Wednesday, April 27, 2017,25, 2018, at 10:00 a.m. CentralMountain Daylight Time at the NorthWestern Energy South Dakota / NebraskaNorthWestern Energy Montana Operational Support Office, 600 Market11 East Park Street, SW, Huron, South Dakota.Butte, Montana.

At the meeting, shareholders will be asked to elect the Board of Directors, to ratify the appointment of our independent registered public accounting firm for 2017,2018, to hold an advisory “say-on-pay” vote on the compensation of our named executive officers to hold an advisory vote on how frequently to conduct the “say-on-pay” vote, and to transact any other matters and business as may properly come before the annual meeting or any postponement or adjournment of the annual meeting. The proxy statement included with this letter provides you with information about the annual meeting and the business to be conducted.

YOUR VOTE IS IMPORTANT. We urge you to read this proxy statement carefully. Whether or not you plan to attend the annual meeting in person, we urge you to vote promptly through the internet, by telephone or by mail.

If you are unable to attend our annual meeting in person, we are pleased to offer an audio webcast of the meeting. The webcast can be accessed live on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Presentations and Webcasts, or you can listen to a replay of the webcast, which will be archived on our website at the above location for one year after the meeting.

Thank you for your continued support of NorthWestern Corporation.
   Very truly yours,
   
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Robert C. Rowe
President and Chief Executive Officer


     
 Table of Contents  
    
 
Annual Meeting Notice
1

 
 
Proxy Summary
2

 
  2016
2017 Executive Pay Overview
2

 
  2016
2017 Corporate Governance Overview
3

 
 
Items of Business to Be ConsiderConsidered at the Annual Meeting
4

 
  
Proposal 1 – Election of Directors
4

 
  
Proposal 2 – Ratification of Deloitte & Touche LLP as the Independent Registered Public Accounting Firm for 20172018
6

 
  
Proposal 3 – Advisory Vote to Approve Named Executive Officer Compensation
8

Executive Pay
10
 
  Proposal 4 – Advisory Vote on the Frequency of the Advisory Votes on Executive
Compensation Discussion and Analysis
10

Executive Pay11
 
  
Compensation Discussion and AnalysisCommittee Report
11
31
 
  
2017 Executive Pay (2017 Summary Compensation Committee ReportTable)
32

 
  2016 Executive
2017 Director Pay (2016 Summary Compensation Table)
33
39

Audit Committee Report
40
Corporate Governance
41
 
  2016 Director Pay
Board of Directors
41
Corporate Governance
42

 
  
Board of DirectorsDiversity
43

 
  Board Diversity
Individual Directors
44

 
  Individual Directors
Board Independence
45
49
 
  
Board IndependenceCommittees
49
50
 
  Board Committees
Other Governance Practices
50
53

Stock Information
55
 
  Other Governance Practices
Who Owns Our Stock
55

Stock Information57
 
  Who Owns Our
Stock for Compensation Plans
57

Annual Meeting Information
58
 
  Stock for Compensation Plans
Voting Procedures
59
Audit Committee Report60
Annual Meeting Information61
58
 
  Voting Procedures61
General Information
63
60
 
 
Proxy Statement Glossary(inside back cover)
  
     


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Notice
20172018 Annual Meeting of Shareholders
Shareholders owning NorthWestern Corporation common stock at the close of business on the record date, or their legal proxy holders, are entitled to vote at the annual meeting. Only our shareholders, their legal proxy holders as of the record date, or our invited guests may attend the annual meeting in person. The annual meeting will be webcast (audio and slides) simultaneously with the meeting.
    
 Meeting Date:April 27, 201725, 2018 
 Meeting Time:10:00 a.m. CentralMountain Daylight Time
 Location:
NorthWestern Energy
South Dakota / Nebraska Montana Operational Support Office,
600 Market 11 East Park Street, SW
Huron, South Dakota
Butte, Montana
 Record Date:February 27, 201726, 2018
Annual Meeting Business:
On or about March 16, 2017,7, 2018, we mailed to our shareholders either (1) a Notice of Internet Availability of Proxy Materials, which indicates how to access our proxy materials on the internet, or (2) a copy of our proxy statement, a proxy card, and our 20162017 Annual Report.
     Board
Recommendation		  
 Proposal  Page
 1Election of nine directors 
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FOR each director nominee 4
 2Approval of Deloitte & Touche LLP as the Independent Registered Accounting Firm for 2017 
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FOR 6
 3Advisory Vote to Approve Named Executive Officer Compensation 
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FOR 8
 4Advisory Vote on the Frequency of the Advisory Votes on Executive Compensation 
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every 1 YEAR 10
     Board
Recommendation		  
 Proposal  Page
 1Election of eight directors 
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FOR each director nominee 
4
 2Approval of Deloitte & Touche LLP as the Independent Registered Accounting Firm for 2018 
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FOR 
6
 3Advisory Vote to Approve Named Executive Officer Compensation 
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FOR 
8
By Order of the Board of Directors,
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Timothy P. Olson
Corporate Secretary


              
 
Proxy Summary
Items of Business to Be Considered at the Annual Meeting
  
           
  Proposal   Board
Recommendation		Page  
       
  1Election of nine directors
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FOR each director nominee4  
  2
Approval of Deloitte & Touche LLP as the Independent Registered
Accounting Firm for 2017
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FOR6  
  3Advisory Vote to Approve Named Executive Officer Compensation
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FOR8  
  4
Advisory Vote on the Frequency of the Advisory Votes on
Executive Compensation
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every 1 YEAR10  
              
              
 
2016 Executive Pay Overview
Alignment of Pay with Shareholder and Customer Interests
Our executive pay program is designed to align the long-term interests of our executives, shareholders, and customers. About 77 percent of the compensation of our chief executive officer, or CEO, and about 58 percent of the compensation of our other named executive officers is at risk in the form of performance-based incentive awards that use Board-established metrics and targets, based upon advice from the Board’s independent compensation consultant. The performance metrics did not change from the prior year. We also require our executives to retain meaningful ownership of our stock. This structure encourages our executives to focus on short- and long-term performance and provides a reward to our executives, shareholders, and customers when we achieve our financial and operating objectives. Our CEO to median employee pay ratio for 2016 was 22:1.
 
              
              
  Executive Pay Components at a Glance  
    Percent of Total Compensation   
  ComponentDescriptionCEOOther NEO Avg.Changes in 2016  
  
Base Salary
Fixed, paid in cash
Target middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experience23%42%Executives received three percent cost of living adjustment provided to all employees  
  
Annual Cash Incentive
Variable, paid in cash
Based on net income, safety, reliability, and customer satisfaction metrics and individual performance19%18%No change to performance metrics in 2016; performance targets updated to encourage improvement over prior year  
  
Long-Term Incentive Program Awards
Variable, paid in equity
Based on earnings per share, return on average equity and relative total shareholder return performance over a three-year vesting period46%31%Increased target opportunity for three executives to align with market median; no change to performance metrics; performance targets updated  
  
Executive Retention / Retirement Program Awards
Variable, paid in equity
Based on net income performance over a five-year vesting period; paid over five-year period following separation from service12%9%No change in 2016  
              
              
             
 
Proxy Summary
Items of Business to Be Considered
at the Annual Meeting
  
  Proposal   Board
Recommendation		Page  
       
  1
Election of eight directors
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FOR each director nominee
4
  
  2
Approval of Deloitte & Touche LLP as the Independent Registered Accounting Firm for 2018
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FOR
6
  
  3
Advisory Vote to Approve Named Executive Officer Compensation
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FOR
8
  
             
 
2017 Executive Pay Overview
Alignment of Pay with Shareholder and Customer Interests
Our executive pay program is designed to align the long-term interests of our executives, shareholders, and customers. About 78 percent of the compensation of our chief executive officer, or CEO, and about 58 percent of the compensation of our other named executive officers is at risk in the form of performance-based incentive awards that use Board-established metrics and targets, based upon advice from the Board’s independent compensation consultant. Other than the addition of a safety training metric, the performance metrics did not change from the prior year. We also require our executives to retain meaningful ownership of our stock. This structure encourages our executives to focus on short- and long-term performance and provides a reward to our executives, shareholders, and customers when we achieve our financial and operating objectives. Our CEO to median employee pay ratio for 2017 was 23:1.
 
             
             
  Executive Pay Components at a Glance  
    Percent of Total Compensation   
  ComponentDescriptionCEOOther NEO Avg.Changes in 2017  
  
Base Salary
Fixed, paid in cash
Target middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experience22%42%One executive received 3.00 percent increase; CEO and remaining executives received 2.75 percent cost of living adjustment provided to all employees  
  
Annual Cash Incentive
Variable, paid in cash
Based on net income, safety, reliability, and customer satisfaction metrics and individual performance22%18%Updated performance targets; added safety training metric; CEO target opportunity increased to align with market median  
  
Long-Term Incentive Program Awards
Variable, paid in equity
Based on earnings per share, return on average equity and relative total shareholder return performance over a three-year vesting period44%32%Increased target opportunity for one executive to align with market median; no change to performance metrics; updated performance targets  
  
Executive Retention / Retirement Program Awards
Variable, paid in equity
Based on net income performance over a five-year vesting period; paid over five-year period following separation from service11%9%No change in 2017  
             
             
Proxy Summary

              
 
Performance Against Incentive Targets
In 2016, we managed our business through warmer than average winter weather and achieved all-time high safety performance and customer satisfaction, while providing shareholders a 45.7 percent return for the three‑year period ending December 31, 2016. As a result, we achieved above target performance for our 2016 incentive awards.
 
              
              
  2016 Annual Cash Incentive Outcome    2014 Long-Term Incentive Program Vesting  
  
Financial (55%) – % of Target Achieved
112%    
ROAE / Avg. Net Inc. Growth – % of Target Achieved
157%  
  
Safety (15%) – % of Target Achieved
150%    
Relative TSR – % of Target Achieved
60%  
  
Reliability (15%) – % of Target Achieved
123%    Total Payout to Participants*108%  
  
Customer Sat. (15%) – % of Target Achieved
73%         
  Total Funding113%    * Each component weighted 50% for total payout   
              
              
 
Shareholder Feedback on Executive Pay
At our 2016 annual meeting, our 2015 named executive officer pay program was approved by 99.2 percent of the votes cast. In light of the overwhelming approval from our shareholders, we have not changed the overall structure of our named executive officer pay program for 2016. We continue to use the same executive pay components and operate within the parameters previously approved by our shareholders.
2016 Corporate Governance Overview
Our Board has nominated nine individuals for election – seven current members and two new candidates, Ms. Britt E. Ide (director and interim CEO of Big Sky Chamber of Commerce) and Ms. Linda G. Sullivan (chief financial officer for American Water). We list all nominees on the following page in Proposal No. 1—Election of Directors.
Last year, shareholders elected six of our current director nominees by at least 99.7 percent of the votes cast. Another current director nominee, Mr. Anthony T. Clark (former FERC commissioner), joined our Board in December 2016, following the April 2016 retirement of director Denton Louis Peoples. Our eighth current Board member, Ms. Dorothy M. Bradley announced in February 2017 that she would not be seeking re-election.
Each of our Board members and nominees is independent, with the sole exception of our CEO. Our Board is led by an independent chair, and our three Board committees – Audit; Compensation; and Governance – are chaired by and composed entirely of independent directors. In addition, diversity is important to our Board, as reflected in the graphs below regarding our slate of nominees.
In 2016, our Board doubled the amount of stock that they are required to hold under our stock ownership guidelines, increasing the guidelines to ten times (from five times) the annual cash Board and committee chair retainers. Other than that change, we made no material changes to our corporate governance practices in 2016.
 
              
 Diverse Slate of Director Nominees 
 
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Performance Against Incentive Targets
In 2017, we managed our business through warmer than average winter weather and achieved all-time high customer satisfaction and near all-time high safety performance, while providing shareholders a 17.4 percent return for the three‑year period ending December 31, 2017, which lagged our peer group. As a result, we achieved near target performance for our 2017 annual incentive awards and below target performance for our long-term incentive awards.
 
              
              
  2017 Annual Cash Incentive Outcome    2015 Long-Term Incentive Program Vesting  
  
Financial (55%) – % of Target Achieved
93%    
ROAE / Avg. Net Inc. Growth – % of Target Achieved
35%  
  
Safety (15%) – % of Target Achieved
107%    
Relative TSR – % of Target Achieved
10%  
  
Reliability (15%) – % of Target Achieved
95%    Total Payout to Participants*45%  
  
Customer Sat. (15%) – % of Target Achieved
116%         
  Total Funding99%    * Each component weighted 50% for total payout   
              
              
 
Shareholder Feedback on Executive Pay
At our 2017 annual meeting, our 2016 named executive officer pay program was approved by 99.2 percent of the votes cast. In light of the overwhelming approval from our shareholders, we have not changed the overall structure of our named executive officer pay program for 2017. We continue to use the same executive pay components and operate within the parameters previously approved by our shareholders.
2017 Corporate Governance Overview
Our Board has nominated eight individuals for election. We list all nominees on the following page in Proposal No. 1—Election of Directors.
Last year, shareholders elected our eight director nominees by at least 99 percent of the votes cast. Our ninth current Board member, Dr. E. Linn Draper, Jr., announced in February 2018 that he would be retiring as a Board member and would not be seeking re-election at this year’s annual meeting. As a result of his announcement, our Board has elected Mr. Stephen P. Adik, current chair of our Audit Committee, to serve as non-executive chair of the Board following Dr. Draper’s retirement, subject to Mr. Adik’s election to serve as a director at our 2018 annual meeting.
Each of our Board members and nominees is independent, with the sole exception of our CEO. Our Board currently is led by an independent non-executive chair, and our three Board committees – Audit; Compensation; and Governance – are chaired by and composed entirely of independent directors. Following Dr. Draper’s retirement, our Board will continue to be led by an independent non-executive chair. In addition, diversity is important to our Board, as reflected in the graphs below regarding our slate of nominees.
We made no material changes to our corporate governance practices in 2017.
 
              
 Diverse Slate of Director Nominees 
 
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Items of Business



         
 
Proposal No. 1
Election of Directors
 
 
The Board of Directors recommends you vote “FOR” each of the nine director nominees.
 
Our Board is nominating nine people for election as directors at the annual meeting. Seven of the nominees currently serve as a director of the company and two nominees, if elected, will become new members of our Board. After election, nominees will serve for one year, until the next annual meeting of shareholders (or until a successor is able to serve). Our nominees are listed below, and we provide additional background information and individual qualifications for each nominee in the Corporate Governance—Individual Directors section of this proxy statement, beginning on page 45.
 
        
   
Name
Occupation
IndependentAgeDirector SinceCommittee Membership 
 �� 
Stephen P. Adik
Retired vice chairman, NiSource, Inc.
Yes732004Audit (Chair); Comp. 
   
E. Linn Draper, Jr.
Retired chairman, president and CEO, American Electric Power Company
Yes752004Board Chair 
   
Anthony T. Clark
Former commissioner, FERC and NDPUC (and chair)
Yes452016Gov. 
   
Dana J. Dykhouse
CEO, First PREMIER Bank
Yes602009Comp. (Chair); Audit 
   
Jan R. Horsfall
CEO, Maxletics Corporation
Yes562015Audit; Gov. 
   
Britt E. Ide
President, Ide Energy & Strategy; Interim CEO Big Sky Chamber of Commerce
Yes45New NomineeN/A 
   
Julia L. Johnson
President, NetCommunications, LLC; former commissioner and chair, Fla. PSC
Yes542004Comp.; Gov. (chair) 
   
Robert C. Rowe
President and CEO, NorthWestern Energy
No612008N/A 
   
Linda G. Sullivan
Executive Vice President and CFO, American Water
Yes53New NomineeN/A 
         
          
  
Proposal No. 1
Election of Directors
 
   
The Board of Directors recommends you vote “FOR” each of the eight director nominees.
The Board of Directors recommends you vote 
“FOR” 
each of the
eight director 
nominees.
 
Our Board is nominating eight people for election as directors at the annual meeting. All of the nominees currently serve as a director of our Board. After election, nominees will serve for one year, until the next annual meeting of shareholders (or until a successor is able to serve). Our nominees are listed below, and we provide additional background information and individual qualifications for each nominee in the Corporate Governance—Individual Directors section of this proxy statement, beginning on page 44.
 
 
Name
Occupation
IndependentAgeDirector SinceCommittee Membership 
  
Stephen P. Adik
Retired Vice Chair, NiSource, Inc.
Yes742004Audit (Chair); Comp. 
  
Anthony T. Clark
Senior Advisor, Wilkinson Barker Knauer, LLP; former Commissioner, FERC and NDPSC (and Chair)
Yes462016Gov. 
    
Dana J. Dykhouse
CEO, First PREMIER Bank
Yes612009Comp. (Chair); Audit 
    
Jan R. Horsfall
CEO, Maxletics Corporation
Yes572015Audit; Gov. 
    
Britt E. Ide
President, Ide Energy & Strategy; Executive Director, Yellowstone Club Community Foundation
Yes462017Gov. 
    
Julia L. Johnson
President, NetCommunications, LLC; former Commissioner and Chair, Florida PSC
Yes552004Gov. (Chair); Comp. 
    
Robert C. Rowe
President and CEO,
NorthWestern Energy
No622008N/A 
    
Linda G. Sullivan
Executive Vice President and CFO, American Water
Yes542017Audit 
          
Items of Business

      
 
Unless you specifically withhold your authority to vote for the election of directors, the persons named in the accompanying proxy intend to vote “FOR” the election of each of the director nominees.
All nominees have advised the Board that they are able and willing to serve as directors. If any nominee becomes unavailable for any reason (which is not anticipated), the shares represented by the proxies may be voted for such other person or persons as may be determined by the holders of the proxies (unless a proxy contains instructions to the contrary). In no event will the proxy be voted for more than nineeight nominees.
Our Board values the diversity of its members. When selecting this slate of nominees, our Board concluded these nominees will provide insight from a number of perspectives, based on their diversity with respect to gender, age, ethnicity, skills and background, as well as location of residence. We believe these varied perspectives expand the Board’s ability to provide relevant guidance to our business.
Our Board also concluded that these individuals bring extensive professional experience from both within and outside our industry. This diversity of experience provides our Board with a broad collective skill set which is advantageous to the Board’s oversight of our company. While the industry-specific expertise possessed by certain of the nominees is essential, we also will benefit from the viewpoints of directors with expertise outside our industry. Thus, our Board recommends a vote “FOR” election of each of the nominees.
Vote Required

Directors will be elected by a favorable vote of a plurality of the shares of voting stock present and entitled to vote, in person or by proxy, at the annual meeting. You may vote “FOR” all of the nominees or you may “WITHHOLD AUTHORITY” for one or more of the nominees. Withheld votes will not count as votes cast for the nominee, but will count for purposes of determining whether a quorum is present. Shareholders do not have the right to cumulate their vote for directors. Abstentions or broker non-votes as to the election of directors will not affect the election of the candidates receiving a plurality of votes; however, under our Majority Plus Resignation Vote Policy described on page 5449 of this proxy statement, if a nominee for director receives more “WITHHOLD AUTHORITY” votes than “FOR” votes, such nominee shall immediately tender his or her resignation under the procedures in the policy.
 
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The Board of Directors recommends a vote “FOR” the election of each of the nine director nominees. 
      
      
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Thanking a retiring board member

In February 2018, Dr. E. Linn Draper, Jr., announced his intent to retire and not seek re-election to our Board at the end of his annual term on April 25, 2018. At his retirement, Dr. Draper will have served over 14 years as the Chair of our Board. As a respected leader in the energy and utility industry, his guidance has been immensely beneficial to both our company and shareholders. His leadership on our Board will be missed. We are grateful to have had his service.
Items of Business


      
 
Proposal No. 2
Ratification of Deloitte & Touche LLP,
as Independent Registered Public
Accounting Firm for 20172018
 
The Board of Directors recommends you vote “FOR” Deloitte as our independent accounting firm.
 
Our Audit Committee oversees the integrity of our accounting, financial reporting and auditing processes. To assist with those responsibilities, the committee has appointed Deloitte & Touche LLP as our independent registered public accounting firm to audit our financial statements for 2017.2018. The Board is asking you to ratify the committee’s decision at the annual meeting. Deloitte representatives will be present at the annual meeting. They will have the opportunity to make a statement and to respond to appropriate questions.
The Board values your input on the committee’s appointment of Deloitte, but approval by shareholders is not required by law. If shareholders do not ratify the appointment of Deloitte, the committee will reconsider its selection. Regardless of the voting result, the committee may appoint a new firm at any time if the committee believes a change would be in the best interests of the company and its shareholders.
 
 
The Board of Directors recommends you vote “FOR”
Deloitte as our independent accounting firm.
  
  
  
Description of Fees

The table on the following page presents a summary of the fees Deloitte billed us for professional services for the fiscal years ended December 31, 20152016 and 2016.2017. As reflected in the table:

Audit feesare fees billed for professional services rendered for the audit of our financial statements, internal control over financial reporting, review of the interim financial statements included in quarterly reports, services in connection with debt and equity securities offerings, and services that are normally provided by Deloitte in connection with statutory and regulatory filings or engagements. For 2016,2017, this amount includes estimated billings for the completion of the 20162017 audit, which Deloitte rendered after year-end.
Audit-related fees are fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” There were no audit-related fees in fiscal 20152016 and 2016.
2017.
Tax feesare fees billed for tax compliance, tax advice and tax planning.
All other feesare fees for products and services other than the services reported above. In fiscal years 20152016 and 2016,2017, there were no other fees.

 
      
Items of Business

          
   Fee Category2015
Fees
($)		 2016
Fees
($)		   
   Audit fees1,285,875
 1,350,850
   
   Audit-related fees—
 —
   
   Tax fees168,628
 325,400
   
   All other fees—
 —
   
   Total fees1,454,503
 1,676,250
   
          
    
 
Pre-approval Policies and Procedures
Rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non-audit services. Our Audit Committee follows procedures pursuant to which audit, audit-related, and tax services and all permissible non-audit services, are pre-approved by category of service. The fees are budgeted, and actual fees versus the budget are monitored throughout the year. During the year, circumstances may arise when it may become necessary to engage the independent public accountants for additional services not contemplated in the original pre-approval. In those instances, we will obtain the specific pre-approval of the Audit Committee before engaging the independent public accountants. The procedures require the Audit Committee to be informed of each service, and the procedures do not include any delegation of the Audit Committee’s responsibilities to management. The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Pursuant to the provisions of the Audit Committee Charter, before Deloitte is engaged to render audit or non-audit services, the Audit Committee must pre-approve such engagement. For 2016, the Audit Committee (or the Chair of the Audit Committee pursuant to delegated authority) pre-approved 100 percent of the tax fees
 
 
Leased Employees
In connection with their audit of our 2016 annual financial statements, more than 50 percent of Deloitte’s work was performed by full-time, permanent employees of Deloitte.
Vote Required
The affirmative vote of the holders of a majority in voting power of the shares of our common stock which are present in person or represented by proxy and entitled to vote thereon is required to ratify the appointment of Deloitte. Brokers may vote a client’s proxy in their own discretion on this proposal. Abstentions will have the same effect as a vote against the proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted “FOR” the proposal to ratify the selection of Deloitte to serve as the independent registered public accounting firm for NorthWestern Corporation for the fiscal year ending December 31, 2017.
 
 
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The Board of Directors recommends a vote “FOR” the ratification of Deloitte & Touche LLP as our independent registered public accounting firm. 
          
          
   Fee Category2016
Fees
($)		 2017
Fees
($)		   
   Audit fees1,350,850
 1,382,084
   
   Audit-related fees—
 —
   
   Tax fees325,400
 85,221
   
   All other fees—
     
   Total fees1,676,250
 1,467,305
   
          
    
 
Pre-approval Policies and Procedures
Rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non-audit services. Our Audit Committee follows procedures pursuant to which audit, audit-related, and tax services and all permissible non-audit services, are pre-approved by category of service. The fees are budgeted, and actual fees versus the budget are monitored throughout the year. During the year, circumstances may arise when it may become necessary to engage the independent public accountants for additional services not contemplated in the original pre-approval. In those instances, we will obtain the specific pre-approval of the Audit Committee before engaging the independent public accountants. The procedures require the Audit Committee to be informed of each service, and the procedures do not include any delegation of the Audit Committee’s responsibilities to management. The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Pursuant to the provisions of the Audit Committee Charter, before Deloitte is engaged to render audit or non-audit services, the Audit Committee must pre-approve such engagement. For 2017, the Audit Committee (or the Chair of the Audit Committee pursuant to delegated authority) pre-approved 100 percent of the tax fees.
 
 
Leased Employees
In connection with their audit of our 2017 annual financial statements, more than 50 percent of Deloitte’s work was performed by full-time, permanent employees of Deloitte.
Vote Required
The affirmative vote of the holders of a majority in voting power of the shares of our common stock which are present in person or represented by proxy and entitled to vote thereon is required to ratify the appointment of Deloitte. Brokers may vote a client’s proxy in their own discretion on this proposal. Abstentions will have the same effect as a vote against the proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted “FOR” the proposal to ratify the selection of Deloitte to serve as the independent registered public accounting firm for NorthWestern Corporation for the fiscal year ending December 31, 2018.
 
          
Items of Business


      
 
Proposal No. 3
Advisory Vote to Approve
Named Executive Officer Compensation
 
      
 
The Board of Directors recommends youvote “FOR” the resolution approving named executive officer pay.
 
We would like your input as to how we pay our named executive officers, as required by Section 14A of the Exchange Act, through an advisory vote to approve named executive officer compensation (or a say-on-pay vote). Your vote will provide insight and guidance to us and our Board regarding your sentiment about our executive pay philosophy, policies and practices, as described in this proxy statement. Our Board will consider the guidance received by the say-on-pay vote when determining executive pay for the remainder of 20172018 and beyond. We ask you to support our executive pay and vote in favor of the say-on-pay resolution.
Last year, through the say-on-pay vote, over 99 percent of the votes cast approved how we pay our named executive officers. In fact, since our first say-on-pay vote in 2011, at least 94 percent of the votes cast have approved our executive pay each year.
We view your voting guidance over the years as strong support for the way we pay our executives. Thus, in 2016,2017, we left intact the executive pay program you previously approved and continued to use four components -components: base salary, annual cash incentive awards, long-term incentive awards, and retention/retirement awards. We did not change the design of these components. In fact, the only changes for 20162017 from the 20152016 program you approved, were (1) two and three quarter percent base salary increases (the same increase available to all employees) and (2) for our CEO and two of our named executive officers, an increase to the long-term incentive target opportunitycertain other adjustments to align with the market median.
If you would like additional information about what we do with our executive pay program, we have provided a more detailed discussion in the Compensation Discussion and Analysissection, or CD&A, starting on page 10 of this proxy statement, and the 2017 Executive Pay section, starting on page 32.
Our Human Resources Committee, or Compensation Committee, and our Board believe the company’s overall executive pay program is structured to reflect a strong pay-for-performance philosophy and aligns the long-term interests of our executives and our shareholders. If you would like additional information about what we do with our executive pay program, we have provided a more detailed discussion in the Compensation Discussion and Analysis section, or CD&A, starting on page 11 of this proxy statement, and the 2016 Executive Pay section, starting on page 33.
We believe we have designed our executive pay program appropriately to align the long-term interests of management and shareholders, andAccordingly, the Board recommends that shareholders approve our executive pay program by voting “FOR” the following advisory resolution:
RESOLVED, that the compensation paid to the company’s named executive officers (as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in the company’s 20172018 proxy statement) is hereby APPROVED.
The Board of Directors recommends you vote 
“FOR”
the resolution approving
named
executive 
officer pay.
 
      
Items of Business

      
 
This advisory vote to approve named executive officer pay is not binding on the company. However, we and our Board will take into account the result of the vote when determining future executive pay arrangements.
At last year’s annual meeting of shareholders, more than a majority of our shareholders voted in favor of an annual advisory vote on executive compensation. Consistent with those voting results, the Board has determined that we will hold an annual advisory vote on executive compensation until the next required vote on the frequency of future shareholder votes on executive compensation, as required pursuant to Section 14A of the Exchange Act and the related rules and regulations. Under current rules and regulations, we will hold the next frequency vote in connection with our 2023 annual meeting of shareholders.
Vote Required
The affirmative vote of the holders of a majority in voting power of the shares of our common stock which are present in person or represented by proxy and entitled to vote thereon is required to approve the say-on-pay resolution set forth above. If your shares are held through a broker, bank, or other nominee and you do not vote your shares, your bank, broker, or other nominee may not vote your shares in this proposal. Assuming a quorum is present, broker non-votes or the failure to vote – either by not returning a properly executed proxy card or not voting in person at the annual meeting – will have no effect on the outcome of the voting on this proposal. Abstentions will have the same effect as a vote against the proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted “FOR” the proposal to approve, on an advisory basis, the pay of the company’s named executive officers, as set forth in the company’s 20172018 proxy statement.
 
   
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The Board of Directors recommends a vote “FOR” adoption of the resolution approving, on an advisory basis, the pay of the company’s named executive officers, as described in this proxy statement.
Items of Business


Proposal No. 4
Advisory Vote on Frequency of Advisory Votes on Executive Compensation
The Board of Directors recommends you vote to hold a Say-on-Pay vote to approve executive pay every “1 YEAR”
In 2011, over 80 percent of our voting shareholders voted for a say-on-pay vote every year, and we have been conducting an annual say-on-pay vote ever since. Now, we would like your input again as to how often we should hold a say-on-pay vote – every one, two or three years.
Our Board believes that continuing our say-on-pay vote every year is the appropriate frequency for our company. We are committed to maintaining high standards of corporate governance. We believe that conducting the say-on-pay vote every year will provide a high level of transparency to our shareholders and a frequent, direct opportunity for our shareholders to offer feedback concerning our executive pay programs. For these reasons, our Board is asking you to vote for a say-on-pay vote every “1 YEAR.”
You have three choices for how frequently we should conduct our say-on-pay vote – every one, two or three years. You also may abstain from voting. Your vote on this proposal is an advisory vote. It is not binding on our Board. However, like in 2011, the Board will take into account the result of this year’s vote when determining the frequency of future say-on-pay votes.
The Board recommends that you vote to conduct the say-on-pay vote every “1 YEAR.” Unless instructed to the contrary in your proxy, the proxy holder(s) will vote the shares represented by your proxy to conduct the say-on-pay vote every “1 YEAR.” Please note that you are voting for how often you feel the company should conduct a say-on-pay vote. You are not voting to approve or disapprove the Board of Directors’ recommendation.
Vote Required
If your shares are held through a broker, bank, or other nominee and you do not vote your shares, your bank, broker, or other nominee may not vote your shares in this proposal. Assuming a quorum is present, broker non-votes or the failure to vote – either by not returning a properly executed proxy card or not voting in person at the annual meeting - will have no effect on the outcome of the voting on this proposal. Abstentions also will have no effect on the outcome of this proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted “FOR” the proposal to approve, on an advisory basis, the pay of the company’s named executive officers, as set forth in the company’s 2017 proxy statement.
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The Board of Directors recommends you vote to hold an advisory vote to approve executive pay every “1 YEAR.”
   
 

Executive Pay
Compensation Discussion and Analysis
The Compensation Discussion and Analysis (CD&A) explains how we pay our executives and how the Compensation Committee of our Board oversees executive pay, including the rationale and processes the Committee used to set executive pay in 2016.2017. The CD&A summarizes the objectives and specific elements of our 20162017 pay program, including cash, stock, and post-termination compensation. The CD&A, which may include forward-looking statements, should be read together with the compensation tables and related disclosures that follow this CD&A.
This CD&A is organized into the following sections:
     
 SectionSummaryPage 
 
Executive Summary
Highlights of our 20162017 executive pay program and results11
10
 
 
Pay for Performance
How our pay and performance, relative to our peers, provides value to shareholders14
13
 
 
Say-on-Pay Results
Details about how our Board uses shareholder feedback to set pay18
17
 
 
How We Set Pay
How our Compensation Committee governs our executive pay programs18
17
 
 
Targeted Pay and Competitive Analysis
How our Compensation Committee determined the amount of 20162017 executive pay19
18
 
 
Pay Components
Details about the different parts of 20162017 executive pay22
21
 
 
Other Pay Policies
Information on other aspects of our pay program31
30
 
     
CD&A Executive Summary
20162017 Results
In 2016,2017, we continuedfaced a number of challenges that required us to show strong operating results, which have translated into returns forefficiently manage our shareholders. Ourbusiness to achieve operational success and earnings per share continued to grow,in line with expectations. We worked safely in 2017 (nearly as safe as our all-time best safety year of 2016) and we achieved our besthighest ever safety results and customer satisfaction ratings, both while providing our customers with reliable service. We also produced financial results in line with our announced expectations. However, primarily as a result of 2017’s regulatory headwinds, our shareholder return lagged our peer group.
           
 
20162017 Basic Earnings Per Share
Our basic earnings per share grew 6.9 declined 0.9 percent to $3.39$3.35 in 20162017 from $3.17$3.40 in 2015.2016, primarily due to a tax benefit included in 2016.
   
Total Shareholder Return
Our TSR was 45.717.4 percent for the three-year period ending December 31, 2016.2017, That was ninth highest inranking 12th of our 14-member peer group and trailedtrailing the peer group average (53.4(42.7 percent).
   
Dividend Yield
Our dividend of $2.00$2.10 per share provided a dividend yield of 3.5 percent based on our stock price at the end of 2016.2017.

 
           
           
           
 
Safety
In 2016,2017, we worked more safely, than ever, with lost time and total recordable incident rates atnear all-time lows.
   
Reliability
Thereliabilityof our electric and natural gas systems was at or slightly better than target.
   
Customer Service
Our JD Power rating for overall satisfaction results showed customer satisfaction at our highest level ever.
 
           


1110
Compensation Discussion and Analysis


We achieved these strong operating results during 2016,2017, while also:
●FilingCompleting the first phase of a Montana natural gas delivery service and production rate case in the state of Montana, which requested an annual increaseshould conclude in base rates of approximately $10.9 million;2018; and
●Successfully accessing the (a) equity capital markets issuing approximately $53.7 million of common stock as part of an ongoing at-the-market equity program, and (b) debt capital markets to refinance outstanding indebtedness to lower our overall cost of capitalinterest costs by participating in the issuance of (a) $60issuing $250 million of South DakotaMontana First Mortgage Bonds at 2.80%4.03%, maturing in 2026; (b) $45 million of South Dakota First Mortgage Bonds at 2.66% maturing in 2026; and (c) the City of Forsyth's Pollution Control Revenue Refunding Bonds of $144.7 million at 2.00% maturing in 2023.2047.
In spite of our strong operating performance and achievements in 2016, theThe overall pay our executives receive ranks near the bottom of our peer group, which is identified on page 1716 of this proxy statement. In summary, for 20152016 (the most recent year for which peer group executive compensation is publicly available in the Summary Compensation Table for each respective company, excluding changes in pension value):
●    Our named executive officers had an average compensation per named executive officer that was less than all but three of the other 13 companies in our peer group ($1.01.19 million for us versus $1.3$1.44 million for the median of our peers)peer median).
●    Our CEO’s total compensation was approximately 8078 percent of the median total compensation (excluding change in pension value) of the CEOs in our peer group.
     
  Named Executive Officers for 20162017 
  
Robert C. Rowe
President and Chief Executive Officer
 
  
Brian B. Bird
VicePresident and Chief FinancialExecutive Officer
 
  
Heather H. Grahame
VicePresident and General Counsel
Brian B. Bird		 
  
Curtis T. Pohl
VicePresident - Distribution
and Chief Financial Officer		 
  
Heather H. Grahame
Vice President - General Counsel / Regulatory & Federal Gov't Affairs
Curtis T. Pohl
Vice President - Distribution
Bobbi L. Schroeppel
VicePresident - Customer Care, Communications and HR
 
We consider our executive pay program to be instrumental in helping us achieve our business objectives and effective in rewarding our executive officers for their role in achieving strong financial and operational performance. Based on our performance and our compensation outcomes, we are requesting your support of Proposal No. 3—Advisory Vote to Approve Named Executive Officer Compensation.
Our overarching philosophy is that we should structure executive pay to be consistent with our peers and to align the long-term interests of our executives, shareholders, and customers so that the pay appropriately reflects performance in achieving financial and non-financial operating objectives. To live up to this philosophy, we believe that a significant portion of an executive’s pay should be at risk in the form of performance-based incentive awards that are only paid if the individual and company performance targets are met.
Our executive pay program is designed to:
●Attract and retain a high-quality executive team by providing competitive pay and benefits that reflect our financial operational size;
●Reward executives for both individual and company performance (based on financial, reliability, customer care, and safety metrics) through performance-based, at-risk pay; and
●Maximize long-term shareholder value by putting a significant emphasis on financial performance, reliability, safety, and customer satisfaction.


1211
Compensation Discussion and Analysis


    
 Our Pay Practices 
    
 Our executive pay program accomplishes our goals by incorporating certain pay practices while avoiding other, more problematic or controversial practices. 
    
 What We Do 
 ●Place a significant portion of executive pay at risk by granting incentive awards that are paid, if earned, based on continuing annual and long-term individual and company performance. 
 ●Utilize multiple performance metrics for long-term incentive awards that align executive and shareholder interests. 
 ●Target executive pay around the median of our peers, while also considering trade area economics, turn-over, tenure, experience, and other factors. 
    
 What We Don’t Do 
 ●Use employment or golden parachute agreements. 
 ●Provide change in control payments exceeding three times base salary and target bonus. Our only change in control provision appears in our Equity Compensation Plan and provides for the immediate vesting or cash payment of any unvested equity awards upon a change in control. 
 ●Grant stock options. No stock options are currently outstanding, and none have been issued under our Equity Compensation Plan. 
 ●Allow option repricing or liberal share recycling. These practices are expressly prohibited under our Equity Compensation Plan. 
 ●Promise multi-year guarantees for salary increases. 
 ●Provide perquisites for executives that differ materially from those available to employees generally. 
 ●Maintain a non-performance-based top hat plan or separate retirement plan available only to our executive officers. We do maintain a performance-based executive retirement / retention program, with five-year cliff vesting and a five-year payout period after the recipient’s separation from service. 
 ●Pay tax gross-ups to our executives. 
 ●Pay dividends or dividend equivalents on unvested performance shares or units. 
 ●Allow our executives or directors to hedge company securities. 
    
Pay Package
For 2016,2017, our executive pay package included the same components as in 20152016 — base salary, annual cash incentive award, and two long-term stock incentive awards. All incentive awards (cash and stock; annual and long-term) were performance-based. Unlike many of our peers, we do not offer a non-performance-based supplemental executive retirement plan.
The table on the following page provides a high level summary of our 20162017 executive pay package. Please see the Pay Components section later in this CD&A for a more detailed summary of how we pay our executives.


1312
Compensation Discussion and Analysis


ComponentDescription
Why we include
this component
How we
determine amount
Decisions for 20162017
Reason for
Change
Base
Salary
Short-term fixed cash compensation
Provide a base level of compensation for executive talentTarget middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experienceOurOne executive received a three percent increase, and our CEO and otherremaining executives received the threetwo and three-quarters percent increase generally provided to all employeesTo remain market competitive and provide cost of living adjustment
Annual
Cash
Incentive
Short-term variable cash compensation, based on corporate performance against annually established metrics (financial, safety, reliability, and customer satisfaction) and individual performance
Motivate employees to meet and exceed annual company objectives that are part of our strategic planTarget middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experienceThere were no changesIncreased target opportunity for our CEO; updated performance targets; and added a safety training metricTo increase the compensation opportunity for our CEO to the annual cash incentive component for 2016, other than updating the performance targetsNot applicablealign with market median
Performance Unit Awards under
Long-Term Incentive Program (LTIP)
Long-term variable, equity compensation, paid following three-year vesting period if financial performance metrics (EPS, ROAE, and TSR) are achieved
Provide market-competitive, performance-based compensation opportunities while aligning interests of executives and shareholdersMarket survey of similar peer group roles and responsibilities and assessment of the strategic value of each positionIncreased target opportunity for our CEO and two executivesone executive and updated performance targetsTo increase the compensation opportunity for strategic positions to align with market median
Restricted Share Grants under Executive Retention / Retirement Program (ERRP)
Long-term variable, equity compensation, with corporate performance metrics over a five-year vesting period; paid over five-year period following separation from service
In lieu of a non-performance based supplemental retirement benefit, provide market-competitive, performance-based compensation opportunity that aligns interests of executives and shareholders, while encouraging retention and the continuity of our strategic planPeer group and competitive survey data and judgment on internal equity of positions and scope of responsibilities, as well as an assessment of the strategic value of each positionThere were no changes to the ERRP restricted share grantsNot applicable
Pay for Performance
Our Compensation Committee has designed our pay program to align pay with performance. Our executives are rewarded for providing value to shareholders and for performing relative to our peer group, which is identified on page 1716 of this proxy statement.
Value Provided to Shareholders
Over the past three years, we have provided value to our shareholders, with total shareholder return (including reinvestment of dividends) of 45.717.4 percent, average EPS growth of 11.63.7 percent, and return on average equity of 10.39.8 percent.
These results we achieved for our shareholders are consistent with the results obtained under our incentive plans. With respect to our annual cash incentive plan for 2016,2017, our net income achieved 111.693.4 percent of target and our safety and customer satisfaction results were at an all-time highs.high, while our safety performance was near our all-time high. These operational successes resulted in a funding of our annual cash incentive plan at 11399 percent of target for 2016.2017.
The grants of long-term performance units that were made in 20142015 pursuant to the LTIP vested on December 31, 2016.2017. The performance measures associated with those grants were measured over a three-year vesting period and were tied to EPS growth, ROAE, and TSR. The company had solid results over the three-year vesting period with respect to the LTIP metrics, attaining 11.63.7 percent average EPS growth, 10.39.8 percent ROAE, and 44.514.4 percent TSR (eighth(12th highest of our 14-member peer group when calculated as required by the LTIP). Based on these results, the LTIP awards paid out at 108.344.9 percent of target.


1413
Compensation Discussion and Analysis


The chart below shows the total return on an investment made over that same three-year vesting period and highlights our stock price performance with the S&P 500 and our peer group. The chart below shows our TSR of 45.717.4 percent, assuming reinvestment of dividends. However, the calculation required by the LTIP results in a TSR of 44.514.4 percent for the same period. The difference in these TSRs is the method of calculation required by the terms of our LTIP, which uses a 20-day average stock price at the beginning and end of the performance period and does not assume reinvestment of dividends.
THREE-YEAR TSR
tsr3yr2016.jpga20183yrtsrgrapha02.jpg
Source: SNL Financial LC (assumes reinvestment of dividends)
The charts below provide another depiction of pay for performance and the value we provide to shareholders by illustrating the directional relationship between the compensation of our CEO and company performance over a five-year period based on the three performance metrics utilized in our LTIP performance units.
5-YEAR CEO PAY ALIGNMENT
 VS. EPSVS. ROAEVS. CUMULATIVE TSR
ceotoeps2017.jpgceotoeps2017a02.jpg
ceotoroae2017.jpgceotoroae2017f.jpg
ceototsr2017.jpgceototsr2017a02.jpg
EPS reflects diluted earnings per average share of our common stock. TSR illustrates the growth of $100 invested in our common stock on December 31, 2011,2012, assuming reinvestment of dividends. CEO Compensation is total compensation (excluding change in pension value) as published in the proxy statement Summary Compensation Table.
Performance Relative to Our Peers
Relative to our peers, our CEO pay is generally aligned with performance. For the three-year period ending December 31, 2016,2017, our TSR was the ninth12th highest in our peer group (according to SNL Financial and assuming reinvestment of dividends), while our CEO’s compensation was the ninth highest of our peer group (based on the three most recently available years of compensation data as disclosed in the proxy statement summary compensation tables of our peers). In addition, the aggregate compensation provided to our named executive officers and the pay multiple of our CEO to the second highest paid named executive officer both lag the median of our peer group.


1514
Compensation Discussion and Analysis


We also provide value to shareholders by maintaining a relatively small executive team, which reduces overall executive compensation. We currently have nineeight members on our executive team. As of February 7, 2017, nine26, 2018, ten of our peers have larger executive teams of tennine or more members; while, fourtwo of our peers have fewer than nineeight executive officers. We believe that having a relatively small executive team creates efficiencies and a stronger team that is more effective as a group.
The pay-for-performance charts and tables below reflect relative values for CEO pay and TSR that are expressed as a percentile of the range between the highest and lowest values. The charts and tables demonstrate a strong CEO pay for performance alignment over the past three years. Our CEO is generally being compensated at a lower level than the CEOs of most of our peers, while delivering similar value to our shareholders relative to our peers.
Datapoints within the shaded pay-for-performance alignment band reflect an alignment of pay and performance. Datapoints to the left and above the band suggest lower pay for higher performance; while those to the right and below the band suggest higher pay for lower performance.
CEO PAY FOR PERFORMANCE VS. PEERS
1-YEAR  3-YEAR
    
payvperf1yr2017a02.jpgpayvperf1yr2017f.jpg
  
payvperf3yr2017a02.jpgpayvperf3yr2017f.jpg
Relative 1-Year CEO Pay*Relative 1-Year CEO Pay* Relative 1-Year TSR* Relative 3-Year CEO Pay* Relative 3-Year TSR*Relative 1-Year CEO Pay* Relative 1-Year TSR* Relative 3-Year CEO Pay* Relative 3-Year TSR*
Great Plains Energy100% Avista Corp.100% PNM Resources Inc.100% Otter Tail Corporation100%
Vectren Corporation96% Vectren Corporation89% Vectren Corporation94% Avista Corp.100%
Black Hills Corporation92% Great Plains Energy71% Avista Corp.83% Vectren Corporation90%
PNM Resources Inc.100% Otter Tail Corporation100% Vectren Corporation100% Westar Energy, Inc.100%89% El Paso Electric Co.70% Black Hills Corporation73% El Paso Electric Co.81%
Vectren Corporation67% MGE Energy Inc.72% PNM Resources Inc.99% MGE Energy Inc.87%
Avista Corp.55% Westar Energy, Inc.59% Avista Corp.83% IDACORP, Inc.71%82% PNM Resources Inc.67% Great Plains Energy72% IDACORP, Inc.81%
Westar Energy, Inc.46% Black Hills Corporation58% Great Plains Energy70% Vectren Corporation63%
OGE Energy Corp.79% ALLETE, Inc.62% Portland General Electric60% ALLETE, Inc.81%
IDACORP, Inc.74% IDACORP, Inc.53% IDACORP, Inc.58% MGE Energy Inc.78%
Portland General Electric44% OGE Energy Corp.51% Black Hills Corporation67% Avista Corp.58%62% Otter Tail Corporation41% OGE Energy Corp.46% PNM Resources Inc.78%
Great Plains Energy40% ALLETE, Inc.49% Westar Energy, Inc.65% Otter Tail Corporation57%
Black Hills Corporation40% Vectren Corporation42% Portland General Electric58% Portland General Electric57%
IDACORP, Inc.30% El Paso Electric Co.36% IDACORP, Inc.54% PNM Resources Inc.53%
OGE Energy Corp.24% Portland General Electric34% NorthWestern Energy30% NorthWestern Energy43%
El Paso Electric Co.50% NorthWestern Energy30% NorthWestern Energy36% Portland General Electric50%
NorthWestern Energy42% Portland General Electric29% El Paso Electric Co.34% Great Plains Energy41%
ALLETE, Inc.23% IDACORP, Inc.32% ALLETE, Inc.28% El Paso Electric Co.42%28% OGE Energy Corp.10% ALLETE, Inc.28% Black Hills Corporation37%
NorthWestern Energy21% Avista Corp.24% OGE Energy Corp.28% ALLETE, Inc.41%
El Paso Electric Co.21% PNM Resources Inc.21% El Paso Electric Co.26% Black Hills Corporation23%
Otter Tail Corporation16% NorthWestern Energy8% Otter Tail Corporation10% Great Plains Energy20%25% Black Hills Corporation7% Otter Tail Corporation20% NorthWestern Energy24%
MGE Energy Inc.0% Great Plains Energy0% MGE Energy Inc.0% OGE Energy Corp.0%—% MGE Energy Inc.—% MGE Energy Inc.—% OGE Energy Corp.—%
     
*Relative CEO pay and TSR are expressed as a percentile of the range between the highest and lowest values.
Source: CEO Pay for the one-year period is the 2015 total compensation and for the three-year period is the 2013-15 total compensation, as published in the 2014, 2015, and 2016 proxy statement Summary Compensation Tables for each respective company. We have excluded any change in pension value from the total compensation calculation because its inclusion could lead to inconsistent comparisons from company to company based upon differing pension plan provisions, length of employee tenure, and other factors. Total Shareholder Return is from SNL Financial for the one- and three-year periods ended December 31, 2016, and assumes reinvestment of dividends.
Source: CEO Pay for the one-year period is the 2016 total compensation and for the three-year period is the 2014-16 total compensation, as published in the 2015, 2016, and 2017 proxy statement Summary Compensation Tables for each respective company. We have excluded any change in pension value from the total compensation calculation because its inclusion could lead to inconsistent comparisons from company to company based upon differing pension plan provisions, length of employee tenure, and other factors. Total Shareholder Return is from SNL Financial for the one- and three-year periods ended December 31, 2017, and assumes reinvestment of dividends. We have excluded the CEO compensation and TSR for one of our peers, Westar Energy, Inc., from this presentation due to a pending merger transaction and the related lack of proxy statement compensation disclosure.Source: CEO Pay for the one-year period is the 2016 total compensation and for the three-year period is the 2014-16 total compensation, as published in the 2015, 2016, and 2017 proxy statement Summary Compensation Tables for each respective company. We have excluded any change in pension value from the total compensation calculation because its inclusion could lead to inconsistent comparisons from company to company based upon differing pension plan provisions, length of employee tenure, and other factors. Total Shareholder Return is from SNL Financial for the one- and three-year periods ended December 31, 2017, and assumes reinvestment of dividends. We have excluded the CEO compensation and TSR for one of our peers, Westar Energy, Inc., from this presentation due to a pending merger transaction and the related lack of proxy statement compensation disclosure.



1615
Compensation Discussion and Analysis


As with our CEO’s total compensation package, the total compensation provided to our named executive officers, as a group, relative to our peers also demonstrates a strong pay-for-performance alignment for our shareholders. As shown in the charts below, our named executive officer group lags the median total compensation provided to our peer group named executive officers. The summary also depicts that the multiple of our CEO’s compensation compared with our next most highly compensated named executive officer has lagged our peer group median until recently.
NAMED EXECUTIVE OFFICER PAY VS. PEERS  PAY MULTIPLE OF CEO TO SECOND HIGHEST PAID NAMED EXECUTIVE OFFICER
    
neovpeersa02.jpgneovpeers2017dr1.jpg
  
ceoto2ndhp.jpgceoto2ndhp2017dr1.jpg
Source: Total compensation (excluding change in pension value) as published in the proxy statement summary compensation table for each respective company. We excluded change in pension value because its inclusion could lead to inconsistent comparisons from company to company based upon differing pension plan provisions, length of employee tenure, and other factors.
 
 Our 20162017 Peer Group 
Our Compensation Committee selects the members of our peer group and periodically examines whether peers continue to meet the criteria for inclusion described below. As part of this process, the Compensation Committee receives advice from its independent compensation consultant and selects a peer group that includes companies that: (1) maintain a regulated utility industry perspective, emphasizing operational excellence and customer satisfaction as a means to create shareholder value; (2) are referenced as relevant comparisons by other companies, the analyst community, and their advisors; and (3) have similar revenue, market capitalization and return-based measures of performance.

For 2016,2017, based on these criteria and the advice of its independent compensation consultant, our Compensation Committee added OGE Energy Corp. and Otter Tail Corporationdid not make any changes to our peer group and removed three companies that were in our 2015 peer group because of merger or acquisition activity.group.
     
20162017 Peer Group

ALLETE, Inc.
Avista Corp.
Black Hills Corporation
El Paso Electric Co.
Great Plains Energy Incorporated
IDACORP, Inc.
MGE Energy Inc.
NorthWestern EnergyOGE Energy Corp.
Otter Tail Corporation
PNM Resources Inc.
Portland General Electric Company
Vectren Corporation
Westar Energy, Inc.
 
Market Capitalization  (1)
 
Revenue (2)
 
peermarketcap2017.jpgpeer2017marketcap.jpg
 
peerrevenue2017.jpgpeer2017revenue.jpg
  
  
    
    
    
    
      
  (1) Market capitalization range of our peer group as of February 3, 2017.9, 2018. 
  (2) Range of total revenues for our peer group over the four most recent publicly available fiscal quarters. 
 


1716
Compensation Discussion and Analysis


Say-on-Pay Results
At our annual meeting in 2016,2017, our shareholders continued to show strong support of our executive pay program, with 99.2 percent of the votes approving the say-on-pay resolution.
Those 20162017 voting results occurred after the Compensation Committee took action to approve 20162017 pay. Nevertheless, the Compensation Committee and the Board reviewed that feedback from shareholders when establishing executive pay for 2017.2018. The Compensation Committee believes the results from our 20162017 annual meeting affirm our shareholders’ continuing support of the company’s approach to executive pay. Thus, the Compensation Committee made no substantive changes to executive pay for 2017.2018.
How we set pay
Compensation Committee
The Compensation Committee, composed entirely of independent directors, is responsible for the oversight of:
Pay, benefits, and other employment matters for executives;
Stock-based pay plans for employees;
The election and appointment of executive officers and other corporate officers;
CEO performance; and
Director pay.
The Compensation Committee considers several factors when it sets executive pay — all of which ultimately influence our executive pay program.
           
 
Align Interests.
Provide pay that aligns management (and employee) interests with those of shareholders and customers.
   
Peer Comparison.
Establish overall pay approximating the median of our peer group and applicable position comparisons.
   
Attract Talent.
Set pay that will attract talent from both within and outside the utility industry.
 
           
           
           
 
Economic Circumstances.
Set pay based on economic circumstances, including turnover and retention considerations.
   
Pay for Performance.
Tie all components of incentive pay to the company’s short-and long-term financial and operational performance.
   
No Executive Perks.
Executives participate in same benefits plans available to all non‑union employees, with no additional perquisites, other than executive physicals.
 
           
Independent Compensation Consultant
To help determine executive pay, the Compensation Committee retains an independent pay consultant, Willis Towers Watson, for advice regarding the general competitive landscape and trends in executive and director pay. While the Compensation Committee meets with the consultant from time to time, the chair of the Compensation Committee also communicates directly with the consultant in between Committee meetings. The consultant advises the Committee on several matters including (1) competitive analysis (including in relation to our peer group), (2) incentive plan design, (3) updates on trends in executive and director compensation, (4) peer group composition, and (5) other compensation-related matters as requested by the Committee.
Decision-Making Process and Role of Executive Officers
The Compensation Committee works with Willis Towers Watson to analyze competitive market data to determine appropriate base salary levels, annual incentive target levels, and long-term incentive target levels for all of our executives, paying particular attention to applicable comparisons with our peer group. When making comparisons to the peer group, the Compensation Committee seeks to establish compensation levels that approximate the median of our peer group. After determining appropriate levels, the Compensation Committee


1817
Compensation Discussion and Analysis


recommends both CEO and executive officer pay to the Board for approval. The CEO is not a member of the Compensation Committee and does not vote on Board matters concerning executive pay.
With respect to our CEO’s pay, the Compensation Committee conducts an annual performance assessment of the CEO and determines appropriate adjustments to all elements of his pay based on his individual performance and the company’s performance. The Compensation Committee then considers our CEO’s preference: having a larger percentage of his pay be at risk in the form of performance-based compensation and his overall pay to be below the median of his peers.
For the other executive officers, the CEO and CFO make recommendations to the Compensation Committee for all elements of pay based on individual performance, market data from our peer group and published survey data. The Compensation Committee reviews, discusses, modifies, and approves, as appropriate, these recommendations.
The diagram below summarizes the Compensation Committee’s annual process for setting executive pay, which begins in July and concludes the following February.
         
 
July
Review and discuss timeline for setting executive pay
   
October
Review materials from independent compensation consultant:
 
      
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●		Executive pay overview 
      
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●		Peer compensation analysis 
      
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●		Preliminary design of annual and long-term incentive opportunities 
         
         
         
 
December
Evaluate overall executive pay program:
   
February
Finalize executive pay:
 
 
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●		Review preliminary five-year financial plan   
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●		Review final five-year financial plan 
 
graycircle.jpg
●		Approve upcoming annual incentive plan grants   
graycircle.jpg
●		Approve executive pay 
 
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●		Review proposed long-term incentive grants   
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●		Approve long-term incentive program grants 
 
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●		Approve annual executive retention / retirement grants   
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●		Review performance metrics results for prior year and approve payouts for current annual incentive plan and vesting of long-term incentive program 
         
At each of its regularly scheduled meetings throughout the year, the Compensation Committee reviews the company’s performance under all outstanding annual and long-term incentive plans.
Targeted Pay and Competitive Analysis
Pay Philosophy
We target base salary, annual cash incentive awards, and long-term equity grants, as well as total pay, to be market competitive for our executive officers. Our Compensation Committee believes that the best proxy to determine market competitiveness of pay is the median of our peer group, including individual pay components, as well as total pay. However, because comparative data is one of several tools that are used in determining executive officer compensation, competitiveness of compensation may fluctuate based on a number of factors, including:
●The level of achievement of our pre-established performance goals;
●Our TSR compared against our peer group;
●Individual performance and scope of job responsibilities;
●Internal equity considerations;
●Market competitiveness and internal executive turnover; and
●The executive’s industry and position experience and tenure.
To align the long-term interests of our executives, shareholders, and customers, our Compensation Committee uses performance-based incentive awards to place a significant component of each executive’s pay at risk. According to


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Compensation Discussion and Analysis


our Compensation Committee’s independent compensation consultant, our relative TSR performance metric that is part of our long term incentive program is set at a higher level, and is more difficult to achieve, than our peers. This structure encourages our executives to focus on both short- and long-term performance and provides a reward to our executives, shareholders, and customers when we achieve our financial and operating objectives.
The target pay mix for our named executive officers changed slightly in 20162017 from 2015.2016. As part of the overall 20162017 pay package, our Compensation Committee increased the targeted long-termannual incentive opportunity for our CEO and twothe targeted long-term incentive opportunity for one of our named executive officers as described below in the 20162017 Long-Term Incentive Program Performance Unit Grants section. As a result, the percentage of at-risk pay component of the target pay mix increased for our named executive officers, as a whole, to 67 percent in 2017 from 66 percent in 2016 from 62 percent in 2015.2016.
 
percent of pay at risk increased for 20162017
For our CEO, 7778 percent of the overall targeted pay in 2017 (base salary plus targeted annual and long-term incentives) relates to performance-based incentive awards. For our named executive officers other than the CEO, that percentage averages 58 percent. The charts below depict the target total pay mix for our CEO and the average of our other named executive officers.
CEO PAY MIX  
OTHER NAMED EXECUTIVE OFFICER
AVERAGE PAY MIX
    
donutceo2016a01.jpgdonutceo2017dr1.jpg
  
donutneo2016a01.jpgdonutneo2017dr1.jpg
Charts represent target level for each component of compensation.
Independent Compensation Consultant Data and Analysis
As a component of the Compensation Committee’s review of executive pay, Willis Towers Watson provides an analysis of the pay levels of our peer group, as well as published survey data that focuses on the energy and utility industry, which is size-adjusted based on our revenues for appropriate market comparison. In 2016,2017, the published survey data included the Willis Towers Watson Compensation DataBank, William M. Mercer’s Executive Benchmark Database and Willis Towers Watson Survey Report on Top Management Compensation. The peer group data is a primary basis for setting pay for our CEO and CFO because these positions are common among our peers. Both the peer group and survey data are analyzed and considered in setting pay levels for the remaining named executive officers because these positions or division of responsibilities may not be common among each of our peers.
For long-term incentive purposes, Willis Towers Watson performs its analysis using the published survey data and focuses on companies in the energy services industry, specifically with annual revenues less than $3 billion. The Compensation Committee considers the responsibilities of the job performed by each of our executive officers and his or her performance, and adjusts each executive’s targeted pay amounts accordingly. As further detailed below, internal comparison with other officer positions also is considered.
In addition to these efforts, Willis Towers Watson prepares an analysis of market data compiled from the Willis Towers Watson Compensation DataBank for energy services executives. The analysis examines the target direct compensation opportunity for energy services executives, including base salary, target annual incentives, and the expected value of long-term incentives. Using regression analysis, Willis Towers Watson size-adjusts the data to reflect our revenue scope.


2019
Compensation Discussion and Analysis


Based on this analysis and as illustratedWe also conducted a separate analysis of the 2016 executive pay of the 13 other companies in our peer group. This internal analysis, which was based on proxy data, examined base salary, bonus, other annual compensation, equity awards, and non-equity incentive plan compensation (and excluded change in pension value). Using this analysis, our named executive officers had average pay of $1.19 million in 2016, which was less than all but three of the companies in our peer group; while the peer group median had average pay per named executive officer of approximately $1.44 million. For 2016, our CEO’s total pay was approximately 78 percent of the chart to the right, the direct pay opportunity for our highest-paid employees is below the market median of the direct pay opportunity for the highest-paid employees for energy services companies. For the top five highest-paid employees, our employees’ pay opportunity is 91 percent of the median; while our top 10, 15, and 20 highest-paid employees have a pay opportunity that is 92 percent, 87 percent and 85 percent, respectively, of the median.

We also conducted a separate analysis of the 2015 executive pay of the 13 other companies in our peer group. This internal analysis, which was based on proxy data, examined base salary, bonus, other annual compensation, equity awards, and non-equity incentive plan compensation (and excluded change in pension value). Using this analysis, our named executive officers had average pay of $1.03 million in 2015, which was less than all but three of the companies in our peer group; while the peer group median had average pay per named executive officer of approximately $1.33 million. For 2015, our CEO’s total pay was approximately 80 percent of the median
AGGREGATE PAY OPPORTUNITY
FOR HIGHEST-PAID EMPLOYEES
top20payopp2017a01.jpg
*Top 5 is based on 2016 proxy data of energy services companies. Top 10, Top 15, and Top 20 are based on a Willis Towers Watson survey of energy services companies. Values exclude any change in pension value.
total pay of CEOs in our peer group.
These analyses demonstrate that, on average, our highest paid employees are paid at a level that is below the median of our peer group and industry. We also are cognizant of prevailing economic conditions, internal pay equity, and executive turnover, which our Compensation Committee takes into account when determining executive compensation.
CEO Pay Ratio and Wealth Accumulation
We believe executive pay must be internally consistent and equitable to motivate our employees to create shareholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay our executive officers receive and the pay our non-managerial employees receive. The Compensation Committee reviewed a comparison of CEO pay (base salary and incentive pay) to the pay of all our employees in 2016.2017. The compensation for our CEO in 20162017 was approximately 2223 times the median pay of our full-time employees.employees as compared to 22 times in 2016, using the same methodology.
22:23:1
CEO Pay Ratio
Since 2010, we have voluntarily disclosed our CEO to median employee pay ratio in our proxy statement. Beginning with our 2018 proxy statement, such disclosure will be required under the Dodd-Frank Act.
Our CEO to median employee pay ratio is calculated in accordance with what the SEC will require in our 2018 proxy statement pursuant to Item 402(u) of Regulation S-K. We identified the median employee by examining the 20162017 total cash compensation for all individuals excluding(excluding our CEO,CEO) who were employed by us on December 16, 2016,15, 2017, the last day of our payroll year.year (last year, we also used the last day of our payroll year). We included all employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, and we did not annualize the compensation for any full-time employees that were not employed by us for all of 2016.2017. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately seven percent of our employees receive annual equity awards.
Our determination of the median employee yielded two median employees because we had an even number of employees. After identifying the two median employeeemployees based on total cash compensation, we calculated annual total compensation for each such employee using the same methodology we use for our named executive officers as set forth in the 20162017 Summary Compensation Table later in this proxy statement.statement and selected the employee with the lower total compensation to compute the ratio.
       
   CEO to Median Employee 
   Pay Ratio 
   President
and CEO		 Median Employee 
 Base Salary$607,232
 $81,939
 
 Stock Awards1,497,280
 —
 
 Non-Equity Incentive Plan Compensation605,836
 3,363
 
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings (1)
94,609
 9,617
 
 All Other Compensation43,322
 29,580
 
 TOTAL$2,848,279
 $124,499
 
      
 CEO Pay to Median Employee Pay Ratio23
:1 
 (1)    These amounts are attributable to a change in the value of each individual’s defined benefit pension account balance and do not represent earned or paid compensation. Pension values are dependent on many variables including years of service, earnings, and actuarial assumptions. 
       


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Compensation Discussion and Analysis


As illustrated in the table below, our 2016 CEO to median employee pay ratio is 22:1. In 2015 the ratio was 19:1.
       
   CEO to Median Employee 
   Pay Ratio 
   President
and CEO		 Median Employee 
 Base Salary$590,641
 $87,525
 
 Stock Awards1,454,138
 —
 
 Non-Equity Incentive Plan Compensation538,403
 1,086
 
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings (1)
68,952
 8,211
 
 All Other Compensation97,933
 27,186
 
 TOTAL$2,750,067
 $124,008
 
      
 CEO Pay to Median Employee Pay Ratio22
:1 
 (1)    These amounts are attributable to a change in the value of each individual’s defined benefit pension account balance and do not represent earned or paid compensation. Pension values are dependent on many variables including years of service, earnings, and actuarial assumptions. 
       
The Compensation Committee reviews annually the wealth accumulation of our executives, considering all of the elements of total pay each executive officer receives during the prior five-year period, including base salaries, annual cash incentive payouts, the value of long-term incentive awards and any special payments made to an individual executive. The Compensation Committee also reviews the projected value of each executive officer’s accumulated equity grants over the subsequent five-year period based upon various stock appreciation and “stay to normal retirement” scenarios. This is done to analyze not only the amount of pay each executive officer has accumulated to date, but also to better understand how current equity grants may affect the amount of wealth executive officers accumulate in the future.
Pay Components
    
 The primary pay components for our executive officers in 20162017 were: 
 ●Base Salary; 
 ●Annual performance-based cash incentive awards; and 
 ●Long-term performance-based equity incentive awards in the form of performance units and ERRP restricted share units. 
    
The Compensation Committee believes these pay components align the interests of our executives and our shareholders by basing a significant portion of total pay on performance and achievement of our short- and long-term goals. The specific mix among the individual components reflects market comparisons (primarily with respect to the median of our peer group) and individual position and performance. Base salary represents 2322 percent of our CEO’s targeted total pay and, on average, 42 percent of our other named executive officers’ targeted total pay. Performance-based awards (annual and long-term incentive) represent the remaining portion of targeted pay.
The Compensation Committee also believes that our executive pay program appropriately mitigates the risk associated with incentive-based pay. The Compensation Committee has designed the entire program and the metrics under our annual and long-term performance-based incentive awards to curb inappropriate risk taking. For example, we do not offer guaranteed bonuses. In addition, our annual and long-term performance-based incentive awards utilize multiple performance metrics which vary from plan to plan, and rewards under those plans are aligned with the interests of our shareholders. If our shareholders benefit from our performance, our executive officers are rewarded. Our ERRP restricted share units also benefit our long-term succession and strategic plan by providing for payment only after the recipient leaves employment with us, and then over a five-year period. Furthermore, we have limited severance packages, we do not maintain a non-performance-based supplemental executive retirement plan,


22
Compensation Discussion and Analysis

and our retirement, healthcare, and welfare benefit programs for executives are generally the same as for all employees and are discussed in the 20162017 Executive Pay section of this proxy statement. Finally, we maintain stock ownership guidelines for our executives. In light of these pay practices, the Compensation Committee believes that our executive pay program appropriately address the risks associated with performance-based incentives.
Base Salary
The general guideline for determining salary levels for our executive officers, including the CEO, is to be around the median of our peer group, adjusted for other factors such as trade area economics, turn-over, tenure, and experience. Adjustments from peer group levels are made based on experience in the position, industry experience, and individual performance and responsibilities. While we are cognizant of the competitive range, our primary goal is to compensate our executives at a level that best achieves our pay philosophy, whether or not this results in actual pay for some positions that may be higher or lower than the market median. We find that survey results for particular positions can vary from year to year. Thus, we consider market trends for certain positions over a period of several years rather than a one-year period in setting pay for such positions.
The Compensation Committee considers adjustments to base salaries for the executive officers on an annual basis. For 2017, the Compensation Committee felt that an increase to the base salaries of our executive officers in line with the increases provided to our employees generally was reasonable in light of the company’s operating results in 2016. To remain competitive with the market, the Compensation Committee also considered the effect of such increased salaries for our executive officers in relation to the median of our peer group. The table following this


21
Compensation Discussion and Analysis


paragraph sets forth the base salaries for our named executive officers. The base salary adjustments for 2017 were effective April 1, 2017.
The Compensation Committee considers adjustments to base salaries for the executive officers on an annual basis. For 2016, the Compensation Committee felt that an increase to the base salaries of our executive officers in line with the increases provided to our employees generally was reasonable in light of the company’s operating results
in 2015. To remain competitive with the market, the Compensation Committee also considered the effect of such increased salaries for our executive officers in relation to the median of our peer group. The table to the right sets forth the base salaries for our named executive officers. The base salary adjustments for 2016 were effective April 1, 2016.        
   Annualized Base Salary 
Increase
(%)
 Name 
2015
($)
 
2016
($)
 
 Robert C. Rowe 578,231 595,578 3.0
 Brian B. Bird 399,952 411,951 3.0
 Heather H. Grahame 350,208 360,714 3.0
 Curtis T. Pohl 271,769 279,922 3.0
 Bobbi L. Schroeppel 250,551 258,068 3.0
  Annualized Base Salary 
Increase
(%)
  2016 2017 
Name ($) ($) 
Robert C. Rowe 595,578 611,956 2.75
Brian B. Bird 411,951 423,280 2.75
Heather H. Grahame 360,714 370,634 2.75
Curtis T. Pohl 279,922 287,620 2.75
Bobbi L. Schroeppel 258,068 265,810 3.00
Annual Cash Incentive Awards
The overall design of our 20162017 annual cash incentive plan was the same as the 20152016’s plan. The plan uses financial (net income) and operational (safety, reliability, and customer care) performance metrics to motivate employees to meet and exceed annual company objectives that are a part of our strategic plan. All regular, non-union employees, including executive officers, participate in the same annual incentive plan; while our union employees participate in a separate, but similar, management-designed program.
Each participating employee has a targeted annual cash incentive award, expressed as a percentage of base salary. Actual payouts for awards reflect the company’s performance against the metrics, as well as the employee’s individual performance. No portion of the annual cash incentive award is guaranteed.
The Compensation Committee calculates the actual payout pursuant to the following formula, which reflects four factors:
(1) (2) (3) (4)  
Base
Salary
x
Individual Target Incentive
(% of Base Salary)
x
Plan
Funding
Percentage
(performance vs. metrics)
xIndividual Performance Multiple=Individual Payout
For example, the Compensation Committee calculated the annual incentive payout for our CEO in 20162017 as follows:
$595,578x80%x113%x1=$538,403


23
Compensation Discussion and Analysis


$611,956x100%x99%x1=$605,836
(1) Base Salary
Base salary is the first component in the calculation of the annual cash incentive award. Base salary is described in the Base Salary section immediately preceding this Annual Cash Incentive Awards discussion.
(2) Individual Target Incentive
Each year, the Compensation Committee approves an annual incentive target, expressed as a percentage of base salary, for each executive. The target opportunity for our executive officers is derived in part from peer group and competitive survey analysis data and in part by the Compensation Committee’s judgment on the internal equity of the positions, scope of job responsibilities, and each executive’s industry experience and tenure. Potential adjustments to the annual incentive target for the executive officers are considered by the Compensation Committee on an annual basis.


22
Compensation Discussion and Analysis

The Compensation Committee did not adjust the target incentive opportunity for any of our named executive officers (or any of our other executive officers) in 2016 because the Compensation Committee believed the targets were appropriate and commensurate with the responsibilities of those executives. The table to the right sets forth the 2016 annual incentive target opportunity for our named executive officers.   2016
 Name Base Salary Target Incentive Opportunity
(% of base salary)		 Target Incentive Opportunity ($)
 Robert C. Rowe $595,578 80% $476,462
 Brian B. Bird $411,951 50% $205,976
 Heather H. Grahame $360,714 45% $162,321
 Curtis T. Pohl $279,922 40% $111,969
 Bobbi L. Schroeppel $258,068 35% $90,324
In 2017, the Compensation Committee adjusted the target incentive opportunity for our chief executive officer only, increasing the opportunity to 100 percent from 80 percent in 2016. The Compensation Committee believed this increase was appropriate to align his incentive opportunity with his peers. The table to the right sets forth the 2017 annual incentive target opportunity for our named executive officers.   2017
 Name Base Salary Target Incentive Opportunity
(% of base salary)		 Target Incentive Opportunity ($)
 Robert C. Rowe $611,956 100% $611,956
 Brian B. Bird $423,280 50% $211,640
 Heather H. Grahame $370,634 45% $166,785
 Curtis T. Pohl $287,620 40% $115,048
 Bobbi L. Schroeppel $265,810 35% $93,034
(3) Plan Funding Percentage
Before each annual incentive plan year begins, management proposes specific performance targets for the plan’s financial and operational measures. The Compensation Committee considers the proposed targets, and the Compensation Committee and the Board approve final targets. Following the end of the plan year, the Compensation Committee reviews data submitted by management regarding company performance against each of the specific performance targets and determines the degree to which each performance measure was met during the year, subject to Board approval. The aggregate percentage of financial and operational measures met during the year represents the plan funding percentage for the annual incentive plan.
For our executives, the funding (as a percentage of target) under the annual incentive plan has ranged from 80 percent to 125 percent for the five previous years, as set forth in the table to the right. 
Historical Funding of Annual Cash Incentive
(as a percentage of target)
 2011201220132014
2015 (1)
 101%98%108%125%80%
      
 (1) Due to a work-related fatality in 2015, the funding level of the annual cash incentive for executives was 80% (for non-executive employees, the plan was funded at 88%).
For our executives, the funding (as a percentage of target) under the annual incentive plan has ranged from 80 percent to 125 percent for the five previous years, as set forth in the table to the right. 
Historical Funding of Annual Cash Incentive
(as a percentage of target)
 2012201320142015 (1)2016
 98%108%125%80%113%
 (1) Due to a work-related fatality in 2015, the funding level of the annual cash incentive for executives was 80% (for non-executive employees, the plan was funded at 88%).
The Compensation Committee may use discretion in increasing or decreasing the plan funding percentage from actual performance due to specific facts and circumstances, such as current economic conditions as well as unusual one-time events that significantly impact financial or non-financial results. The Compensation Committee exercises this discretion only for unusual, non-operational items.
For many years, including 2016,2017, the annual incentive plan has used four categories of performance measures to determine the plan funding percentage – financial, safety, reliability, and customer satisfaction. The relative weightings of these measures isare set forth in the graphic onto the following page.


24
Compensation Discussion and Analysis

right.
In order for any awards under the 20162017 annual incentive plan to be earned and paid out, the company must attain at least 90 percent of the budgeted net income target, which coincides with the threshold net income target for the plan. This metric for determining performance against our financial goal is derived from our audited financial statements. However, the Compensation Committee, in its discretion, may consider certain items or events as unusual when determining performance against the metric and make what it deems to be appropriate adjustments. There were no adjustments in 2016.2017. In addition, the 20162017 annual incentive plan provided that the lost-time incident rate portion of the safety metric would be forfeited in the event of a work-related fatality, unless the Compensation Committee determined that no actions on the part of the employee or the Company contributed to the incident. Annual Incentive Plan Metrics
 
pieanninc2017.jpgpieanninc2017a06.jpg
In two incredibly important ways, 2016 was a record year for us. We achieved our best ever annual safety performance and attainedcontinued to achieve high levels of customer satisfaction in 2017, achieving our highest ever J.D. Power overall customer satisfaction score. Our employees completed their work more safely andscore, which was an increase over our customers appreciated their efforts more than ever.
previously highest score in 2016. The table that followson the following page shows the associated performance metrics (including threshold, target, and maximum levels),


23
Compensation Discussion and Analysis


weighting and plan payout percentage for each of the 20162017 performance measures, which resulted in the plan funding at 11399 percent of target for our named executive officers.
 2016 Annual Incentive Plan Information
2017 Annual Incentive Plan Information
Performance Measures 
Weight
(% of Total Plan Payout)
 Performance Level Target % Achieved Final Funding % of Total
Weight
(% of Total Plan Payout)		 Performance Level Target % Achieved Final Funding % of Total
Threshold Target Maximum Actual AchievedThreshold Target Maximum Actual Achieved
              


 
 
 
 
 
 
Financial (55%)(1)
              


 
 
 
 
 
 
Net Income ($ in millions) (1) 55% $144.4 $160.5
 $176.5
 $164.2 111.6% 61.4

55% $148.4 $164.9
 $181.4
 $162.7 93.4% 51.3
              

 
 
 
 
 
 
Safety (15%) (2)              

 
 
 
 
 
 
Lost Time Incident Rate 7.5% 0.8
 0.65
 0.34
 0.31
 150.0% 11.3

5% 0.70
 0.55
 0.30
 0.51
 108.0% 5.4
Total Recordable Incident Rate 7.5% 2.3
 2.0
 1.5
 1.31
 150.0% 11.3

5% 2.00
 1.70
 1.40
 1.92
 63.3% 3.2
Safety Training Completion 5% 93.0% 96.0% 99.0% 99.2% 150.0% 7.5
              

 
 
 
 
 
 
Reliability (15%) (3)              

 
 
 
 
 
 
SAIDI (excluding major event days) 5.0% 123.00
 108.00
 97.00
 95.67
 150.0% 7.5

5.0% 122.00
 107.00
 94.00
 114.96
 73.5% 3.7
SAIDI (including major event days) 5.0% 191.00
 123.00
 108.00
 129.22
 95.4% 4.8

5.0% 191.00
 130.00
 103.00
 131.81
 98.5% 4.9
Gas – Leaks per 100 Miles of Main
2.5% 7.50
 6.00
 4.20
 4.20
 150.0% 3.8
Gas – Damages per 1000 Locates 2.5% 2.62
 2.12
 1.72
 2.20
 92.0% 2.3

2.5% 2.50
 2.10
 1.70
 2.30
 75.0% 1.9
Gas – Leaks per 100 Miles of Main 2.5% 7.55
 6.05
 4.84
 3.60
 150.0% 3.8
              

 
 
 
 
 
 
Customer Satisfaction (15%) (4)              

 
 
 
 
 
 
JD Power Residential Electric and
Gas Survey Performance Ranking
 5% 638.0
 656.0
 661.0
 687.2
 150.0% 7.5

5% 650.00
 688.00
 692.00
 696.60
 150.0% 7.5
Operational Performance –
Customer Survey by Flynn Wright
 5% 36.62 38.55 40.48 37.29 67.4% 3.4

5% 33.73 37.48 41.23 37.54 100.8% 5.0
Reputational Perceptions –
Customer Survey by Flynn Wright
 5% 36.56
 38.48
 40.40
 36.40
 —% —

5% 33.16
 36.84
 40.52
 36.54
 95.9% 4.8
              


 

 

 

 

 

 
       TOTAL FUNDING PERCENTAGE  113%


 

 

 TOTAL FUNDING PERCENTAGE  99.0%
(1)
Net Income.Financial. The net income target is based upon the Board approved budget for the plan year, and the actual achieved is determined by what is reported in our annual report on Form 10-K for the plan year.
(2)
Safety. Safety performance regarding Lost Time Incident Rate and Total Recordable Incident Rate is calculated according to Occupational Safety and Health Administration (OSHA) standards. OSHA specifically defines what workplace injuries and illnesses should be recorded and, of those recorded, which must be considered lost time incidents. The threshold level for the safety measures represents our five-year average performance for these metrics, which is significantly above our Edison Electric Institute (EEI) peer group average; the target level is significantly above our peer group average and represents a 15 percent improvement over our five-year average performance for lost time incident rate and total recordable incident rate; and the maximum represents topfirst quartile performance for our EEI peer group and a significant improvement over historical company performance.Safety Training Completion includes completion of assigned safety training for all employees through an internal education portal, and is calculated by dividing the difference of total courses assigned less total courses overdue by the total courses assigned.


25
Compensation Discussion and Analysis


(3)
Reliability. SAIDI (excluding major event days). System Average Interruption Duration Index (SAIDI) is a system reliability index used by us and participating Institute of Electrical and Electronic Engineers, Inc. (IEEE), utilities to measure the duration of interruptions on a utility’s electric system. SAIDI indicates the total duration of interruption for the average customer during a predefined period of time. The threshold level for SAIDI, excluding major event days, represents a 20 percent improvement of the five-year average performance for IEEE medium-sized utilities; the target level represents a 20 percent improvement over the difference between the company’s five-year average results and the maximum level; and the maximum level is the five-year average of first quartile performance of IEEE medium-sized utilities.
SAIDI (excluding major event days). System Average Interruption Duration Index (SAIDI) is a system reliability index used by us and participating Institute of Electrical and Electronic Engineers, Inc., utilities to measure the duration of interruptions on a utility’s electric system. SAIDI indicates the total duration of interruption for the average customer during a predefined period of time. The threshold level for SAIDI, excluding major event days, represents first quartile performance within rural and suburban medium sized investor owned utilities; the target level represents a 20 percent improvement over the difference between the company’s five-year average results and the maximum level; and the maximum level is equal to the company’s best SAIDI performance (excluding major event days) which was achieved in 2009.
SAIDI (including major event days). The threshold for SAIDI, including major event days, represents first quartilea 20 percent improvement of the five-year average performance within rural and suburban medium sized investor ownedfor IEEE medium-sized utilities; the target level represents a 20 percent improvement over the gap between the company’s five-year average results and the maximum level; and the maximum level is equal to the company’s best SAIDI, including major event days, in the last five years.
Damages per 1000 Locates. This natural gas reliability metric assesses the effectiveness of the company’s programs to prevent damage to its natural gas system. The threshold level represents the company’s three-yearfive-year average and is approximately 10 percent better than second quartile performance as reported in a leak reporting survey conducted by the American Gas Association (AGA); the target level represents a twenty percent improvement over the company’s three-yearfive-year average; and the maximum level represents a 35 percent improvement over the company’s three-yearfive-year average.
Leaks per 100 Miles of Main. This natural gas reliability metric assesses the overall performance of the company’s natural gas system. The threshold level represents a level 50 percent improvement abovebetter than second quartile average performance as reported by the AGA; the target level represents the company’s three-yearfive-year average, which is first quartile performance; and the maximum level represents a 2030 percent improvement over the company’s three-year average.five-year average, well into first quartile performance.


24
Compensation Discussion and Analysis

(4)
Customer Satisfaction.J.D. Power. One customer satisfaction metric is measured by the broadly utilized J.D. Power residential electric and gas customer satisfaction surveys and studies, which include the following components: communications, corporate citizenship, billing and payment, price, power quality and reliability (electric) or field service (gas) and customer service. The threshold level represents the company’s five-year average; the target level is an improvement of one point over our best ever score, which we achieved in 2016; and the maximum level is a five point improvement over our 2016 best ever score, which would be first quartile performance based on 2016 data.
J.D. Power. One customer satisfaction metric is measured by the broadly utilized J.D. Power residential electric and gas customer satisfaction surveys and studies, which include the following components: communications, corporate citizenship, billing and payment, price, power quality and reliability (electric) or field service (gas) and customer service. The threshold level represents the company’s five-year average; the target level is an improvement of one point over our best ever score, which we achieved in 2015; and the maximum level is a five point improvement over 2016 target, which would be first quartile performance based on 2015 data.
Flynn Wright Surveys. The remaining two customer satisfaction metrics are measured based on the results of a 20162017 customer tracking survey conducted on our behalf by Flynn Wright, a full service advertising, marketing, public relations, web design, interactive and research advertising agency. For both of these metrics, the threshold level is set fiveten percent below target; the target level represents our average scoresscore for 2013-2015;three waves of surveys from Fall 2016 to Fall 2017; and the maximum level is set at fiveten percent above target.
(4) Individual Performance Multiple
After the Compensation Committee determines the plan funding percentage, the committee determines an individual performance multiple for each executive, which is factored into the incentive payout calculation. To make this determination, the Compensation Committee analyzes the total mix of available information, as well as actual performance measured against pre-established goals.
The company’s successes in 2017 were due to the substantial efforts of our executive officers and many other employees across all departments of the company. As a result of the factors noted above, the Compensation Committee determined that it was appropriate to award each named executive officer (and the other executive officers) the annual cash incentive award as provided by the 2017 annual cash incentive plan, without the addition of any performance multiplier. Actual 2017 annual cash incentive awards for the named executive officers are reflected in the following table.
The company’s successes in 2016 were due to the substantial efforts of our executive officers and many other employees across all departments of the company. As a result of the factors noted above, the Compensation
Committee determined that it was appropriate to award each named executive officer (and the other executive officers) the annual cash incentive award as provided by the 2016 annual cash incentive plan, without the addition of any performance multiplier. Actual 2016 annual cash incentive awards for the named executive officers are reflected in the table to the right.
        
 Name 
2016 Target Cash Incentive, as Percent of Base Salary
(%)
 
2016 Actual Cash Incentive, as Percent of Base Salary
(%)
 
2016 Cash Incentive Award
 ($)
 Robert C, Rowe 80.0 90.4 538,403
 Brian B. Bird 50.0 56.5 232,752
 Heather H. Grahame 45.0 50.9 183,603
 Curtis T. Pohl 40.0 45.2 126,525
 Bobbi L. Schroeppel 35.0 39.6 102,195
 2017
NameBase Salary Target Cash Incentive, as % of Base Salary Funding Percentage Individual Performance Multiple Actual Cash Incentive, as % of Base Salary 
Cash Incentive Award
 ($)
Robert C. Rowe$611,956
 100% 99% 1.00 99.0% $605,836
Brian B. Bird$423,280
 50% 99% 1.00 49.5% $209,524
Heather H. Grahame$370,634
 45% 99% 1.00 44.6% $165,117
Curtis T. Pohl$287,620
 40% 99% 1.00 39.6% $113,898
Bobbi L. Schroeppel$265,810
 35% 99% 1.00 34.7% $92,103
   
 Clawback of Annual Cash Incentive Awards
 Although we have not adopted a formal clawback policy, the annual cash incentive awards are specifically made subject to any formal clawback policy that we may adopt in the future.
   
Long-Term Performance-Based Equity Incentive Awards
We have used our Equity Compensation Plan to provide for the award of long-term, performance-based equity incentive awards to our executive officers. These performance-based awards help us achieve our compensation


26
Compensation Discussion and Analysis

philosophy of being market competitive while simultaneously aligning the interests of our executives and shareholders.
The Equity Compensation Plan authorizes several types of stock-based awards, including restricted stock and a variety of performance-based awards. In 2016,2017, the Compensation Committee granted two types of long-term, equity incentive awards to our executives under the Equity Compensation Plan: (1) LTIP performance units with cliff vesting after a three-year performance period; and (2) a smaller award of ERRP restricted share units with cliff vesting after a five-year performance period and a payout over five years following the executive’s separation from service with the company. All of these 20162017 awards are performance-based and payable, if and when earned, in shares of our common stock.
LTIP Performance Units. The Compensation Committee determines the terms and restrictions applicable to grants of LTIP performance units. After the company’s financial results are available for the prior year, the


25
Compensation Discussion and Analysis


Compensation Committee approves the annual grant of LTIP performance units to our executive officers (and approximately 115 other participants in 2016 ).2017). The awards of LTIP performance units are intended to provide a link between executive officer compensation and long-term shareholder interests as reflected in changes in our stock price, and to motivate and reward achievement of pre-established corporate financial goals and relative TSR. The Compensation Committee believes that making an annual grant of LTIP performance units motivates our executive officers (and the other participants) to focus on long-term, sustainable improvement in shareholder value because the award payout is tied to financial performance and continued service over a three-year period with cliff vesting at the end of such period, and the ultimate value delivered is dependent upon the value of our stock.
During the performance periods summarized in the table below, the performance measures for the LTIP awards included (1) a combined financial metric comprised of ROAE and either average EPS or net income growth, contributing 50 percent of the payout, and (2) TSR relative to our peer group, also contributing 50 percent of the payout. The table below shows, for the past five completed performance periods, the contribution of these two performance measures (and our relative TSR ranking within our peer group when calculated as required by the LTIP) to the overall payout (expressed as a percentage of target).
 Performance Period
 2010-20122011-20132012-20142013-20152014-2016
Financial Measures Payout Percentage143.2%59.9%156.7%154.5%78.3%
Relative TSR4th of 124th of 122nd of 152nd of 158th of 14
Relative TSR Payout Percentage125.0%125.0%180.0%180.0%30.0%
Total Payout Percentage134.1%92.5%168.4%167.3%108.3%
Historical Funding of LTIP (as a percentage of target)
2011-20132012-20142013-20152014-20162015-2017
92.5%168.4%167.3%108.3%44.9%
ERRP Restricted Share Units. In 2011, the Compensation Committee made the first annual grants of ERRP restricted share units. The Compensation Committee instituted the practice of granting ERRP restricted share units to bring the long-term incentive component of our executives’ compensation in line with the median of our peers, while simultaneously encouraging retention with the five-year cliff vesting component and providing retirement benefits. The ERRP share units also encourage succession planning and continuity of our strategic plan through the five-year payout of vested awards following the executive officer’s separation from service with the company. The key distinction between these awards and the non-performance-based supplemental executive retirement plans that certain of our peers and many other companies provide is that our ERRP restricted share units are earned based upon company performance.
The number of ERRP restricted share units that the Compensation Committee has granted annually has been considerably fewer than the grants of performance units. Like the performance units described above, these restricted share units are intended to provide a link between executive officer compensation and retirement planning and long-term shareholder interests and to motivate and reward achievement of pre-established corporate financial goals. The Compensation Committee believes that an annual grant of restricted share units motivates our executive officers to focus on long-term, sustainable improvement in our business because (1) vesting of the award is tied to financial performance and continued service over a five-year period and (2) payout of the vested award occurs over a five-year period following the executive officer’s separation from service with the company. On December 31, 2016, the first ERRP grants vested.


27
Compensation Discussion and Analysis


20162017 Long-Term Incentive Program Performance Unit Grants
In February 2016,2017, the Compensation Committee approved grants of LTIP performance units subject to a three-year performance period with cliff vesting at the end of such period. The target long-term equity opportunities for each executive officer are derived from peer group and competitive survey data and from the Compensation Committee’s judgment on the internal equity of the positions and scope of job responsibilities. To determine the target value of each executive officer’s LTIP performance unit awards, the Compensation Committee considered the range for comparable roles within our peer group, with consideration given to the strategic value of each position. Based on these considerations, in 2016,2017, the Compensation Committee increased the targeted opportunity (expressed as a percentage of base salary) associated with the LTIP awards for our CEO and twoone of our named executive officers to better align with the market median.
Each executive officer’s targeted opportunity is converted into specific LTIP performance unit grants by dividing the total targeted value (the targeted percentage of base salary) by the weighted average fair value of a share of our stock on the grant date, less the present value of expected dividends. The resulting calculation represents the number of LTIP performance units that were granted and will vest on December 31, 2018,2019, if all performance goals are met at the target performance level.


26
Compensation Discussion and Analysis

The target equity opportunities (value at target and number of shares) for the 2016 grants of LTIP performance units are shown in the table to the right. The table also compares the target opportunities (expressed as a percentage of base salary) applicable to the 2015 and 2016 awards.    Target LTIP Performance Unit Opportunity for 2016
 Name2015
Base Salary
(%)		 
2016
Base Salary
(%)
 
2016
Value at Target
 ($)
 
LTIP Stock Awards
(#) (1)
 Robert C. Rowe150 200 1,156,462
 22,982
 Brian B. Bird100 100 399,952
 7,948
 Heather H. Grahame70 80 280,166
 5,568
 Curtis T. Pohl60 60 163,061
 3,240
 Bobbi L. Schroeppel40 50 125,276
 2,490
         
 (1) Based on a weighted average grant date fair value of $50.32, which was calculated using the closing stock price of $58.16 on February 10, 2016, less the present value of expected dividends
The target equity opportunities (value at target and number of shares) for the 2017 grants of LTIP performance units are shown in the table to the right. The table also compares the target opportunities (expressed as a percentage of base salary) applicable to the 2016 and 2017 awards.    Target LTIP Performance Unit Opportunity for 2017
  2016 2017 2017  
 NameBase Salary
(%)		 
Base Salary
(%)
 
Value at Target
 ($)
 LTIP Stock Awards (1)
 Robert C. Rowe200% 200% 1,191,156
 24,821
 Brian B. Bird100% 100% 411,951
 8,584
 Heather H. Grahame80% 80% 288,571.2
 6,013
 Curtis T. Pohl60% 60% 167,953.2
 3,500
 Bobbi L. Schroeppel40% 50% 129,034
 2,689
         
 (1) Based on a weighted average grant date fair value of $47.99, which was calculated using the closing stock price of $57.40 on February 16, 2017, less the present value of expected dividends
After the performance period, the Compensation Committee calculates the actual company performance relative to the performance goals and determines the number of LTIP performance units that vest based on such performance. Depending on performance, the exact number of units that vest will vary from zero to 200 percent of the target award. In addition, the value of the award on payout will depend on the market price of our common stock on the date of payout.
The performance goals for these awards are independent of each other and are equally weighted. Vesting of awards is also contingent on maintaining investment grade secured and unsecured credit ratings. The following table summarizes the performance measures for the 20162017 LTIP performance unit awards.
Performance Measures — 2016-2018 Threshold Target Maximum
Performance Measures — 2017-2019
Threshold
Target
Maximum
Financial Goals – 50%      





ROAE 8.95% 9.70% 10.45%
9%
9.60%
10.2%
Simple Average EPS Growth 1.2% 4.2% 7.2%
0.4%
2.4%
4.4%
TSR – 50%      
     
Relative Average vs. Peers 13th
 6th
 1st

13th

6th

1st
In general, based on a market analysis conducted by Willis Towers Watson, our performance levels for relative TSR are established at levels higher than our peers and the market. For example, according to this market analysis, we use a ranking of 1st for maximum, while the market uses 3rd; we use a ranking of 6th for target, while the market uses 8th; and our threshold of 13th pays at ten percent, and 9th pays at 50 percent, while the market threshold of 12th pays at 50 percent.
The ROAE and simple average EPS growth levels are tied to management performance as these goals relate to revenue enhancement and cost containment. TSR is determined by our common stock price change and


28
Compensation Discussion and Analysis

dividends paid over the performance period. We then compare our TSR with the total shareholder returns achieved by our peers over the same three-year period and determine our ranking.
20162017 Executive Retention / Retirement Program Restricted Share Unit Grants
In December 2016,2017, the Compensation Committee approved performance-based ERRP restricted share unit grants. These restricted share unit awards are subject to a five-year performance and five-year cliff vesting period and, once vested, will be paid out in shares of the company’s common stock over a five-year period after a recipient has separated from service with the company.
Our overall compensation program does not provide any non-performance-based supplemental executive retirement benefit. The Compensation Committee designed and implemented the ERRP in lieu of a traditional supplemental executive retirement plan which is not performance-based but is offered by many of our peers and other companies to increase overall competitiveness. The ERRP restricted share units help to achieve our compensation philosophy of being market competitive while aligning the interests of our executives and shareholders. It also promotes retention through the five-year cliff vesting component and benefits succession planning and continuity of our strategic plan through its five-year payout following separation from service.


27
Compensation Discussion and Analysis


The long-term equity opportunity for the ERRP is derived from peer group and competitive survey data and from the Compensation Committee’s judgment on the internal equity of the positions and scope of job responsibilities. To determine the value of each executive officer’s ERRP restricted share unit award, the Compensation Committee considered the range for comparable roles within our peer group, with consideration given to each position’s strategic value, and the overall long-term equity opportunity offered to that group. For 2016,2017, the Compensation Committee reviewed the equity incentive opportunities provided to our peer group to analyze whether the targeted ERRP restricted share unit awards to our executive officers approximated the peer group median. Based on its review, the Compensation Committee determined that no changes were required for the 20162017 ERRP restricted share unit awards.
The target equity opportunities for the 20162017 ERRP restricted share unit grants to our named executive officers, based on a percentage of base salary, are shown in the table below. The 20162017 grants offered the same targeted opportunity that was provided by the 20152016 ERRP grants. Each executive officer’s 20162017 award value was converted into specific equity grants by dividing the total potential value of the award by the fair market value of a share of our stock on the grant date. This represents the number of restricted share units that will vest on December 31, 2021,2022, if the company’s net income for three of the five calendar years 20172018 – 20212022 exceeds the company’s net income for 2016.2017. The value of the award on the grant date, as reflected in the below table, is based on the closing market price of our stock on the grant date, less the present value of expected dividends. If earned, the value of the award on payout will depend on the market price of our common stock on the date of payout.
 2016 Target ERRP Opportunity  2017 Target ERRP Opportunity
Name 
2016
Base Salary (%)
 
Value at Grant Date
 ($)
 
ERRP
 Stock Awards (1) (#)
 2017
Base Salary ($)		 Award % of
Base Salary (%)		 
Value at Grant Date
 ($)
 
ERRP
 Stock Awards (1) (#)
Robert C. Rowe 50.0 297,789
 6,505
 $611,956 50.0% 305,978
 5,862
Brian B. Bird 25.0 102,988
 2,250
 $423,280 25.0% 105,820
 2,027
Heather H. Grahame 20.0 72,143
 1,576
 $370,634 20.0% 74,127
 1,420
Curtis T. Pohl 20.0 55,984
 1,223
 $287,620 20.0% 57,524
 1,102
Bobbi L. Schroeppel 15.0 38,710
 846
 $265,810 15.0% 39,872
 764
(1)
Based on a grant date fair value of $45.78,$52.20, which was calculated using the closing stock price of $55.70$62.12 on December 7, 2016,12, 2017, less the present value of expected dividends, calculated using a 1.82.18 percent five-year Treasury rate and assuming quarterly dividends of $0.52$0.525 for the five-year vesting period.period, based on announced planned dividend of $2.20 per share for 2017.
Vesting of 20142015 Long-Term Incentive Program Performance Unit Grants in 20162017
In February 2014,2015, the Compensation Committee approved grants of LTIP performance units, subject to a three-year performance period. The 20142015 LTIP performance unit grants vested on December 31, 2016.
2017. The performance goals were independent of each other and equally weighted. The table on the following pagetable summarizes the performance measures which governed these 20142015 grants.


29
Compensation Discussion and Analysis


Performance Measures — 2014-2016 Threshold Target Maximum Actual
Performance Measures — 2015-2017 Threshold Target Maximum Actual
Financial Goals – 50%                
ROAE 9.0% 10.0% 11.0% 10.3% 9.0% 9.6% 10.2% 9.8%
Average EPS Growth 3.3% 6.3% 9.3% 11.6% 0.4% 2.4% 4.4% 3.7%
Market Goal – 50%                
Relative TSR Average vs. Peers 13th
 6th
 1st
 8th
 13th
 6th
 1st
 12th
Depending upon actual company performance relative to these performance goals, the exact number of shares that could have vested ranged from zero to 200 percent of the target award. As summarized above in the 20162017 Long-Term Incentive Program Performance Unit Grants section, our relative TSR metrics are established at levels higher than our peers according to a market analysis conducted by the Compensation Committee’s independent compensation consultant. At the conclusion of the performance period, the Compensation Committee calculated the company’s performance relative to these goals during the three-year performance period to determine the vesting percentage for the 20142015 LTIP performance unit grants.
For the financial goals related to the 20142015 LTIP performance unit grants, ROAE was 10.39.8 percent and average EPS growth was 11.63.7 percent. This financial performance resulted in a 78.334.9 percent vesting percentage for that half of the


28
Compensation Discussion and Analysis

program. For our market goal, TSR was 44.514.4 percent, resulting in a ranking of eighth12th with respect to our peers, and contributing 30.010.0 percent with respect to that half of the program.
For purposes of our LTIP, we calculate TSR by comparing the average closing price for a share of common stock of us and our peers during the period beginning 10 days prior to the end of the performance period and ending 10 days after the performance period plus the cumulative dividends earned during the performance period, to the average closing price of a share of common stock of us and our peers during the period beginning 10 days prior to the start of the performance period and ending 10 days after the start of the performance period. Our Compensation Committee believes that calculating relative TSR using the 20-day average share price around the beginning and end of the performance period results in a more accurate reflection of return for the period that is less impacted by stock market activity on the first and last days of the performance period.
Based on the Compensation Committee’s calculation of these performance measures, the 2014 LTIP performance unit grants vested at 108.3 percent. The following table summarizes the performance results with respect to each of the performance measures applicable to the 2014 LTIP performance unit grants and the corresponding contributions to the vesting percentage.
Performance Measures — 2014-2016 Result Weight Vesting
Financial Goals – ROAE and Average Net Income Growth 156.6% 50% 78.3%
Market Goal – TSR 60.0% 50% 30.0%
    TOTAL
 108.3%
Based on the Compensation Committee’s calculation of these performance measures, the 2015 LTIP performance unit grants vested at 44.9 percent. The table to the right summarizes the performance results with respect to each
of the performance measures applicable to the 2015 LTIP performance unit grants and the corresponding contributions to the vesting percentage.        
 Performance Measures — 2015-2017 Result Weight Vesting
 Financial Goals – ROAE and Average Net Income Growth 69.8% 50% 34.9%
 Market Goal – TSR 20.0% 50% 10.0%
     TOTAL
 44.9%
The table on the following pagebelow summarizes the number of shares awarded for the 20142015 LTIP performance unit grants and the number of shares paid out in 20162017 with respect to such grants for our named executive officers, based on the 108.3 percent percent vesting percentage of 44.9 percent approved by the Compensation Committee.
  Vesting of 2014 Performance Unit Grants
Name 
Units at
Grant Date
(#)
 
Vesting
Percentage
(%)
 
Units upon Vesting
(#)
Robert C. Rowe 21,329
 108.3% 23,099
Brian B. Bird 8,629
 108.3% 9,345
Heather H. Grahame 5,518
 108.3% 5,976
Curtis T. Pohl 4,010
 108.3% 4,343
Bobbi L. Schroeppel 2,395
 108.3% 2,594


30
Compensation Discussion and Analysis


  Vesting of 2015 Performance Unit Grants
Name 
Units at
Grant Date
(#)
 
Vesting
Percentage
(%)
 
Units upon Vesting
(#)
Robert C. Rowe 19,828
 44.9% 8,903
Brian B. Bird 8,672
 44.9% 3,894
Heather H. Grahame 5,524
 44.9% 2,480
Curtis T. Pohl 3,728
 44.9% 1,674
Bobbi L. Schroeppel 2,291
 44.9% 1,029
Vesting of 20112012 Executive Retention / Retirement Program Grants in 20162017
In December 2011,2012, the Compensation Committee approved the first grants of ERRP restricted share units, subject to a five-year performance period from 20122013 to 2016.
2017. The 20112012 ERRP restricted share unit grants contained a financial performance metric that required the company to achieve net income during any three of the five years during the performance period that exceeded the company’s net income for 2011.2012. As summarized in the following table, the company achieved net income in eachfour of the five performance period years that was higher than its net income for 2011.2012, satisfying the performance metric.
Net Income (millions)
201120122013201420152016
$92.6$98.4$94.0$120.7$151.2$164.2
Net Income (millions)
201220132014201520162017
$98.4$94.0$120.7$151.2$164.2$162.7
 As a result of achieving the financial performance metric, the 20112012 ERRP restricted share unit grants vested on December 31, 2016.2017. In accordance with the terms of the grants, the vested restricted share units have been credited to an account for each executive officer similar to a deferred compensation account. AnExecutives are not
 
executive is not entitled to payout of any of the vested units in such account until the executive leaves the company, and following such departure, each unit will be paid out as a share of common stock of the company in five equal annual installments.

The table to the right summarizes the number of 20112012 ERRP restricted share units which vested on December 31, 2016,2017, for each of our named executive officers.
    
  Name 20112012 ERRP Restricted Share Units Vested
 
  Robert C. Rowe 3,6673,814
  Brian B. Bird 1,2031,251
  Heather H. Grahame 876911
  Curtis T. Pohl 689717
  Bobbi L. Schroeppel 456482


29
Compensation Discussion and Analysis


Other Pay Policies
Retirement and Other Benefits
Retirement benefits are offered to employees hired prior to January 1, 2009, through tax-qualified company-funded pension plans and to all eligible employees through a 401(k) defined contribution plan. Both pension plans and 401(k) plans are common benefits provided in the utility and energy industry. Our executive officers, including the CEO, participate in some or all of these plans, and the terms governing the retirement benefits under these plans are the same as those available to substantially all employees. We do not offer any supplemental retirement benefits to our executive officers other than the performance-based ERRP restricted share units described above. Our healthcare, insurance, and other welfare and employee-benefit programs are generally the same for substantially all employees, including the CEO and executive officers. We share the cost of health and welfare benefits with our employees, which is dependent on the benefit coverage option that each employee elects. Our executive officers do not receive any material perquisites or special benefits that differ materially from those available to employees generally.
Severance and Post-Termination Benefits
We provide severance and post-termination benefits to our executive officers under our severance plan. Severance and post-termination benefits are explained in detail under the 20162017 Executive Pay—Pay After Employment Ends section, starting on page 3735 of this proxy statement.
Non-qualified Deferred Compensation
The company provides a non-qualified deferred compensation plan, which is intended to be an unfunded plan. The 2009 Officer Deferred Compensation Plan (officer deferred plan) allows eligible officers to defer up to 100 percent of certain compensation, including base salary (subject to compliance with Section 409A of the Internal Revenue Code compensation limit), short-term incentive awards and awards earned under our Equity Compensation Plan. There are no company contributions to the officer deferred plan. Participants in the officer deferred plan may elect to have


31
Compensation Discussion and Analysis


deferrals credited to their account in company stock (in the form of deferred share units issued under the Equity Compensation Plan) or cash investment options that substantially mirror the qualified employee 401(k) plan investment options. The value of each deferred compensation account is adjusted periodically to reflect the gains, losses, and dividends associated with the designated investments. Officer deferred plan participants do not pay income taxes on amounts deferred or earnings thereon until those amounts are distributed from the officer deferred plan. A participant’s benefits under the officer deferred plan are fully vested and are payable after terminating employment. Benefits are paid in a lump sum unless a participant elects annual installments.
No Employment Agreements
We currently do not have employment agreements with any of our executives. We generally believe that ongoing employment agreements are not necessary to retain talented executives; however, agreements may be appropriate on a case-by-case basis, such as when an executive begins employment with us. Due to the changing marketplace in which we compete for talent, the Compensation Committee regularly reviews this practice to help ensure that we remain competitive in our industry.
Tax Treatment of Certain Compensation
Section 162(m) of the Internal Revenue Code limits the company deductibility of executive compensation paid to certain named executive officers to $1 million per year, but containsyear. Prior to the Tax Cuts and Jobs Act signed into law on December 22, 2017, Section 162(m) contained an exception for certain performance-based compensation. Compensation that qualifies as “performance-based compensation” is not subject to the $1 million deduction limit if, at least every five years, shareholders approve the material terms of suchfor certain qualifiying performance-based compensation. The Act eliminated this performance-based exception; however, the Act preserved this exception for “written binding contracts” in effect as of November 2, 2017, so long as such contracts are not materially modified after that date.
We had structured our Equity Compensation Plan is structured to enable grants of equity-based incentive awards to be deductible under Section 162(m), and the material terms of the Equity Compensation Plan were approved by shareholders at last year’sour 2016 annual meeting. Thus, we believe we should be able to deduct our long-term performance-based equity


30
Compensation Discussion and Analysis

incentive awards that were outstanding as of November 2, 2017 (such as LTIP performance unit awards and ERRP restricted share unit awards). However, similar awards made after such date will not be eligible for the exception and may not be deductible.
The Compensation Committee generally seeks ways to limit the impact of Section 162(m). However, the Compensation Committee believes that the tax deduction limitation should not compromise our ability to establish and implement incentive programs that support the compensation objectives discussed above. Accordingly, achieving these objectives and maintaining required flexibility in this regard may result in payments of compensation or grants of awards that are not deductible for federal income tax purposes. In 2014, we incurred compensation for our Named Executive Officers of approximately $118,000 that may not be deductible for tax purposes.


   
 
Compensation Committee Report
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the proxy statement and incorporated by reference into the Annual Report on Form 10-K for the year ended December 31, 2016.2017.
Compensation Committee
Dana J. Dykhouse, Chair
Stephen P. Adik
Dorothy M. Bradley
Julia L. Johnson
 
   



3231
 

20162017 Executive Pay
The followingIn this section, the tables, footnotes, and narratives provide information regarding the compensation, benefits, and equity holdings in the company for the named executive officers during the years ended December 31, 2017, 2016, 2015, and 2014.2015. Please see the CD&ACompensation Discussion and Analysis on the previous pages for a description of our executive pay program necessary to gain an understanding of the information disclosed below.
20162017 Summary Compensation Table
The following table below sets forth the compensation earned during 2017, 2016, 2015, and 20142015 for services in all capacities by theour named executive officers:officers.
Name and
Principal Position
 Year 
Salary
 ($)
 
Bonus
($)
 
Stock Awards
(1) ($)
 
Non-Equity Incentive Plan Compensation
 (2) ($)
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings
(3) ($)
 
All Other Compen- sation
 (4) ($)
 
Total
($)
 Year Salary
($)		 Bonus
($)		 Stock Awards
(1) ($)		 Non-Equity Incentive Plan Compensation
(2) ($)		 
Change in
Pension Value and Nonqualified Deferred Compensation Earnings
(3) ($)
 All Other Compen- sation
(4) ($)		 Total
($)
Robert C. Rowe               
 
 
 
 
 
 
 
President and Chief Executive Officer 2016 590,641
 —
 1,454,138
 538,403
 68,952
 27,933
 2,680,067
 2017 607,232
 —
 1,497,280
 605,836
 94,609
 43,322
 2,848,279
2015 573,567
 —
 1,131,121
 370,068
 39,285
 41,564
 2,155,605
 2016 590,641
 —
 1,454,138
 538,403
 68,952
 27,933
 2,680,067
2014 556,924
 —
 1,098,234
 561,389
 104,139
 22,155
 2,342,841
 2015 573,567
 —
 1,131,121
 370,068
 39,285
 41,564
 2,155,605
Brian B. Bird               
 
 
 
   
 
 
Vice President and
Chief Financial Officer
 2016 408,536
 —
 502,909
 232,752
 15,458
 50,027
 1,209,682
 2017 420,012
 —
 517,798
 209,524
 22,378
 54,923
 1,224,635
2015 391,181
 —
 468,227
 159,981
 9,264
 49,677
 1,078,330
 2016 408,536
 —
 502,909
 232,752
 15,458
 50,027
 1,209,682
2014 365,351
 —
 422,840
 230,175
 32,002
 49,005
 1,099,373
 2015 391,181
 —
 468,227
 159,981
 9,264
 49,677
 1,078,330
Heather H. Grahame               
 
 
 
   
 
 
Vice President and General Counsel 2016 357,724
 —
 352,303
 183,423
 —
 51,496
 944,946
2015 346,032
 —
 304,597
 126,075
 —
 48,360
 825,064
2014 332,462
 —
 278,547
 188,509
 —
 46,629
 846,147
Vice President - General Counsel / Regulatory & Federal Gov't Affairs 2017 367,773
 —
 362,718
 165,117
 —
 49,527
 945,135
2016 357,724
 —
 352,303
 183,423
 —
 51,496
 944,946
2015 346,032
 —
 304,597
 126,075
 —
 48,360
 825,064
Curtis T. Pohl               
 
 
 
   
 
 
Vice President - Retail Operations 2016 277,602
 —
 219,010
 126,525
 21,421
 59,155
 703,713
2015 269,577
 —
 212,661
 86,966
 5,814
 59,702
 634,720
2014 261,754
 —
 206,470
 131,927
 64,786
 62,079
 727,016
Vice President - Distribution 2017 285,399
 —
 225,507
 113,898
 38,024
 49,257
 712,085
2016 277,602
 —
 219,010
 126,525
 21,421
 59,155
 703,713
2015 269,577
 —
 212,661
 86,966
 5,814
 59,702
 634,720
Bobbi L. Schroeppel               
 
 
 
 
 
 
 
Vice President - Customer Care, Communications and Human Resources 2016 255,929
 —
 164,014
 102,066
 13,992
 50,221
 586,222
2015 248,530
 —
 134,849
 70,154
 5,012
 49,823
 508,368
Ms. Schroeppel was not a named executive officer in 2014.
Vice President - Customer Care, Communications and HR 2017 263,577
 —
 168,940
 92,103
 24,602
 53,984
 603,206
2016 255,929
 —
 164,014
 102,066
 13,992
 50,221
 586,222
2015 248,530
 —
 134,849
 70,154
 5,012
 49,823
 508,368
(1)
These values reflect the grant date fair value of these awards as calculated utilizing the provisions of Accounting Standards Codification 718, Stock Compensation, and do not represent earned or paid compensation as the shares are subject to performance and vesting conditions. The values in the table above assume 100 percent payout based on grant date fair value. The exact number of shares issued will vary from zero to 200 percent of the target award, depending on actual company performance relative to the performance goals. See Note 1615 to the consolidated financial statements in our 20162017 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards. The value of awards granted in 2017for each named executive officer assuming a maximum payout based on grant date fair value would be $2,610,478$2,688,290 for Mr. Rowe; $902,812$929,468 for Mr. Bird; $632,457$651,088 for Ms. Grahame; $382,030$393,304 for Mr. Pohl; and $289,299$297,872 for Ms. Schroeppel.
(2)The “Non-Equity Incentive Plan Compensation” column reflects cash incentive awards earned pursuant to our annual incentive plan as previously described. These awards are earned during the year reflected and paid in the following fiscal year.
(3)These amounts are attributable to a change in the value of each named executive officer’sindividual’s defined benefit pension account balances and do not represent earned or paid compensation. Pension values are dependent on many variables including years of service, earnings and actuarial assumptions. Our pension plans were closed prior to Ms. Grahame joining the company; therefore, she is not eligible to participatea participant in a pension plan.
(4)The table on the top of the following page identifies the items included in the “All Other Compensation” column for 2016. Employee benefits include employer contributions, as applicable, for health benefits (medical, dental, vision, employee assistance plan and health savings account), group term life and 401(k) plan, which are generally available to all employees on a nondiscriminatory basis. Life insurance also includes imputed income consistent with IRS guidelines for coverage amounts in excess of $50,000 for each of the named executive officers. Mr. Rowe’s, Ms. Grahame’s and Mr. Pohl’s other income for 2016 is from vacation sold back to the company at a rate of 75 percent.
(4)The table to the right identifies the items included in the “All Other Compensation” column for 2017. Employee benefits include employer contributions, as applicable, for health benefits (medical, dental, vision, employee assistance plan and health savings account), group term life and 401(k) plan, which are generally available to all employees on a nondiscriminatory basis. Life insurance also includes imputed
 income consistent with IRS guidelines for coverage amounts in excess of $50,000 for each of the named executive officers. Mr. Rowe’s, Mr. Bird’s and Ms. Schroeppel’s other income for 2017 includes imputed income related to executive physicals. Mr. Rowe’s other income also includes vacation sold back to the company at a rate of 75 percent.            
  

Health Benefits Life Insurance 401(k) Contributions Other Income Total All Other Compensation
  Robert C. Rowe
$7,763
 $5,204
 $10,800
 $19,555
 $43,322
  Brian B. Bird
22,744
 2,357
 27,000
 2,822
 54,923
  Heather H. Grahame
19,528
 2,999
 27,000
 —
 49,527
  Curtis T. Pohl
16,423
 3,134
 29,700
 —
 49,257
  Bobbi L. Schroeppel
22,743
 1,419
 27,000
 2,822
 53,984


3332
Executive Pay


  Health Benefits Life Insurance 401(k) Contributions Other Income Total All Other Compensation
Robert C. Rowe $7,376
 $6,204
 $10,600
 $3,753
 $27,933
Brian B. Bird 21,457
 2,070
 26,500
 —
 50,027
Heather H. Grahame 18,317
 3,603
 26,500
 3,076
 51,496
Curtis T. Pohl 14,727
 4,363
 29,150
 10,915
 59,155
Bobbi L. Schroeppel 21,457
 2,191
 26,500
 73
 50,221
20162017 Grants of Plan-Based Awards
The following table shows the range of each named executive officer’s annual and long-term incentive award opportunities granted for the fiscal year ended December 31, 2016.2017. The narrative following the table describes the terms of each incentive award opportunity.
Name Grant Date Estimated Future Payouts Under Non-equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards (1) 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 
Grant Date Fair Value of Stock Awards (2)
($)
 Grant Date Estimated Future Payouts Under Non-equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards (1) 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 Grant Date Fair Value of Stock Awards (2)
($)
Threshold
($)
 
Target
($)
 
Maximum
($)
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 Threshold
($)		 Target
($)		 Maximum
($)		Threshold
(#)		 Target
(#)		 Maximum
(#)		 
Robert C. Rowe                                    
Annual Cash Incentive —
 238,231
 476,462
 714,693
 —
 —
 —
 —
 —
 —
 305,978
 611,956
 917,934
 —
 —
 —
 —
 —
Performance Units 2/10/2016
 —
 —
 —
 —
 22,982
 45,964
 —
 1,156,339
 2/16/2017
 —
 —
 —
 —
 24,821
 49,642
 —
 1,191,284
Restricted Share Units 12/7/2016
 —
 —
 —
 —
 6,505
 6,505
 —
 297,799
 12/12/2017
 —
 —
 —
 —
 5,862
 5,862
 —
 305,996
Brian B. Bird                                    
Annual Cash Incentive —
 102,988
 205,976
 308,964
 —
 —
 —
 —
 —
 —
 105,820
 211,640
 317,460
 —
 —
 —
 —
 —
Performance Units 2/10/2016
 —
 —
 —
 —
 7,948
 15,896
 —
 399,904
 2/16/2017
 —
 —
 —
 —
 8,584
 17,168
 —
 411,989
Restricted Share Units 12/7/2016
 —
 —
 —
 —
 2,250
 2,250
 —
 103,005
 12/12/2017
 —
 —
 —
 —
 2,027
 2,027
 —
 105,809
Heather H. Grahame                                    
Annual Cash Incentive —
 81,161
 162,321
 243,481.5
 —
 —
 —
 —
 —
 —
 83,393
 166,785
 250,178
 —
 —
 —
 —
 —
Performance Units 2/10/2016
 —
 —
 —
 —
 5,568
 11,136
 —
 280,154
 2/16/2017
 —
 —
 —
 —
 6,013
 12,026
 —
 288,594
Restricted Share Units 12/7/2016
 —
 —
 —
 —
 1,576
 1,576
 —
 72,149
 12/12/2017
 —
 —
 —
 —
 1,420
 1,420
 —
 74,124
Curtis T. Pohl                                    
Annual Cash Incentive —
 55,985
 111,969
 167,953.5
 —
 —
 —
 —
 —
 —
 57,524
 115,048
 172,572
 —
 —
 —
 —
 —
Performance Units 2/10/2016
 —
 —
 —
 —
 3,240
 6,480
 —
 163,021
 2/16/2017
 —
 —
 —
 —
 3,500
 7,000
 —
 167,983
Restricted Share Units 12/7/2016
 —
 —
 —
 —
 1,223
 1,223
 —
 55,989
 12/12/2017
 —
 —
 —
 —
 1,102
 1,102
 —
 57,524
Bobbi L. Schroeppel                                    
Annual Cash Incentive —
 45,162
 90,324
 135,486
 —
 —
 —
 —
 —
 —
 46,517
 93,034
 139,550
 —
 —
 —
 —
 —
Performance Units 2/10/2016
 —
 —
 —
 —
 2,490
 4,980
 —
 125,284
 2/16/2017
 —
 —
 —
 —
 2,689
 5,378
 —
 129,059
Restricted Share Units 12/7/2016
 —
 —
 —
 —
 846
 846
 —
 38,730
 12/12/2017
 —
 —
 —
 —
 764
 764
 —
 39,881
(1)Reflects possible payout range of 20162017 performance units and restricted share units awards. The performance units granted on February 10, 2016,16, 2017, have a weighted average grant date fair value of $50.32.$47.99. The restricted share units granted on December 7, 2016,12, 2017, have a weighted average grant date fair value of $45.78.$52.20.
(2)These values reflect the grant date fair value of these awards as calculated utilizing the provisions of Accounting Standards Codification 718, Stock Compensation, and do not represent earned or paid compensation as the shares are subject to performance and vesting conditions. The values in the table above reflect grant date fair value assuming payment at target. See Note 1615 to the consolidated financial statements in our 20162017 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards.
Non-equity Incentive Plan Awards
Non-equity incentive plan compensation includes amounts earned under the NorthWestern Energy 20162017 Annual Incentive Plan for 20162017 performance, which were paid in 2017.2018. The Compensation Committee reviewed 20162017 performance against plan targets and the plan achieved a payout of 11399 percent, as discussed in the Compensation Discussion and Analysis—Pay Components —Annual Cash Incentive Awards section, starting on page 2322 of this proxy statement.


34
Executive Pay


Equity Incentive Plan Awards
As previously discussed in the Compensation Discussion and Analysis—Pay Components—Long-Term Performance-Based Equity Incentive Awards section in this proxy statement, the Board approved granting performance awards in 20162017 under the Equity Compensation Plan. The values of stock awards included in the table onat the previoustop of this page reflect the grant date fair value of these awards as calculated utilizing the provisions of Accounting Standards Codification 718, Stock Compensation, and do not represent earned or paid compensation as the shares are subject to performance and vesting conditions. For the 20162017 performance unit awards, the exact


33
Executive Pay

number of shares issued upon vesting will vary from zero to 200 percent of the target award, depending on actual company performance relative to the performance goals. In addition, if earned, the value of a performance unit award and a restricted share unit award on the vesting date, based on the fair market value of our stock on that future date, likely will differ from the value on the grant date, which is based on the fair market value of a share of our stock and, with respect to a performance unit award, is based on the target amount for such award. See Note 1615 to the consolidated financial statements in our 20162017 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards.
Percentage of Salary Compared to Total Compensation
For 2016, “Salary”2017, base salary for the named executive officers accounted for approximately 26 percent22 to 5350 percent of total direct compensation (i.e.(i.e., salary plus targeted annual and long-term incentive compensation), while incentive compensation accounted for approximately 47 percent50 to 7478 percent of total direct compensation, assuming achievement of a target level of performance for each named executive officer.
20162017 Stock Vested
The table below shows the number of shares acquired and the dollar amounts realized pursuant to the vesting of equity-based awards during the last fiscal year.
Stock AwardsStock Awards
Name
Number of LTIP Shares Acquired on Vesting
(#) (1)
 
Value Realized on LTIP Vesting
($)
 Number of ERRP Shares Acquired on Vesting
(#) (2)		 Value Realized on ERRP Vesting
($)		 Total Value Realized
($)		Number of LTIP Shares Acquired on Vesting
(#) (1)
Value Realized on LTIP Vesting
($)
Number of ERRP Shares Acquired on Vesting
(#) (2)
Value Realized on ERRP Vesting
($)
Total Value Realized
($)
Robert C. Rowe23,099
 1,313,640
 3,667
 208,542
 1,522,182
8,903
 531,495
 3,814
 227,696
 759,191
Brian B. Bird9,345
 531,450
 1,203
 68,415
 599,865
3,894
 232,456
 1,251
 74,685
 307,140
Heather H. Grahame5,976
 339,855
 876
 49,818
 389,673
2,480
 148,072
 911
 54,387
 202,459
Curtis T. Pohl4,343
 246,986
 689
 39,183
 286,169
1,674
 99,930
 717
 42,805
 142,735
Bobbi L. Schroeppel2,594
 147,521
 456
 25,933
 173,454
1,029
 61,411
 482
 28,775
 90,186
(1)LTIP Shares vested consist of performance units for the 2014-20162015-2017 performance period that vested on December 31, 2016,2017, at a performance level of 108.344.9 percent. We determined the value realized for the vesting of these shares using the fair market value of our common stock on the vesting date, which was $56.87.$59.70.
(2)ERRP Shares vested consist of restricted share units for the 2011-20162012-2017 performance period that vested on December 31, 2016.2017. We determined the value realized for the vesting of these restricted share units using the fair market value of our common stock on the December 31, 2016,2017, vesting date, which was $56.87.$59.70.



35
Executive Pay

Outstanding Equity Awards at 20162017 Fiscal Year-End
The table below and continuing on the following tablepage contains information regarding outstanding equity-based awards, including the potential dollar amounts realizable with respect to the awards for each named executive officer. Dividends are not paid or accrued on any unvested awards.
    Stock Awards
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) (2) (3) ($)
Robert C. Rowe      
  12/7/2016 6,505
 369,939
  2/10/2016 22,982
 1,306,986
  12/9/2015 6,458
 367,266
  2/11/2015 19,828
 1,127,618
  12/16/2014 6,410
 364,537
  12/10/2013 3,878
 220,542
  12/12/2012 3,814
 216,902
Brian B. Bird      
  12/7/2016 2,250
 127,958
  2/10/2016 7,948
 904,006
  12/9/2015 2,233
 126,991
  2/11/2015 8,672
 986,353
  12/16/2014 2,103
 119,598
  12/10/2013 1,272
 72,339
  12/12/2012 1,251
 71,144
Heather H. Grahame      
  12/7/2016 1,576
 89,627
  2/10/2016 5,568
 316,652
  12/9/2015 1,564
 88,945
  2/11/2015 5,524
 314,150
  12/16/2014 1,531
 87,068
  12/10/2013 926
 52,662
  12/12/2012 911
 51,809
Curtis T. Pohl   
 
  12/7/2016 1,223
 69,552
  2/10/2016 3,240
 184,259
  12/9/2015 1,214
 69,040
  2/11/2015 3,728
 212,011
  12/16/2014 1,205
 68,528
  12/10/2013 729
 41,458
  12/12/2012 717
 40,776
Bobbi L. Schroeppel     
  12/7/2016 846
 48,112
  2/10/2016 2,490
 141,606
  12/9/2015 839
 47,714
  2/11/2015 2,291
 130,289
  12/16/2014 833
 47,373
  12/10/2013 490
 27,866
  12/12/2012 482
 27,411
    Stock Awards
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) (2) (3) ($)
Robert C. Rowe      
  12/12/2017 5,862
 349,961
  2/16/2017 24,821
 1,481,814
  12/7/2016 6,505
 388,349
  2/10/2016 22,982
 1,372,025
  12/9/2015 6,458
 385,543
  12/16/2014 6,410
 382,677
  12/10/2013 3,878
 231,517


34
Executive Pay


    Stock Awards
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) (2) (3) ($)
Brian B. Bird      
  12/12/2017 2,027
 121,012
  2/16/2017 8,584
 512,465
  12/7/2016 2,250
 134,325
  2/10/2016 7,948
 474,496
  12/9/2015 2,233
 133,310
  12/16/2014 2,103
 125,549
  12/10/2013 1,272
 75,938
Heather H. Grahame      
  12/12/2017 1,420
 84,774
  2/16/2017 6,013
 358,976
  12/7/2016 1,576
 94,087
  2/10/2016 5,568
 332,410
  12/9/2015 1,564
 93,371
  12/16/2014 1,531
 91,401
  12/10/2013 926
 55,282
Curtis T. Pohl      
  12/12/2017 1,102
 65,789
  2/16/2017 3,500
 208,950
  12/7/2016 1,223
 73,013
  2/10/2016 3,240
 193,428
  12/9/2015 1,214
 72,476
  12/16/2014 1,205
 71,939
  12/10/2013 729
 43,521
Bobbi L. Schroeppel      
  12/12/2017 764
 45,611
  2/16/2017 2,689
 160,533
  12/7/2016 846
 50,506
  2/10/2016 2,490
 148,653
  12/9/2015 839
 50,088
  12/16/2014 833
 49,730
  12/10/2013 490
 29,253
(1)The performance units granted in February 20152016 and 20162017 will vest, if at all, on December 31, 20172018 and 2018,2019, respectively, subject to the satisfaction of the applicable performance and market criteria and generally subject to the recipient’s continued employment through such date. Based on performance through December 31, 2016,2017, we are below target for obtaining payout of the 20152016 and 20162017 grants. The number of units and payout value shown for the 20152016 and 20162017 grants assume a target level of performance (100 percent), as required by the SEC’s disclosure rules.
(2)Values were calculated based on a $56.87$59.70 closing price of our common stock on December 31, 2016.2017.
(3)The performance-based restricted share units granted under the ERRP in December 2012, 2013, 2014, 2015, 2016, and 20162017 will vest, if at all, on December 31, 2017, 2018, 2019, 2020, 2021, and 2021,2022, respectively, subject to the satisfaction of the applicable performance criteria and generally subject to the recipient’s continued employment through such date.


36
Executive Pay


Pay After Employment Ends
20162017 Pension Benefits
We have two separate defined benefit pension plans that cover employees hired prior to January 1, 2009. The NorthWestern Energy Pension Plan is applicable to employees who began their employment in Montana, and the NorthWestern Corporation Pension Plan is applicable to employees who began their employment in South Dakota or Nebraska. The table on the following page summarizes for each of our named executive officers the years of credited service, present value of accumulated benefit, and any payments during the last fiscal year.


35
Executive Pay

Name Plan Name 
Number of Years Credited Service
(#)
 
Present Value of Accumulated Benefit
($)
 
Payments During Last Fiscal Year
($)
 Plan Name 
Number of Years Credited Service
(#)
 Present Value of Accumulated Benefit
($)		 Payments During Last Fiscal Year
($)
Robert C. Rowe NorthWestern Energy Pension Plan 8.00
 433,164
 —
 NorthWestern Energy Pension Plan 9.00
 527,773
 —
Brian B. Bird NorthWestern Corporation Pension Plan 13.08
 185,721
 —
 NorthWestern Corporation Pension Plan 14.08
 208,099
 —
Heather H. Grahame (1) — —
 —
 —
 — —
 —
 —
Curtis T. Pohl NorthWestern Corporation Pension Plan 30.39
 386,261
 —
 NorthWestern Corporation Pension Plan 31.39
 424,285
 —
Bobbi L. Schroeppel NorthWestern Corporation Pension Plan 18.63
 176,109
 —
 NorthWestern Corporation Pension Plan 19.63
 200,711
 —
(1)Ms. Grahame joined the company after the pension plans were closed to new entrants and therefore is not eligible to participate.
We calculated the present value of accumulated benefits assuming benefits commence at age 65 and using the discount rate, mortality assumption, and assumed payment form consistent with those disclosed in Note 1514 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016.2017. While we calculated the present values in the table above assuming that benefits commence at age 65, the table to the right summarizes the cash balance available if the individual had terminated service as of December 31, 2016.2017. NameCash Balance
($)
 Robert C. Rowe321,818378,434
 Brian B. Bird180,987198,547
 Heather H. Grahame—
 Curtis T. Pohl374,686401,088
 Bobbi L. Schroeppel169,130185,965
   
Under the NorthWestern Energy Pension Plan, a participant’s account grows based upon (1) contributions by the company made once per year, and (2) interest credits at the rate of six percent per year. Contributions by the company range from (a) three percent to 12 percent for eligible compensation, plus (b) 1.5 percent to six percent for eligible compensation above one-half of the taxable social security wage base. Upon termination of employment, an employee who is at least 50 years of age with five years of service may begin receiving a monthly annuity or defer receiving benefits until he or she is required to take a minimum distribution.
Under the cash balance formula of the NorthWestern Corporation Pension Plan, a participant’s account grows based upon (1) annual pay credits, and (2) annual interest credits based on the average federal 30-year Treasury Bill rate for November of the preceding year. Pay credits range from three percent to 7.5 percent for compensation below the taxable wage base, and such amounts are doubled for compensation above the taxable wage base. Upon termination of employment, an employee (or if deceased, his or her beneficiary) may elect to receive a lump sum equal to the cash balance in the account, a monthly annuity if age 55 or greater, or defer receiving benefits until he or she is required to take a minimum distribution.
For both pension plans, credited years of service are based on actual hire date, and pensionable earnings include base pay only. Mercer Human Resources Consulting, the actuary for our pension plans, calculated the present value of accumulated benefits using participant data provided by us.





37
Executive Pay

Non-qualified Deferred Compensation Plan
As discussed in the Compensation Discussion and Analysis—Other Pay Policies—Non-qualified Deferred Compensation section in this proxy statement, we implemented a deferred compensation plan in 2009. In 2016,2017, Mr. Rowe was the only one of our named executive officers did not defer anywho deferred compensation into the plan. The table below provides information onsummarizes the non-qualified deferred compensation ofparticipation in the plan by our named executive officers who participate in the plan.officers.
  Executive Contributions in 2016 Registrant Contributions in 2016 
Aggregate Earnings
in 2016
 Aggregate Withdrawals/ Distributions in 2016 Aggregate Balance on December 31, 2016
Robert C. Rowe (1) $—
 $—
 $551,528
 $—
 $7,124,294
  Executive Contributions in 2017 Registrant Contributions in 2017 Aggregate Earnings
in 2017		 Aggregate Withdrawals/ Distributions in 2017 Aggregate Balance on December 31, 2017
Robert C. Rowe (1) $206,165
 $—
 $643,984
 $—
 $8,008,104
(1)Mr. Rowe’s aggregate contributions under the plan are $4,584,407, all of which were reported as compensation in the Summary Compensation Table for prior years.
Termination or Change in Control Arrangements
Key Employee Severance Plan
Our named executive officers participate in our Key Employee Severance Plan. The Compensation Committee believes that it is appropriate for us to have a severance plan to provide a consistent means of addressing severance situations. During 2016, the Compensation Committee reviewed the terms of the plan with assistance from the Compensation Committee’s independent compensation consultant. Based on this review and the advice of its independent compensation consultant, the Compensation Committee concluded that the severance benefits provided by the plan were below market in general and with respect to our peers. Accordingly, the Compensation Committee recommended, and the Board approved, amendments to the plan to align the severance benefits with market.


36
Executive Pay


The Key Employee Severance Plan does not provide for change in control payments, but it does provide for the payment of severance benefits in the event an officer is terminated involuntarily without cause. Cause generally is defined in the Key Employee Severance Plan as (1) fraud, misappropriation of corporate property or funds, or embezzlement; (2) malfeasance in office, misfeasance in office which is willful or grossly negligent, or nonfeasance in office which is willful or grossly negligent; (3) failure to comply with our Code of Conduct; (4) illegal conduct, gross misconduct, or dishonesty, in each case which is willful and results (or is reasonably likely to result) in substantial damage to the company; or (5) willful and continued failure by the employee to perform substantially his/her duties. Involuntary termination does not include a termination resulting from a participant’s death or disability.
The severance benefits payable under the Key Employee Severance Plan consist of:
Severance Payment: A lump-sum cash payment equal to two times annual base pay plus two times targeted annual cash incentive;
Interrupted Annual Bonus: A lump-sum cash payment equal to the amount of the annual cash incentive, pro-rated to the end of the month prior to separation of service and based on actual performance;
Welfare Benefits: Reimbursement of Consolidated Omnibus Budget Reconciliation Act (COBRA) premiums paid by the participant during the 24-month period following the participant’s termination date; and
Outplacement Services: Up to $12,000 of outplacement services during the 12-month period following the participant’s termination date.
The table on the following pagebelow shows the amount of potential cash severance that would have been payable, based on an assumed termination date of December 31, 2016,2017, under the normal severance provisions of the Key Employee Severance Plan, including the amount that each named executive officer would be entitled to be reimbursed for outplacement expenses and reimbursement of costs for continuing coverage and other benefits under our group health, dental, and life insurance plans. Severance benefits are not provided in connection with terminations for cause.


38
Executive Pay


Name Base
Salary
($)		 Targeted Annual Incentive
($)		 2x Base
Salary + 2x Targeted Annual Incentive
($)		 Interrupted Annual Bonus
($) (1)		 COBRA Premiums
($) (2)		 Outplacement Services
($)		 Amount of Potential Severance Benefit
($)		 Base
Salary
($)		 Targeted Annual Incentive
($)		 2x Base
Salary + 2x Targeted Annual Incentive
($)		 Interrupted Annual Bonus
($) (1)		 COBRA Premiums
($) (2)		 Outplacement Services
($)		 Amount of Potential Severance Benefit
($)
Robert C. Rowe 595,578
 476,462
 2,144,080
 436,757
 12,232
 12,000 2,605,069
 611,956
 611,956
 2,447,824
 560,960
 13,020
 12,000 3,033,804
Brian B. Bird 411,951
 205,976
 1,235,854
 188,811
 39,656
 12,000 1,476,321
 423,280
 211,640
 1,269,840
 194,003
 42,280
 12,000 1,518,123
Heather H. Grahame 360,714
 162,321
 1,046,070
 148,794
 43,660
 12,000 1,250,524
 370,634
 166,785
 1,074,838
 152,886
 45,334
 12,000 1,285,058
Curtis T. Pohl 279,922
 111,969
 783,782
 102,638
 27,558
 12,000 925,978
 287,620
 115,048
 805,336
 105,461
 29,386
 12,000 952,183
Bobbi L. Schroeppel 258,068
 90,324
 696,784
 82,797
 40,591
 12,000 832,172
 265,810
 93,034
 717,688
 85,281
 43,215
 12,000 858,184
(1) Calculated at 100% of target and prorated for 11 of 12 months pursuant to the terms of the Key Employee Severance Plan.
(2)Amounts calculated using COBRA premiums in effect as of December 31, 2016.2017.
Equity Compensation Plan Change in Control Provision
All outstanding equity awards were granted under our Equity Compensation Plan. In a change in control situation, the plan provides that either the vesting of awards shall accelerate so that awards shall vest as to the shares that otherwise would have been unvested, or the Compensation Committee shall arrange or otherwise provide for the payment of cash or other consideration to participants in exchange for the satisfaction and cancellation of outstanding awards.
All outstanding equity awards were granted under our Equity Compensation Plan. In a change in control situation, the plan provides that either the vesting of awards shall accelerate so that awards shall vest as to the shares that otherwise would have been unvested, or the Compensation Committee shall arrange or otherwise provide for the payment of cash or other consideration to participants in exchange for the satisfaction and
cancellation of outstanding awards.
The table to the right shows the amount of potential stock value that would have been received, based on an assumed change in control date of December 31, 2016,2017, outstanding equity awards at target payout, and a closing stock price on December 31, 2016,2017, of $56.87.$59.70. For a termination of service that does not involve a change in control, death, disability, or retirement, all outstanding equity awards granted under the Equity Compensation Plan are forfeited.
 Name 
Value of Accelerated Stock Vesting
($)
 Robert C. Rowe 3,973,7914,591,885
 Brian B. Bird 1,463,2081,577,095
 Heather H. Grahame 1,000,9121,110,301
 Curtis T. Pohl 685,625729,116
 Bobbi L. Schroeppel 470,372534,375


37
Executive Pay

ERRP Restricted Share Units
Awards under our ERRP, as discussed in the Compensation Discussion and Analysis—Pay Components—Long-Term Performance-Based Equity Awards section in this proxy statement, if earned, will be paid out in shares of common stock of the company over a five-year period following the participant’s separation of service.
Death and Disability Benefits
Our executives are covered by the standard death and disability benefits that are available to substantially all employees. In addition, upon the death or disability of a recipient of a performance unit award, such recipient (or his or her executor or administrator) is entitled to receive a pro-rata portion of the award based on the number of full months such recipient was employed by the company, and the remaining portion of the award is forfeited. An award under the ERRP vests in full upon the death or disability of the recipient.
Assuming that our named executive officers terminated their employment as a result of death, disability or retirement on December 31, 2016,2017, each named executive officer would have received the same payout of the earned annual cash incentive award for 20162017 that is set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 33.32. Similarly, each named executive officer would have received the same payout of long-term incentive compensation for the LTIP performance units whose three-year performance period ended December 31, 20162017 as reflected in the “Stock Awards - Value Realized” on LTIP Vesting column in the 20162017 Stock Vested Table on page 35.34. The reason for the same payouts is that the individual would have been employed throughout the entire performance period for the awards.
For the remaining outstanding grants of LTIP performance units and for the outstanding grants of ERRP restricted share units, the table below and continuing on the following page shows the original grants, the percentage of the original grants that would vest, and the vesting value of those grants, assuming (1) the applicable named executive officer terminated his or her


39
Executive Pay

employment as a result of death, disability or retirement on December 31, 2016,2017, (2) the applicable goals for such performance units were subsequently satisfied at target levels and (3) the price of the Company's Common Stock was $56.87$59.70 (the closing price on December 31, 2016)2017) at the time payouts of such performance units and restricted share units occurred.
    Future Vesting Date Assumed 12/31/16 Death / Disability Assumed 12/31/16 Retirement
Original Grant (#) Percent to Vest (%) Vesting Value ($) (1) Original Grant (#) Percent to Vest (%) Vesting Value ($) (1)
Robert C. Rowe         
      
President and Chief Executive Officer ERRP 12/31/2021 6,505
 100.0% 369,939
 6,505
 —% —
 LTIP 12/31/2018 22,982
 33.3% 435,226
 22,982
 33.3% 435,226
 ERRP 12/31/2020 6,458
 100.0% 367,266
 6,458
 20.0% 73,453
 LTIP 12/31/2017 19,828
 66.7% 752,121
 19,828
 66.7% 752,121
 ERRP 12/31/2019 6,410
 100.0% 364,537
 6,410
 40.0% 145,815
 ERRP 12/31/2018 3,878
 100.0% 220,542
 3,878
 60.0% 132,325
 ERRP 12/31/2017 3,814
 100.0% 216,902
 3,814
 80.0% 173,522
       TOTAL
 $2,726,533
   TOTAL
 $1,712,462
Brian B. Bird         
      
Vice President and Chief Financial Officer ERRP 12/31/2021 2,250
 100.0% 127,958
 2,250
 —% —
 LTIP 12/31/2018 7,948
 33.3% 150,517
 7,948
 33.3% 150,517
 ERRP 12/31/2020 2,233
 100.0% 126,991
 2,233
 20.0% 25,398
 LTIP 12/31/2017 8,672
 66.7% 328,949
 8,672
 66.7% 328,949
 ERRP 12/31/2019 2,103
 100.0% 119,598
 2,103
 40.0% 47,839
 ERRP 12/31/2018 1,272
 100.0% 72,339
 1,272
 60.0% 43,403
 ERRP 12/31/2017 1,251
 100.0% 71,144
 1,251
 80.0% 56,915
       TOTAL
 $997,496
   TOTAL
 $653,021
Heather H. Grahame         
      
Vice President and General Counsel ERRP 12/31/2021 1,576
 100.0% 89,627
 1,576
 —% —
 LTIP 12/31/2018 5,568
 33.3% 105,445
 5,568
 33.3% 105,445
 ERRP 12/31/2020 1,564
 100.0% 88,945
 1,564
 20.0% 17,789
 LTIP 12/31/2017 5,524
 66.7% 209,538
 5,524
 66.7% 209,538
 ERRP 12/31/2019 1,531
 100.0% 87,068
 1,531
 40.0% 34,827
 ERRP 12/31/2018 926
 100.0% 52,662
 926
 60.0% 31,597
 ERRP 12/31/2017 911
 100.0% 51,809
 911
 80.0% 41,447
       TOTAL
 $685,094
   TOTAL
 $440,643
Curtis T. Pohl                
Vice President - Retail Operations ERRP 12/31/2021 1,223
 100.0% 69,552
 1,223
 —% —
 LTIP 12/31/2018 3,240
 33.3% 61,358
 3,240
 33.3% 61,358
 ERRP 12/31/2020 1,214
 100.0% 69,040
 1,214
 20.0% 13,808
 LTIP 12/31/2017 3,728
 66.7% 141,412
 3,728
 66.7% 141,412
 ERRP 12/31/2019 1,205
 100.0% 68,528
 1,205
 40.0% 27,411
 ERRP 12/31/2018 729
 100.0% 41,458
 729
 60.0% 24,875
 ERRP 12/31/2017 717
 100.0% 40,776
 717
 80.0% 32,621
       TOTAL
 $492,124
   TOTAL
 $301,485
Bobbi L. Schroeppel                
Vice President - Customer Care, Communications, and Human Resources ERRP 12/31/2021 846
 100.0% 48,112
 846
 —% —
 LTIP 12/31/2018 2,490
 33.3% 47,155
 2,490
 33.3% 47,155
 ERRP 12/31/2020 839
 100.0% 47,714
 839
 —% —
 LTIP 12/31/2017 2,291
 66.7% 86,903
 2,291
 66.7% 86,903
 ERRP 12/31/2019 833
 100.0% 47,373
 833
 —% —
 ERRP 12/31/2018 490
 100.0% 27,866
 490
 —% —
 ERRP 12/31/2017 482
 100.0% 27,411
 482
 —% —
       TOTAL
 $332,534
   TOTAL
 $134,058
    Future Vesting Date Assumed 12/31/17 Death / Disability Assumed 12/31/17 Retirement
Original Grant (#) Percent to Vest (%) Vesting Value ($) (1) Original Grant (#) Percent to Vest (%) Vesting Value ($) (1)
Robert C. Rowe                
President and Chief Executive Officer ERRP 12/31/2022 5,862
 100.0% 349,961
 5,862
 —% —
 LTIP 12/31/2019 24,821
 33.3% 493,937
 24,821
 33.3% 493,937
 ERRP 12/31/2021 6,505
 100.0% 388,349
 6,505
 20.0% 77,670
 LTIP 12/31/2018 22,982
 66.7% 915,141
 22,982
 66.7% 915,141
 ERRP 12/31/2020 6,458
 100.0% 385,543
 6,458
 40.0% 154,217
 ERRP 12/31/2018 6,410
 100.0% 382,677
 6,410
 60.0% 229,606
 ERRP 12/31/2018 3,878
 100.0% 231,517
 3,878
 80.0% 185,213
       TOTAL
 $3,147,124
   TOTAL
 $2,055,785
Brian B. Bird                
Vice President and Chief Financial Officer ERRP 12/31/2022 2,027
 100.0% 121,012
 2,027
 —% —
 LTIP 12/31/2019 8,584
 33.3% 170,821
 8,584
 33.3% 170,821
 ERRP 12/31/2021 2,250
 100.0% 134,325
 2,250
 20.0% 26,865
 LTIP 12/31/2018 7,948
 66.7% 316,489
 7,948
 66.7% 316,489
 ERRP 12/31/2020 2,233
 100.0% 133,310
 2,233
 40.0% 53,324
 ERRP 12/31/2018 2,103
 100.0% 125,549
 2,103
 60.0% 75,329
 ERRP 12/31/2018 1,272
 100.0% 75,938
 1,272
 80.0% 60,751
       TOTAL
 $1,077,444
   TOTAL
 $703,579
(1)Values were calculated based on a $56.87$59.70 closing price of our common stock on December 31, 2016.2017.


4038
DirectorExecutive Pay


2016
    Future Vesting Date Assumed 12/31/17 Death / Disability Assumed 12/31/17 Retirement
Original Grant (#) Percent to Vest (%) Vesting Value ($) (1) Original Grant (#) Percent to Vest (%) Vesting Value ($) (1)
Heather H. Grahame                
Vice President - General Counsel / Regulatory & Federal Gov't Affairs ERRP 12/31/2022 1,420
 100.0% 84,774
 1,420
 —% —
 LTIP 12/31/2019 6,013
 33.3% 119,659
 6,013
 33.3% 119,659
 ERRP 12/31/2021 1,576
 100.0% 94,087
 1,576
 20.0% 18,817
 LTIP 12/31/2018 5,568
 66.7% 221,717
 5,568
 66.7% 221,717
 ERRP 12/31/2020 1,564
 100.0% 93,371
 1,564
 40.0% 37,348
 ERRP 12/31/2018 1,531
 100.0% 91,401
 1,531
 60.0% 54,840
 ERRP 12/31/2018 926
 100.0% 55,282
 926
 80.0% 44,226
       TOTAL
 $760,291
   TOTAL
 $496,608
Curtis T. Pohl                
Vice President - Retail Operations ERRP 12/31/2022 1,102
 100.0% 65,789
 1,102
 —% —
 LTIP 12/31/2019 3,500
 33.3% 69,650
 3,500
 33.3% 69,650
 ERRP 12/31/2021 1,223
 100.0% 73,013
 1,223
 20.0% 14,603
 LTIP 12/31/2018 3,240
 66.7% 129,016
 3,240
 66.7% 129,016
 ERRP 12/31/2020 1,214
 100.0% 72,476
 1,214
 40.0% 28,990
 ERRP 12/31/2018 1,205
 100.0% 71,939
 1,205
 60.0% 43,163
 ERRP 12/31/2018 729
 100.0% 43,521
 729
 80.0% 34,817
       TOTAL
 $525,405
   TOTAL
 $320,239
Bobbi L. Schroeppel                
Vice President - Customer Care, Communications, and Human Resources ERRP 12/31/2022 764
 100.0% 45,611
 764
 —% —
 LTIP 12/31/2019 2,689
 33.3% 53,511
 2,689
 33.3% 53,511
 ERRP 12/31/2021 846
 100.0% 50,506
 846
 —% —
 LTIP 12/31/2018 2,490
 66.7% 99,152
 2,490
 66.7% 99,152
 ERRP 12/31/2020 839
 100.0% 50,088
 839
 —% —
 ERRP 12/31/2018 833
 100.0% 49,730
 833
 —% —
 ERRP 12/31/2018 490
 100.0% 29,253
 490
 —% —
       TOTAL
 $377,851
   TOTAL
 $152,663
(1)Values were calculated based on a $59.70 closing price of our common stock on December 31, 2017.
2017 Director Pay
Compensation to our non-employee directors consists of an annual cash retainer, an annual unrestricted stock award, an annual cash retainer for the chairperson of each committee of the Board and meeting attendance fees. Non-employee directors are not eligible to participate in our retirement plans. The company also reimburses non-employee directors for the cost of participation in certain continuing education programs and the expense of traveling to Board and committee meetings. Employee directors are not compensated for service on the Board.
In 2015, the Compensation Committee asked Willis Towers Watson to update its review of the competitive market data concerning Board compensation from peer company comparisons so that the Compensation Committee could determine 2016 compensation levels for non-employee directors. Based upon this review, the Compensation Committee made no changes to the compensation provided to our non-employee directors. The rate schedule for non-employee director compensation for 2016 is presented in the table to the right. Director Compensation Cash ($) Shares (#)
 Annual Board Retainer    
 New Member Initial Stock Grant —
 1,000
 Board Chair 125,000
 3,750
 Board Member 25,000
 2,750
 Annual Committee Chairperson Retainer    
 Audit Committee 10,000
 —
 Governance and Innovation Committee 10,000
 —
 Compensation Committee 10,000
 —
 
Meeting Fees (Board Chair does not receive meeting fees)
 Board Meeting 2,000
 —
 Committee Meeting 2,000
 —
In 2017, the Compensation Committee asked Willis Towers Watson to update its review of the competitive market data concerning Board compensation from peer company comparisons so that the Compensation Committee could determine 2018 compensation levels for non-employee directors. Based upon this review, the Compensation Committee made no changes to the compensation provided to our non-employee directors. The table to the right presents the 2018 compensation schedule for non-employee directors.  Cash ($) Shares (#)
 Annual Retainer   
 New Member Initial Stock Grant—
 1,000
 Board Chair125,000
 3,750
 Board Member25,000
 2,750
     Committee Chair10,000
 —
 
Meeting Fees (Board Chair does not receive meeting fees)
 Board Meeting2,000
 —
 Committee Meeting2,000
 —
Non-employee directors may elect to defer up to 100 percent of any qualified cash or equity-based compensation that would be otherwise payable to them, subject to compliance with NorthWestern’s 2005 Deferred Compensation Plan for Non-Employee Directors (director deferred plan) and Section 409A of the Internal Revenue Code. For those directors who defer their compensation under the director deferred plan, the meeting fee or retainer, as applicable, is the value utilized to determine the amount of deferred compensation. The deferred compensation may be invested in deferred stock units of the company’s common stock or in designated investment options that substantially mirror the qualified employee 401(k) plan options. Our directors defer a significant portion of their total compensation each year into the company's common stock. For 2016, our directors deferred 51 percent of the aggregate compensation paid to all directors into the company's common stock.
Based on the election of the non-employee director, other than on account of death, he or she shall receive a distribution either in a lump sum or in approximately equal installments


39
Director Pay

over a designated number of years (not to exceed ten years). Distributions of deferred share units will be equal to one share of the company’s common stock for each unit. The value of each deferred compensation account is adjusted periodically to reflect the gains, losses, and dividends associated with the designated investments.
The following table sets forth the 20162017 compensation received by our non-employee directors.
Name Fees Earned or Paid in Cash (1) ($) 
Stock Awards
(2) ($)
 
Total
($)
 Fees Earned or Paid in Cash (1) ($) 
Stock Awards
(2) ($)
 
Total
($)
E. Linn Draper Jr., Board Chair
 125,000
 209,400
 334,400
 125,000
 214,163
 339,163
Stephen P. Adik, Audit Chair
 71,000
 153,560
 224,560
 67,000
 157,053
 224,053
Dorothy M. Bradley 61,000
 153,560
 214,560
Tony Clark (joined Board in December 2016) 2,000
 —
 2,000
Dorothy M. Bradley (retired April 27, 2017) 19,000
 157,053
 176,053
Anthony T. Clark 47,000
 213,923
 260,923
Dana J. Dykhouse, Compensation Chair
 71,000
 147,125
 218,125
 67,000
 156,750
 223,750
Jan R. Horsfall 61,000
 147,125
 208,125
 57,000
 156,750
 213,750
Britt E. Ide (joined April 27, 2017) 30,700
 159,666
 190,366
Julia L. Johnson, Governance Chair
 64,000
 153,560
 217,560
 67,000
 157,053
 224,053
Denton Louis Peoples (retired April 20, 2016) 27,500
 153,560
 181,060
Linda G. Sullivan (joined April 27, 2017) 30,700
 159,666
 190,366
(1)Of the fees earned or paid in cash for 2016,2017, amounts deferred under the deferred compensation plan described above included $125,000 for Mr. Draper; $36,000 for Mr. Adik; $5,000$1,250 for Ms. Bradley; $64,000$67,000 for Ms. Johnson; and $27,500$26,500 for Mr. Peoples.Ms. Sullivan.
(2)The values for stock awards reflect the grant date fair value of the awards, calculated utilizing the provisions of Accounting Standards Codification 718, Stock Compensation. See Note 1615 to the consolidated financial statements in our 20162017 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards. The grant date fair value of annual stock awards made during 20162017 was (a) $55.84$57.11 per share for Mr. Draper, Mr. Adik, Ms. Bradley, Mr. Clark, and Ms. Johnson, and Mr. Peoples and (b) $53.50$57.00 for Mr. Dykhouse and Mr. Horsfall.Horsfall, and (c) $61.41 for Ms. Ide and Ms. Sullivan. Mr. Clark also received his initial sign on stock grant with a grant date fair value of$56.87. The 20162017 stock awards were deferred by Mr. Draper, Mr. Adik, Ms. Bradley, Mr. Clark, Ms. Ide, Ms. Johnson and Mr. PeoplesMs. Sullivan under the deferred compensation plan described above. The total deferred share units outstanding as of December 31, 20162017 (rounded down to the nearest whole number), are as follows: Mr. Draper – 114,527;124,706; Mr. Adik – 62,878;67,986; Mr. Clark – 3,885, Ms. BradleyIde – 19,813; and2,670, Ms. Johnson – 77,276.82,898, and Ms. Sullivan – 2,670.


Audit Committee Report
In the performance of the Audit Committee’s oversight function, and in connection with the December 31, 2017, financial statements, the Audit Committee reviewed and discussed the audited financial statements with management. The Audit Committee has discussed the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. The Audit Committee received the written disclosures and the letter from Deloitte & Touche LLP (Deloitte), our independent registered public accounting firm, required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence; and the Audit Committee has discussed with Deloitte the firm’s independence. The compatibility of non-audit services was considered with the auditor’s independence.
Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC.
Audit Committee
Stephen P. Adik, Chair
Dana J. Dykhouse
Jan R. Horsfall
Linda G. Sullivan


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Corporate Governance
Our Board oversees the business of the company. It establishes overall policies and standards for us and reviews the performance of our management. The Board operates pursuant to a set of written Corporate Governance Guidelines that set forth the company’s corporate governance philosophy and the governance policies and practices that the company has established to assist in governing the company and its affiliates. In addition to our Corporate Governance Guidelines, the principal documents which establish our primary corporate governance practices are listed below and can be found on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
●    Certificate of Incorporation
●    Bylaws
●    Audit Committee Charter
●    Human Resources Committee Charter 
●    Governance and Innovation Committee Charter
●    Corporate Governance Guidelines
●    Code of Conduct and Ethics
●    Code of Ethics for the Chief Executive Officer
      and Senior Financial Officers 
●    Complaint Procedures for the Audit Committee of the Board 
●     Corporate Political Contributions Policy 
●    Insider Trading Policy 
●    Related Persons Transactions Policy 
We are committed to strong corporate governance. As governance standards have evolved, we have enhanced our governance standards as appropriate to best serve the interests of our shareholders. Our commitment to corporate governance best practices has been recognized. Forbes has recognized us three times on its list of America’s Most Trustworthy Companies, a distinction awarded, according to Forbes, for transparent accounting and solid corporate governance practices. Our proxy disclosures also have been recognized by the NYSE Governance Services and Corporate Secretary magazine. In June of 2015, our 2014 proxy statement received NYSE's Exemplary CD&A award. That proxy statement also received Corporate Secretary’s Best Proxy Statement (small to mid-cap) award, and we were a finalist for Corporate Secretary’s Best Proxy Statement in 2012, 2013, 2016 and 2016.2017. Glass Lewis and C-Suite magazine also have recognized our say-on-pay disclosures.
   
 What We Do
 ●Annual election of all directors.
 ●Majority vote plus resignation standard in uncontested elections. If a director receives more “WITHHOLD AUTHORITY” votes than “FOR” votes, the director must submit a resignation for the Board to consider.
 ●Allow shareholders owning 25 percent of our shares to call a special meeting.
 ●Independent board. Our Board is comprised entirely of independent directors, except our CEO.
 ●Independent Board Chair.
 ●Independent Board committees. Each of our Board committees (audit, compensation, and governance) is made up solely of independent directors.
 ●Committee authority to retain independent advisors. Each of our Board committees has the authority to retain independent advisors, which will be paid for by the company.
 ●
Code of Conduct and Ethics. We are committed to operating with honesty and integrity and maintaining the highest level of ethical conduct. Our Code of Conduct and Ethics applies to all employees, as well as the Board. We also have a separate Code of Ethics for the Chief Executive Officer and Senior Financial Officers concerning financial reporting and other related matters.
 ●Robust stock ownership guidelines for executive officers and directors.
   


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Corporate Governance


   
 What We Don’t Do
 ●Poison pill. We do not have a shareholders rights plan or poison pill.
 ●Hedging of company securities. We do not allow our directors, executives, or employees to hedge company securities.
 ●Corporate political contributions. We do not make contributions to candidates for political office, political parties, or committees, or political committees organized to advance political candidates.
 ●Supermajority voting. We do not have supermajority voting provisions in our certificate of incorporation or bylaws, except to approve (or amend provisions concerning) certain business combinations or mergers.
   
Board of Directors
Our bylaws authorize a Board consisting of five to 11 directors, as determined by our Board from time to time. Our Board currently has eightnine members. Our Board has nominated nine directors for electionAs previously noted, our current Chair will be retiring at the end of his current term and is not seeking re-election at our 20172018 annual meeting and has approved increasingmeeting. Accordingly, we will be reducing the numbersize of directors on ourthe Board to nine,eight members effective with his retirement at the timeend of annual meeting.his current term.
Each Board member ismembers are elected at each annual meeting to serve for approximately one year, until the next annual meeting of shareholders (or until a successor is able to serve). If any director is not elected or is unable to complete his or her term, the Board may choose a substitute to fill the vacant position or reduce the number of directors on the Board. We believe a limited number of directors helps maintain personal and group accountability.
Our Board acts as a coherent team within an environment that allows individual insights to contribute to group consensus. Our Board focuses on long-term company success and maintains an effective dialogue with management through constructive relationships which provide timely and appropriate deliberation.
Each director with more than one year of service on our Board (seven of eight)directors has exceeded the stock ownership requirements established by our Corporate Governance Guidelines and continues to hold stock in excess of the ownership requirements. Each director with more than one year of service on our Board also has been recognized as a Governance Fellow by the National Association of Corporate Directors (NACD).
Our Board is actively engaged both inside and outside of the boardroom. Our Board members have knowledge and insight that enables them to provide guidance concerning our business, with particular focus on succession planning, corporate strategy, executive compensation, risk management and operating performance. Our Board members spend time in our service territory interacting with our employees, customers and community leaders. They seek and participate in learning opportunities to stay abreast of the latest industry and corporate governance developments affecting their role as directors.
Most of our Board meetings, including the annual meeting, are held throughout our service territory at approximately twelve rotating locations. This practice of rotating meeting locations offers several educational opportunities for our Board members, including attending receptions of community leaders and meetings with employees. These opportunities are intended to inform our Board about the communities we serve and the issues, concerns and successes of our employees. Holding Board meetings in our service territory allows our Board to gain a broader understanding of various areas of our company and permits non-management employees to make presentations to the Board that highlight their work.
Our Board considers attendance at Board and shareholderShareholder meetings and participation by directors in determining continued service on the Board. Attendance and participation is reviewed as part of an annual self-evaluation process. The Board held eightsix meetings in 2016.2017. Each of our current directors attended 100 percent of the meetings of the Board and of each committee on which he or she served in 2016. At2017. All of our current directors attended our last annual meeting of shareholders in April 2016, all of our directors who were on the Board at that time were in attendance.2017.


4342
Corporate Governance


Board Diversity
Our Board values the diversity of its members. When considering director nominees, our Board strives to identify nominees that will provide insight to our Board from a number of perspectives, with equal importance placed on gender, age, ethnicity, skills and background, as well as location of residence. Our Board believes diversity is important because varied perspectives expand the Board’s ability to provide relevant guidance to our business. As��As depicted below, our slate of director nominees demonstratedemonstrates diversity.
diversitymapa01.jpgdiversitymapa03.jpg
Our individual Board members also have varied expertise and bring extensive professional experience from both within and outside our industry. This diversity of experience provides our Board with a vast collective skill set which is advantageous to the Board’s oversight of our company. While the industry-specific expertise possessed by certain of our Board members is essential, we also benefit from the viewpoints of our directors with expertise outside our industry. A high level overview of the skills and backgrounds of our director nominees follows.
Skills MatrixDraperAdikClarkDykhouseHorsfallIdeJohnsonRoweSullivan
Utility
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Finance
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Executive
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Regulatory 
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Engineering
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Service Territory  
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Legal / Public Policy 
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Board
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NACD Fellow
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Individual Directors
Following areThe biographies of seven of our eight currentindividual Board members,nominees, each of whom is currently serving and has been nominated to serve another one-year term. The eighthas a member of the Board, member, Dorothy M. Bradley, has announced that she will not be seeking re-election atare provided on the 2017 annual meeting. The biographies of two new director nominees follow the biographies of our current directors.following pages.


43
Corporate Governance


Individual Directors
 
Stephen P. AdikAge 73 Independent Director since 2004
Audit Chair
 
bwadika03.jpgadikcrop.jpg
    
 
UtilityStephen P. Adik, Finance, and EngineeringDirector since experience2004 Age: as74
Retired Vice Chairman, NiSource, Inc.
Biography:  Mr. Adik is the retired vice chairman (2001-03)Vice Chairman (2001−2003) of NiSource Inc., ana Fortune 500 electric and natural gas production, transmission and distribution company, as well as other executive roles with NiSource prior to that, including chief financial officer (1996-2001)Senior Executive Vice President and Chief Financial Officer (1998−2001), and Executive Vice President and Chief Financial Officer (1996−1998). Mr. Adik also served as a financial executive for American Natural Resources Company and three railroad companies.
Other Executive, Board, and NACD Fellowcredentials through positions in the railroad industry, current service Mr. Adik currently services on the board of the Chicago SouthShore and South Bend Railroad, and prior servicepreviously served on the boards of American Water Works Company, Inc. (NYSE: AWK, 2009-14), Beacon Power (NASDAQ: BCON, 2004-10), the Dearborn Midwest Conveyor Company and several nonprofits.nonprofit organizations.

Skills and Qualifications:  Our Board concluded that Mr. Adik is qualified to serve as a Board member because of his 25+ year career in the energy and utility industries, having served on the board and as the chief financial officer for a Fortune 500 utility holding company. Mr. Adik holds an MBA in Finance, is considered financially literate under NYSE rules and qualifies as an audit committee financial expert under SEC rules. Mr. Adik also serves and has in the past served on the boards of other companies in energy- and utility-related industries, which provides him a wide perspective on various issues applicable to the company. During his more than 13+ year tenure on our Board, Mr. Adik has gained a solid working knowledge of our company that provides efficiency and continuity to our Board. Mr. Adik has been an NACD Governance Fellow since 2011, demonstrating his commitment to boardroom excellence.
Experience Highlights:
Utility, Finance, Executive, Engineering, Board, and NACD Governance Fellow

Independent Director

NorthWestern Committees:
Audit (chair), Compensation

Other Public Boards:
Former American Water Works (NYSE: AWK) and Beacon Power (NASDAQ: BCON)
  
      
  
We believe Mr. Adik is Qualified to Serve on our Board because of his
● 25+ years energy and utility experience
● Financial proficiency – audit committee financial expert (SEC), financially literate (NYSE), finance MBA
● Board service in energy- and utility-related industries brings developed perspective
● Tenure on our Board provides working knowledge of our company, efficiency and continuity
● Commitment to boardroom excellence – NACD Governance Fellow since 2011

 
Anthony T. ClarkAge 45 Independent Director since 2016
 
 
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UtilityAnthony T. Clark, Regulatory, and Public PolicyDirector since experience2016 Age: as46
Senior Advisor, Wilkinson Barker; former Commissioner, FERC and NDPSC
Biography:  Mr. Clark is a senior advisor atSenior Advisor with Wilkinson Barker Knauer, LLP, and prior serviceLLP. Prior to that he had a distinguished career as a public servant. Most recently, he was a Commissioner (2012-16) ofwith the Federal Energy Regulatory Commission prior service as Commissioner (2001-12) of(2012-16), and before that a commissioner with the North Dakota Public UtilitiesService Commission (NDPSC) from 2001-12 (including five years as its chair), former President. While serving with the NDPSC, Mr. Clark also was an active member of the National Association of Regulatory Utility Commissioners (NARUC) (2010-11), serving as its president as well as a member of its board and executive committee, and the chair of the NARUCNARUC’s telecommunications committee, formercommittee. Mr. Clark served in North DakotaDakota’s state government as Labor Commissioner (1999-2000), and formeradministrative officer for the North Dakota tax department (1997-99), and as a state legislator (1994-97).

Skills and Qualifications:  Our Board concluded that Mr. Clark is qualified to serve as a Board member because of his 15+ years of experience as a federal and state utility regulator. He has in-depth knowledge of the regulatory, public policy and market dynamics that are impacting the operations of current and future opportunities for electric and natural gas utilities. His extensive experience at the nexus of complex federal and state jurisdictional issues, including the development of electricity markets, market oversight and enforcement and permitting of large energy infrastructure projects is important for our company. He has additional experience regarding employment matters gained from his time as the North Dakota Labor Commissioner. Mr. Clark also has been an NACD Governance Fellow since 2017, demonstrating his commitment to boardroom excellence.
Experience Highlights:
Utility, Executive, Regulatory,
Legal/Public Policy, Board, and NACD Governance Fellow

Independent Director

NorthWestern Committees:
Governance

Other Public Boards:
None
 
      
  




44
Corporate Governance


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We believe Mr. Clark is Dana J. DykhouseQualified to ServeDirector since on our2009 Age: 61
Chief Executive Officer, First PREMIER Bank
Biography:  Mr. Dykhouse is the Chief Executive Officer of First PREMIER Bank, a regional bank headquartered in Sioux Falls, South Dakota, with bank locations across eastern South Dakota (since 1995). He has served in a variety of executive leadership roles in community and professional organizations and non-public company boards in South Dakota.
Skills and Qualifications:  Our Board concluded that Mr. Dykhouse is qualified to serve as a Board member because of his
● Experience reputation as a respected civic, community and professional leader in South Dakota. Mr. Dykhouse has served as chief executive officer of a $1.5 billion regional bank for 20+ years and provides a local perspective on the issues relevant to our service area that spans the eastern one-third of South Dakota. Mr. Dykhouse has 30+ years of experience in the statefinancial services industry and federal public utility regulatory arena, as a regulator
● Public policy background which provides a wide perspective on regulatory and political issues
● Demonstratedis considered financially literate under NYSE rules. Mr. Dykhouse also has been an NACD Governance Fellow since 2011, demonstrating his commitment to boardroom excellence – working to attainexcellence.
Experience Highlights:
Finance, Executive,
Service Territory, Board,
and NACD Governance Fellow status in 2017

Independent Director

NorthWestern Committees:
Audit, Compensation (Chair)

Other Public Boards:
None

 Thanking a retiring board member
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bwbradleya03.jpgJan R. HorsfallDirector since 2015 Age: 57
 In February 2017, Dorothy M. Bradley announced that she would not be seeking re-election to our Board at
President and Chief Executive Officer, Maxletics Corporation
Biography: Mr. Horsfall is the endPresident and Chief Executive Officer of her annual term on April 27, 2017. DorothyMaxletics Corporation, a sports technology company. He previously has served over eight yearsas chief executive officer of Universal Lubricants, LLC (2012-14), chief marketing officer of Turbine Inc.; founder and CEO of Gemini Voice Solutions, Inc.; vice president of marketing for LYCOS, Inc., and vice president of consumer brand strategy for Valvoline. Mr. Horsfall serves as a current and former board member of several privately held and non-profit entities.

Skills and Qualifications:  Our Board concluded that Mr. Horsfall is qualified to serve as a Board member because of his executive experience as a chief executive officer, chief marketing officer and other executive leadership positions. He is financially literate according to NYSE standards and has experience with mergers, acquisitions, and the growth and development of companies. Mr. Horsfall also has been an NACD Governance Fellow since 2015, demonstrating his commitment to boardroom excellence.
Experience Highlights:
Finance, Executive,
Marketing, Board, and NACD Governance Fellow

Independent Director

NorthWestern Committees:
Audit, Governance

Other Public Boards:
None


45
Corporate Governance


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Britt E. IdeDirector since 2017 Age: 46
President, Ide Energy & Strategy
Biography:  Ms. Ide is the President of Ide Energy & Strategy (since 2011) and the Executive Director of the Yellowstone Club Community Foundation (since 2017). Previously, she served as the interim Chief Executive Officer of the Big Sky Chamber of Commerce (2016) and Senior Counsel at Idaho Power Company (2009-11), Associate General Counsel at Healthwise, Inc. (2005-08), Senior Attorney at Albertson's Inc. (2005), and Counsel at Boise Cascade Corporation (2000-04). Ms. Ide currently serves on our Board, asthe boards of the Big Sky Chamber of Commerce and Hotrock Energy Research Organization and is an appointed member of Montana's Clean Power Plan Advisory Council and an ambassador of the Clean Energy Education & Empowerment Initiative. Previously, she was a member of the Governanceboard of directors of PCS Edventures!, Inc. (OTC: PCSV) (2014-15), serving as the independent chair, the chair of the nominating and Innovationgovernance committee, and Human Resources Committees. Asa member of the compensation committee.

Skills and Qualifications:  Our Board concluded that Ms. Ide is qualified to serve as a Board member because of her 25+ years of business, engineering and legal experience, her utility and energy industry experience and, as a resident of and respected civic leader in Montana, she has offered an importantour service territory, her local perspective on relevant regulatory, political and community issues. Ms. Ide has been an NACD Governance Fellow since 2017, demonstrating her commitment to boardroom excellence.
Experience Highlights:
Utility, Executive, Regulatory, Engineering, Service Territory, Legal / Public Policy, Board, and environmental issues facing our company. HerNACD Governance Fellow

Independent Director

NorthWestern Committees:
Governance

Other Public Boards:
Former PSC Edventures!, Inc. (OTC: PCSV)

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Julia L. JohnsonDirector since 2004 Age: 55
President, NetCommunications, LLC; former Commissioner (and Chair) Florida PSC
Biography:  Ms. Johnson is President of NetCommunications, LLC, a strategy consulting firm specializing in the energy, telecommunications and information technology public policy arenas (since 2000). Previously, she served as Chair (1997-99) and Commissioner (1993-97) of the Florida Public Service Commission. Ms. Johnson currently serves on the boards of directors of FirstEnergy (NYSE: FE), an electric utility holding company (since 2011 following merger with Allegheny Energy in 2011); MasTec, Inc. (NYSE: MTZ), a leading end-to-end voice, video, data and energy infrastructure solution provider (since 2002) (chair of the nominating and governance committee and member of the compensation committee); and American Water Works Company, Inc. (NYSE: AWK), a provider of high-quality water and wastewater services to more than 1,600 communities in the United States and Ontario, Canada (since 2008) (member of the compensation committee and the nominating and governance committee). Previously, she served on the board of Allegheny Energy (NYSE: AYE), an electric utility holding company (from 2003 until merger with FirstEnergy in 2011) (member of the finance committee and the corporate governance committee).

Skills and Qualifications:  Our Board concluded that Ms. Johnson is qualified to serve as a Board member because of her extensive experience working with federal, state and local legislative, regulatory and administrative agencies, including as chair and a commissioner on the Florida Public Service Commission and as president of NetCommunications. Ms. Johnson’s public company board experience and legal background provides her with a broad perspective on the issues our company faces. In addition, Ms. Johnson has gained a good working knowledge of our Montana service territorycompany during her more than 13-year tenure on our Board that provides efficiency and unique engagement with our employees and customers will be missed. We are grateful to have had her servicecontinuity to our shareholdersBoard. Ms. Johnson also has been an NACD Governance Fellow since 2011, demonstrating her commitment to boardroom excellence.
Experience Highlights:
Utility, Executive, Regulatory,
Legal / Public Policy, Board, and company these past years.NACD Governance Fellow

Independent Director

NorthWestern Committees:
Governance (Chair), Compensation

Other Public Boards:
American Water Works (NYSE: AWK), FirstEnergy (NYSE: FE) and MasTec, Inc. (NYSE: MTZ)
 



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E. Linn Draper, Jr.Age 75       Independent Director since 2004 Board Chair
     
 
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Utility, Executive, and EngineeringRobert C. Rowe     experienceDirector sincethrough positions as retired chairman, president 2008 Age: 62
President and chief executive officer of both American Electric Power Company, a public utility holding company (1992-2004), and Gulf States Utilities Company, an electric utility company (1979-1992), as well as other executive roles and his background in nuclear engineering.Chief Executive Officer, NorthWestern Corporation
 
     
 
Finance, Board,Biography: Mr. Rowe is the President and NACD Fellowcredentials asCEO of NorthWestern Corporation (since August 2008). Prior to that he was co-founder and senior partner at Balhoff, Rowe & Williams, LLC, a result of extensive service on several public boards (and their committees) for companiesspecialized national professional services firm providing financial and regulatory advice to clients in the utility,telecommunications and energy industries (January 2005−August 2008). He also previously served as commissioner (1993-2002) and related industries, including service tochair (2003-04) of the Montana Public Service Commission. Mr. Rowe currently serves on the Health Care Services Corporation Montana Advisory Board (Blue Cross Blue Shield of Montana), the largest and most experienced health insurance company in the state of Montana, providing more than 250,000 Montana members with comprehensive and affordable health plans. He also serves on the boards of Alliance Data Systems (NYSE: ADS)the Edison Electric Institute (since 2005)2015-present), Alpha Natural Resources, Inc. (2004-16); TransCanada (NYSE: TRP) (2005-13)American Gas Association (2015-present), Western Energy Institute (2009-present), Yellowstone Forever (2017-present), and Temple-Inland Inc. (2004-12)University of Montana Foundation (2017-present).

Skills and Qualifications:  Our Board concluded that Mr. Rowe is qualified to serve as a Board member because of his position as president and chief executive officer of our company and his significant experience in the regulatory and public policy arenas. Mr. Rowe previously founded and was senior partner for three and one-half years in a specialized national professional services firm providing financial and regulatory advice to clients in the telecommunications and energy industries. In addition, Mr. Rowe previously served 12 years as a commissioner (and chairman) of the Montana Public Service Commission. Mr. Rowe also served a term as president of the National Association of Regulatory Utility Commissioners. Mr. Rowe is financially literate under NYSE rules. Mr. Rowe also has been an NACD Governance Fellow since 2011, demonstrating his commitment to boardroom excellence.
  
Experience Highlights:
Utility, Finance, Executive, Regulatory, Service Territory,
Legal / Public Policy, Board,
and NACD Governance Fellow

Non-Independent Director

NorthWestern Committees:
None

Other Public Boards:
None

      
  
We believe Dr. Draper is Qualified to Serve on our Board because of his
● Extensive experience as the lead executive for some of the top electric utilities in the country
● Wide perspective gained from public company board and committee service
● Financial proficiency – audit committee financial expert (SEC), financially literate (NYSE)
● Tenure on our Board provides working knowledge of our company, efficiency and continuity
● Commitment to boardroom excellence – NACD Governance Fellow since 2011sullivancrop.jpg
 
Dana J. DykhouseLinda G. Sullivan     Age 60Director since Independent2017 Age: Director since 200954
Compensation Chair
   
 
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Executive Vice President and Chief Financial Officer of American Water
Finance, Executive, and Boardexperiencethrough his leadership of First PREMIER Bank, a regional bank headquartered in Sioux Falls, South Dakota, as its chief executive officer (since 1995) and his service in a variety of executive leadership roles in community and professional organizations and non-public company boards in South Dakota.
 
     
 
Service TerritoryBiography: Ms. Sullivan is the executive vice president and chief financial officer (CFO) of American Water Works Company, Inc., the largest publicly traded U.S. water and wastewater utility company. Prior to joining American Water in April 2014, Ms. Sullivan completed 22 years of progressive leadership roles at the Edison International Companies, serving as senior vice president and CFO of Southern California Edison (2009-14), vice president and controller of both Edison International and Southern California Edison for five years, and prior to that performing finance and accounting functions at the corporate level and within an operating business unit at the utility. Before her career at Edison International, Ms. Sullivan was a senior auditor with Arthur Andersen, LLP. Ms. Sullivan has been a Certified Public Accountant since 1991 (inactive) and a Certified Management Accountant since 1995. Ms. Sullivan is a current board member of the U.S. Environmental Protection Agency's Financial Advisory Board and the University of Maryland University College Ventures, a non-profit organization dedicated to supporting accessible, affordable quality education to adult students. Previously, she served on the boards of Crystal Stairs Inc., a non-profit organization assisting working families with childcare services in underserved communities in Los Angeles County, and Executive Services Corps, which provides coaching and consulting for nonprofits throughout southern California.

Skills and Qualifications:NACD Fellowcredentials  Our Board concluded that Ms. Sullivan is qualified to serve as a residentBoard member on our Board because of her 25+ years of utility, finance and respected civic leader in South Dakota.regulatory experience, her financial proficiency - audit committee financial expert (SEC), financially literate (NYSE), and her financial expertise as a Certified Public Accountant since 1991 (inactive) and Certified Management Accountant since 1995. Ms. Sullivan also has been an NACD Governance Fellow since 2017, demonstrating her commitment to boardroom excellence.
Experience Highlights:
Utility, Finance, Executive,
Regulatory, Board, and NACD Governance Fellow

Independent Director

NorthWestern Committees:
Audit

Other Public Boards:
None
  
      
We believe Mr. Dykhouse is Qualified to Serve on our Board because of his
● Experience as a respected civic, community and professional leader within South Dakota
● Local perspective on relevant issues facing our company in South Dakota
● Financial proficiency – audit committee financial expert (SEC), financially literate (NYSE)
● Tenure on our Board provides working knowledge of our company, efficiency and continuity
● Commitment to boardroom excellence – NACD Governance Fellow since 2011
Jan R. Horsfall Age 56       Independent Director since 2015
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Finance, Marketing, and Executiveexperiencethrough his current position as president and chief executive officer of Maxletics Corporation, a sports technology company that connects influential elite athletes to brands (since 2014) and former roles as chief executive officer of Universal Lubricants, LLC (2012-14), a privately held environmental energy company; founder and co-chairman of Startup Colorado (2011-12), a startup business facilitator in Colorado's front range; chief marketing officer of Turbine Inc. (2009-10), an online gaming company, and senior marketing roles at Lycos, Inc., the search engine/portal, and The Valvoline Company, an automotive supply company.
Boardand NACD Fellowcredentials as a current and former board member of several privately held and non-profit entities.
We believe Mr. Horsfall is Qualified to Serve on our Board because of his
● Executive experience as a chief executive officer, chief marketing officer and other positions
● Financial proficiency – financially literate (NYSE)
● Marketing background
● Experience with mergers, acquisitions and the growth and development of companies
● Tenure on our Board provides working knowledge of our company, efficiency and continuity
● Commitment to boardroom excellence – NACD Governance Fellow since 2015


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Julia L. JohnsonAge 54       Independent Director since 2004
Governance Chair
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Utility, Regulatory, Executive, Finance, and Legal / Public Policy experiencethrough her leadership as President of NetCommunications, LLC (since 2000), a consulting firm in the energy, telecommunications and information technology public policy arenas, prior service as Chairwoman (1997-99) and Commissioner (1993-97) of the Florida Public Service Commission, service to various public policy and non-profit organizations, and legal background.
Boardand NACD Fellowcredentials as a director on public company boards, including companies in the utility and energy industries, such as current service to American Water Works Company, Inc. (NYSE: AWK) (since 2008), FirstEnergy (NYSE: FE) (since 2011 following merger with Allegheny Energy in 2011), and MasTec, Inc. (NYSE: MTZ) (since 2002), and former service to the board of Allegheny Energy (2003 until merger with FirstEnergy in 2011).
We believe Ms. Johnson is Qualified to Serveon our Board because of her
● Experience in the public utility regulatory arena, as an executive, board member and regulator
● Public policy background which provides a wide perspective on regulatory and political issues
● Financial proficiency – financially literate (NYSE)
● Tenure on our Board provides working knowledge of our company, efficiency and continuity
● Commitment to boardroom excellence – NACD Governance Fellow since 2011
Robert C. RoweAge 61 Director since 2008
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Utility, Regulatory, Finance, Executive, and Legal / Public Policy experiencethrough service as our president and chief executive officer (since 2008) and former service as co-founder and senior partner at Balhoff, Rowe & Williams (2005-08), a national professional services firm advising the telecommunications and energy industries, and chairman (2003-04) and commissioner (1993-2002) of the Montana Public Service Commission.
Service Territory, Board, and NACD Fellowcredentials as a resident of Montana, and from voluntary leadership roles in the utility industry, such as chairman (2012-2013) of the Western Energy Institute (2012-present), co-chair of the Institute of Electric Innovation (Edison Electric Foundation), board member of the American Gas Association, and past president of the National Association of Regulatory Utility Commissioners.
We believe Mr. Rowe is Qualified to Serve on our Board because of his
● Position as our president and chief executive officer
● Experience in the regulatory and public policy arenas
● Financial proficiency – financially literate (NYSE)
● Commitment to boardroom excellence – NACD Governance Fellow since 2011
Director Succession Planning
Over the past several years, our Governance Committee has led our Board through a director succession planning process. The Governance Committee initiated the process to allow for a smooth and gradual transition from our directors who were in the final third of their 15-year term limit to new directors with the right skills for our company’s future, while preserving the culture of the Board.
The process began with a review of the individual skill sets of current members and consideration of additional skills that could be beneficial for the Board in the future, with a particular focus on the company’s strategy and emerging risks. The Governance Committee also reviewed tenure limits regarding each existing Board member and discussed potential timing for inviting new members to join the Board. With that background analysis, the Governance Committee began developing a general transition timeline and assembling a list of potential candidates who were identified through a combination of personal relationships, industry knowledge, and research. This foundational work regarding director succession planning proved beneficial with the retirement of two directors since April of 2016 and with the upcoming retirement of Chair Draper. Additionally, with two current Board nominees nearing the end of their 15-year term limits, our Board’s succession planning work will continue.
Director Candidate Evaluation
Our Governance Committee evaluates each director candidate to determine whether the Board should recommend such candidate as a director nominee. In considering new individuals for nomination as directors, the Governance Committee typically solicits recommendations from its current directors and is authorized to engage third-party advisers, including search firms, to assist in the identification and evaluation of candidates, if necessary.
Our goal is to maintain a diverse Board that operates cohesively and challenges management in a constructive way. The Governance Committee has not established specific minimum qualifications for director nominees or set forth specific qualities or skills that the committee believes are necessary for one or more directors to possess. Instead, in considering director candidates, the Governance Committee considers the diversity of our Board and takes into account whether the Board as a whole has the skills, experience, and background that add to and complement the range of skills, experience, and background of each director, based on the following: integrity, accomplishments, business judgment, experience and education, commitment, representation of shareholders, industry knowledge, independence, and financial literacy. With the exception of the company’s CEO, all of our directors are independent, as required by our Corporate Governance Guidelines.
When nominating persons to serve on our Board, the Governance Committee considers individuals who can add value to the strategic policymaking and oversight responsibilities of the Board. A director’s ability and available time to contribute to the Board and his or her participation on other boards also are considered because we believe these are important factors that enhance the quality of the Board’s decision-making, its oversight of management, and our business overall. The Governance Committee believes that the nominees for election at this year’s annual meeting collectively possess the experience, skills, and attributes necessary to lead the company to a long and successful future.
Our Governance Committee also has the responsibility for considering nominees for directors properly recommended by shareholders. A shareholder who wishes to submit a candidate for consideration at the annual meeting of shareholders must notify our Corporate Secretary in writing not less than 90 days and no more than 120 days prior to the first anniversary date of the preceding year’s annual meeting. The shareholder’s written notice must include information about each proposed nominee, including name, age, business address, principal occupation and other information required in proxy solicitations. The nomination notice also must include the nominating shareholder’s name and address, the number of shares of our common stock beneficially owned by the shareholder and any arrangements or understandings between the nominee and the shareholder. The shareholder also must furnish a statement from the nominee indicating that the nominee wishes and is able to serve as a director.
The manner in which the Governance Committee evaluates candidates recommended by shareholders is generally the same as candidates from other sources. However, the Governance Committee also will seek and consider information concerning the relationship between the recommending shareholder and the candidate to determine if the candidate can represent the interests of all of the shareholders. The Governance Committee will not evaluate


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Corporate Governance


This foundational work regarding director succession planning proved beneficial when one of our directors, Mr. Denton Louis Peoples, retired in April 2016 after serving approximately eight years on our Board, and then again, in February 2017, when another director, Ms. Dorothy M. Bradley, announced her retirement, effective April 27, 2017.
With three current Board members ina candidate recommended by a shareholder unless the final years of their 15-year term limit, our Board’s succession planning work will continue. Our Board believes maintaining a relatively small Board of approximately eight members provides several benefits. However, to preserve the Board’s culture, the size of our Board may increase temporarily so that new members can serve alongside Board members nearing the end of their terms. As the transition to new membership concludes, we anticipateshareholder notice states that the size of our Board will return to approximately eight members.
Nomination of New Directors
At the beginning of 2016, our Board had eight members. When Mr. Peoples retired at the conclusion of his annual term in April 2016, our Board acted to reduce the size of the Board to seven members. Several months later,potential candidate has indicated a non-management director and our CEO recommended that the Board consider Anthony T. Clark, former FERC commissioner, as a candidate. After meeting with Mr. Clark, the Board concluded that he has the expertise, experience, and skills to augment our Board’s collective skill set. Accordingly, in December 2016, our Board increased its size to eight members and elected Mr. Clarkwillingness to serve as a director, untilto comply with the 2017 annual meeting. expectations and requirements for Board service publicly disclosed by NorthWestern and to provide all of the information required to conduct an evaluation.
Director Resignation Vote Policy
The Board has re-nominated Mr. Clarkin place a Majority Plus Resignation Vote Policy for the election by our shareholdersof directors. The policy provides that, in an uncontested election, any nominee for director who receives a greater number of “WITHHOLD AUTHORITY” votes from his or her election than votes “FOR” such election (or a Majority Withheld Vote) shall promptly offer his or her resignation following certification of the shareholder vote.
Under this policy, the Governance Committee shall promptly make a recommendation to the Board regarding the resignation offer and possible responses based on the circumstances that led to the Majority Withheld Vote, if known. The Board must act on the Governance Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board will promptly disclose its decision-making process and decision regarding whether to accept the director’s resignation offer (or the reason(s) for rejecting the resignation offer, if applicable) in a Current Report on Form 8-K.
Any director who tenders his or her resignation pursuant to this policy shall not participate in the Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer. However, if each member of the Governance Committee receives a Majority Withheld Vote at the annual meeting,same election, then the independent directors who did not receive a Majority Withheld Vote shall appoint a committee among themselves to consider the resignation offers and his biography appears above with our other current directors.
During 2016 and as a result of the ongoing director succession planning process described above, our Board also began considering additional candidates for service on our Board. The Governance Committee identified a pool of candidates with solid backgrounds in finance and utility executive experience. After considering several potential candidates,recommend to the Board metwhether to accept them. If the only directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer directors, all directors may participate in the action regarding whether to accept the resignation offers, with Ms. Linda G. Sullivan, who was initially recommended by a non-management director. The Board found Ms. Sullivan to possess the skills and qualities, including with respect to finance and the utility industry, that would enhance the Board’s collective skill set today and into the future. Thus, the Board nominated Ms. Sullivan to serve on our Board, subject to election by shareholders at the 2017 annual meeting.
In February 2017, Ms. Bradley announced that she would not be seeking re-election at the conclusioneach director recusing himself or herself from consideration of his or her annual term in April 2017. As a resident of Montana, Ms. Bradley provided our Board with a valuable local perspective. Thus, our Board reviewed a pool of candidates who were residents of Montana. After considering and meeting with several candidates, the Board concluded that Ms. Britt E. Ide, initially recommended by a non-management director, possessed utility, engineering, legal, and other skills that would be beneficial to our Board, in addition to her local Montana knowledge. Thus, the Board also nominated Ms. Ide to serve on our Board, subject to election by shareholders at the 2017 annual meeting.
Our Board has chosen to nominate Ms. Ide and Ms. Sullivan for election by shareholders at the annual meeting, rather than exercising its right under our bylaws to increase the size of the Board by immediately fill the vacancy without shareholder approval. The Board has approved increasing the size of our Board to nine directors (from eight), effective at the time of annual meeting. If our shareholders do not support all of our director nominees, our Board may act to reduce the size of our Board rather than fill any resulting vacancy.
We are delighted that Ms. Ide and Ms. Sullivan accepted our Board’s invitation and recommend that you vote “For” their election at the annual meeting. Ms. Ide’s and Ms. Sullivan’s summary biographies are provided on the following page.


47
Corporate Governance


Britt E. IdeAge 45     Nominated as Independent Director
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Utility, Legal, Engineering, and Executive experience through her current positions as president of Ide Energy & Strategy; and director and interim chief executive officer of the Big Sky Chamber of Commerce (Montana). Former progressive leadership roles include senior counsel of Idaho Power Company (2009-11), associate general counsel at Healthwise, Incorporated (2005-2008), senior attorney, Albertson’s Inc. (2005) and counsel at Boise Cascade Corporation (2000-2004).
Service Territory and Board credentials as a resident of and respected civic leader in Montana and from service on the boards of the Big Sky Chamber of Commerce and Hotrock Energy Research Organization, as well as appointments to Montana’s Clean Power Plan Advisory Council and as an ambassador of the Clean Energy & Empowerment Initiative. Previous member of the Northwest Chapter of the National Association of Corporate Directors (2015-2016) and the former independent chair of the board of directors of PCS Edventures!, Inc. (2014-2015) (also nominating and governance chair and compensation committee member).
We believe Ms. Ide is Qualified to Serve on our Board because of her
● 25+ years business, engineering and legal experience
● Utility and energy industry experience
● Local perspective on relevant regulatory, political and community issues facing our company
● Board credentials and demonstrated commitment to boardroom excellence – working to attain NACD Governance Fellow status in 2017
Linda G. SullivanAge 53     Nominated as Independent Director
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Utility, Finance, Executive, and Regulatory experiencethrough her position as executive vice president and chief financial officer (CFO) of American Water, the largest publicly traded U.S. water and wastewater utility company (since 2014) and former progressive leadership roles over 22 years with the Edison International companies, including senior vice president and CFO of Southern California Edison (2009-14), vice president and controller of both Edison International and Southern California Edison (2005-09), assistant controller of Edison International (2001-05), and prior finance and accounting roles at the corporate level and within an operating business unit at the utility.
Board credentials as a current board member of the University of Maryland University College (UMUC) Ventures, a non-profit organization dedicated to supporting accessible, affordable quality education to adult students and prior service on the boards of Crystal Stairs, Inc., a $90 million non-profit organization assisting working families with child care services in underserved communities of Los Angeles County, and Executive Services Corps, which provides coaching and consulting to nonprofits throughout southern California.
We believe Ms. Sullivan is Qualified to Serve on our Board because of her
● 25+ years utility finance and regulatory experience
● Financial proficiency – audit committee financial expert (SEC), financially literate (NYSE)
● Financial expertise as a Certified Public Accountant since 1991 (inactive) and Certified Management Accountant since 1995
● Board credentials and demonstrated commitment to boardroom excellence – working to attain NACD Governance Fellow status in 2017
resignation offer.
Board Independence
Independent Board Chair
Our Board has placed the responsibilities of Chair with an independent member of the Board, which we believe provides optimum accountability between the Board and our management team. We believe it is beneficial to have


48
Corporate Governance


an independent Chair whose sole responsibility is leading our Board members as they provide leadership to our executive team.
Following Chair Draper’s announcement that he would be retiring, our Board members elected Mr. Stephen P. Adik, current Chair of the Audit Committee, to serve as the Board’s Chair following our 2018 annual meeting. The Board members selected Mr. Adik because of his experience as an executive in the utility industry and his active participation on our Board, particularly with respect to his current role leading our Audit Committee.
Our Chair is responsible for providing leadership to the Board and facilitating communication among the directors; setting the Board meeting agendas in consultation with the CEO; presiding at Board meetings, executive sessions and shareholder meetings; and serving as an ex-officio member of each Board committee. This delineation of duties allows the CEO to focus his attention on managing the day-to-day business of the company. We believe this structure provides strong leadership for our Board, while positioning our CEO as the leader of the company in the eyes of our customers, employees, and other stakeholders.
Each regularly scheduled Board and committee meeting provides the opportunity for executive sessions of the non-employee directors without management in attendance. These executive sessions are chaired by our Board Chair or the independent Chair of the respective committee.


49
Corporate Governance


Determination of Independence and Family Relationships
All of our directors are independent, with the sole exception of our CEO. A director is considered independent if he or she qualifies as “independent” under (1) NYSE standards and any applicable laws and (2) he or she (a) has never been an employee of the company or any of its subsidiaries, (b) is not a close relative of any management employee of the company, (c) provides no services to the company, and is not employed by any firm providing major services to the company, other than as a director, and (d) receives no compensation from the company other than director fees and benefits. The Board’s determination of independence is based upon a review of the questionnaires submitted on an annual basis by each director, the company’s relevant business records, publicly available information and the applicable SEC and NYSE requirements.
Based on its review, the Board determined that all of the non-employee directors (Messrs. Adik, Clark, Draper, Dykhouse, and Horsfall and Ms. Johnson, as well as new director nominees Mses. Ide, Johnson and Sullivan) are independent as defined in the listing standards noted above. Our final director, Mr. Rowe, is an executive officer of the company and, therefore, is not independent.
In addition to the independence assessment of our current directors, our Board reviewed the family relationships of our current directors and executive officers to determine the existence of any family relationships not more remote than first cousins. Based on this review, our Board determined that no such family relationships exist, except that current directors Dana J. Dykhouse and Jan R. Horsfall are first cousins.
Board Committees
We have three Board committees composed solely of independent directors, each with a different independent director serving as chairperson of the committee. Our Board committees are:
●  Audit Committee;
●  Human Resources Committee (Compensation Committee); and
●  Governance and Innovation Committee.
 
COMMITTEES
100%
INDEPENDENT
Our Board holds its committee meetings sequentially (i.e., committee meetings do not overlap with one another). As a result of holding sequential meetings, each of our Board members is able to attend each committee meeting. We believe this practice is highly beneficial to our Board as a whole and the company in general because each of our Board members is aware of the detailed work conducted by each Board committee. This practice also affords each of our Board members the opportunity to provide input to the committee members before a committee reaches any conclusions.



49
Corporate Governance


Audit Committee   
 
Primary Responsibilities
Our Audit Committee assists the Board with oversight of:
●    The company’s accounting and financial reporting processes;
●    The audit and integrity of the company’s financial statements;
●    The company’s compliance with legal and regulatory requirements;
●    The independent auditor’s qualifications and independence;
●    The performance of the company’s internal audit function and independent auditors;
●    The preparation of the Audit Committee Report for the company’s proxy statement;
●    Significant financings and dividend policy and dividend payment recommendations;
●    The company’s key business, financial and regulatory risks and security program (including physical and cyber security, and business continuity); and
●    Such other duties as directed by the Board.
Financial Expertise, Financial Literacy, and Independence
The Board determined that each member of the Audit Committee:
●Qualifies as an audit committee financial expert under the applicable SEC regulations;
●Is financially literate within the meaning of the listing standards of the NYSE; and
●Is independent, as defined in the listing standards of the NYSE and the SEC regulations.
Audit Committee Report
The Audit Committee Report is included on page 60 of this proxy statement.
Audit Committee Charter
The Audit Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2016. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
 
       
 5Meetings in 20162017
Members
Stephen P. Adik (Chair)
Dana J. Dykhouse
Jan R. Horsfall
Linda G. Sullivan
    
      
Members
Stephen P. Adik (Chair)
Dana J. Dykhouse
Jan R. Horsfall
“The Audit Committee encourages broad attendance and participation by management at its meetings. In addition,
at each meeting, the Committee conducts private and separate executive sessions with the company’s chief audit and compliance officer, with the company’s management, and with the company’s external auditors. This allows the direct and candid communication necessary for the Committee to operate effectively.”
Stephen P. Adik,
Audit Committee Chair
(continued on next page)


50
Corporate Governance


Compensation Committee    
 
Financial Expertise, Financial Literacy, and Independence
The Board determined that each member of the Audit Committee:
●    Qualifies as an audit committee financial expert under the applicable SEC regulations;
●    Is financially literate within the meaning of NYSE listing standards; and
●    Is independent, as defined in the listing standards of the NYSE and the SEC regulations.
Audit Committee Report
The Audit Committee Report is included on page 40 of this proxy statement.
Audit Committee Charter
The Audit Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
“The Audit Committee encourages broad attendance and participation by management at its meetings. In addition,
at each meeting, the Committee conducts private and separate executive sessions with the company’s chief audit and compliance officer, with the company’s management, and with the company’s external auditors. This permits direct and candid communication.”
Stephen P. Adik,
Audit Committee Chair
Governance Committee
Primary Responsibilities
Our Governance and Innovation Committee (Governance Committee) assists the Board in:
●Identifying qualified individuals to become Board members, including recommending nominees for the Board and succession planning regarding current Board members;
●Determining the composition of the Board and its committees;
●Monitoring a process to assess Board effectiveness;
●Developing and implementing corporate governance principles; and
●Overseeing the company’s efforts concerning innovation, including emerging or competing technologies and alternative energy resources.
The Governance Committee also reviews and oversees our position on corporate social responsibilities, such as environmental and public policy issues that significantly affect us, and our shareholders, customers, and other key stakeholders.
Independence
Each member of our Governance Committee meets the independence requirements under the NYSE corporate governance listing standards.
Governance and Innovation Committee Charter
The Governance and Innovation Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
5Meetings in 2017
Members
Julia L. Johnson (Chair)
Anthony T. Clark
Jan R. Horsfall
Britt E. Ide
“Corporate governance is emphasized at NorthWestern. We believe strong governance leads to investor confidence in the company and are proud of the national recognition our governance practices have received.”
Julia L. Johnson,
Governance
Committee Chair


51
Corporate Governance


Compensation Committee
 
Primary Responsibilities
Our Human Resources Committee (Compensation Committee) acts on behalf of and with the concurrence of the Board with respect to:
●    Compensation, benefits and other employment matters for executives;
●    Stock-based compensation plans for employees;
●    The election and appointment of executive officers and other officers;
●    The assessment of the performance of the CEO;
●    Succession planning for the CEO, executives and other officers; and
●    The compensation of non-employee members of the Board.
As discussed in the Compensation Discussion and Analysis section of this proxy statement, the Compensation Committee also considers input on executive compensation from our CEO and CFO.
Our Compensation Committee has delegated some of the administration of our executive compensation and benefits plans to our Compensation and Benefits Department.
Independence
Each member of our Compensation Committee is an “outside director” within the meaning ofas formerly defined under Section 162(m) of the Internal Revenue Code, a “non-employee” director within the meaning of Rule 16b-3 under the Exchange Act, and independent under the standards of the NYSE.
Compensation Committee Report
The Compensation Committee reportReport is included at page 3231 of this proxy statement.
CompensationDirector Resignation Vote Policy
The Board has in place a Majority Plus Resignation Vote Policy for the election of directors. The policy provides that, in an uncontested election, any nominee for director who receives a greater number of “WITHHOLD AUTHORITY” votes from his or her election than votes “FOR” such election (or a Majority Withheld Vote) shall promptly offer his or her resignation following certification of the shareholder vote.
Under this policy, the Governance Committee Chartershall promptly make a recommendation to the Board regarding the resignation offer and possible responses based on the circumstances that led to the Majority Withheld Vote, if known. The Board must act on the Governance Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board will promptly disclose its decision-making process and decision regarding whether to accept the director’s resignation offer (or the reason(s) for rejecting the resignation offer, if applicable) in a Current Report on Form 8-K.
We call our compensation committee the Human Resources Committee because its responsibilities extend beyond the realm of compensation to other human resources and employee issues. The Human Resources Committee operatesAny director who tenders his or her resignation pursuant to this policy shall not participate in the Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer. However, if each member of the Governance Committee receives a charterMajority Withheld Vote at the same election, then the independent directors who did not receive a Majority Withheld Vote shall appoint a committee among themselves to consider the resignation offers and recommend to the Board whether to accept them. If the only directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer directors, all directors may participate in the action regarding whether to accept the resignation offers, with each director recusing himself or herself from consideration of his or her resignation offer.
Board Independence
Independent Board Chair
Our Board has placed the responsibilities of Chair with an independent member of the Board, which we believe provides optimum accountability between the Board and our management team. We believe it is beneficial to have an independent Chair whose sole responsibility is leading our Board members as they provide leadership to our executive team.
Following Chair Draper’s announcement that he would be retiring, our Board members elected Mr. Stephen P. Adik, current Chair of the Audit Committee, to serve as the Board’s Chair following our 2018 annual meeting. The Board members selected Mr. Adik because of his experience as an executive in the utility industry and his active participation on our Board, particularly with respect to his current role leading our Audit Committee.
Our Chair is responsible for providing leadership to the Board and facilitating communication among the directors; setting the Board meeting agendas in consultation with the CEO; presiding at Board meetings, executive sessions and shareholder meetings; and serving as an ex-officio member of each Board committee. This delineation of duties allows the CEO to focus his attention on managing the day-to-day business of the company. We believe this structure provides strong leadership for our Board, while positioning our CEO as the leader of the company in the eyes of our customers, employees, and other stakeholders.
Each regularly scheduled Board and committee meeting provides the opportunity for executive sessions of the non-employee directors without management in attendance. These executive sessions are chaired by our Board Chair or the independent Chair of the respective committee.


49
Corporate Governance


Determination of Independence and Family Relationships
All of our directors are independent, with the sole exception of our CEO. A director is considered independent if he or she qualifies as “independent” under (1) NYSE standards and any applicable laws and (2) he or she (a) has never been an employee of the company or any of its subsidiaries, (b) is not a close relative of any management employee of the company, (c) provides no services to the company, and is not employed by any firm providing major services to the company, other than as a director, and (d) receives no compensation from the company other than director fees and benefits. The Board’s determination of independence is based upon a review of the questionnaires submitted on an annual basis by each director, the company’s relevant business records, publicly available information and the applicable SEC and NYSE requirements.
Based on its review, the Board determined that all of the non-employee directors (Messrs. Adik, Clark, Draper, Dykhouse, and Horsfall and Mses. Ide, Johnson and Sullivan) are independent as defined in the listing standards noted above. Our final director, Mr. Rowe, is an executive officer of the company and, therefore, is not independent.
In addition to the independence assessment of our current directors, our Board reviewed annuallythe family relationships of our current directors and was last amendedexecutive officers to determine the existence of any family relationships not more remote than first cousins. Based on this review, our Board determined that no such family relationships exist, except current directors Dana J. Dykhouse and Jan R. Horsfall are first cousins.
Board Committees
We have three Board committees composed solely of independent directors, each with a different independent director serving as chairperson of the committee. Our Board committees are:
●  Audit Committee;
●  Human Resources Committee (Compensation Committee); and
●  Governance and Innovation Committee.
COMMITTEES
100%
INDEPENDENT
Our Board holds its committee meetings sequentially (i.e., committee meetings do not overlap with one another). As a result of holding sequential meetings, each of our Board members is able to attend each committee meeting. We believe this practice is highly beneficial to our Board as a whole and the company in October 2016.general because each of our Board members is aware of the detailed work conducted by each Board committee. This practice also affords each of our Board members the opportunity to provide input to the committee members before a committee reaches any conclusions.
Audit Committee
Primary Responsibilities
Our Audit Committee assists the Board with oversight of:
●The company’s accounting and financial reporting processes;
●The audit and integrity of the company’s financial statements;
●The company’s compliance with legal and regulatory requirements;
●The independent auditor’s qualifications and independence;
●The performance of the company’s internal audit function and independent auditors;
●The preparation of the Audit Committee Report for the company’s proxy statement;
●Significant financings and dividend policy and dividend payment recommendations;
●    The company’s key business, financial and regulatory risks and security program (including physical and cyber security, and business continuity); and
●Such other duties as directed by the Board.
5Meetings in 2017
Members
Stephen P. Adik (Chair)
Dana J. Dykhouse
Jan R. Horsfall
Linda G. Sullivan
(continued on next page)


50
Corporate Governance


Financial Expertise, Financial Literacy, and Independence
The Board determined that each member of the Audit Committee:
●    Qualifies as an audit committee financial expert under the applicable SEC regulations;
●    Is financially literate within the meaning of NYSE listing standards; and
●    Is independent, as defined in the listing standards of the NYSE and the SEC regulations.
Audit Committee Report
The Audit Committee Report is included on page 40 of this proxy statement.
Audit Committee Charter
The Audit Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
“The Audit Committee encourages broad attendance and participation by management at its meetings. In addition,
at each meeting, the Committee conducts private and separate executive sessions with the company’s chief audit and compliance officer, with the company’s management, and with the company’s external auditors. This permits direct and candid communication.”
Stephen P. Adik,
Audit Committee Chair
 
        
 5Meetings in 2016  
Governance Committee
Primary Responsibilities
Our Governance and Innovation Committee (Governance Committee) assists the Board in:
●Identifying qualified individuals to become Board members, including recommending nominees for the Board and succession planning regarding current Board members;
●Determining the composition of the Board and its committees;
●Monitoring a process to assess Board effectiveness;
●Developing and implementing corporate governance principles; and
●Overseeing the company’s efforts concerning innovation, including emerging or competing technologies and alternative energy resources.
The Governance Committee also reviews and oversees our position on corporate social responsibilities, such as environmental and public policy issues that significantly affect us, and our shareholders, customers, and other key stakeholders.
Independence
Each member of our Governance Committee meets the independence requirements under the NYSE corporate governance listing standards.
Governance and Innovation Committee Charter
The Governance and Innovation Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
5Meetings in 2017
Members
Julia L. Johnson (Chair)
Anthony T. Clark
Jan R. Horsfall
Britt E. Ide
“Corporate governance is emphasized at NorthWestern. We believe strong governance leads to investor confidence in the company and are proud of the national recognition our governance practices have received.”
Julia L. Johnson,
Governance
Committee Chair
  
       
Members
Dana J. Dykhouse (Chair)
Stephen P. Adik
Dorothy M. Bradley
Julia L. Johnson
“We evaluate executive compensation annually and believe we have developed a program for compensation that we can consistently apply year after year. The performance metrics attempt to align our interests with those of our shareholders, customers, employees and regulators.”
Dana J. Dykhouse,
Compensation
Committee Chair
        
Independent Compensation Consultant
The Compensation Committee has directly retained Willis Towers Watson as its independent, external compensation consultant for the last several years. Willis Towers Watson is an independent consulting firm that provides services in the areas of executive compensation and benefits and has specific expertise in evaluating compensation in the utility industry. Willis Towers Watson reports directly to the Compensation Committee and, at the Compensation Committee’s request, provides an annual evaluation and analysis of trends in both executive compensation and director compensation. Willis Towers Watson also evaluates other compensation issues at the direct request of the Compensation Committee.
In accordance with NYSE requirements approved by the SEC in 2013, the Compensation Committee evaluated the following six factors to assess independence and conflicts of interest before it engaged Willis Towers Watson to do work in 2016 and 2017:
1.The provision of other services to the company by Willis Towers Watson.
2.The amount of fees received from the company by Willis Towers Watson, as a percentage of the firm's total revenues.


51
Corporate Governance


3.The policies or procedures of Willis Towers Watson that are designed to prevent conflicts of interest.
4.Any business or personal relationship of a member of the Compensation Committee with the regular members of the Willis Towers Watson executive compensation team serving the company.
5.Any stock of the company owned by the regular members of the Willis Towers Watson executive compensation team serving the company.
6.Any business or personal relationships between the executive officers of the company and the regular members of the Willis Towers Watson executive compensation team serving the company.
The Compensation Committee also obtained a representation letter from Willis Towers Watson addressing these six factors and certain other matters related to its independence. Based on the Compensation Committee’s evaluation of these factors and the representations from Willis Towers Watson, the Compensation Committee concluded that Willis Towers Watson is an independent adviser and has no conflicts of interest with us.
Governance Committee
Primary Responsibilities
Our Governance and Innovation Committee (Governance Committee) assists the Board in:
●Identifying qualified individuals to become Board members, including succession planning regarding current Board members;
●Determining the composition of the Board and its committees;
●Monitoring a process to assess Board effectiveness;
●Developing and implementing corporate governance principles; and
●Overseeing the company’s efforts concerning innovation, including emerging or competing technologies and alternative energy resources.
Further, the Governance Committee reviews and oversees our position on corporate social responsibilities, such as environmental and public policy issues that significantly affect us, our shareholders, our customers and our other key stakeholders.
Independence
Each member of our Governance Committee meets the independence requirements under the NYSE corporate governance listing standards.
Governance and Innovation Committee Charter
The Governance and Innovation Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2016. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
5Meetings in 2016
Members
Julia L. Johnson (Chair)
Dorothy M. Bradley
Anthony T. Clark
Jan R. Horsfall
“Corporate governance is emphasized at NorthWestern. We believe strong governance leads to investor confidence in the company and are proud of the national recognition our governance practices have received.”
Julia L. Johnson,
Governance
Committee Chair
        
Director Candidate Evaluation
Our Governance Committee evaluates each director candidate to determine whether the Board should recommend such candidate as a director nominee. In considering new individuals for nomination as directors, the Governance Committee typically solicits recommendations from its current directors and is authorized to engage third-party advisers, including search firms, to assist in the identification and evaluation of candidates, if necessary.
Our goal is to maintain a diverse Board that operates cohesively and challenges management in a constructive way. The Governance Committee has not established specific minimum qualifications for director nominees or set forth specific qualities or skills that the committee believes are necessary for one or more directors to possess. Instead, in considering director candidates, the Governance Committee considers the diversity of our Board and takes into account whether the Board as a whole has the skills, experience, and background that add to and complement the


52
Compensation Committee
Primary Responsibilities
Our Human Resources Committee (Compensation Committee) acts on behalf of and with the concurrence of the Board with respect to:
●Compensation, benefits and other employment matters for executives;
●Stock-based compensation plans for employees;
●The election and appointment of executive officers and other officers;
●The assessment of the performance of the CEO;
●    Succession planning for the CEO, executives and other officers; and
●The compensation of non-employee members of the Board.
As discussed in the Compensation Discussion and Analysis section of this proxy statement, the Compensation Committee also considers input on executive compensation from our CEO and CFO.
Our Compensation Committee has delegated some of the administration of our executive compensation and benefits plans to our Compensation and Benefits Department.
Independence
Each member of our Compensation Committee is an “outside director” as formerly defined under Section 162(m) of the Internal Revenue Code, a “non-employee” director within the meaning of Rule 16b-3 under the Exchange Act, and independent under the standards of the NYSE.
Compensation Committee Report
The Compensation Committee Report is included at page 31 of this proxy statement.
Corporate Governance


range of skills, experience, and background of each director, based on the following: integrity, accomplishments, business judgment, experience and education, commitment, representation of shareholders, industry knowledge, independence, and financial literacy. With the exception of the company’s CEO, all of our directors are independent, as required by our Corporate Governance Guidelines.
When nominating persons to serve on our Board, the Governance Committee considers individuals who can add value to the strategic policymaking and oversight responsibilities of the Board. A director’s ability and available time to contribute to the Board and his or her participation on other boards also are considered because we believe these are important factors that enhance the quality of the Board’s decision-making, its oversight of management, and our business overall. The Governance Committee believes that the nominees for election at this year’s annual meeting collectively possess the experience, skills, and attributes necessary to lead the company to a long and successful future.
Our Governance Committee also has the responsibility for considering nominees for directors properly recommended by shareholders. A shareholder who wishes to submit a candidate for consideration at the annual meeting of shareholders must notify our Corporate Secretary in writing not less than 90 days and no more than 120 days prior to the first anniversary date of the preceding year’s annual meeting. The shareholder’s written notice must include information about each proposed nominee, including name, age, business address, principal occupation and other information required in proxy solicitations. The nomination notice also must include the nominating shareholder’s name and address, the number of shares of our common stock beneficially owned by the shareholder and any arrangements or understandings between the nominee and the shareholder. The shareholder also must furnish a statement from the nominee indicating that the nominee wishes and is able to serve as a director.
The manner in which the Governance Committee evaluates candidates recommended by shareholders is generally the same as candidates from other sources. However, the Governance Committee also will seek and consider information concerning the relationship between the recommending shareholder and the candidate to determine if the candidate can represent the interests of all of the shareholders. The Governance Committee will not evaluate a candidate recommended by a shareholder unless the shareholder notice states that the potential candidate has indicated a willingness to serve as a director, to comply with the expectations and requirements for Board service publicly disclosed by NorthWestern and to provide all of the information required to conduct an evaluation.
Director Resignation Vote Policy
The Board has in place a Majority Plus Resignation Vote Policy for the election of directors. The policy provides that, in an uncontested election, any nominee for director who receives a greater number of “WITHHOLD AUTHORITY” votes from his or her election than votes “FOR” such election (or a Majority Withheld Vote) shall promptly offer his or her resignation following certification of the shareholder vote.
Under this policy, the Governance Committee shall promptly make a recommendation to the Board regarding the resignation offer and possible responses based on the circumstances that led to the Majority Withheld Vote, if known. The Board must act on the Governance Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board will promptly disclose its decision-making process and decision regarding whether to accept the director’s resignation offer (or the reason(s) for rejecting the resignation offer, if applicable) in a Current Report on Form 8-K.
Any director who tenders his or her resignation pursuant to this policy shall not participate in the Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer. However, if each member of the Governance Committee receives a Majority Withheld Vote at the same election, then the independent directors who did not receive a Majority Withheld Vote shall appoint a committee among themselves to consider the resignation offers and recommend to the Board whether to accept them. If the only directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer directors, all directors may participate in the action regarding whether to accept the resignation offers, with each director recusing himself or herself from consideration of his or her resignation offer.
Board Independence
Independent Board Chair
Our Board has placed the responsibilities of Chair with an independent member of the Board, which we believe provides optimum accountability between the Board and our management team. We believe it is beneficial to have an independent Chair whose sole responsibility is leading our Board members as they provide leadership to our executive team.
Following Chair Draper’s announcement that he would be retiring, our Board members elected Mr. Stephen P. Adik, current Chair of the Audit Committee, to serve as the Board’s Chair following our 2018 annual meeting. The Board members selected Mr. Adik because of his experience as an executive in the utility industry and his active participation on our Board, particularly with respect to his current role leading our Audit Committee.
Our Chair is responsible for providing leadership to the Board and facilitating communication among the directors; setting the Board meeting agendas in consultation with the CEO; presiding at Board meetings, executive sessions and shareholder meetings; and serving as an ex-officio member of each Board committee. This delineation of duties allows the CEO to focus his attention on managing the day-to-day business of the company. We believe this structure provides strong leadership for our Board, while positioning our CEO as the leader of the company in the eyes of our customers, employees, and other stakeholders.
Each regularly scheduled Board and committee meeting provides the opportunity for executive sessions of the non-employee directors without management in attendance. These executive sessions are chaired by our Board Chair or the independent Chair of the respective committee.


5349
Corporate Governance


Determination of Independence and Family Relationships
All of our directors are independent, with the sole exception of our CEO. A director is considered independent if he or she qualifies as “independent” under (1) NYSE standards and any applicable laws and (2) he or she (a) has never been an employee of the company or any of its subsidiaries, (b) is not a close relative of any management employee of the company, (c) provides no services to the company, and is not employed by any firm providing major services to the company, other than as a director, and (d) receives no compensation from the company other than director fees and benefits. The Board’s determination of independence is based upon a review of the questionnaires submitted on an annual basis by each director, the company’s relevant business records, publicly available information and the applicable SEC and NYSE requirements.
Based on its review, the Board determined that all of the non-employee directors (Messrs. Adik, Clark, Draper, Dykhouse, and Horsfall and Mses. Ide, Johnson and Sullivan) are independent as defined in the listing standards noted above. Our final director, Mr. Rowe, is an executive officer of the company and, therefore, is not independent.
In addition to the independence assessment of our current directors, our Board reviewed the family relationships of our current directors and executive officers to determine the existence of any family relationships not more remote than first cousins. Based on this review, our Board determined that no such family relationships exist, except current directors Dana J. Dykhouse and Jan R. Horsfall are first cousins.
Board Committees
We have three Board committees composed solely of independent directors, each with a different independent director serving as chairperson of the committee. Our Board committees are:
●  Audit Committee;
●  Human Resources Committee (Compensation Committee); and
●  Governance and Innovation Committee.
COMMITTEES
100%
INDEPENDENT
Our Board holds its committee meetings sequentially (i.e., committee meetings do not overlap with one another). As a result of holding sequential meetings, each of our Board members is able to attend each committee meeting. We believe this practice is highly beneficial to our Board as a whole and the company in general because each of our Board members is aware of the detailed work conducted by each Board committee. This practice also affords each of our Board members the opportunity to provide input to the committee members before a committee reaches any conclusions.
Audit Committee
Primary Responsibilities
Our Audit Committee assists the Board with oversight of:
●The company’s accounting and financial reporting processes;
●The audit and integrity of the company’s financial statements;
●The company’s compliance with legal and regulatory requirements;
●The independent auditor’s qualifications and independence;
●The performance of the company’s internal audit function and independent auditors;
●The preparation of the Audit Committee Report for the company’s proxy statement;
●Significant financings and dividend policy and dividend payment recommendations;
●    The company’s key business, financial and regulatory risks and security program (including physical and cyber security, and business continuity); and
●Such other duties as directed by the Board.
5Meetings in 2017
Members
Stephen P. Adik (Chair)
Dana J. Dykhouse
Jan R. Horsfall
Linda G. Sullivan
(continued on next page)


50
Corporate Governance


Financial Expertise, Financial Literacy, and Independence
The Board determined that each member of the Audit Committee:
●    Qualifies as an audit committee financial expert under the applicable SEC regulations;
●    Is financially literate within the meaning of NYSE listing standards; and
●    Is independent, as defined in the listing standards of the NYSE and the SEC regulations.
Audit Committee Report
The Audit Committee Report is included on page 40 of this proxy statement.
Audit Committee Charter
The Audit Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
“The Audit Committee encourages broad attendance and participation by management at its meetings. In addition,
at each meeting, the Committee conducts private and separate executive sessions with the company’s chief audit and compliance officer, with the company’s management, and with the company’s external auditors. This permits direct and candid communication.”
Stephen P. Adik,
Audit Committee Chair
Governance Committee
Primary Responsibilities
Our Governance and Innovation Committee (Governance Committee) assists the Board in:
●Identifying qualified individuals to become Board members, including recommending nominees for the Board and succession planning regarding current Board members;
●Determining the composition of the Board and its committees;
●Monitoring a process to assess Board effectiveness;
●Developing and implementing corporate governance principles; and
●Overseeing the company’s efforts concerning innovation, including emerging or competing technologies and alternative energy resources.
The Governance Committee also reviews and oversees our position on corporate social responsibilities, such as environmental and public policy issues that significantly affect us, and our shareholders, customers, and other key stakeholders.
Independence
Each member of our Governance Committee meets the independence requirements under the NYSE corporate governance listing standards.
Governance and Innovation Committee Charter
The Governance and Innovation Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
5Meetings in 2017
Members
Julia L. Johnson (Chair)
Anthony T. Clark
Jan R. Horsfall
Britt E. Ide
“Corporate governance is emphasized at NorthWestern. We believe strong governance leads to investor confidence in the company and are proud of the national recognition our governance practices have received.”
Julia L. Johnson,
Governance
Committee Chair


51
Corporate Governance


Compensation Committee
Primary Responsibilities
Our Human Resources Committee (Compensation Committee) acts on behalf of and with the concurrence of the Board with respect to:
●Compensation, benefits and other employment matters for executives;
●Stock-based compensation plans for employees;
●The election and appointment of executive officers and other officers;
●The assessment of the performance of the CEO;
●    Succession planning for the CEO, executives and other officers; and
●The compensation of non-employee members of the Board.
As discussed in the Compensation Discussion and Analysis section of this proxy statement, the Compensation Committee also considers input on executive compensation from our CEO and CFO.
Our Compensation Committee has delegated some of the administration of our executive compensation and benefits plans to our Compensation and Benefits Department.
Independence
Each member of our Compensation Committee is an “outside director” as formerly defined under Section 162(m) of the Internal Revenue Code, a “non-employee” director within the meaning of Rule 16b-3 under the Exchange Act, and independent under the standards of the NYSE.
Compensation Committee Report
The Compensation Committee Report is included at page 31 of this proxy statement.
Compensation Committee Charter
We call our compensation committee the Human Resources Committee because its responsibilities extend beyond the realm of compensation to other human resources and employee issues. The Human Resources Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2017. The Charter is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
5Meetings in 2017
Members
Dana J. Dykhouse (Chair)
Stephen P. Adik
Julia L. Johnson
“We evaluate executive compensation annually and believe we have developed a program for compensation that we can consistently apply year after year. The performance metrics attempt to align our interests with those of our shareholders, customers, employees and regulators.”
Dana J. Dykhouse,
Compensation
Committee Chair
Independent Compensation Consultant

The Compensation Committee has directly retained Willis Towers Watson as its independent, external compensation consultant for the last several years. Willis Towers Watson is an independent consulting firm that provides services in the areas of executive compensation and benefits and has specific expertise in evaluating compensation in the utility industry. Willis Towers Watson reports directly to the Compensation Committee and, at the Compensation Committee’s request, provides an annual evaluation and analysis of trends in both executive compensation and director compensation. Willis Towers Watson also evaluates other compensation issues at the direct request of the Compensation Committee.

The Compensation Committee evaluated the following six factors to assess independence and conflicts of interest before it engaged Willis Towers Watson to do work in 2017 and 2018:
1.   The provision of other services to the company by Willis Towers Watson.
2.   The amount of fees received from the company by Willis Towers Watson, as a percentage of the firm's total revenues.


52
Corporate Governance


3.    The policies or procedures of Willis Towers Watson that are designed to prevent conflicts of interest.
4.    Any business or personal relationship of a member of the Compensation Committee with the regular members of the Willis Towers Watson executive compensation team serving the company.
5.    Any stock of the company owned by the regular members of the Willis Towers Watson executive compensation team serving the company.
6.    Any business or personal relationships between the executive officers of the company and the regular members of the Willis Towers Watson executive compensation team serving the company.

The Compensation Committee also obtained a representation letter from Willis Towers Watson addressing these six factors and certain other matters related to its independence. Based on the Compensation Committee’s evaluation of these factors and the representations from Willis Towers Watson, the Compensation Committee concluded that Willis Towers Watson is an independent adviser and has no conflicts of interest with us.
Other Governance Practices
Code of Conduct
Our Board adopted a Code of Conduct and Ethics (Code of Conduct) which it reviews annually. Our Code of Conduct embodies the standards that form our culture and sets forth expectations of conduct for all of our officers, directors, and employees, including all full- and part-time employees and certain persons that provide services on our behalf. Our Code of Conduct focuses on our corporate vision, mission and values. You may review our Code of Conduct on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance. We intend to post on our website any amendments to, or waivers from, our Code of Conduct. In addition, our Board adopted a separate Code of Ethics for the Chief Executive Officer and Senior Financial Officers that applies to our principal executive officer, principal financial officer, and principal accounting officer or controller (or persons performing similar functions), which includes complaint procedures that specifically apply to this separate code. Our Board also annually reviews this separate code of ethics, which is available on our website at the location noted above. We intend to post on our website any amendments to, or waivers from, this special code of ethics.
Risk Oversight of the Company
Our Audit Committee is primarily responsible for overseeing the company’s risk management processes on behalf of the full Board by monitoring company processes for management’s identification and control of key strategic, operational, financial, regulatory, compliance, and security risks. The Audit Committee receives reports from management at least quarterly regarding the company’s assessment of risks. The Compensation Committee oversees risks in compensation plans, and the Governance Committee oversees risks in corporate governance and social responsibilities including environmental, health and safety matters. In addition, the Audit Committee reports regularly to the full Board, which also considers the company’s risk profile. The Audit Committee and the full Board focus on the most significant risks facing the company and review the corporate risk appetite in evaluating strategic alternatives and business development opportunities. The Board oversees the company’s risk management, our CEO and executive Enterprise Risk Management Committee act to ensure that our enterprise risk management and business continuity programs (ERM) achieve their objectives. While management is responsible for the day-to-day risk management processes, we have structured our ERM reporting relationship through our Chief Audit and Compliance Officer who has a reporting relationship to the Audit Committee. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.


53
Corporate Governance


Transactions with Related Persons
Our Audit Committee has adopted a written Related Persons Transaction Policy. The policy requires that any related person transaction be reviewed and approved by the Audit Committee based on its consideration of all available relevant facts and circumstances. The Audit Committee approves a related person transaction only if it determines in good faith that such transaction is in, or is consistent with, the best interests of the company and its shareholders. No material related person transactions were identified during 2016.2017.
Under the policy, a “related person” is an officer, director, director nominee, or five percent or more shareholder of the company, as well as any immediate family member of such individuals or any entity which is owned or controlled by any of such individuals; and a “related person transaction” is a transaction involving (1) the company, (2) a related person and (3) an aggregate annual amount in excess of $120,000.
The policy also provides ratification procedures for approval of transactions that have been commenced or consummated prior to any knowledge of the involvement of a related person and for the annual review of ongoing related person transactions to ensure that such transactions continue to remain in the best interests of the company and its shareholders. The policy is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.


54
Corporate Governance


Hedging and Pledging Our Securities
Our Insider Trading Policy prohibits our directors and employees from engaging in certain transactions involving our securities, including hedging or other monetization transactions and publicly traded options. The Insider Trading Policy also prohibits our directors and employees from pledging any of our securities as collateral for a loan, unless pre-cleared by our general counsel. None of our directors or executive officers have pledged any of our securities as collateral for a loan. The policy is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
Political Contributions Policy
As a public utility, we are subject to various laws and regulations at the federal, state, and local levels; and changes to these laws can affect our business, employees, communities and shareholders. Accordingly, we are committed to being an active and responsible corporate citizen.
We use our resources, through legally permissible participation in the political process, to advance matters of public policy that are consistent with our values, our legal obligations and our Code of Conduct. We also encourage our employees to be active in civic and community activities, including by participating in the political and democratic process.
We have a formal political contributions policy. We do not make (and our policy prohibits) corporate contributions to candidates for political office, political parties, or committees, or political committees organized for the advancement of political candidates, whether federal, state, or local.
State and local ballot initiatives and referenda on important policy issues do have the potential to impact our business and our stakeholders. Accordingly, the policy permits corporate contributions in connection with such matters, as well as lobbying efforts and contributions to trade and local associations. In addition, the policy allows individual employees to make personal contributions to political action committees. The policy is available on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
Communications with Our Board
You may contact our Board, Board Chair or independent directors, individually or as a group, by sending your communication to our Corporate Secretary at NorthWestern Corporation, 3010 West 69th Street, Sioux Falls, South Dakota 57108. The Corporate Secretary will forward any communication received to the intended recipient.


5554
 

Stock Information
Who owns our stock
Our common stock is currently our only class of voting securities. The number of shares noted in the table below are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and any shares which the person has the right to acquire within 60 days through the exercise of option, warrant, or right.
Stock Ownership by Directors and Executives
The following table provides information as of February 27, 2017,26, 2018, with respect to the beneficial ownership of shares of our common stock owned by our current non-employee directors, our named executive officers, and by all of our directors and executive officers as a group.
Amount and Nature of Beneficial Ownership Amount and Nature of Beneficial Ownership 
Name of Beneficial Owner
Unrestricted Shares of 
Common 
Stock Beneficially 
Owned Directly
(#)
 
Unrestricted Shares of 
Common 
Stock Beneficially 
Owned Indirectly
(#)
 
Deferred Stock Units
(#)
 
Total Shares of Common Stock Beneficially Owned
(#)
 
Percent of Common
Stock
(%)
Unrestricted Shares of 
Common 
Stock Beneficially 
Owned Directly
(#)
 
Unrestricted Shares of 
Common 
Stock Beneficially 
Owned Indirectly
(#)
 
Deferred Stock Units
(#)
 
Total Shares of Common Stock Beneficially Owned
(#)
 
Percent of Common
Stock
(%)
Stephen P. Adik (1)—
 20,000
 65,629
 85,629
 *—
 20,000
 70,735
 90,735
 *
E. Linn Draper Jr.—
 —
 118,825
 118,825
 *—
 —
 129,031
 129,031
 *
Dorothy M. Bradley3,987
 —
 22,564
 26,551
 *
Anthony T. Clark—
 —
 3,750
 3,750
 *—
 —
 6,635
 6,635
 *
Dana J. Dykhouse23,000
 —
 —
 23,000
 *25,750
 —
 —
 25,750
 *
Jan R. Horsfall5,950
 —
 —
 5,950
 *6,955
 —
 —
 6,955
 *
Britt E. Ide—
 —
 5,420
 5,420
 *
Julia L. Johnson—
 —
 80,027
 80,027
 *—
 —
 85,647
 85,647
 *
Linda G. Sullivan    5,420
 5,420
 *
Robert C. Rowe2,818
 —
 125,273
 128,091
 *11,953
 —
 137,044
 148,997
 *
Brian B. Bird52,469
 —
 —
 52,469
 *64,797
 —
 2,268
 67,065
 *
Heather H. Grahame22,907
 —
 —
 22,907
 *23,938
 —
 1,647
 25,585
 *
Curtis T. Pohl16,653
 —
 —
 16,653
 *36,156
 —
 1,297
 37,453
 *
Bobbi L. Schroeppel15,147
 —
 —
 15,147
 *17,920
 —
 859
 18,779
 *
Directors and Executive Officers as a Group (16 persons)190,757
 20,000
 434,387
 645,144
 1.33201,984
 20,000
 469,271
 691,255
 1.40
*Less than one percent.        
*Less than one percent        
(1)Shares held indirectly by Mr. Adik represent shares held in a trust of which Mr. Adik and his spouse are co-trustees.
Stock Ownership Guidelines
We believe it is important that our interests are aligned with the interests of our shareholders. Accordingly, our Board has established robust stock ownership guidelines for our non-employee directors and executive officers. Our stock ownership guidelines are set forth in our Corporate Governance Guidelines on our website at NorthWesternEnergy.com under Our Company / Investor Relations / Corporate Governance.
In 2016,Under our Board doubled the amount of stock ownership required for non-employee directors. Under the increased stock ownership guidelines, each non-employee director must retain at least ten times the value of his or her annual cash Board and committee chair retainer(s) in common stock or deferred stock units within five years of commencing service on our Board. The previous guideline was five times.
For executives, the stock ownership guidelines are six times base salary for the CEO, four times base salary for the CFO, three times base salary for our Vice President and General Counsel and our Vice President - Distribution, and two times base salary for our Vice President - Customer Care, Communications and Human Resources.


5655
Stock Ownership Information

For executives, the stock ownership guidelines range from six to two times base salary as summarized in the table below. Each executive is restricted, absent a hardship and prior Board approval, from selling stock until his or her guideline amount is achieved and must continue to maintain the required ownership level once it is obtained.
Our Board instituted stock ownership guidelines to require its members and our executives to hold a meaningful financial stake in the company to align our interests with those of our shareholders. As summarized in the table below, all of our directors and our named executive officers who have been serving more than one year have satisfied his or herthe applicable stock ownership guideline.
As important as it was to achieve the required stock ownership levels, we believe it is equally significant that our non-employee directors have continued to retain and increase their stock ownership after meeting their stock ownership guidelines. For 2016, our directors deferred 51 percent of their aggregate compensation into the company’s common stock, even though they previously had satisfied their stock ownership guideline requirements.
Satisfaction of Stock Ownership GuidelinesSatisfaction of Stock Ownership Guidelines  Satisfaction of Stock Ownership Guidelines  
 Pay Subject to Multiple Multiple Required 
Stock Ownership Requirement
($)
 
Number of Shares and DSUs Owned
(#)
 
Value of Shares and DSUs Owned
(1)
($)
 
Percent of Guideline Achieved as of Feb. 27, 2017
(1)
(%)
 Percent of Guideline Achieved
as of 12/31/15
(%)		 Pay Subject to Multiple Multiple Required 
Stock Ownership Requirement
($)
 
Number of Shares and DSUs Owned
(#)
 
Value of Shares and DSUs Owned
(1)
($)
 
Percent of Guideline Achieved as of Feb. 26, 2018
(1)
(%)
 Percent of Guideline Achieved
Last Year (2) (%)
Directors                    
E. Linn Draper Jr., Board Chair
 $125,000 10x 1,250,000
 118,825
 6,889,474
 551% 455% $125,000 10x 1,250,000
 129,031
 6,676,064
 534% 557%
Stephen P. Adik, Audit Chair
 $35,000 10x 350,000
 85,629
 4,964,769
 1,419% 1,201% $35,000 10x 350,000
 90,735
 4,694,629
 1,341% 1,419%
Dorothy M. Bradley $25,000 10x 250,000
 26,551
 1,539,427
 616% 440%
Anthony T. Clark (2) $25,000 10x 250,000
 3,750
 217,425
 87% N/A
Anthony T. Clark $25,000 10x 250,000
 6,635
 343,295
 137% 87%
Dana J. Dykhouse, Comp. Chair
 $35,000 10x 350,000
 23,000
 1,333,540
 381% 272% $35,000 10x 350,000
 25,750
 1,332,305
 381% 381%
Jan R. Horsfall $25,000 10x 250,000
 5,950
 344,981
 138% 62% $25,000 10x 250,000
 6,955
 359,852
 144% 138%
Britt E. Ide $25,000 10x 250,000
 5,420
 280,431
 112% N/A
Julia L. Johnson, Gov. Chair
 $35,000 10x 350,000
 80,027
 4,639,965
 1,326% 1,541% $35,000 10x 350,000
 85,647
 4,431,376
 1,266% 1,326%
Linda G. Sullivan $25,000 10x 250,000
 5,420
 280,431
 112% N/A
Executives                    
Robert C. Rowe $595,578 6x 3,573,468
 128,091
 7,426,716
 208% 230% $595,578 6x 3,573,468
 148,997
 7,709,105
 216% 208%
Brian B. Bird $411,951 4x 1,647,804
 52,469
 3,042,153
 185% 201% $411,951 4x 1,647,804
 67,065
 3,469,943
 211% 185%
Heather H. Grahame $360,714 3x 1,082,142
 22,907
 1,328,148
 123% 161% $360,714 3x 1,082,142
 25,585
 1,323,768
 122% 123%
Curtis T. Pohl $279,922 3x 839,766
 16,653
 965,541
 115% 142% $279,922 3x 839,766
 37,453
 1,937,818
 231% 115%
Bobbi L. Schroeppel $258,068 2x 516,136
 15,147
 878,223
 170% 205% $258,068 2x 516,136
 18,779
 971,625
 188% 170%
(1)
Value of shares or DSUs owned and ownership as a percent of stock ownership requirement are calculated as of February 27, 201726, 2018, using a closing stock price of $57.9851.74.
(2)Mr. Clark joined our BoardPercent of guideline achieved last year was calculated based on December 6, 2016.ownership as of February 27, 2017, using the closing stock price as of such date of $57.98.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on information furnished to us and contained in reports filed with the SEC, as well as written representations that no other reports were required, NorthWestern believes that during 20162017 all of its directors and executive officers timely filed all reports required by Section 16 of the Exchange Act.Act, with the exception of the following: Michael Cashell (one report, one transaction, reported one business day late); Heather Grahame (one report, one transaction, reported one business day late); Curtis Pohl (one report, one transaction, reported one business day late); and Jan Horsfall (one report, one transaction, reported two business days late).
Largest Shareholders
The table on the following page sets forth information regarding whom we know to be the beneficial owners of more than five percent of our issued and outstanding common stock as of February 27, 2017.26, 2018. The information reflected in the table is based solely on a review of statements filed with the SEC pursuant to Sections 13(d), 13(f), and 13(g) of the Exchange Act.


5756
Stock Ownership Information

Name of Beneficial Owner 
Shares of Common Stock
Beneficially Owned
(#)
 
Percent of Common Stock
(%)
 
Shares of Common Stock
Beneficially Owned
(#)
 
Percent of Common Stock
(%)
BlackRock, Inc. (1)
 8,208,262 17.0 8,688,874 17.9
55 East 52nd Street, New York, NY 10022
  
Deutsche Bank AG (2)
 5,710,128 11.8
Taunusanlage 12, 60325 Frankfurt am Main, Federal Republic of Germany 
The Vanguard Group (3)
 4,099,389 8.5
The Vanguard Group (2)
 4,551,759 9.4
100 Vanguard Blvd., Malvern, PA 19355  
JP Morgan Chase & Co. (3)
 2,478,534 5.1
270 Park Avenue, New York, NY 10017 
(1)Reflects shares beneficially owned by BlackRock, Inc. as of December 31, 2016,2017, according to a statement on Schedule 13G/A filed with the SEC on January 11, 2017,17, 2018, which indicates that the beneficial owner, a holding company, or control person in accordance with Rule 13d-1(b), has sole voting power with respect to 8,072,3708,570,938 shares and sole dispositive power with respect to 8,208,2628,688,874 shares. The beneficial owner holds shared voting or dispositive power with respect to none of the shares. The Schedule 13G/A certifies that the securities were acquired in the ordinary course and not with the purpose or with the effect of changing or influencing the control of NorthWestern Corporation.
(2)Reflects shares beneficially owned by Deutsche Bank AG,The Vanguard Group, as of December 31, 2016,2017, according to a statement on Schedule 13G filed with the SEC on February 13,7, 2018, which indicates that the beneficial owner, an investment adviser in accordance with Rule 13d-1, has sole voting power with respect to 60,562 shares and sole dispositive power with respect to 4,485,499 shares. The beneficial owner has shared voting power with respect to 17,100 shares and shared dispositive power with respect to 66,260 shares. The Schedule 13G/A certifies that the securities were acquired in the ordinary course and not with the purpose or with the effect of changing or influencing the control of NorthWestern Corporation.
(3)Reflects shares beneficially owned by JP Morgan Chase & Co., as of December 29, 2017, according to a statement on Schedule 13G filed with the SEC on January 10, 2018, which indicates that the beneficial owner, an investment adviser in accordance with Rule 13d-1(b), has sole voting power with respect to 5,508,1762,283,617 shares and sole dispositive power with respect to 5,710,1282,478,534 shares. The beneficial owner holds shared voting or dispositive power with respect to none of the shares. The Schedule 13G certifies that, to the best of the beneficial owner’s knowledge and belief, the foreign regulatory scheme applicable to the beneficial owner, a bank organized under the laws of the Federal Republic of Germany, is substantially comparable to the regulatory scheme applicable to the functionally equivalent U.S. institution. The beneficial owner also undertakes to furnish to the Commission staff, upon request, information that would otherwise be disclosed in a Schedule 13D.
(3)Reflects shares beneficially owned by The Vanguard Group, as of December 31, 2016, according to a statement on Schedule 13G filed with the SEC on February 9, 2017, which indicates that the beneficial owner, an investment adviser in accordance with Rule 13d-1(b), has sole voting power with respect to 62,691 shares and sole dispositive power with respect to 4,038,600 shares. The beneficial owner has shared voting power with respect to 5,400 shares and shared dispositive power with respect to 60,789 shares and shared voting power with respect to none of the shares. The Schedule 13G certifies that the securities were acquired in the ordinary course and not with the purpose or with the effect of changing or influencing the control of NorthWestern Corporation.
Stock for Compensation Plans
The following table presents summary information about our Equity Compensation Plan, as of the close of business on December 31, 2016:2017:
a.The aggregate number of shares of our common stock subject to outstanding stock options, warrants, and rights, including unvested performance units and unvested restricted share units;
b.The weighted average exercise price (or grant date fair value) of those outstanding stock options, warrants, and rights; and
c.The number of shares that remain available for future option grants, excluding the number of shares to be issued upon the exercise of outstanding options, warrants, and rights.
For additional information regarding our long-term incentive plans and the accounting effects of our stock-based compensation, please see Note 1615 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.2017.
Plan category 
Number of securities to be issued upon exercise of outstanding options, warrants, and rights
(a)
 
Weighted average exercise price of outstanding options, warrants, and rights
(b)
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
 
Number of securities to be issued upon exercise of outstanding options, warrants, and rights
(a)
 
Weighted average exercise price of outstanding options, warrants, and rights
(b)
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
Equity compensation plans approved by security holders (1) 258,168
(2)$44.97(3)870,186
(4) 243,008
(2)$47.44(3)822,695
(4)
Equity compensation plans not approved by security holders —
 —
 —
  —
 —
 —
 
Total 258,168




870,186
  243,008




822,695
 
(1)Consists of the Equity Compensation Plan, which is the company’s only equity compensation plan.
(2)
Consists of (a) 195,577175,468 unvested performance units, with a weighted average grant date fair value of $46.35,$49.11, granted to employees who participate in our LTIP, and (b) 62,59167,540 unvested restricted share units, with a weighted average grant date fair value of $41.14,$43.09, granted to executive officers under our ERRP. For descriptions of our LTIP and ERRP, please see theCompensation Discussion and Analysis section of this proxy statement.
(3)Amount represents the weighted average grant date fair value of the outstanding awards reflected in column (a).
(4)Awards under the Equity Compensation Plan can take the form of stock options, share appreciation rights, restricted and unrestricted share awards, deferred share units, and performance awards.


58

Audit Committee Report
In the performance of the Audit Committee’s oversight function, and in connection with the December 31, 2016, financial statements, the Audit Committee reviewed and discussed the audited financial statements with management. The Audit Committee has discussed the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. The Audit Committee received the written disclosures and the letter from Deloitte & Touche LLP (Deloitte), our independent registered public accounting firm, required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence; and the Audit Committee has discussed with Deloitte the firm’s independence. The compatibility of non-audit services was considered with the auditor’s independence.
Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC.
Audit Committee
Stephen P. Adik, Chair
Dana J. Dykhouse
Jan R. Horsfall


5957
 

Annual Meeting Information
Voting Procedures
Appointment of Proxy Holders
Our Board asks you to appoint our independent Board Chair, Dr. E. Linn Draper, Jr., and our CEO, Robert C. Rowe, as your proxy holders to vote your shares at the annual meeting. You make this appointment by voting the proxy card provided to you or by using one of the voting methods described below.
If appointed by you, the proxy holders will vote your shares as you direct on the matters described in this proxy statement. If you sign and date your proxy card, but do not provide direction, they will vote your shares as recommended by our Board.
Management is not aware of any matters to be brought before the annual meeting other than the matters described in the notice of annual meeting accompanying this proxy statement. The persons named in the form of proxy solicited by our Board will vote all proxies that have been properly executed, and if any matters not set forth in the notice of annual meeting are properly brought before the meeting, such persons will vote thereon in accordance with their best judgment.
Record Date and Voting
All shareholders of record as of the close of business on the record date, February 27, 2017,26, 2018, are entitled to receive notice of and to vote, in person or by proxy, at the annual meeting or any postponement or adjournment of the annual meeting. If you owned shares of our common stock at the close of business on the record date, you are entitled to one vote per share upon each matter presented at the annual meeting. The company does not have any other outstanding class of voting stock. Shareholders whose shares are held in an account at a brokerage firm, bank, or other nominee (i.e., in “street name”) will need to obtain a proxy from the broker, bank, or other nominee that holds their shares authorizing them to vote at the annual meeting.
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Voting on the Internet. You may vote by proxy on the internet up until 11:59 p.m. Eastern Daylight Time the day before the annual meeting. The website for internet voting is www.proxyvote.com. Easy-to-follow prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote on the internet, you can request electronic delivery of future proxy materials.
  
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Voting by Telephone. You may vote by proxy by telephone up until 11:59 p.m. Eastern Daylight Time the day before the annual meeting by using the toll-free number listed on your proxy card or voting instruction form. Easy-to-follow prompts allow you to vote your shares and confirm that your instructions have been properly recorded.
  
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Voting by Mail. Mark, sign and date your proxy card or voting instruction form and return it in the postage-paid envelope provided. Your proxy card or voting instruction form must be received far enough in advance of the annual meeting to allow sufficient time for processing.


6058
Annual Meeting Information


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Voting in Person at the Annual Meeting. If you attend the annual meeting and wish to vote in person, you will be given a ballot at the annual meeting. Please note, however, that if your shares are held in street name by a broker, bank, or other nominee and you wish to vote at the annual meeting, you must bring to the annual meeting a proxy from the record holder of the shares authorizing you to vote at the annual meeting. Submitting your vote by proxy will not affect your right to attend the annual meeting and to vote in person.
  
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Revoking Your Proxy or Your Voting Instructions to Your Proxy Holders.  If you are a record holder of our common stock, you can change your vote at any time before your proxy is voted at the annual meeting by again voting by one of the methods described above or by attending the annual meeting and voting in person. You also may revoke your proxy by delivering a notice of revocation to our corporate secretary at NorthWestern Corporation, 3010 West 69th Street, Sioux Falls, South Dakota 57108, prior to the vote at the annual meeting. If your shares are held in street name, you must contact your broker, bank, or other nominee to revoke your proxy.
Quorum
At the close of business on the record date, there were 48,335,24649,406,778 shares of NorthWestern Corporation common stock outstanding and entitled to vote at the annual meeting. Each outstanding share is entitled to one vote.
A quorum, which is a majority of the outstanding shares as of the record date, is necessary to hold a valid annual meeting. A quorum will be present at the annual meeting if the holders of a majority of the shares of our common stock outstanding and entitled to vote on the record date are present in person or represented by proxy. If a quorum is not present at the annual meeting, we expect that the annual meeting will be adjourned to solicit additional proxies.
Broker Non-Votes
Under the rules of the New York Stock Exchange (NYSE), certain shareholder nominees (such as brokers) have the discretion to vote shares on routine matters, such as the ratification of the appointment of our independent registered public accounting firm, when they do not receive voting instructions from the beneficial owner. They do not have authority to vote on non-routine matters (such as the election of directors, the advisory vote to approve named executive officer compensation, and the advisory vote on the frequency of advisory votes on executive compensation) unless they receive instruction from the beneficial owner.
A “broker non-vote” occurs when your broker submits a proxy for your shares but does not indicate a vote for a particular proposal because the broker does not have authority to vote on that proposal and has not received voting instructions from you. Broker non-votes are not counted as votes for or against the proposal in question or as abstentions, and are not counted to determine the number of votes present for the particular proposal.
Under the rules of the NYSE, if your broker holds shares in your name and delivers this proxy statement to you, the broker is entitled to vote your shares on Proposal 2 — Ratification of Independent Registered Public Accounting Firm even if the broker does not receive voting instructions from you. Without your instructions, the broker is not entitled to vote your shares on Proposal 1 — Election of Directors or Proposal 3 — Advisory Vote to Approve Named Executive Officer Compensation or Proposal 4 — Advisory Vote to Approve Frequency of Advisory Votes on Executive Compensation.. We encourage you to provide instructions to your broker, bank, or other nominee. This ensures your shares will be voted at the annual meeting.
Required Vote and Method of Counting
The required vote and method of counting votes for the various business matters to be considered at the annual meeting are described in the table on the following page. If you sign and return your proxy card without indicating your vote, your shares will be voted “FOR” each of the nominees for director, “FOR” ratification of Deloitte & Touche LLP as our independent registered public accounting firm, and “FOR” the advisory vote to approve named executive officer compensation, for every “1 YEAR” on the advisory vote on the frequency of advisory votes on executive compensation and in accordance with the recommendations of our Board on any other matters properly brought before the annual meeting for a vote.


6159
Annual Meeting Information


Item of BusinessBoard RecommendationVoting Approval StandardEffect of Abstention
Effect of Broker
Non-Vote
Proposal 1:

Election of Directors
FOR
election of each director nominee
If a quorum exists, the nominee with mostmost “FOR” votes is elected.

If a Nominee receives more “WITHHOLD AUTHORITY” votes than “FOR” votes, the Nominee must submit resignation for consideration by the Governance Committee and final Board decision.
No effectNo effect
Proposal 2:

Ratification of Appointment of Independent Registered Public Accounting Firm
FOR
If a quorum exists, the majority of votes present in person or represented by proxy and entitled to vote.
Vote againstNot applicable; broker may
vote shares without instruction
Proposal 3:

Advisory “Say-on-Pay” Vote to Approve Executive Compensation
FOR
If a quorum exists, the majority of votes present in person or represented by proxy and entitled to vote.
This advisory vote is not binding on the Board, but the Board will consider the vote results when making future executive compensation decisions.
Vote againstNo effect
Proposal 4:

Advisory Vote on Frequency of Future Say-on-Pay Votes
for every
1 YEAR
If a quorum exists, the pluralityof votes present in person or represented by proxy and entitled to vote.
This advisory voteis not binding on the Board, but the Board will consider the vote results when determining the frequency of future Say-on-Pay votes.
No effectNo effect
Method and Cost of Soliciting and Tabulating Votes
The Board is providing these proxy materials to you in connection with the solicitation by the Board of proxies to be voted at our annual meeting. NorthWestern will pay the cost of the solicitation, which will be made primarily by the use of mail and the internet. Proxies also may be solicited in person or by telephone, facsimile, or similar means by our directors, officers, or employees without additional compensation.
We will, on request, reimburse shareholders who are brokers, banks, or other nominees for their reasonable expenses in sending proxy materials and annual reports to the beneficial owners of the shares they hold of record. Broadridge Financial Solutions, Inc., will be the proxy tabulator, and a representative from NorthWestern will act as the Inspector of Election.
Electronic Access to Proxy Statement and Annual Report
The proxy statement, annual report, voting card, and voting instructions are available on the internet at www.proxyvote.com where you can also cast your vote and request to receive future proxy materials in printed form by mail or electronically by email. These materials will be available for one year following the annual meeting. You will need the control number provided on your notice to access the electronic materials.
General Information
Attending the Annual Meeting in Person or by Webcast
Only shareholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person. If you wish to attend the annual meeting and your shares are held in street name at a brokerage firm, bank, or other nominee, you will need to bring your notice or a copy of your brokerage statement or other documentation reflecting your stock ownership as of the record date. You may be asked to provide photo identification, such as a driver’s license.


6260
Annual Meeting Information


No cameras, recording equipment, electronic devices, large bags, briefcases, or packages will be permitted at the annual meeting. No banners, signs, firearms, or weapons will be allowed in the meeting room.

We reserve the right to inspect all items entering the meeting room.
The annual meeting will be held at the NorthWestern Energy South Dakota / NebraskaMontana Operational Support Office, 600 Market11 East Park Street, West, Huron, South Dakota,Butte, Montana, as shown on the map to the right.
The annual meeting will be webcast (audio and slides) simultaneously with the live meeting. You may access the webcast from our website at NorthWesternEnergy.com under Our Company / Investor Relations / Presentations and Webcasts. A webcast replay will be available at the same location on our website through April 27, 2018.25, 2019.
  
 
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11 East Park Street, Butte, Montana
 
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Householding; Receipt of Multiple Notices
Under the rules of the SEC, a single Notice of Internet Availability of Proxy Materials or set of annual reports and proxy statements may be sent to any household at which two or more shareholders reside if they appear to be members of the same family. Each shareholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing expenses. In accordance with a notice sent to certain shareholders who shared a single address, only one annual report and proxy statement were sent to that address unless any shareholder at that address requested that multiple sets of documents be sent. However, if any shareholder who agreed to householding wishes to receive a separate annual report or proxy statement for 20172018 or in the future, he or she may telephone toll-freecall (800) 542-1061 or write to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717, and the company will deliver promptly upon such written or oral request a separate Notice of Internet Availability of Proxy Materials or annual report or proxy statement. Shareholders sharing an address who wish to receive a single set of reports may do so by contacting their banks, brokers, or other nominees, if they are beneficial holders, or by contacting Broadridge at the address set forth above, if they are record holders.
Available Information
We file annual, quarterly, and current reports, proxy statements and other information with the SEC. These filings are available through a website maintained by a third-party and accessible through our company website at NorthWesternEnergy.com under Our Company / Investor Relations / SEC Filings.
Our public filings also are available to the public from document retrieval services and the website maintained by the SEC at www.sec.gov. You may read and copy any reports, proxy statements or other information that we file with the SEC at the SEC Public Reference Room, 100 F Street NE, Room 1580, Washington, DC 20549. You also may request copies of this information from the SEC by mail from the same address, at prescribed rates. Please call the SEC at (800) 732-0330 for further information on the public reference room.
Future Shareholder Proposals
Shareholder Proposals for Inclusion in Next Year’s Proxy Statement. To be considered for inclusion in the proxy statement for our annual meeting to be held in 2018,2019, shareholder proposals submitted under Exchange Act Rule 14a-8 must be received by the corporate secretary of NorthWestern Corporation not later than November 3, 2017.7, 2018. Such proposal must comply with all applicable SEC requirements that a shareholder must meet in order to have a shareholder proposal included in the company’s proxy statement.


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Annual Meeting Information


Other Shareholder Proposals for Presentation at the 20182019 Annual Shareholders’ Meeting. For nominations of persons for election as a director or for any proposal that is not submitted for inclusion in next year’s proxy statement, but is instead sought to be presented directly from the floor of the 20182019 Annual Shareholders’ Meeting, the company’s bylaws require that timely notice must be given to the corporate secretary. To be timely, the notice must be received by the corporate secretary of NorthWestern Corporation between December 26, 2017,2018 and January 25, 2018.2019.
Shareholder proposals should be delivered or mailed to and received by the Company at its principal executive offices in accordance with the dates set forth above and addressed to:
Corporate Secretary
NorthWestern Corporation
3010 West 69th Street
Sioux Falls, South Dakota 57108
To be in proper written form, a shareholder’s notice for both annual and special meetings must set forth:
(1)as to each person whom the shareholder proposes to nominate for election as a director, (a) the name, age, and business and residence address of the person, (b) the principal occupation or employment of the person, (c) the class or series and number of shares of capital stock of the company that are owned beneficially or of record by the person, (d) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities and Exchange Act of 1934, as amended (Exchange Act) and the rules and regulations promulgated thereunder, and (e) the written consent of each proposed nominee to being named as a nominee and to serve as a director if elected;
(2)as to any other business that the shareholder proposes to bring before the meeting, (a) a brief description of the business desired to be brought before the meeting, (b) the text of the proposal or business (including the text of any resolutions proposed for consideration, and, in the event that such business includes a proposal to amend the bylaws of the company, the language of the proposed amendment), (c) the reasons for conducting such business at the meeting, and (d) any material interest of such shareholder in the business being proposed and the beneficial owner, if any, on whose behalf the proposal is being made; and
(3)as to the shareholder giving this notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (a) the name and record address of such shareholder and any such beneficial owner, (b) the class or series and number of shares of capital stock of the company that are owned beneficially or of record by such shareholder and beneficial owner, (c) a description of all arrangements or understandings between such shareholder and any such beneficial owner and each proposed nominee and any other persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (d) a representation that such shareholder is a shareholder of record entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the persons and/or conduct the business being proposed as described in the notice, and (e) a representation of whether such shareholder or any such beneficial owner intends or is part of a group which intends (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the company’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (ii) otherwise to solicit proxies from shareholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a shareholder with respect to an annual meeting if the shareholder has notified the company of his or her intention to present a proposal at such annual meeting in compliance with Regulation 14A (or any successor thereof) promulgated under the Exchange Act and such shareholder’s proposal has been included in a proxy statement that has been prepared by the company to solicit proxies for such annual meeting. The company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the company.
Assistance
If you need assistance with voting your proxy or have questions regarding our annual meeting, please contact:
Travis Meyer
Director -Corporate Finance and Investor Relations
and Corporate Planning Officer
(605) 978-2945
or
Emily Larkin
Assistant Corporate Secretary
(605) 978-2871
No persons have been authorized to give any information or to make any representations other than those contained in this proxy statement and, if given or made, such information or representations must not be relied upon as having been authorized by us or any other person. You should not assume that the information contained in this proxy statement is accurate as of any date other than the date of this proxy statement, and the mailing of this proxy statement to shareholders shall not create any implication to the contrary.


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Proxy Statement Glossary
The list below defines the various terms, abbreviations, and acronyms used in this proxy statement.
AGAAmerican Gas Association
BoardBoard of Directors of NorthWestern Corporation
CD&ACompensation Discussion and Analysis
CEOPresident and Chief Executive Officer
CFOVice President and Chief Financial Officer
COBRAConsolidated Omnibus Budget Reconciliation Act
Code of ConductCode of Conduct and Ethics
CompanyNorthWestern Corporation d/b/a NorthWestern Energy
Compensation CommitteeHuman Resources Committee
DeloitteDeloitte & Touche LLP
Director Deferred PlanNorthWestern Corporation 2005 Deferred Compensation Plan for Non-Employee Directors
Equity Compensation Plan
NorthWestern Corporation Amended and Restated Equity Compensation Plan
(f/k/a NorthWestern Corporation Amended and Restated 2005 Long-Term Incentive Plan)
EPSEarnings per share
ERMEnterprise Risk Management and Business Continuity Programs
ERRPExecutive Retention / Retirement Program
Exchange ActSecurities and Exchange Act of 1934, as amended
Executive Officer
The Named Executive Officers and other executives responsible for company policy, strategy and operations. For 2016,2017, there were nine executive officers serving on our executive team.
Governance CommitteeGovernance and Innovation Committee
Key Employee Severance PlanNorthWestern Corporation Key Employee Severance Plan, effective Oct. 19, 2016
LTIPLong-Term Incentive Program
NACDNational Association of Corporate Directors
Named Executive Officer
The CEO, CFO, and the three most highly compensated officers, other than the CEO and CFO, who were serving as executive officers at the end of 2016.2017. Our named executive officers for 20162017 are identified in the Compensation Discussion and Analysis section of this proxy statement.
NorthWesternNorthWestern Corporation d/b/a NorthWestern Energy
NYSENew York Stock Exchange
Officer Deferred PlanNorthWestern Corporation 2009 Officer Deferred Compensation Plan
OSHAOccupational Safety and Health Administration
OurNorthWestern Corporation d/b/a NorthWestern Energy
PCAOBPublic Company Accounting Oversight Board
Record DateFebruary 27, 201726, 2018
ROAEReturn on average equity
SAIDISystem Average Interruption Duration Index
SECSecurities and Exchange Commission
TSRTotal shareholder return
UsNorthWestern Corporation d/b/a NorthWestern Energy
WeNorthWestern Corporation d/b/a NorthWestern Energy

 




















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Montana Operational Support Office
11 East Park Street
Butte, Montana 59701
(406) 497-1000
 
South Dakota / Nebraska Operational Support Office
600 Market Street West
Huron, South Dakota 57350
(605) 353-7478
 
Corporate Support Office
3010 West 69th Street
Sioux Falls, South Dakota 57108
(605) 978-2900
Connect With Us:
 
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NorthWestern Energy.com


VOTING CARD
[Front Side]
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NORTHWESTERN CORPORATION
3010 W. 69TH STREET
SIOUX FALLS, SD 57108
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the VOTE BY INTERNET instructions above, and when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instruction prompts.

VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY, 11717.





TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLANK INK AS FOLLOWS: 
  KEEP THIS PORTION FOR YOUR RECORDS
  DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.


NORTHWESTERN CORPORATION 
 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSFor AllWithhold AllFor All Except  
 The Board of Directors recommends that you vote FOR the following nominees:ooo   
 
Vote on Directors
1. Election of Directors
     Nominees:
 
 
01) Stephen P. Adik
02) Anthony T. Clark
03) E. Linn Draper
04) Dana J. Dykhouse
05) 04) Jan R. Horsfall
06)05) Britt E. Ide
07)06) Julia L. Johnson
08) 07) Linda G. Sullivan
09)08) Robert C. Rowe
    
 Vote on Proposals  ForAgainstAbstain
 The Board of Directors recommends that you vote FOR Proposal 2:    
 2. Ratification of Deloitte & Touche LLP as the independent registered public accounting firm for 2017.2018. ooo
 The Board of Directors recommends that you vote FOR Proposal 3:    
 3. Advisory vote to approve named executive officer compensation. ooo
 The Board of Directors recommends that you vote 1 Year onFOR Proposal 4:1 Year2 Years3 YearsAbstain
4. Advisory vote on the frequency of the advisory votes on executive compensation.oooo
    
 The Board of Directors recommends that you vote FOR Proposal 5:ForAgainstAbstain
5.4. Transaction of any other matters and business as may properly come before the annual meeting or any postponement or adjournment of the annual meeting. ooo
 Please sign exactly as name(s) appear(s) on this Proxy. Joint owners should each sign personally. Corporation Proxies should be signed by an authorized officer. When signing as executors, administrators, trustees, etc., give full title.     
       
 Signature [PLEASE SIGN WITHIN BOX]Date   Signature (Joint Owners)    


VOTING CARD
[Back Side]



 
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.

PLEASE VOTE PROMPTLY BY INTERNET, PHONE OR MAIL.






Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report with 10-K Wrap are available at www.proxyvote.com.
 
   
   
 
NORTHWESTERN CORPORATION
3010 W. 69TH STREET, SIOUX FALLS, SD 57108

PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 201725, 2018

The undersigned hereby appoints E. Linn Draper Jr. and Robert C. Rowe, and each of them, with full power of substitution, attorneys and proxies to represent the undersigned at the 20172018 Annual Meeting of Shareholders of NORTHWESTERN CORPORATION to be on held Thursday,Wednesday, April 27, 2017,25, 2018, at 10:00 a.m. CentralMountain Daylight Time at the NorthWestern Energy South Dakota/NebraskaMontana Operational Support Office, 600 Market11 East Park Street, West, Huron, South Dakota,Butte, Montana, or at any adjournment or postponement thereof, with all power which the undersigned would possess if personally present, and to vote all shares of common stock of the Company which the undersigned may be entitled to vote at said Meeting as directed on the reverse side.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE NOMINEES NAMED IN ITEM 1; “FOR” RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM IN ITEM 2; AND “FOR” THE ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION IN ITEM 3; AND FOR EVERY “1 YEAR” IN ITEM 4.
3.
Continued and to be signed on the reverse side