| 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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| o | Definitive Additional Materials | ||||
| o | Soliciting Material Pursuant to §240.14a-12 | ||||
| NorthWestern Corporation | ||
| (Name of Registrant as Specified In Its Charter) | ||
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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 | ||||||||||||||
IMPORTANT VOTING INFORMATION
If you owned shares of NorthWestern Corporation common stock at the close of business on February 28, 2022 (the Record Date), you are entitled to one vote per share upon each matter presented at the annual meeting of shareholders to be held virtually, on April 29, 2022. 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.
Your broker is not permitted to vote on your behalf for the election of directors and other matters to be considered at this shareholders meeting, except for the ratification of our appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022, 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 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.
If you owned shares of NorthWestern Corporation common stock at the close of business on February 28, 2022 (the Record Date), you are entitled to one vote per share upon each matter presented at the annual meeting of shareholders to be held virtually, on April 29, 2022. 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.
Your broker is not permitted to vote on your behalf for the election of directors and other matters to be considered at this shareholders meeting, except for the ratification of our appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022, 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 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 The Notice of Annual Meeting, Proxy Statement, and Shareholders are available on the internet at www.proxyvote.com. | ||||
ATTENDING THE ANNUAL MEETING VIRTUALLY
Only shareholders of record or their legal proxy holders as of the record date or our invited guests may participate in the virtual annual meeting. If you wish to participate in the virtual annual meeting and your shares are held in street name at a brokerage firm, bank, or other nominee, you will need the 16-digit control number that can be found on your Annual Meeting Notice.
A replay of the Annual Meeting will be available on our website at NorthWesternEnergy.com under About Us / Investors / Presentations, Webcasts & Reports through April 29, 2023.
Only shareholders of record or their legal proxy holders as of the record date or our invited guests may participate in the virtual annual meeting. If you wish to participate in the virtual annual meeting and your shares are held in street name at a brokerage firm, bank, or other nominee, you will need the 16-digit control number that can be found on your Annual Meeting Notice.
A replay of the Annual Meeting will be available on our website at NorthWesternEnergy.com under About Us / Investors / Presentations, Webcasts & Reports through April 29, 2023.
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 | Notice of March 7, Dear Fellow NorthWestern Corporation Shareholder: You are cordially invited to attend the 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 YOUR VOTE IS IMPORTANT. We urge you to read this proxy statement carefully. Whether or not you plan to attend the virtual annual meeting, For details on how to access the virtual annual meeting, please see the information under the caption “Attending the Annual Meeting Virtually” in the proxy statement. If you are unable to attend our virtual annual meeting, Thank you for your continued support of NorthWestern Corporation. | |||||||||||||
| Very truly yours, | ||||||||||||||
 | ||||||||||||||
Robert C. Rowe | ||||||||||||||
3010 West 69th Street|Sioux Falls, SD 57108 NorthWesternEnergy.com | ||||||||||||||
| Table of Contents | ||||||||||||||
Proxy Statement Glossary (inside back cover) | ||||||||||||||
| | ||||
Notice
Shareholders owning NorthWestern Corporation common stock at the close of business on February 28, 2022, the record date, or their legal proxy holders, are entitled to vote at the virtual annual meeting. Only our shareholders, their legal proxy holders as of the record date, or our invited guests may attendparticipate in the annual meeting in person. The annual meeting will be webcast (audio and slides) simultaneously with the meeting.
| Meeting Date: | April | ||||||||||
| Meeting Time: | 10:00 a.m. Mountain Daylight Time | ||||||||||
| Location: | |||||||||||
| Record Date: | February | ||||||||||
Annual Meeting Business:
On or about March 7, 2018,2022, 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 20172021 Annual Report.
| Board Recommendation | ||||||||
| Proposal | Page | |||||||
| 1 | Election of eight directors |  | FOR each director nominee | |||||
| 2 | Approval of Deloitte & Touche LLP as the Independent Registered Accounting Firm for 2018 | | FOR | |||||
| 3 | Advisory Vote to Approve Named Executive Officer Compensation | | FOR | |||||
| Board Recommendation | ||||||||||||||||||||||||||
| Proposal | Page | |||||||||||||||||||||||||
| 1 | Election of Directors |  | FOR each director nominee | |||||||||||||||||||||||
| 2 | Ratification of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for 2022 | | FOR | |||||||||||||||||||||||
| 3 | Advisory Vote to Approve Named Executive Officer Compensation | | FOR | |||||||||||||||||||||||
By Order of the Board of Directors,
 | ||
Timothy P. Olson
Corporate Secretary
3010 West 69th Street|Sioux Falls, SD 57108 | NorthWesternEnergy.com | |||||||||||||
Proxy Summary Items of Business | ||||||||||||||||||||||||||||||||||||||
| Proposal | Board Recommendation | Page | ||||||||||||||||||||||||||||||||||||
| 1 | Election of Directors | | FOR each director nominee | |||||||||||||||||||||||||||||||||||
| 2 | Ratification of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for 2022 | | FOR | |||||||||||||||||||||||||||||||||||
| 3 | | FOR | ||||||||||||||||||||||||||||||||||||
2021 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. Approximately 79 percent of the compensation of our CEO and about 63 percent of the compensation of our other named executive officers is at risk in the form of performance-based incentive awards. Our Board establishes the metrics and targets for these incentive awards, based upon advice from the Board’s independent compensation consultant. The 2021 performance metrics did not change from 2020. We also require our executives to retain meaningful ownership of our stock (from 2x to 6x their annual base salary). This compensation 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 2021 was 28 to 1. | ||||||||||||||||||||||||||||||||||||||
| Executive Pay Components at a Glance | ||||||||||||||||||||||||||||||||||||||
| Percent of Total Compensation | ||||||||||||||||||||||||||||||||||||||
| Component | Description | CEO | Other NEO Avg. | Changes in 2021 | ||||||||||||||||||||||||||||||||||
Base Salary Fixed, paid in cash | Target middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experience | 21% | 36% | Named executive officers received the same 1.5 percent cost of living adjustment provided to employees; two named executive officers received additional increases related to promotions | ||||||||||||||||||||||||||||||||||
Annual Cash Incentive Variable, paid in cash | Based on net income, safety, reliability, and customer satisfaction metrics and individual performance | 21% | 20% | Updated performance targets; target incentive increased for two named executive officers to reflect promotions | ||||||||||||||||||||||||||||||||||
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 period | 46% | 35% | Updated performance targets; target incentive increased for two named executive officers to align with market median and for two additional named executive officers to reflect promotions | ||||||||||||||||||||||||||||||||||
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 service | 12% | 9% | Increased target opportunity for one named executive officer to align with market and for two named executive officers to reflect promotions | ||||||||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 2
Proxy Summary Items of Business to Be Considered at the Annual Meeting | ||||||||||||
| Proposal | Board Recommendation | Page | ||||||||||
| 1 | | FOR each director nominee | ||||||||||
| 2 | | FOR | ||||||||||
| 3 | | FOR | ||||||||||
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 | ||||||||||||
| Component | Description | CEO | Other 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 experience | 22% | 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 performance | 22% | 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 period | 44% | 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 service | 11% | 9% | No change in 2017 | ||||||||
| Proxy Summary | ||
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 Funding | 99 | % | * 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 | |||||||||||||||
 | |||||||||||||||
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 | Independent | Age | Director Since | Committee Membership | |||||
Stephen P. Adik Retired Vice Chair, NiSource, Inc. | Yes | 74 | 2004 | Audit (Chair); Comp. | |||||
Anthony T. Clark Senior Advisor, Wilkinson Barker Knauer, LLP; former Commissioner, FERC and NDPSC (and Chair) | Yes | 46 | 2016 | Gov. | |||||
Dana J. Dykhouse CEO, First PREMIER Bank | Yes | 61 | 2009 | Comp. (Chair); Audit | |||||
Jan R. Horsfall CEO, Maxletics Corporation | Yes | 57 | 2015 | Audit; Gov. | |||||
Britt E. Ide President, Ide Energy & Strategy; Executive Director, Yellowstone Club Community Foundation | Yes | 46 | 2017 | Gov. | |||||
Julia L. Johnson President, NetCommunications, LLC; former Commissioner and Chair, Florida PSC | Yes | 55 | 2004 | Gov. (Chair); Comp. | |||||
Robert C. Rowe President and CEO, NorthWestern Energy | No | 62 | 2008 | N/A | |||||
Linda G. Sullivan Executive Vice President and CFO, American Water | Yes | 54 | 2017 | Audit | |||||
Performance Against Incentive Targets In 2021, we continued to manage our business through the challenges of the COVID-19 pandemic and increased our net income from 2020, while investing a record amount of capital and continuing strong employee safety and strong customer satisfaction. For the three-year period ending December 31, 2021, we achieved an average return on equity of 8.7 percent and a total shareholder return of 5.9 percent, while our EPS growth rate was negative 1.36 percent. Despite the challenges associated with the pandemic, we achieved target performance for our 2021 annual incentive awards, but we failed to achieve target for our long-term incentive awards, as reflected in the tables below. | |||||||||||||||||||||||||||||||||||||||||
| 2021 Annual Cash Incentive Outcome | 2019 Long-Term Incentive Program Vesting | ||||||||||||||||||||||||||||||||||||||||
Financial (55%) – % of Target Achieved | 112 | % | ROAE / Avg. EPS Growth – % of Target Achieved | 90 | |||||||||||||||||||||||||||||||||||||
Safety (15%) – % of Target Achieved | 110 | % | Relative TSR – % of Target Achieved | 55 | % | ||||||||||||||||||||||||||||||||||||
Reliability (15%) – % of Target Achieved | 91 | % | Total Payout to Participants* | 73 | % | ||||||||||||||||||||||||||||||||||||
Cust. Sat. (15%) – % of Target Achieved | 94 | % | |||||||||||||||||||||||||||||||||||||||
| Total Funding | 106 | % | * Each component weighted 50% for total payout | ||||||||||||||||||||||||||||||||||||||
Shareholder Feedback on Executive Pay At our 2021 virtual annual meeting, shareholders approved our 2020 named executive officer pay by 98.7 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 2021. We continue to use the same executive pay components and operate within the parameters our shareholders previously approved. ESG Sustainability Over the past 100 years, we have maintained our commitment to provide our customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have an obligation to ensure sustainable long-term strategies and practices to meet today’s needs while preparing for tomorrow’s demands. Thus, we have responded to climate change, its implications, and risks by increasing our environmental sustainability efforts and our access to clean energy resources. But more must be done. In 2021, we continued working together to deliver a bright future by maintaining our focus on environmental, social, and governance (ESG) sustainability. We supported our ESG efforts with a cross-functional committee of company leaders, chaired by our president and chief operating officer, to identify opportunities to effectively communicate our ESG story and transition to a cleaner energy future. Our Board oversees our ESG sustainability efforts and initiatives and has designated responsibilities for various components of ESG to the Board’s Compensation, Governance, or Operations committees. On at least a quarterly basis, management informs the Board and its committees of our progress on various ESG initiatives that we believe are material to our business. We have released publicly numerous ESG sustainability reports, together with other information on ESG issues relevant to NorthWestern, on our website via our Sustainability Portal at NorthWesternenergy.com/about-us/environmental-social-governance. As part of that Sustainability Portal, we publish our Key Sustainability Statistics Report, Environmental Stewardship Report, corporate policies addressing ESG-related matters, and various ESG reporting frameworks. Our website and these ESG reports and related website content are not incorporated by reference into this proxy statement. We currently have several ESG initiatives underway, including: •Environment. With our recent announcement, we have committed to Net Zero by 2050 for our Scope one and two electric and natural gas emissions. We believe we can achieve our emissions reduction commitment through incremental steps regarding a diverse and balanced generation portfolio; energy efficiency programs; grid and gas infrastructure modernization; electrification of fleet vehicles; our sustainable procurement committee; and other measures. During 2021, we mapped our | |||||||||||||||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 3
ESG efforts to the Sustainability Accounting Standards Board (SASB) framework, and by the end of 2022, we anticipate addressing the expanded voluntary reporting framework regarding climate related information developed by the Taskforce on Climate-related Financial Disclosure (TCFD). •Social. We care for our employees and communities. We continue to promote our safety culture and value the diversity of thought, background, culture, perspective, and experience our employees bring to our business. We provide challenging opportunities to accompany competitive and equitable compensation and benefits, while developing our future leaders and taking care of our retired employees. We partner with our communities to support charitable contributions and sustainable economic development in our service territories. •Governance.Our governance practices are sound, as demonstrated by our ranking as the 5th best utility for governance practices by Moody’s Investor Service. Our Board is diverse from several perspectives and is led by an independent chair. Our dedication to strong governance is demonstrated through the descriptions of our governance practices in this proxy statement. | ||||||||||||||
Oversight of ESG Our Board has general oversight of our ESG initiatives and has delegated oversight responsibility with respect to certain ESG components to several of the Board’s Committees, as reflected formally in committee charters and depicted in the illustration below. During 2021, management presented, at least quarterly, to the Board or applicable Committee(s) regarding our ESG initiatives. For years, safety has been a standing agenda item at our Board and Committee meetings, and in 2021, ESG reporting and diversity, equity and inclusion efforts became additional standing agenda items. We anticipate that our Board and its committees will continue to take an active role as our ESG strategy, policies, programs, and public reporting evolve. In addition to Board oversight of ESG matters, our executive team established in 2020 an internal, cross-functional ESG Committee, led by our president and chief operating officer, as a central coordinating body to facilitate our ESG strategy and reporting efforts. Our ESG Committee serves as a crucial central depository and coordinator of our company-wide ESG efforts. The illustration below depicts how we oversee ESG issues at NorthWestern. | ||||||||||||||
 | ||||||||||||||
NorthWestern Energy | Proxy Statement | Page 4
| Proxy Summary | ||
| ESG Reporting | ||||||||||||||||||||
Although we have been providing information about matters related to ESG for many years, it was not part of a formal or coordinated process until we established our internal ESG Committee in 2020. That committee centralized all aspects of reporting that could be considered to be related to ESG and, in 2021, finished a large disclosure project designed to gather ESG information, synthesize it into a publicly available report, and work with ESG ratings providers to ensure that the ratings we were receiving were based upon complete and accurate information. We focused on two providers during the first half of 2021 and improved our ratings as a result of those efforts. Following that initial push, our committee expanded its efforts and published reports aligned with the ESG reporting requirements for SASB. Since September 2021, our reporting has been SASB compliant. Recently, we issued our Net Zero by 2050 report and announced our commitment to transition to an even cleaner energy future with net zero carbon and methane emissions by 2050. The Net Zero by 2050 report summarizes the incremental steps we will take and the investments we have identified that will allow us to build upon the substantial progress we already have made and transition to an even cleaner energy future. Implications of climate change mean we must continue to increase NorthWestern Energy’s environmental sustainability and create an even cleaner portfolio of electric and gas resources and infrastructure for our customers and communities. Net Zero by 2050 is achievable for our electric and natural gas business by responsibly taking incremental steps toward this goal and maintaining our commitment to reliable, affordable, environmentally sustainable service capable of meeting the needs of all customers. On the heels of our Net Zero by 2050 report, our next target will be to address the TCFD reporting framework. Although we have not finalized our analysis concerning the TCFD framework, we anticipate completing this work by the end of 2022 and can offer our preliminary thoughts regarding the four pillars of TCFD. | ||||||||||||||||||||
| TCFD Pillar | Recommended Disclosure | NorthWestern Response | ||||||||||||||||||
Governance Disclose the organization’s governance around climate-related risks and opportunities. | Describe the board’s oversight of climate-related risks and opportunities. | The charters for our Board’s Compensation, Governance, and Operations Committees formalize the board’s oversight of ESG-related matters. The Governance Committee has primary oversight of ESG reporting and governance, the Operations Committee has specific oversight of environmental and other operational concerns, and the Compensation Committee oversees various human capital and social matters. In addition to the charters, our 2021 and 2022 proxy statements and our Net Zero by 2050 report discuss these oversight responsibilities. | ||||||||||||||||||
| Describe management’s role in assessing and managing climate-related risks and opportunities. | ||||||||||||||||||||
To learn more about our sustainability and ESG efforts, as well as the various reports mentioned in this ESG Reporting summary, please visit the Sustainability Portal which can be found on our public website and is located at NorthWesternenergy.com/about-us/environmental-social-governance. Our Net Zero by 2050 report is available at NorthWesternenergy.com/NetZero. Our website, the Sustainability Portal, the Net Zero by 2050 report, other reports mentioned in this ESG Sustainability summary, and related website content are not incorporated by reference into this proxy statement. | ||||||||||||||||||||
| TCFD Pillar | Recommended Disclosure | NorthWestern Response | ||||||||||||||||||
Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. | Describe the climate-related risks and opportunities the organization has identified over the short, medium and long term. | Our Net Zero by 2050 report highlights that we, like the rest of the regulated energy industry, have been transitioning our generation portfolio to cleaner resources to reduce emissions. We have made considerable progress with that transition through the addition of owned and contracted carbon‑free resources and currently have a generation portfolio that is 56% carbon-free, significantly better than the electric industry’s 40% equivalent measure. | ||||||||||||||||||
| Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. | As noted in our Net Zero by 2050 report, we see significant opportunity to continue to invest in assets to support our clean energy transition. However, legislative and regulatory support of this transition will be necessary to ensure recovery of new investment and appropriate treatment on recovery of our existing fossil fuel resources in the event these resources are retired in advance of their planned useful life. | |||||||||||||||||||
| Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C scenario. | The Electric Business portion of our Net Zero by 2050 report details our preliminary portfolio analysis and its alignment with the Paris Accord (2°C scenario). In summary, to help make informed resource planning decisions in line with the 2°C goal, NorthWestern has referenced two studies completed by the Electric Power Research Institute (EPRI) to assess scenarios and pathways for the | |||||||||||||||||||
Risk Management Disclose how the organization identifies, assesses and manages climate-related risks. | Describe the organization’s processes for identifying and assessing climate-related risks. | We deploy a robust ERM program developed nearly 20 years ago. This program is overseen by an executive ERM committee that has identified wild fire as the largest climate-related risk we currently experience. Over the last decade, we have made significant investment to clear hazard trees in heavily forested areas, especially focusing on those areas infested with mountain pine beetles. Those areas often have standing dead trees that are at a much higher risk of falling into our transmission and distribution power lines and sparking fire. In addition, with warmer temperatures and reduced precipitation, we are experiencing longer fire seasons. Both forested and prairie grass fires pose a risk to us and our customers and communities. We continue to expand our fire mitigation activities to address these risks while also hardening our system against other physical and cyber related threats. | ||||||||||||||||||
| Describe the organization's processes for managing climate-related risks. | ||||||||||||||||||||
| Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organization's overall risk management. | ||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 5
| Proxy Summary | ||
| TCFD Pillar | Recommended Disclosure | NorthWestern Response | ||||||||||||||||||
Metrics and Targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. | Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. | We utilize several different frameworks to disclose our climate related metrics, including the industry specific templates developed in collaboration with the Edison Electric Institute and the American Gas Association. These reports can be found on the Sustainability Portal on our website. | ||||||||||||||||||
| Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions and the related risks. | While our Net Zero 2050 report announces a target that is specific to our Scope 1 and 2 emissions, we will continue to identify and assess our Scope 3 emissions. However, we currently believe there are too many complexities and variables outside our control to establish any Scope 3 targets at this time. | |||||||||||||||||||
| Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets. | Our Net Zero by 2050 report describes the targets we are using to manage climate-related risks and opportunities and the incremental steps we will take as we transition to a cleaner energy future. | |||||||||||||||||||
| Environmental Sustainability | ||||||||||||||||||||
With our recent Net Zero by 2050 announcement, we committed to build upon the considerable progress we have already made with respect to our electricity portfolio and transition to an even cleaner energy future. Today, our total portfolio of electric generation is approximately 56% carbon-free, which is higher than the national electric utility average of 40%, and our natural gas system has a leak per mile rate that also beats the industry average thanks to our investments in pipe infrastructure and leak detection capabilities. But more must be done. During the last 10 years, nearly all the owned assets we have put into service are carbon‑free resources. In 2014, NorthWestern Energy bought Montana hydro facilities, adding 446 megawatts of clean generation to our portfolio. These facilities are the backbone of our generation fleet in that state. We built or bought more than | ||||||||||||||||||||
130 megawatts of wind facilities in both Montana and South Dakota. These clean resources have reduced our Scope 1 carbon emissions significantly over the last decade. Implications of climate change mean we must continue to increase our environmental sustainability and create an even cleaner portfolio of electric and gas resources and communities. Net Zero by 2050 is achievable for our electric and natural gas business by responsibly taking incremental steps toward this goal and maintaining our commitment to reliable, affordable, environmentally sustainable service capable of meeting the needs of all customers. | ||||||||||||||||||||
| NorthWestern Energy - 2021 Electric Portfolio | ||||||||||||||||||||
   | ||||||||||||||||||||
55.9% Carbon-Free Electricity Portfolio from Owned and Long-Term Contract Resources - Based on MWHs | ||||||||||||||||||||
| U.S. Electric Utilities - 2020 Net Electric Generation | ||||||||||||||||||||
 | ||||||||||||||||||||
39.9% Carbon-Free U.S. Electric Utilities Net Generation - Based on MWHs | ||||||||||||||||||||
| Source: EIA.gov Table 7.2b Electric Net Generation: U.S. Electric Power Sector - 2020 | ||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 6
| Proxy Summary | ||
| Net Zero by 2050 | |||||||||||||||||||||||
 | Electric Operations | Carbon-Free Resources Continue transition to a carbon-free portfolio | Natural Gas Plants Gas plants needed to offset intermittency of renewable energy and will ultimately transition to peak load only | Fossil Fuel Transition Retire coal plants the earlier of depreciable life or when no longer cost effective | |||||||||||||||||||
 | Natural Gas Operations | Pipeline Modernization Replace aging pipe and other infrastructure to minimize leaks | Enhanced Leak Detection Use technology to improve leak detection and expand plant emission monitoring | Development of Alternative Fuels Renewable natural gas and/or Hydrogen | |||||||||||||||||||
 | Other Actions | Partner with customers on emissions reductions Enhance energy efficiency programs, expand green energy offering and develop other solutions for customers | Electric Vehicles Convert fleet to electric over time and develop infrastructure to support EVs | Carbon Offsets Utilize carbon offsets as necessary | |||||||||||||||||||
| Social Sustainability | |||||||||||||||||||||||
We care for our employees, retirees and communities. We continue to promote our safety culture and value the diversity of thought, background, culture, perspective, and experience our employees bring to our business. We provide challenging opportunities to accompany competitive and equitable compensation and benefits, while developing our future leaders. This includes an integrated learning and performance management system that includes annual performance reviews that link goals and competencies together so that managers are able to provide a holistic view to employees in regards to their performance against goals as well as key competencies as they relate to their role in the organization. This process provides opportunities to develop and enhance skills and knowledge, and enables our employees to grow professionally and perform their duties in a safe and efficient manner. We partner with our communities, supporting charitable contributions and sustainable economic development in our service territories. During 2021, we began a diversity, equity, and inclusion initiative that included unconscious bias training for our team of managers, and our Governance Committee made diversity, equity, and inclusion a standing agenda item at each of its meetings as it oversees our human capital efforts. We continue to maintain a diverse workforce, with an executive team that is 44% female and a board of directors that is 38% female and has one ethnically diverse member (13%). In addition, the | |||||||||||||||||||||||
| Governance Sustainability | |||||||||||||||||||||||
Our governance practices are sound, as demonstrated by our ranking as the 5th best utility for governance practices by Moody’s Investor Service. We have provided details concerning our governance practices in the We have nominated eight individuals for election | |||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 7
| Proxy Summary | ||
Items of Business to be Considered at the Annual Meeting
Proposal No. 1 Election of Directors | |||||||||||||||||||||||||||||
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. Elected directors 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 50. 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. | ||||||||||||||||||||||||||||
| Name Occupation | Independent | Age | Director Since | Committee Membership | |||||||||||||||||||||||||
Anthony T. Clark Senior Advisor, Wilkinson Barker Knauer, LLP; former Commissioner, FERC and NDPSC (and Chair) | Yes | 50 | 2016 | Comp.; Gov. | |||||||||||||||||||||||||
Dana J. Dykhouse CEO, First PREMIER Bank | Yes | 65 | 2009 | Independent Board Chair | |||||||||||||||||||||||||
Jan R. Horsfall Managing Partner, Red Surfboard, LLC | Yes | 61 | 2015 | Operations (Chair); Audit | |||||||||||||||||||||||||
Britt E. Ide President, Ide Energy & Strategy | Yes | 50 | 2017 | Comp.; Gov. | |||||||||||||||||||||||||
Robert C. Rowe Chief Executive Officer, NorthWestern Energy | No | 66 | 2008 | N/A | |||||||||||||||||||||||||
Linda G. Sullivan Retired Executive Vice President and CFO, American Water | Yes | 58 | 2017 | Audit (Chair); Operations | |||||||||||||||||||||||||
Mahvash Yazdi President, Feasible Management Consulting | Yes | 70 | 2019 | Comp. (Chair); Operations | |||||||||||||||||||||||||
Jeffrey W. Yingling Partner, Energy Capital Ventures | Yes | 62 | 2019 | Audit; Gov. (chair) | |||||||||||||||||||||||||
| (continued on next page) | |||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 8
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 eight nominees. Board Nomination Process 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. Over the past several years, our Governance Committee has led our Board through a director succession planning process to allow for a smooth and gradual transition from our longer tenured directors while preserving the culture of the Board. The process reviews individual skill sets and tenures of current members and considered additional skills that could be beneficial for the Board in the future, with a particular focus on company strategy, emerging risks, and a diversity of perspectives. 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 at the virtual annual meeting or by proxy and entitled to vote, | |||||||||||||||||||||||
 | |||||||||||||||||||||||
| Board Diversity | |||||||||||||||||||||||
 | |||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 9
| Items of Business | ||
Proposal No. 2 Ratification of Deloitte & Touche LLP, as Independent Registered Public Accounting Firm for 2022 | ||||||||||||||||||||||||||||||||
The Board of Directors recommends you vote “FOR” the ratification of Deloitte as our independent accounting firm for 2022. | 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 2022. The Board is asking you to ratify the committee’s decision at the annual meeting. 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. Deloitte representatives will be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions. Description of Fees The table below presents a summary of the fees Deloitte billed us for professional services for the fiscal years ended December 31, 2020 and 2021. | |||||||||||||||||||||||||||||||
| Fee Category | 2020 Fees ($) | 2021 Fees ($) | ||||||||||||||||||||||||||||||
| Audit fees | 1,324,144 | 1,339,144 | ||||||||||||||||||||||||||||||
| Audit-related fees | — | 199,300 | ||||||||||||||||||||||||||||||
| Tax fees | 108,018 | 104,733 | ||||||||||||||||||||||||||||||
| All other fees | — | — | ||||||||||||||||||||||||||||||
| Total fees | 1,432,162 | 1,643,177 | ||||||||||||||||||||||||||||||
Audit fees are 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 2021, this amount includes estimated billings for the completion of the 2021 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.” The 2021 audit-related fees concerned Deloitte’s review of the company’s registration statements (and preparation of comfort letters) and our use of certain Deloitte research tools. | ||||||||||||||||||||||||||||||||
| (continued on next page) | ||||||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 10
| Items of Business | ||
Tax fees are fees billed for tax compliance, tax advice and tax planning. All other fees are fees for products and services other than the services reported above. In fiscal years Pre-approval Policies and Procedures SEC rules require public company audit committees to pre-approve audit and non-audit services. Our Audit Committee follows procedures pursuant to which audit, audit-related, tax, 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 pre-approved budget. 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 2021, the Audit Committee (or the Chair of the Audit Committee pursuant to delegated authority) pre-approved 100 percent of the audit and tax fees. | |||||||||||||||||||||||||||||
| Fee Category | 2016 Fees ($) | 2017 Fees ($) | |||||||||
| Audit fees | 1,350,850 | 1,382,084 | |||||||||
| Audit-related fees | — | — | |||||||||
| Tax fees | 325,400 | 85,221 | |||||||||
| All other fees | — | ||||||||||
| Total fees | 1,676,250 | 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. | |||||||||||
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 online at the virtual annual meeting or represented by proxy and entitled to vote thereon is required to ratify the appointment of Deloitte as our independent registered public accounting firm for 2022. If voting instructions are not provided, brokers may vote a client’s proxy in | |||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 11
| Items of Business | ||
Proposal No. 3 Advisory Vote to Approve Named Executive Officer Compensation | |||||||||||||||||
The Board of Directors recommends you vote “FOR” the resolution approving named executive officer compensation. | 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 2022 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, 98.7 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 2021, we left intact the executive pay program you previously approved and continued to use the same four 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 2021 from the 2020 program you approved, were (1) 1.5 percent base salary increases (the | |||||||||||||||||
same increase available to some employees) and (2) additional increases to certain executives’ target incentives either to align with the market or to reflect increased responsibilities following their promotions. | |||||||||||||||||
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. Accordingly, 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 2022 proxy statement) is hereby APPROVED. 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. | |||||||||||||||||
| (continued on next page) | |||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 12
| Items of Business | ||
Vote Required The affirmative vote of the holders of a majority in voting power of the shares of our common stock which are present at the virtual annual meeting 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 | |||||||||||||||||
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 2017.2021. The CD&A summarizes the objectives and specific elements of our 20172021 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.it.
This CD&A is organized into the following sections:
| Section | Summary | Page | ||||||||||||
| Highlights of our | ||||||||||||||
| How our pay and performance, relative to our peers, provides value to shareholders | ||||||||||||||
| Details about how our Board uses shareholder feedback to set pay | ||||||||||||||
| How our Compensation Committee governs our executive pay programs | ||||||||||||||
| How our Compensation Committee determined the amount of | ||||||||||||||
| Details about the different parts of | ||||||||||||||
| Information on other aspects of our pay program | ||||||||||||||
| Items of Business | ||
Executive Summary
In 2017,2021, we facedcontinued to face a number of challenges due to the COVID-19 pandemic that required us to efficiently manage our business to achieve operational success and earnings in line with expectations.success. We worked safely in 2017 (nearly as safe as our all-time best safety year of 2016) and achieved some of our highest ever customer satisfaction ratings, bothall while providing our customers with reliable service. We also produced financial resultsIn addition, we had a record year of capital investment in the infrastructure and technology that reliably serves our customers, made a seamless migration to the Western Energy Imbalance Market, and significantly increased the quality and quantity of our environmental, social and governance practices and disclosures. However, our shareholder return trailed our 2021 peer group average and we ranked 9th of our 13-member peer group. Meanwhile, our earnings per share were in line with our initial announced expectations. However, primarily as a result of 2017’s regulatory headwinds,expectations, and our shareholder return laggednet income exceeded our peer group.
target.
Our basic | Total Shareholder Return Our TSR was | Dividend Yield Our dividend of of | ||||||||||||||||||||||||||||||
Safety In | Reliability The reliability of our electric | Customer Service | ||||||||||||||||||||||||||||||
The overall pay our executives receive ranks nearnamed executive officers received in 2020 is in the bottom half of our 2021 peer group, which is identified on page 1620 of this proxy statement. In summary, for 2016 (the2020 is the most recent year for which peer group executive compensation is publicly available for our peers. Based on such 2020 compensation data:
•Our named executive officers had an average compensation per named executive officer that was less than all but four of the other 12 companies in our 2021 peer group ($1.35 million for us versus $1.64 million for the Summary Compensation Table for each respective company, excludingpeer median) (excluding changes in pension value):; and
•Our CEO’s total compensation was approximately 79 percent of the median total compensation (excluding change in pension value) of the CEOs in our 2021 peer group.
| Named Executive Officers | |||||||||||||||
| Robert C. Rowe | Crystal D. Lail | ||||||||||||||
| Vice President and Chief Financial Officer | |||||||||||||||
| Brian B. Bird | Curtis T. Pohl | ||||||||||||||
| President and Chief Operating Officer (former Chief Financial Officer) | Vice President - Distribution | ||||||||||||||
| Heather H. Grahame | Bobbi L. Schroeppel | ||||||||||||||
| General Counsel and Vice President - | |||||||||||||||
| Vice President - 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.
NorthWestern Energy | Proxy Statement | Page 14
| Compensation Discussion and Analysis | ||
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 emphasizing financial performance, reliability, safety, and customer satisfaction.
| 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 2017,2021, our executive pay package included the same components as in 20162020 — 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.
NorthWestern Energy | Proxy Statement | Page 15 | ||
| Compensation Discussion and Analysis | ||
The table on the following pagebelow provides a high level summary of our 20172021 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.
| Component | Description | Why we include this component | How we determine amount | Decisions for | Reason for Change | |||||||||||||
Base Salary | Short-term fixed cash compensation | Provide a base level of compensation for executive talent | Target middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experience | |||||||||||||||
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 plan | Target middle of competitive range of peer group, with adjustments for trade area economics, turnover, tenure, and experience | |||||||||||||||
| 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 shareholders | Market survey of similar peer group roles and responsibilities and assessment of the strategic value of each position | Reflect increased responsibilities | ||||||||||||||
| 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 plan | Peer 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 position | |||||||||||||||
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 2021 peer group, which is identified on page 1620 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 reinvestmentor TSR, of dividends) of 17.45.9 percent average EPS growth of 3.7 percent,(as calculated as required by our LTIP) and return on average equity of 9.88.7 percent. However, due in part to the continued challenges in 2021 associated with the COVID-19 pandemic, our average EPS growth over the past three years was negative, decreasing 1.36 percent.
NorthWestern Energy | Proxy Statement | Page 16 | ||
| Compensation Discussion and Analysis | ||
The grants of long-term performance units that were made in 20152019 pursuant to the LTIP vested on December 31, 2017.2021. 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 solidmixed results over the three-year vesting period with respect to the LTIP metrics, attaining 3.7negative 1.4 percent average EPS growth, 9.88.7 percent ROAE, and 14.45.9 percent TSR (12th(9th highest of our 14-member13-member 2019 peer group when calculated as required by the LTIP). Based on these results, we failed to achieve our LTIP targets, and the LTIP awards paid out at 44.972.7 percent of target.
The chart below shows the total return on an investment made over that same three-year vesting period and highlights our stock price performance withas compared to the S&P 500 and our 2021 peer group. The chart below shows our TSR of 17.48.0 percent, assuming reinvestment of dividends. However, the calculation required by the 2019 LTIP results in a TSR of 14.45.9 percent for the same period. The difference in these TSRs is the method of calculation required by the terms of our LTIP award agreement, 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 | ||
  | ||
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. BASIC EPS | VS. ROAE | VS. CUMULATIVE TSR | ||||||
  |   |   | ||||||
| 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, | ||||||||
NorthWestern Energy | Proxy Statement | Page 17 | ||
| Compensation Discussion and Analysis | ||
Performance Relative to Our Peers
Relative to our 2021 peers, our CEO pay is generallyhighly aligned with performance. For the three-year period ending December 31, 2017,2021, our 8.0 percent TSR was the 12th highestranked 9th in our 13-member 2021 peer group (according to SNL FinancialS&P Global Market Intelligence and assuming reinvestment of dividends), while our CEO’s compensation also was the ninth highest of our 2021 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 lagtrail the median of our 2021 peer 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 aour 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 our2021 peers.
| CEO PAY FOR PERFORMANCE VS. 2021 PEERS | |||||||||||
| 1-YEAR | 3-YEAR | ||||||||||
  |   | ||||||||||
| 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 Energy | 100% | Avista Corp. | 100% | PNM Resources Inc. | 100% | Otter Tail Corporation | 100% | |||||||||||||||||||||||||||||||||||
| Vectren Corporation | 96% | Vectren Corporation | 89% | Vectren Corporation | 94% | Avista Corp. | 100% | |||||||||||||||||||||||||||||||||||
| PNM Resources Inc. | PNM Resources Inc. | 100% | Otter Tail Corporation | 100% | PNM Resources Inc. | 100% | Otter Tail Corporation | 100% | ||||||||||||||||||||||||||||||||||
| OGE Energy Corp. | OGE Energy Corp. | 45% | Portland General Electric | 41% | OGE Energy Corp. | 84% | MGE Energy Inc. | 82% | ||||||||||||||||||||||||||||||||||
| Black Hills Corporation | 92% | Great Plains Energy | 71% | Avista Corp. | 83% | Vectren Corporation | 90% | Black Hills Corporation | 35% | OGE Energy Corp. | 39% | IDACORP, Inc. | 60% | IDACORP, Inc. | 63% | |||||||||||||||||||||||||||
| PNM Resources Inc. | 89% | El Paso Electric Co. | 70% | Black Hills Corporation | 73% | El Paso Electric Co. | 81% | |||||||||||||||||||||||||||||||||||
| Avista Corp. | 82% | PNM Resources Inc. | 67% | Great Plains Energy | 72% | IDACORP, Inc. | 81% | |||||||||||||||||||||||||||||||||||
| OGE Energy Corp. | 79% | ALLETE, Inc. | 62% | Portland General Electric | 60% | ALLETE, Inc. | 81% | |||||||||||||||||||||||||||||||||||
| Spire Inc. | Spire Inc. | 35% | IDACORP, Inc. | 33% | Spire Inc. | 55% | Portland General Electric | 56% | ||||||||||||||||||||||||||||||||||
| Otter Tail Corporation | Otter Tail Corporation | 33% | MGE Energy Inc. | 31% | Black Hills Corporation | 52% | Black Hills Corporation | 50% | ||||||||||||||||||||||||||||||||||
| ONE Gas Inc. | ONE Gas Inc. | 33% | Black Hills Corporation | 29% | ONE Gas Inc. | 51% | PNM Resources Inc. | 45% | ||||||||||||||||||||||||||||||||||
| IDACORP, Inc. | 74% | IDACORP, Inc. | 53% | IDACORP, Inc. | 58% | MGE Energy Inc. | 78% | IDACORP, Inc. | 30% | ALLETE, Inc. | 19% | Portland General Electric | 44% | Avista Corp. | 34% | |||||||||||||||||||||||||||
| Portland General Electric | 62% | Otter Tail Corporation | 41% | OGE Energy Corp. | 46% | PNM Resources Inc. | 78% | Portland General Electric | 25% | Avista Corp. | 18% | Otter Tail Corporation | 41% | OGE Energy Corp. | 33% | |||||||||||||||||||||||||||
| El Paso Electric Co. | 50% | NorthWestern Energy | 30% | NorthWestern Energy | 36% | Portland General Electric | 50% | |||||||||||||||||||||||||||||||||||
| NorthWestern Energy | 42% | Portland General Electric | 29% | El Paso Electric Co. | 34% | Great Plains Energy | 41% | NorthWestern Energy | 19% | Northwest Natural Holding | 18% | NorthWestern Energy | 35% | NorthWestern Energy | 27% | |||||||||||||||||||||||||||
| Northwest Natural Holding | Northwest Natural Holding | 17% | Spire Inc. | 12% | Avista Corp. | 28% | ONE Gas Inc. | 24% | ||||||||||||||||||||||||||||||||||
| Avista Corp. | Avista Corp. | 16% | ONE Gas Inc. | 10% | Northwest Natural Holding | 27% | Spire Inc. | 13% | ||||||||||||||||||||||||||||||||||
| ALLETE, Inc. | 28% | OGE Energy Corp. | 10% | ALLETE, Inc. | 28% | Black Hills Corporation | 37% | ALLETE, Inc. | 3% | NorthWestern Energy | 7% | ALLETE, Inc. | 20% | ALLETE, Inc. | 11% | |||||||||||||||||||||||||||
| Otter Tail Corporation | 25% | Black Hills Corporation | 7% | Otter Tail Corporation | 20% | NorthWestern Energy | 24% | |||||||||||||||||||||||||||||||||||
| MGE Energy Inc. | —% | MGE Energy Inc. | —% | MGE Energy Inc. | —% | OGE Energy Corp. | —% | MGE Energy Inc. | —% | PNM Resources Inc. | —% | MGE Energy Inc. | —% | Northwest Natural Holding | —% | |||||||||||||||||||||||||||
| *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 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. | ||||||||||||||||||||||||||||||||||||||||||
| *Relative CEO pay and relative TSR are expressed as a percentile of the range between the highest and lowest values of actual CEO pay and actual TSR. | *Relative CEO pay and relative TSR are expressed as a percentile of the range between the highest and lowest values of actual CEO pay and actual TSR. | |||||||||||||||||||||||||||||||||||||||||
| Source: CEO Pay for the one-year period is the 2020 total compensation and for the three-year period is the 2018-2020 total compensation, as published in the 2019, 2020, and 2021 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 S&P Global Market Intelligence for the one- and three-year periods ended December 31, 2021, and assumes reinvestment of dividends. | Source: CEO Pay for the one-year period is the 2020 total compensation and for the three-year period is the 2018-2020 total compensation, as published in the 2019, 2020, and 2021 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 S&P Global Market Intelligence for the one- and three-year periods ended December 31, 2021, and assumes reinvestment of dividends. | |||||||||||||||||||||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 18 | ||
| Compensation Discussion and Analysis | ||
As with our CEO’s total compensation package, the total compensation provided to our other 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 2021 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 laggedlags our 2021 peer group median until recently.
median.
| NAMED EXECUTIVE OFFICER PAY VS. 2021 PEERS | PAY MULTIPLE OF CEO TO SECOND HIGHEST PAID NAMED EXECUTIVE OFFICER | ||||||||||
  |   | ||||||||||
| 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 | ||||||||||||||||||||
Our Compensation Committee (a) selects the members of our peer group and periodically examines whether peers continue to meet the criteria for inclusion described For | ||||||||||||||||||||
ALLETE, Inc. (ALE) Avista Black Hills Corporation IDACORP, Inc. (IDA) MGE Energy Inc. (MGEE) NorthWestern Energy (NWE) Northwest Natural Holding Co. (NWN) OGE Energy Corp. (OGE) ONE Gas Inc. (OGS) Otter Tail Corporation (OTTR) PNM Resources Inc. (PNM) Portland General Electric Company (POR) | Market Capitalization(1) | Revenue (2) | ||||||||||||||||||
  |   | |||||||||||||||||||
| (1) Market capitalization range of our peer group as of February | ||||||||||||||||||||
| (2) Range of publicly available trailing twelve months total revenues for our peer group | ||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 19 | ||
| Compensation Discussion and Analysis | ||
Say-on-Pay Results
At our annual meeting in 2017,2021, our shareholders continued to show strong support of our executive pay program, with 99.298.7 percent of the votes approving the say-on-pay resolution.
Those 20172021 voting results occurred after the Compensation Committee took action to approve 20172021 pay. Nevertheless, the Compensation Committee and the Board reviewed that feedback from shareholders when establishing executive pay for 2018.2022. The Compensation Committee believes the results from our 20172021 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 2018.2022.
How we set payWe 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. | ||||||||||||||||||||||||||||||
Our Compensation Committee has the authority to delegate certain responsibilities and has delegated some of the administration of our executive compensation and benefits plans to our Compensation and Benefits Department.
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 2021 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.
NorthWestern Energy | Proxy Statement | Page 20 | ||
| Compensation Discussion and Analysis | ||
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 2021 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
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: | |||||||||||||||||||||||||
•Executive pay overview | ||||||||||||||||||||||||||
•Peer compensation analysis | ||||||||||||||||||||||||||
•Preliminary design of annual and long-term incentive opportunities | ||||||||||||||||||||||||||
December Evaluate overall executive pay program: | February Finalize executive pay: | |||||||||||||||||||||||||
•Review preliminary five-year financial plan | ||||||||||||||||||||||||||
•Approve upcoming annual incentive plan grants | ||||||||||||||||||||||||||
•Review proposed long-term incentive grants | ||||||||||||||||||||||||||
•Approve annual executive retention / retirement grants | •Review final five-year financial plan •Approve executive pay •Approve long-term incentive program grants •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 areis 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;
NorthWestern Energy | Proxy Statement | Page 21 | |||
•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
our Compensation Committee’s independent compensation consultant, our relative TSR performance metric that is part of our long termlong-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.
For our CEO, 78approximately 79 percent of the overall targeted pay in 20172021 (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 5863 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 | ||||||||||
  |   | ||||||||||
| 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 2017,2021, 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 2021 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 those with annual revenues less than $3 billion.
NorthWestern Energy | Proxy Statement | Page 22 | ||
| Compensation Discussion and Analysis | ||
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.
We also conducted a separate analysis of the 20162020 executive pay of the 1312 other companies in our 2021 peer group. This internal analysis which(which was based on proxy data,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$1.35 million in 2016,2020, which was less than all but threefour of the 12 other companies in our 2021 peer group; while the peer group median had average pay per named executive officer of approximately $1.44$1.64 million. For 2016, ourOur CEO’s total 2020 pay was approximately 7879 percent of the median total pay of CEOs in our2021 peer group.group CEOs.
These analyses demonstrate that, on average, our highest paid employees are paid at a level that is below the median of our 2021 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 (other than our CEO) in | CEO Pay Ratio | ||||
Our CEO to median employee pay ratio is calculated in accordance with Item 402(u) of Regulation S-K. Although the applicable SEC rules would permit us to use the same median employee, we identified a new median employee for 2021 because that is the same process we have been using since our Compensation Committee first asked us to calculate our CEO pay ratio in 2010, and not because of any changes to our employee population or employee compensation arrangements that would significantly impact our pay ratio.
We identified the new median employee this year by using the same methodology we used to identify last year’s median employee — by examining the 20172021 total cash compensation for all individuals (excluding our CEO) who were employed by us on December 15, 2017, the last day of our payroll year (last year, we also used the last day of our payroll year)(December 24, 2021). 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 2017.2021. 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 sevenemployees (six percent of our employees receive annual equity awards.awards).
| CEO to Median Employee | ||||||||||
| Pay Ratio | ||||||||||
| President and CEO | Median Employee | |||||||||
| Base Salary | $ | 607,232 | $ | 81,939 | ||||||
| Stock Awards | 1,497,280 | — | ||||||||
| Non-Equity Incentive Plan Compensation | 605,836 | 3,363 | ||||||||
Change in Pension Value and Nonqualified Deferred Compensation Earnings (1) | 94,609 | 9,617 | ||||||||
| All Other Compensation | 43,322 | 29,580 | ||||||||
| TOTAL | $ | 2,848,279 | $ | 124,499 | ||||||
| CEO Pay to Median Employee Pay Ratio | 23 | : | 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. | ||||||||||
NorthWestern Energy | Proxy Statement | Page 23 | ||
| Compensation Discussion and Analysis | ||
| CEO to Median Employee Pay Ratio | ||||||||||||||||||||
| CEO | Median Employee | |||||||||||||||||||
| Base Salary | $674,138 | $93,127 | ||||||||||||||||||
| Stock Awards | $1,906,246 | — | ||||||||||||||||||
| Annual Incentive Plan Compensation | $717,359 | $1,458 | ||||||||||||||||||
Change in Pension Value and Nonqualified Deferred Compensation Earnings (1) | $77,372 | — | ||||||||||||||||||
| All Other Compensation | $70,252 | $30,478 | ||||||||||||||||||
| TOTAL | $3,445,367 | $125,063 | ||||||||||||||||||
| CEO Pay to Median Employee Pay Ratio | 28 | : | 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. | ||||||||||||||||||||
Wealth Accumulation
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 | |||||||||||
•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 2021 peer group) and individual position and performance. Base salary represents 2221 percent of our CEO’s targeted total pay and, on average, 4237 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,
NorthWestern Energy | Proxy Statement | Page 24 | ||
| 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 20172021 Executive Pay section of this proxy statement. Finally, we maintain robust stock ownership guidelines for our executives. In light of these pay practices, the Compensation Committee believes that our executive pay program appropriately addressaddresses 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.
| Annualized Base Salary | Increase (%) | |||||
| 2016 | 2017 | |||||
| Name | ($) | ($) | ||||
| Robert C. Rowe | 595,578 | 611,956 | 2.75 | |||
| Brian B. Bird | 411,951 | 423,280 | 2.75 | |||
| Heather H. Grahame | 360,714 | 370,634 | 2.75 | |||
| Curtis T. Pohl | 279,922 | 287,620 | 2.75 | |||
| Bobbi L. Schroeppel | 258,068 | 265,810 | 3.00 | |||
| The Compensation Committee considers adjustments to base salaries for executive officers on an annual basis. For 2021, the Compensation Committee felt that an increase to the base salaries of our executive officers in line with the increases generally provided to our employees was reasonable in light of the company’s operating results | ||||||||||||||||||||||||||
| in 2020. In early 2021, we announced that Brian Bird had been promoted to president and chief operating officer and Crystal Lail had been promoted to vice president and chief financial officer. Their base salary increases reflected the increased responsibilities of their new positions. The table to the right sets forth the base salaries for our named executive officers. The base salary adjustments for 2021 were effective April 1, 2021, with the exception of Mr. Bird and Ms. Lail, who received adjustments as of January 1, 2021. | ||||||||||||||||||||||||||
| Annualized Base Salary | Increase (%) | |||||||||||||||||||||||||
| 2020 | 2021 | |||||||||||||||||||||||||
| Name | ($) | ($) | ||||||||||||||||||||||||
| Robert C. Rowe | 666,753 | 676,754 | 1.5 | |||||||||||||||||||||||
| Brian B. Bird | 461,182 | 500,000 | 8.4 | |||||||||||||||||||||||
| Heather H. Grahame | 434,951 | 441,475 | 1.5 | |||||||||||||||||||||||
| Crystal D. Lail | 280,706 | 375,000 | 33.6 | |||||||||||||||||||||||
| Curtis T. Pohl | 313,375 | 318,076 | 1.5 | |||||||||||||||||||||||
| Bobbi L. Schroeppel | 297,536 | 301,999 | 1.5 | |||||||||||||||||||||||
Annual Cash Incentive Awards
The overall design of our 20172021 annual cash incentive plan was the same as the 20162020 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. The performance metrics include targets for net income, reliability, and two metrics related to the social category of our ESG sustainability efforts in the form of employee safety and customer satisfaction targets, which have been part of our plan for numerous years. 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:
four-factor formula:
| (1) | (2) | (3) | (4) | |||||||||||||||||||||||
| Base Salary | x | Individual Target Incentive (% of Base Salary) | x | Plan Funding Percentage (performance vs. metrics) | x | Individual Performance Multiple | = | Individual Payout | ||||||||||||||||||
For example, the Compensation Committee calculated the annual incentive payout for our CEO in 20172021 as follows:
| $676,754 | x | 100% | x | 106% | x | 1 | = | $717,359 | ||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 25 | ||
| $611,956 | x | 100% | x | 99% | x | 1 | = | $605,836 |
| Compensation Discussion and Analysis | ||
(1) Base Salary
Base salary is the first component in the calculation of the annual cash incentive award. Base salary is described in the Base Salary section immediately preceding this Annual Cash Incentive Awards discussion.
(2) Individual Target Incentive
Each year, the Compensation Committee approves an annual incentive target, expressed as a percentage of base salary, for each executive. The target opportunity for our executive officers is derived in part from peer group and competitive survey analysis data and in part by the Compensation Committee’s judgment on the internal equity of the positions, scope of job responsibilities, and each executive’s industry experience and tenure. Potential adjustments to the annual incentive target for the executive officers are considered by the Compensation Committee on an annual basis.
| The table to the right sets forth the 2021 annual incentive target opportunity for our named executive officers. In 2021, the Compensation Committee adjusted the target incentive opportunity for Mr. Bird and Ms. Lail in connection with their promotions and increased responsibilities. The other named executive officers remained at 2020 levels after the Compensation Committee determined that the existing target incentive opportunities were aligned with the incentive opportunity in the market place generally. | 2021 | |||||||||||||||||||||||||
| Name | Base Salary ($) | Target Incentive Opportunity (% of base salary) | Target Incentive Opportunity ($) | |||||||||||||||||||||||
| Robert C. Rowe | 676,754 | 100% | 676,754 | |||||||||||||||||||||||
| Brian B. Bird | 500,000 | 75% | 375,000 | |||||||||||||||||||||||
| Heather H. Grahame | 441,475 | 55% | 242,811 | |||||||||||||||||||||||
| Crystal D. Lail | 375,000 | 50% | 187,500 | |||||||||||||||||||||||
| Curtis T. Pohl | 318,076 | 40% | 127,230 | |||||||||||||||||||||||
| Bobbi L. Schroeppel | 301,999 | 40% | 120,800 | |||||||||||||||||||||||
(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 | ||||||||||||||||||||
| Historical Funding of Annual Cash Incentive (as a percentage of target) | ||||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
| 113% | 99% | 136% | 126% | 74% | ||||||||||||||||
| 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 74 percent to 136 percent for the five previous years, as set forth in the table above. | ||||||||||||||||||||
| For many years, including 2021, 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 are set forth in the graphic to the right. In order for any awards under the 2021 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. In addition, the 2021 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 | ||||||||
 | ||||||||
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| Compensation Discussion and Analysis | ||
| 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% | $93,034 | |||||
| For our executives, the funding (as a percentage of target) under the annual incentive plan has ranged from 80 percent to 125 percent for the five previous years, as set forth in the table to the right. | Historical Funding of Annual Cash Incentive (as a percentage of target) | |||||
| 2012 | 2013 | 2014 | 2015 (1) | 2016 | ||
| 98% | 108% | 125% | 80% | 113% | ||
| (1) Due to a work-related fatality in 2015, the funding level of the annual cash incentive for executives was 80% (for non-executive employees, the plan was funded at 88%). | ||||||
The Compensation Committee may use discretion in increasing or decreasing the plan funding percentage from actual performance due to specific facts and circumstances, such as current economic conditions as well as unusual one-time events that significantly impact financial or non-financial results. The Compensation Committee exercises this discretion only for unusual, non-operational items.items and did not exercise any such discretion for 2021.
 | ||
weighting and plan payout percentage for each of the 20172021 performance measures, which resulted in the plan funding at 99106 percent of target for our named executive officers.
| 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan Information | ||||||||||||||||||||||||||||||||||||||||||||
| Performance Measures | Weight (% of Total Plan Payout) | Performance Level | Target % Achieved | Final Funding % of Total | ||||||||||||||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Actual Achieved | |||||||||||||||||||||||||||||||||||||||||
| Financial (55%) (1) | ||||||||||||||||||||||||||||||||||||||||||||
| Net Income ($ in millions) | 55 | % | $164.3 | $ | 182.5 | $ | 200.8 | $186.8 | 111.9 | 61.5 | ||||||||||||||||||||||||||||||||||
| Safety (15%) (2) | ||||||||||||||||||||||||||||||||||||||||||||
| Lost Time Incident Rate | 5 | % | 0.58 | 0.47 | 0.24 | 0.46 | 102.2 | 5.1 | ||||||||||||||||||||||||||||||||||||
| Total Recordable Incident Rate | 5 | % | 1.80 | 1.51 | 1.09 | 1.64 | 77.6 | 3.9 | ||||||||||||||||||||||||||||||||||||
| Safety Training Completion | 5 | % | 99.0 | % | 99.5 | % | 100.0 | % | 100.0 | % | 10,050.0 | 7.5 | ||||||||||||||||||||||||||||||||
| Reliability (15%) (3) | ||||||||||||||||||||||||||||||||||||||||||||
| SAIDI (excluding major event days) | 5.0 | % | 117.00 | 103.00 | 89.00 | 111.00 | 71.4 | 3.6 | ||||||||||||||||||||||||||||||||||||
| SAIDI (including major event days) | 5.0 | % | 168.00 | 124.00 | 94.00 | 131.50 | 91.5 | 4.6 | ||||||||||||||||||||||||||||||||||||
| Gas – Leaks per 100 Miles of Main | 2.5 | % | 15.20 | 9.70 | 8.10 | 9.66 | 10,001.3 | 2.5 | ||||||||||||||||||||||||||||||||||||
| Gas – Damages per 1000 Locates | 2.5 | % | 3.40 | 3.00 | 1.60 | 2.51 | 10,017.5 | 2.9 | ||||||||||||||||||||||||||||||||||||
| Customer Satisfaction (15%) (4) | ||||||||||||||||||||||||||||||||||||||||||||
J.D. Power Residential Electric and Gas Survey Performance Ranking | 5 | % | 707.00 | 723.00 | 727.00 | 720.60 | 92.3 | 4.6 | ||||||||||||||||||||||||||||||||||||
Operational Performance – Customer Survey by Flynn Wright | 5 | % | 35.04 | 38.93 | 42.82 | 38.51 | 94.6 | 4.7 | ||||||||||||||||||||||||||||||||||||
Reputational Perceptions – Customer Survey by Flynn Wright | 5 | % | 34.46 | 38.29 | 42.12 | 37.94 | 95.4 | 4.8 | ||||||||||||||||||||||||||||||||||||
| TOTAL FUNDING PERCENTAGE | 106.0 | |||||||||||||||||||||||||||||||||||||||||||
| 2017 Annual Incentive Plan Information | |||||||||||||||||||||||
| Performance Measures | Weight (% of Total Plan Payout) | Performance Level | Target % Achieved | Final Funding % of Total | |||||||||||||||||||
| Threshold | Target | Maximum | Actual Achieved | ||||||||||||||||||||
Financial (55%) (1) | |||||||||||||||||||||||
| Net Income ($ in millions) | 55 | % | $148.4 | $ | 164.9 | $ | 181.4 | $162.7 | 93.4 | % | 51.3 | ||||||||||||
| Safety (15%) (2) | |||||||||||||||||||||||
| Lost Time Incident Rate | 5 | % | 0.70 | 0.55 | 0.30 | 0.51 | 108.0 | % | 5.4 | ||||||||||||||
| Total Recordable Incident Rate | 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 | % | 122.00 | 107.00 | 94.00 | 114.96 | 73.5 | % | 3.7 | ||||||||||||||
| SAIDI (including major event days) | 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 | % | 2.50 | 2.10 | 1.70 | 2.30 | 75.0 | % | 1.9 | ||||||||||||||
| Customer Satisfaction (15%) (4) | |||||||||||||||||||||||
JD Power Residential Electric and Gas Survey Performance Ranking | 5 | % | 650.00 | 688.00 | 692.00 | 696.60 | 150.0 | % | 7.5 | ||||||||||||||
Operational Performance – Customer Survey by Flynn Wright | 5 | % | 33.73 | 37.48 | 41.23 | 37.54 | 100.8 | % | 5.0 | ||||||||||||||
Reputational Perceptions – Customer Survey by Flynn Wright | 5 | % | 33.16 | 36.84 | 40.52 | 36.54 | 95.9 | % | 4.8 | ||||||||||||||
| TOTAL FUNDING PERCENTAGE | 99.0 | % | |||||||||||||||||||||
(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 (other than training completion) represents an improvement over our 2020 plan and ten to 15 percent better than our Edison Electric Institute (EEI) peer group average; the target level is significantly above our peer group average, an improvement over our five-year average, and an improvement over our 2020 plan; and the maximum represents first 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.
(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 one percent improvement over our 2020 target; the target level represents a one percent improvement over the company’s 2020 plan; and the maximum level is slightly better than the five-year average of first quartile performance of IEEE medium-sized utilities.
SAIDI (including major event days). The threshold for SAIDI, including major event days, representswas set at a 20one percent improvement ofover the five-year average performance for IEEE medium-sized utilities;2020 target; the target level represents a 20one percent improvement over the gap between the company’s five-year average results and the maximum level;2020 plan; and the maximum level is equal to the company’s best SAIDI, including major event days, in the last five years.significantly better than first quartile performance of IEEE medium-sized utilities.
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 representswas set at a six percent improvement over the company’s five-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);2020 threshold; the target level representswas maintained at the 2020 target, representing a twentyfive percent improvement over the company’s five-year average;2019 results; and the maximum level represents a 35 percent improvement over the company’s five-year average.near first quartile performance for AGA companies.
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| Compensation Discussion and Analysis | ||
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 representswas set at a level 50two percent improvement over the 2020 plan and is eight percent better than second quartile average performance as reported by the AGA; the target level representswas set at three percent improvement over the company’s five-year average, which2020 results and is first40 percent better than AGA second quartile performance; and the maximum level represents a 30 percent improvement over the company’s five-year average, well intobetter than AGA first quartile performance.
(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, achieved in 2020; and the maximum level is a five point improvement over our 2020 best ever score.
Flynn Wright Surveys. The remaining two customer satisfaction metrics are measured based on the results of a 20172021 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 ten percent below target; the target level represents our average score for three waves of surveys from Fall 20162020 to Fall 2017;2021; and the maximum level is set at ten 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 20172021 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 20172021 annual cash incentive plan, without the addition of any performance multiplier. Actual 20172021 annual cash incentive awards for the named executive officers are reflected in the following table.table below.
| 2017 | |||||||||||||||
| Name | Base 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 | |||||||
| 2021 | |||||||||||||||||||||||||||||||||||
| Name | Base 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 | 676,754 | 100% | 106 | 1.0 | 106.0% | 717,359 | |||||||||||||||||||||||||||||
| Brian B. Bird | 500,000 | 75% | 106 | 1.0 | 79.5% | 397,500 | |||||||||||||||||||||||||||||
| Heather H. Grahame | 441,475 | 55% | 106 | 1.0 | 58.3% | 257,380 | |||||||||||||||||||||||||||||
| Crystal D. Lail | 375,000 | 50% | 106 | 1.0 | 53.0% | 198,750 | |||||||||||||||||||||||||||||
| Curtis T. Pohl | 318,076 | 40% | 106 | 1.0 | 42.4% | 134,864 | |||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | 301,999 | 40% | 106 | 1.0 | 42.4% | 128,048 | |||||||||||||||||||||||||||||
| 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 philosophy of being market competitive while simultaneously aligning the interests of our executives and shareholders.
We do not recover equity incentive awards from customers in our rates approved by our regulators.
The Equity Compensation Plan authorizes several types of stock-based awards, including restricted stock and a variety of performance-based awards. In 2017,2021, 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
NorthWestern Energy | Proxy Statement | Page 28 | ||
| Compensation Discussion and Analysis | ||
five-year performance period and a payout over five years following the executive’s separation from service with the company. All of these 20172021 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
Compensation Committee approves the annual grant of LTIP performance units to our executive officers (and approximately 11575 other participants in 2017)2021). 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, to the overall payout (expressed as a percentage of target).
| Historical Funding of LTIP (as a percentage of target) | ||||
| 2011-2013 | 2012-2014 | 2013-2015 | 2014-2016 | 2015-2017 |
| 92.5% | 168.4% | 167.3% | 108.3% | 44.9% |
| Historical Funding of LTIP (as a percentage of target) | ||||||||||||||
| 2015-2017 | 2016-2018 | 2017-2019 | 2018-2020 | 2019-2021 | ||||||||||
| 44.9% | 94.3% | 122.2% | 50% | 72.7% | ||||||||||
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.
In February 2017,2021, 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 2021 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 2017,2021, the Compensation Committee increased the targeted opportunity (expressed as a percentage of base salary) associated with the LTIP awards for oneall but two of our named executive officers to (1) better align with the market median.median and (2) acknowledge the increased responsibilities associated with the promotions of Mr. Bird and Ms. Lail.
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
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| Compensation Discussion and Analysis | ||
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, 2019,2023, if all performance goals are met at the target performance level.
| 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 | |||||||||
| Name | Base Salary (%) | Base Salary (%) | Value at Target ($) | LTIP Stock Awards (1) | |||||||
| Robert C. Rowe | 200% | 200% | 1,191,156 | 24,821 | |||||||
| Brian B. Bird | 100% | 100% | 411,951 | 8,584 | |||||||
| Heather H. Grahame | 80% | 80% | 288,571.2 | 6,013 | |||||||
| Curtis T. Pohl | 60% | 60% | 167,953.2 | 3,500 | |||||||
| Bobbi L. Schroeppel | 40% | 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 $57.40 on February 16, 2017, less the present value of expected dividends | |||||||||||
| The target equity opportunities (value at target and number of shares) for the 2021 grants of LTIP performance units are shown in the table to the right. The table also compares the target opportunities (expressed as a percentage of base salary) applicable to the 2020 and 2021 awards. | Target LTIP Performance Unit Opportunity for 2021 | ||||||||||||||||||||||||||||
| 2020 | 2021 | 2021 | 2021 | ||||||||||||||||||||||||||
| Name | Base Salary (%) | Base Salary (%) | Value at Target ($) | LTIP Stock Awards (1) | |||||||||||||||||||||||||
| Robert C. Rowe | 200% | 225 | 1,500,194 | 29,689 | |||||||||||||||||||||||||
| Brian B. Bird | 100% | 140 | 700,000 | 13,853 | |||||||||||||||||||||||||
| Heather H. Grahame | 90% | 90 | 391,456 | 7,747 | |||||||||||||||||||||||||
| Crystal D. Lail | 45% | 90 | 337,500 | 6,679 | |||||||||||||||||||||||||
| Curtis T. Pohl | 60% | 60 | 188,025 | 3,721 | |||||||||||||||||||||||||
| Bobbi L. Schroeppel | 50% | 55 | 163,645 | 3,239 | |||||||||||||||||||||||||
| (1) Based on a weighted average grant date fair value of $50.53, which was calculated using the closing stock price of $57.47 on February 11, 2021, 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. We do not recover LTIP awards from customers in our rates approved by our regulators.
The performance goals for these awards are independent of each other and are equally weighted. Vesting of awards also is also contingent on maintaining investment grade secured and unsecured credit ratings. The following table summarizes the performance measures for the 20172021 LTIP performance unit awards.
| Performance Measures — 2017-2019 | Threshold | Target | Maximum | ||||||
| Financial Goals – 50% | |||||||||
| ROAE | 9 | % | 9.60 | % | 10.2 | % | |||
| Simple Average EPS Growth | 0.4 | % | 2.4 | % | 4.4 | % | |||
| TSR – 50% | |||||||||
| Relative Average vs. Peers | 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 useour program requires a first place relative TSR to earn the maximum performance level, while the average program in the market only requires a third place relative TSR to earn the maximum performance level. We earn target performance for a ranking of 1st for maximum,sixth, while the market uses 3rd; we useearns target performance for a ranking of 6theighth; and we earn threshold performance (and a 10 percent payout) for target,a ranking of 13th, while the market uses 8th; and ourearns threshold of 13th pays at ten percent, and 9th pays atperformance (and a 50 percent while the market thresholdpayout) for a ranking of 12th pays at 50 percent.twelfth.
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 dividends paid over the performance period. We then compare our TSR with the total shareholder returns achieved by our 2021 peers over the same three-year period and determine our ranking.
In December 2017,2021, 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.
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| 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 2017,2021, the Compensation Committee reviewed the equity incentive opportunities provided to our 2021 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 20172021 ERRP restricted share unit awards.awards other than for one of our named executive officers, whose award was increased to 25 percent of base salary from 20 percent of base salary, and the awards for Mr. Bird and Ms. Lail were increased by an additional five percent from their 2020 levels to reflect their promotions.
The target equity opportunities for the 20172021 ERRP restricted share unit grants to our named executive officers, based on a percentage of base salary, are shown in the table below. The 2017 grants offered
| 2021 Target ERRP Opportunity | |||||||||||||||||||||||
| Name | 2021 Base Salary ($) | Award % of Base Salary (%) | Value at Grant Date ($) | ERRP Stock Awards (#) (1) | |||||||||||||||||||
| Robert C. Rowe | 676,754 | 60 | 406,060 | 9,380 | |||||||||||||||||||
| Brian B. Bird | 500,000 | 30 | 150,000 | 3,465 | |||||||||||||||||||
| Heather H. Grahame | 441,475 | 25 | 110,390 | 2,550 | |||||||||||||||||||
| Crystal D. Lail | 375,000 | 25 | 93,766 | 2,166 | |||||||||||||||||||
| Curtis T. Pohl | 318,076 | 20 | 63,636 | 1,470 | |||||||||||||||||||
| Bobbi L. Schroeppel | 301,999 | 20 | 60,400 | 1,395 | |||||||||||||||||||
(1)Based on a grant date fair value of $43.29, which was calculated using the same targeted opportunity that was provided byclosing stock price of $55.30 on December 14, 2021, less the 2016 ERRP grants. present value of expected dividends, calculated using a 1.23 percent five-year Treasury rate and assuming quarterly dividends of $0.62 for the five-year vesting period, based on announced planned dividend of $2.48 per share for 2021.
Each executive officer’s 20172021 award value was converted into specific equity grants by dividing the total potential value of the award by the fair market value of a share of our stock on the grant date. This represents the number of restricted share units that will vest on December 31, 2022,2026, if the company’s net income for three of the five calendar years 20182022 – 20222026 exceeds the company’s net income for 2017.2021. The value of the award on the grant date, as reflected in the below table above, is based on the closing market price of our stock on the grant date, less the present value of expected dividends. If earned, the value of the award on payout will depend on the market price of our common stock on the date of payout.
| 2017 Target ERRP Opportunity | ||||||||||
| Name | 2017 Base Salary ($) | Award % of Base Salary (%) | Value at Grant Date ($) | ERRP Stock Awards (1) (#) | ||||||
| Robert C. Rowe | $611,956 | 50.0% | 305,978 | 5,862 | ||||||
| Brian B. Bird | $423,280 | 25.0% | 105,820 | 2,027 | ||||||
| Heather H. Grahame | $370,634 | 20.0% | 74,127 | 1,420 | ||||||
| Curtis T. Pohl | $287,620 | 20.0% | 57,524 | 1,102 | ||||||
| Bobbi L. Schroeppel | $265,810 | 15.0% | 39,872 | 764 | ||||||
Vesting of 20152019 Long-Term Incentive Program Performance Unit Grants in 20172021
In February 2015,2019, the Compensation Committee approved grants of LTIP performance units, subject to a three-year performance period. The 20152021 LTIP performance unit grants vested on December 31, 2017.2021. The performance goals were independent of each other and equally weighted. The following table below summarizes the performance measures which governed these 20152021 grants.
| Performance Measures — 2015-2017 | Threshold | Target | Maximum | Actual | |||||||||||||||||||||||||||||||||||||
| Performance Measures — 2019-2021 | Performance Measures — 2019-2021 | Threshold | Target | Maximum | Actual | ||||||||||||||||||||||||||||||||||||
| Financial Goals – 50% | Financial Goals – 50% | ||||||||||||||||||||||||||||||||||||||||
| ROAE | 9.0 | % | 9.6 | % | 10.2 | % | 9.8 | % | ROAE | 8.4 | % | 8.8 | % | 9.3 | % | 8.7 | % | ||||||||||||||||||||||||
| Average EPS Growth | 0.4 | % | 2.4 | % | 4.4 | % | 3.7 | % | |||||||||||||||||||||||||||||||||
| Simple Average EPS Growth | Simple Average EPS Growth | 1.7 | % | 3.2 | % | 4.7 | % | (1.4) | % | ||||||||||||||||||||||||||||||||
| Market Goal – 50% | Market Goal – 50% | ||||||||||||||||||||||||||||||||||||||||
| Relative TSR Average vs. Peers | 13th | 6th | 1st | 12th | Relative TSR Average vs. Peers | 13th | 6th | 1st | 9th | ||||||||||||||||||||||||||||||||
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 20172021 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
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| Compensation Discussion and Analysis | ||
company’s performance relative to these goals during the three-year performance period to determine the vesting percentage for the 20152019 LTIP performance unit grants.
For the financial goals related to the 20152019 LTIP performance unit grants, ROAE was 9.8 percent8.7 and simple average EPS growth was 3.7negative 1.4 percent. This financial performance resulted in a 34.945.2 percent vesting percentage for that half of the
program. For our market goal, TSR was 14.45.9 percent, resulting in a ranking of 12th9th out of 14 with respect to our 2019 peers, and contributing 10.027.5 percent with respect to that half of the program. Our peer group remains generally consistent from year to year. However, with mergers and acquisition activities over the years, we have made minor changes to our peer groups, and our 2019 peer group differs from our 2021 peer group.
For purposes of our 2019 LTIP, we calculatecalculated TSR by comparing the average closing price for a share of common stock of us and our 2019 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 2019 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 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 | % | |||||||||
| Based on the Compensation Committee’s calculation of these performance measures, the 2019 LTIP performance unit grants vested at 72.7 percent. The table to | Performance Measures — 2019-2021 | Result | Weight | Vesting | ||||||||||||||||||||||
| Financial Goals – ROAE and Simple Average EPS Growth | 90.4 | 50 | % | 45.2 | % | |||||||||||||||||||||
| Market Goal – TSR | 55.0 | % | 50 | % | 27.5 | % | ||||||||||||||||||||
| TOTAL | 72.7 | % | ||||||||||||||||||||||||
| the right summarizes the performance results with respect to each of the performance measures applicable to the 2019 LTIP performance unit grants and the corresponding contributions to the vesting percentage. | ||||||||||||||||||||||||||
The table below summarizes the number of shares awarded for the 20152019 LTIP performance unit grants and the number of shares paid out in 20172021 with respect to such grants for our named executive officers, based on the vesting percentage of 44.972.7 percent approved by the Compensation Committee.
| Vesting of 2019 Performance Unit Grants | ||||||||||||||||||||
| Name | Units at Grant Date (#) | Vesting Percentage (%) | Units upon Vesting (#) | |||||||||||||||||
| Robert C. Rowe | 20,868 | 72.7% | 15,171 | |||||||||||||||||
| Brian B. Bird | 7,217 | 72.7% | 5,247 | |||||||||||||||||
| Heather H. Grahame | 5,952 | 72.7% | 4,327 | |||||||||||||||||
| Crystal D. Lail | 1,660 | 72.7% | 1,207 | |||||||||||||||||
| Curtis T. Pohl | 2,942 | 72.7% | 2,139 | |||||||||||||||||
| Bobbi L. Schroeppel | 2,310 | 72.7% | 1,679 | |||||||||||||||||
| 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 20122016 Executive Retention / Retirement Program Grants in 20172021
In December 2012,2016, the Compensation Committee approved grants of ERRP restricted share units, subject to a five-year performance period from 20132017 to 2017.2021. The 20122016 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 2012.2016. As summarized in the following table, the company achieved net income in four of the five performance period years that was higher than its net income for 2012,2016, satisfying the performance metric.
Net Income (millions) | |||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||
| $162.7 | $172.7 | $197.0 | $202.1 | $155.2 | $186.8 | ||||||||||||
Net Income (millions) | |||||
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| $98.4 | $94.0 | $120.7 | $151.2 | $164.2 | $162.7 |
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| Compensation Discussion and Analysis | ||
| As a result of achieving the financial performance metric, the | |||||||||||||||
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 | |||||||||||||||
| Name | |||||||||||||||
| Robert C. Rowe | |||||||||||||||
| Brian B. Bird | |||||||||||||||
| Heather H. Grahame | |||||||||||||||
| Crystal D. Lail | 776 | ||||||||||||||
| Curtis T. Pohl | |||||||||||||||
| Bobbi L. Schroeppel | |||||||||||||||
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 20172021 Executive Pay—Pay After Employment Ends section, starting on page 3540 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)(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.Officer Deferred Plan. Participants in the officer deferred planOfficer Deferred Plan may elect to have 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 planDeferred Plan participants do not pay income taxes on amounts deferred or earnings thereon until those amounts are distributed from the officer deferred plan.Officer Deferred Plan. A participant’s benefits under the officer deferred planOfficer 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
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| Compensation Discussion and Analysis | ||
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 ofcompany’s ability to deduct executive compensation paid to certain named executive officers (and, beginning in 2018, certain former executive officers) to $1 million per year. Prior to theThe Tax Cuts and Jobs Act (Act), signed into law on December 22, 2017, Section 162(m) containedeliminated an exception to the $1 million deduction limit for certain qualifiyingqualifying 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 arecompensation generally, and we do not materially modified afterexpect to have further compensation arrangements that date.
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. The Compensation Committee reserves the right to pay compensation that exceeds Section 162(m)’s deductibility limit.
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, Compensation Committee | ||||||||
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| Compensation Discussion and Analysis |
In 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, 2016,2021, 2020, and 2015.2019. Please see the Compensation 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.
The table below sets forth the compensation earned during 2017, 2016, and 2015 for services in all capacities by our named executive officer during 2021, 2020, and 2019.
| Name and Principal Position (1) | Year | Salary ($) | Bonus ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (4) | All Other Compen- sation ($) (5) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
| Robert C. Rowe | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2021 | 674,138 | — | 1,906,246 | 717,359 | 77,372 | 70,252 | 3,445,367 | ||||||||||||||||||||||||||||||||||||||||||
| 2020 | 687,206 | 493,397 | 1,698,500 | — | 165,530 | 57,415 | 3,102,048 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 643,770 | — | 1,650,164 | 818,022 | 144,501 | 41,847 | 3,298,304 | |||||||||||||||||||||||||||||||||||||||||||
| Brian B. Bird | ||||||||||||||||||||||||||||||||||||||||||||||||||
| President and Chief Operating Officer (former Chief Financial Officer) | 2021 | 494,774 | — | 850,000 | 397,500 | 8,196 | 62,157 | 1,812,627 | ||||||||||||||||||||||||||||||||||||||||||
| 2020 | 475,329 | 204,765 | 564,353 | — | 28,446 | 58,672 | 1,331,565 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 445,284 | — | 548,242 | 339,487 | 31,861 | 57,387 | 1,422,261 | |||||||||||||||||||||||||||||||||||||||||||
| Heather H. Grahame | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General Counsel and Vice President - Regulatory & Federal Gov't Affairs | 2021 | 439,769 | — | 501,825 | 257,380 | — | 53,163 | 1,252,137 | ||||||||||||||||||||||||||||||||||||||||||
| 2020 | 448,293 | 177,025 | 468,154 | — | — | 55,026 | 1,148,498 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 416,601 | — | 444,292 | 293,497 | — | 51,505 | 1,205,895 | |||||||||||||||||||||||||||||||||||||||||||
| Crystal D. Lail | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President and Chief Financial Officer | 2021 | 362,307 | — | 431,250 | 198,750 | 1,954 | 51,193 | 1,045,454 | ||||||||||||||||||||||||||||||||||||||||||
| Curtis T. Pohl | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President - Distribution | 2021 | 316,847 | — | 251,640 | 134,864 | 2,553 | 57,519 | 763,423 | ||||||||||||||||||||||||||||||||||||||||||
| 2020 | 322,988 | 92,759 | 245,757 | — | 52,154 | 56,770 | 770,428 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 302,572 | — | 238,776 | 153,789 | 59,131 | 53,608 | 807,876 | |||||||||||||||||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President - Customer Care, Communications and HR | 2021 | 300,832 | — | 224,045 | 128,048 | 1,509 | 54,834 | 709,268 | ||||||||||||||||||||||||||||||||||||||||||
| 2020 | 306,000 | 88,071 | 203,244 | — | 38,170 | 56,168 | 691,653 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 285,059 | — | 182,672 | 144,887 | 39,441 | 56,915 | 708,974 | |||||||||||||||||||||||||||||||||||||||||||
(1)On February 5, 2021, our Board appointed Mr. Bird as president and chief operating officer, succeeding Mr. Rowe as president. At the same time, the Board appointed Ms. Lail as vice president and chief financial officer to replace Mr. Bird as the chief financial officer.
(2)The “Bonus” column reflects a cash incentive award earned pursuant to our annual incentive plan. Typically, this award is reported in the “Non-Equity Incentive Plan Compensation” column. However, in 2020, our Board exercised discretion to make payments under the annual incentive plan even though the performance targets had not been met due to the financial results being impacted by the COVID-19 pandemic, and we reported such discretionary award in the “Bonus” column for 2020.
(3)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 payout at target (100 percent) 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 15 to the consolidated financial statements in our 2021 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards. The value of awards granted in 2021 for each named executive officer assuming a maximum payout based on grant date fair value would be $3,406,430 for Mr. Rowe; $1,549,984 for Mr. Bird; $893,302 for Ms. Grahame; $768,746 for Ms. Lail; $439,680 for Mr. Pohl; and $387,724 for Ms. Schroeppel.
(4)These amounts are attributable to a change in the value of each individual’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 a participant in a pension plan.
(5)The table on the following page identifies the items included in the “All Other Compensation” column for 2021. 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 $50,000 for each of the named executive officers. Ms. Grahame’s, Mr. Pohl’s and Mr. Rowe’s other income relates to paid time off benefit sold back to the company at a rate of 75 percent. Mr. Bird’s other income relates to imputed income (and related tax gross up) from an executive physical. Ms. Lail’s other income includes paid time off benefit sold back to the company at a rate of 75 percent and imputed income (and related tax gross up) from an executive physical.
| Name and Principal Position | Year | Salary ($) | 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) ($) | Total ($) | |||||||||||||||
| Robert C. Rowe | |||||||||||||||||||||||
| President and Chief Executive Officer | 2017 | 607,232 | — | 1,497,280 | 605,836 | 94,609 | 43,322 | 2,848,279 | |||||||||||||||
| 2016 | 590,641 | — | 1,454,138 | 538,403 | 68,952 | 27,933 | 2,680,067 | ||||||||||||||||
| 2015 | 573,567 | — | 1,131,121 | 370,068 | 39,285 | 41,564 | 2,155,605 | ||||||||||||||||
| Brian B. Bird | |||||||||||||||||||||||
| Vice President and Chief Financial Officer | 2017 | 420,012 | — | 517,798 | 209,524 | 22,378 | 54,923 | 1,224,635 | |||||||||||||||
| 2016 | 408,536 | — | 502,909 | 232,752 | 15,458 | 50,027 | 1,209,682 | ||||||||||||||||
| 2015 | 391,181 | — | 468,227 | 159,981 | 9,264 | 49,677 | 1,078,330 | ||||||||||||||||
| Heather H. Grahame | |||||||||||||||||||||||
| 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 - 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 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 | ||||||||||||||||
| (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 | ||||||||||||||||||
| Health Benefits | Life Insurance | 401(k) Contributions | Other Income | Total All Other Compensation | ||||||||||||||||||||||||||||
| Robert C. Rowe | $ | 19,396 | $ | 9,925 | $ | 11,600 | $ | 29,331 | $ | 70,252.00 | ||||||||||||||||||||||
| Brian B. Bird | 24,118 | 2,597 | 31,900 | 3,542 | $ | 62,157.00 | ||||||||||||||||||||||||||
| Heather H. Grahame | 14,867 | 6,214 | 31,900 | 182 | $ | 53,163.00 | ||||||||||||||||||||||||||
| Crystal D. Lail | 11,594 | 1,251 | 28,892 | 9,456 | $ | 51,193.00 | ||||||||||||||||||||||||||
| Curtis T. Pohl | 17,874 | 5,229 | 31,900 | 2,516 | $ | 57,519.00 | ||||||||||||||||||||||||||
| Bobbi L. Schroeppel | 22,963 | 1,885 | 29,986 | — | $ | 54,834.00 | ||||||||||||||||||||||||||
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, 2017.2021. 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) ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Robert C. Rowe | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 338,377 | 676,754 | 1,015,131 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 29,689 | 59,378 | — | 1,500,185 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 9,380 | 9,380 | — | 406,060 | |||||||||||||||||||||||||||||||||||||||||||||||
| Brian B. Bird | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 187,500 | 375,000 | 562,500 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 13,853 | 27,706 | — | 699,992 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 3,465 | 3,465 | — | 150,000 | |||||||||||||||||||||||||||||||||||||||||||||||
| Heather H. Grahame | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 121,406 | 242,811 | 364,217 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 7,747 | 15,494 | — | 391,456 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 2,550 | 2,550 | — | 110,390 | |||||||||||||||||||||||||||||||||||||||||||||||
| Crystal D. Lail | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 93,750 | 187,500 | 281,250 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 6,679 | 13,358 | — | 337,490 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 2,166 | 2,166 | — | 93,766 | |||||||||||||||||||||||||||||||||||||||||||||||
| Curtis T. Pohl | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 63,615 | 127,230 | 190,846 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 3,721 | 7,442 | — | 188,022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 1,470 | 1,470 | — | 63,636 | |||||||||||||||||||||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Cash Incentive | — | 60,400 | 120,800 | 181,199 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/11/2021 | — | — | — | — | 3,239 | 6,478 | — | 163,667 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted Share Units | 12/14/2021 | — | — | — | — | 1,395 | 1,395 | — | 60,390 | |||||||||||||||||||||||||||||||||||||||||||||||
| 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) ($) | ||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||
| Robert C. Rowe | |||||||||||||||||||||||||||
| Annual Cash Incentive | — | 305,978 | 611,956 | 917,934 | — | — | — | — | — | ||||||||||||||||||
| Performance Units | 2/16/2017 | — | — | — | — | 24,821 | 49,642 | — | 1,191,284 | ||||||||||||||||||
| Restricted Share Units | 12/12/2017 | — | — | — | — | 5,862 | 5,862 | — | 305,996 | ||||||||||||||||||
| Brian B. Bird | |||||||||||||||||||||||||||
| Annual Cash Incentive | — | 105,820 | 211,640 | 317,460 | — | — | — | — | — | ||||||||||||||||||
| Performance Units | 2/16/2017 | — | — | — | — | 8,584 | 17,168 | — | 411,989 | ||||||||||||||||||
| Restricted Share Units | 12/12/2017 | — | — | — | — | 2,027 | 2,027 | — | 105,809 | ||||||||||||||||||
| Heather H. Grahame | |||||||||||||||||||||||||||
| Annual Cash Incentive | — | 83,393 | 166,785 | 250,178 | — | — | — | — | — | ||||||||||||||||||
| Performance Units | 2/16/2017 | — | — | — | — | 6,013 | 12,026 | — | 288,594 | ||||||||||||||||||
| Restricted Share Units | 12/12/2017 | — | — | — | — | 1,420 | 1,420 | — | 74,124 | ||||||||||||||||||
| Curtis T. Pohl | |||||||||||||||||||||||||||
| Annual Cash Incentive | — | 57,524 | 115,048 | 172,572 | — | — | — | — | — | ||||||||||||||||||
| Performance Units | 2/16/2017 | — | — | — | — | 3,500 | 7,000 | — | 167,983 | ||||||||||||||||||
| Restricted Share Units | 12/12/2017 | — | — | — | — | 1,102 | 1,102 | — | 57,524 | ||||||||||||||||||
| Bobbi L. Schroeppel | |||||||||||||||||||||||||||
| Annual Cash Incentive | — | 46,517 | 93,034 | 139,550 | — | — | — | — | — | ||||||||||||||||||
| Performance Units | 2/16/2017 | — | — | — | — | 2,689 | 5,378 | — | 129,059 | ||||||||||||||||||
| Restricted Share Units | 12/12/2017 | — | — | — | — | 764 | 764 | — | 39,881 | ||||||||||||||||||
(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 15 to the consolidated financial statements in our 2021 Annual Report on Form 10-K for further information regarding assumptions underlying the valuation of equity awards.
NorthWestern Energy | Proxy Statement | Page 36 | |||
Non-equity Incentive Plan Awards
Non-equity incentive plan compensation includes amounts earned under the NorthWestern Energy 20172021 Annual Incentive Plan for 2017Plan. Such amounts relate to 2021 performance which wereand are actually paid in 2018.mid-March 2022. The Compensation Committee reviewed 20172021 performance against plan targets and theapproved a plan achieved a payout of 99106 percent, as discussed in the Compensation Discussion and Analysis—Pay Components —AnnualComponents—Annual Cash Incentive Awards section, starting on page 2226 of this proxy statement.
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 20172021 under the Equity Compensation Plan. The values of the stock awards included in the table aton the top of thisprevious 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 20172021 performance unit awards, the exact
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 15 to the consolidated financial statements in our 20172021 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 2017,2021, base salary for the named executive officers accounted for approximately 2221 to 5047 percent of total direct compensation (i.e., salary plus targeted annual and long-term incentive compensation), while incentive compensation accounted for approximately 5053 to 7879 percent of total direct compensation, assuming achievement of a target level of performance for each named executive officer.
The table below shows the number of shares acquired and the dollar amounts realized during 2021 pursuant to the vesting of prior equity-based awards during.
| Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of LTIP Shares Acquired on Vesting (#) (1) | Value Realized on LTIP Vesting ($) (2) | Number of ERRP Shares Acquired on Vesting (#) (3) | Value Realized on ERRP Vesting ($) (2) | Total Shares Acquired on Vesting (#) | Total Value Realized ($) (2) | |||||||||||||||||||||||||||||
| Robert C. Rowe | 15,171 | 867,176 | 6,505 | 371,826 | 21,676 | 1,239,002 | |||||||||||||||||||||||||||||
| Brian B. Bird | 5,247 | 299,905 | 2,250 | 128,610 | 7,497 | 428,515 | |||||||||||||||||||||||||||||
| Heather H. Grahame | 4,327 | 247,337 | 1,576 | 90,084 | 5,903 | 337,421 | |||||||||||||||||||||||||||||
| Crystal D. Lail | 1,207 | 68,982 | 776 | 44,356 | 1,983 | 113,338 | |||||||||||||||||||||||||||||
| Curtis T. Pohl | 2,139 | 122,256 | 1,223 | 69,907 | 3,362 | 192,162 | |||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | 1,679 | 95,993 | 846 | 48,357 | 2,525 | 144,350 | |||||||||||||||||||||||||||||
(1) LTIP Shares vested consist of performance units for the last fiscal year.2019-2021 performance period that vested on December 31, 2021, at a performance level of 72.7 percent. We determined the value realized for the vesting of these shares using the fair market value of our common stock on the December 31, 2021, vesting date, which was $57.16.
(2) As a regulated utility, we do not include the amounts we pay for stock awards in the rates we charge our customers.
(3) ERRP Shares vested consist of restricted share units for the 2016-2021 performance period that vested on December 31, 2021. 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, 2021, vesting date, which was $57.16. All of the restricted share units are deferred until the recipient departs NorthWestern. Upon departure, the restricted share units are paid out as shares of common stock in five annual installments.
| Stock Awards | ||||||||||||||
| Name | Number of LTIP Shares Acquired on Vesting (#) (1) | Value Realized on LTIP Vesting ($) | Number of ERRP Shares Acquired on Vesting (#) (2) | Value Realized on ERRP Vesting ($) | Total Value Realized ($) | |||||||||
| Robert C. Rowe | 8,903 | 531,495 | 3,814 | 227,696 | 759,191 | |||||||||
| Brian B. Bird | 3,894 | 232,456 | 1,251 | 74,685 | 307,140 | |||||||||
| Heather H. Grahame | 2,480 | 148,072 | 911 | 54,387 | 202,459 | |||||||||
| Curtis T. Pohl | 1,674 | 99,930 | 717 | 42,805 | 142,735 | |||||||||
| Bobbi L. Schroeppel | 1,029 | 61,411 | 482 | 28,775 | 90,186 | |||||||||
NorthWestern Energy | Proxy Statement | Page 37 | |||
Outstanding Equity Awards at 20172021 Fiscal Year-End
The table below and continuing on the following page 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. As a regulated utility, we do not include the amounts we pay for stock awards in the rates we charge our customers.
| Stock Awards | ||||||||||||||||||||||||||||||||
| Type of Award | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) (2) (3) | |||||||||||||||||||||||||||
| Robert C. Rowe | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 9,380 | 536,161 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 29,689 | 1,697,023 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 8,976 | 513,068 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 17,755 | 1,014,876 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 6,414 | 366,624 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 6,976 | 398,748 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 5,862 | 335,072 | |||||||||||||||||||||||||||||
| Brian B. Bird | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 3,465 | 198,059 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 13,853 | 791,837 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 2,587 | 147,873 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 6,141 | 351,020 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 1,849 | 105,689 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 2,011 | 114,949 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 2,027 | 115,863 | |||||||||||||||||||||||||||||
| Heather H. Grahame | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 2,550 | 145,758 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 7,747 | 442,819 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 1,952 | 111,576 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 5,212 | 297,918 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 1,395 | 79,738 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 1,474 | 84,254 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 1,420 | 81,167 | |||||||||||||||||||||||||||||
| Crystal D> Lail | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 2,166 | 123,809 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 6,679 | 381,772 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 1,260 | 72,022 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 1,412 | 80,710 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 638 | 36,468 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 694 | 39,669 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 699 | 39,955 | |||||||||||||||||||||||||||||
| Curtis T. Pohl | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 1,470 | 84,025 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 3,721 | 212,692 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 1,406 | 80,367 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 2,504 | 143,129 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 1,005 | 57,446 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 1,093 | 62,476 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 1,102 | 62,990 | |||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | ||||||||||||||||||||||||||||||||
| ERRP | 12/14/2021 | 1,395 | 79,738 | |||||||||||||||||||||||||||||
| LTIP | 2/11/2021 | 3,239 | 185,141 | |||||||||||||||||||||||||||||
| ERRP | 12/22/2020 | 1,335 | 76,309 | |||||||||||||||||||||||||||||
| LTIP | 2/12/2020 | 1,965 | 112,319 | |||||||||||||||||||||||||||||
| ERRP | 12/18/2019 | 710 | 40,584 | |||||||||||||||||||||||||||||
| ERRP | 12/13/2018 | 772 | 44,128 | |||||||||||||||||||||||||||||
| ERRP | 12/12/2017 | 764 | 43,670 | |||||||||||||||||||||||||||||
(1) The performance units granted in February 2020 and 2021 will vest, if at all, on December 31, 2022 and 2023, 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, 2021, we are below target for payout of the 2020 and 2021 grants. As required by the SEC’s disclosure rules, the number of units and payout value shown for the 2020 grants and the 2021 grants assume a target level of performance (100 percent).
(2) Values were calculated based on a $57.16 closing price of our common stock on December 31, 2021.
| Stock Awards | ||||||||
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) (2) (3) ($) | |||||||
| 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 | ||||||
NorthWestern Energy | Proxy Statement | Page 38 | ||
| Executive Pay | ||
(3) The performance-based restricted share units granted under the ERRP in December 2017, 2018, 2019, 2020, and 2021 will vest, if at all, on December 31, 2022, 2023, 2024, 2025, and 2026, respectively, subject to the satisfaction of the applicable performance criteria and generally subject to the recipient’s continued employment through such date. The 2017 ERRP award has satisfied the applicable performance criteria.
| 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) ($) | |||||||
| Brian B. Bird | ||||||||
| 12/12/2017 | 2,027 | 121,012 | ||||||
| 2/16/2017 | 8,584 | 512,465 | ||||||
| 12/7/2016 | 2,250 | 134,325 | ||||||
| 2/10/2016 | 7,948 | 474,496 | ||||||
| 12/9/2015 | 2,233 | 133,310 | ||||||
| 12/16/2014 | 2,103 | 125,549 | ||||||
| 12/10/2013 | 1,272 | 75,938 | ||||||
| Heather H. Grahame | ||||||||
| 12/12/2017 | 1,420 | 84,774 | ||||||
| 2/16/2017 | 6,013 | 358,976 | ||||||
| 12/7/2016 | 1,576 | 94,087 | ||||||
| 2/10/2016 | 5,568 | 332,410 | ||||||
| 12/9/2015 | 1,564 | 93,371 | ||||||
| 12/16/2014 | 1,531 | 91,401 | ||||||
| 12/10/2013 | 926 | 55,282 | ||||||
| Curtis T. Pohl | ||||||||
| 12/12/2017 | 1,102 | 65,789 | ||||||
| 2/16/2017 | 3,500 | 208,950 | ||||||
| 12/7/2016 | 1,223 | 73,013 | ||||||
| 2/10/2016 | 3,240 | 193,428 | ||||||
| 12/9/2015 | 1,214 | 72,476 | ||||||
| 12/16/2014 | 1,205 | 71,939 | ||||||
| 12/10/2013 | 729 | 43,521 | ||||||
| Bobbi L. Schroeppel | ||||||||
| 12/12/2017 | 764 | 45,611 | ||||||
| 2/16/2017 | 2,689 | 160,533 | ||||||
| 12/7/2016 | 846 | 50,506 | ||||||
| 2/10/2016 | 2,490 | 148,653 | ||||||
| 12/9/2015 | 839 | 50,088 | ||||||
| 12/16/2014 | 833 | 49,730 | ||||||
| 12/10/2013 | 490 | 29,253 | ||||||
Pay After Employment Ends
We have two separate defined benefit pension plans that cover employees hired prior to January 1, 2009. The NorthWestern Energy Pension Plan is applicable to employees who began their employment in Montana, and the NorthWestern Corporation Pension Plan is applicable to employees who began their employment in South Dakota or Nebraska. The table on the following pagebelow summarizes for each of our named executive officers the years of credited service, present value of accumulated benefit, and any payments during the last fiscal year.
2021 Pension Benefits
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||||||
| Robert C. Rowe | NorthWestern Energy Pension Plan | 13.00 | 949,969 | — | ||||||||||||||||
| Brian B. Bird | NorthWestern Corporation Pension Plan | 18.08 | 282,541 | — | ||||||||||||||||
Heather H. Grahame (1) | — | — | — | — | ||||||||||||||||
| Crystal D. Lail | NorthWestern Corporation Pension Plan | 18.93 | 155,778 | — | ||||||||||||||||
| Curtis T. Pohl | NorthWestern Corporation Pension Plan | 35.39 | 535,642 | — | ||||||||||||||||
| Bobbi L. Schroeppel | NorthWestern Corporation Pension Plan | 23.63 | 278,629 | — | ||||||||||||||||
(1) Ms. Grahame joined the company after the pension plans were closed to new entrants and therefore is not eligible to participate.
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | |||||||
| Robert C. Rowe | NorthWestern Energy Pension Plan | 9.00 | 527,773 | — | |||||||
| Brian B. Bird | NorthWestern Corporation Pension Plan | 14.08 | 208,099 | — | |||||||
| Heather H. Grahame (1) | — | — | — | — | |||||||
| Curtis T. Pohl | NorthWestern Corporation Pension Plan | 31.39 | 424,285 | — | |||||||
| Bobbi L. Schroeppel | NorthWestern Corporation Pension Plan | 19.63 | 200,711 | — | |||||||
| We calculated the present value of accumulated benefits assuming benefits commence at age 65 and using the discount rate, mortality assumption, and assumed payment form consistent with those disclosed in Note 14 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, | Name | Cash Balance ($) | |||||||||
| Robert C. Rowe | |||||||||||
| Brian B. Bird | |||||||||||
| Heather H. Grahame | — | ||||||||||
| Crystal D. Lail | 136,080 | ||||||||||
| Curtis T. Pohl | |||||||||||
| Bobbi L. Schroeppel | |||||||||||
Under the NorthWestern Energy Pension Plan, a participant’s account grows based upon (1) contributions by the company madewe make once per year, and (2) interest credits at the rate of six percent per year. Contributions by the companyOur contributions 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 ageold 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. Mr. Rowe currently is eligible for this early retirement option.
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(a) defer receiving benefits until he or she is required to take a minimum distribution.distribution or (b) receive an early retirement benefit of either (i) a lump sum payment equal to the cash balance in the account or (ii) a monthly annuity if age 55 or greater. Messrs. Bird and Pohl and Ms. Schroeppel currently are eligible for the lump sum early retirement option. Messrs. Bird and Pohl also are eligible for the monthly annuity early retirement option.
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.
NorthWestern Energy | Proxy Statement | Page 39 | ||
| Executive Pay | ||
Non-qualified Deferred Compensation Plan
Our executive officers receive annual grants under our ERRP program. Pursuant to the terms of the ERRP award agreement, when a grant vests, our executive officers receive restricted share units, which we credit to an account for each executive officer similar to a deferred compensation account. These restricted share units are not deferrals under our deferred compensation plan; however, the restricted share units are similar to deferred compensation because an executive officer cannot access the units until he or she is no longer our employee. For more details about our ERRP program, please refer to the Compensation Discussion and Analysis—Pay Components—Long-Term Performance-Based Equity Incentive Awards section in this proxy statement, we implemented a deferred compensation plan in 2009. In 2017, Mr. Rowe was the only one of our named executive officers who deferred compensation into the plan. statement.
The table below summarizes the participation in the deferred compensation plan and our ERRP program by our named executive officers.officers in 2021.
| 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 | ||||||||||
| Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) (1) | Aggregate Earnings in Last Fiscal Year ($) (1) | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) | Aggregate Balance on December 31, 2021 ($) (2) | ||||||||||||||||||||||
Robert C. Rowe (3) | — | 362,463 | 431,433 | — | 10,225,220 | |||||||||||||||||||||
| Brian B. Bird | — | 125,342 | 20,650 | — | 488,609 | |||||||||||||||||||||
| Heather H. Grahame | — | 87,814 | 14,845 | — | 351,257 | |||||||||||||||||||||
| Crystal D. Lail | — | 41,608 | 1,823 | — | 43,128 | |||||||||||||||||||||
| Curtis T. Pohl | — | 68,504 | 11,659 | — | 275,884 | |||||||||||||||||||||
| Bobbi L. Schroeppel | — | 46,723 | 7,912 | — | 187,202 | |||||||||||||||||||||
(1) All registrant contributions in 2021 relate to the ERRP program and are reported as compensation to such executive officer in the Summary Compensation Table on page36. None of the earnings were reported as compensation to such executive officer in the Summary Compensation Table on page36.
(2) Reflects the following amounts for each of the following executive officers related to the ERRP program that were reported as compensation to such executive officer in the prior Summary Compensation Tables: Mr. Rowe, $1,138,355; Mr. Bird, $370,296; Ms. Grahame, $269,681; Ms. Lail, $0 (Ms. Lail’s first compensation under the ERRP program occurred in 2021); Mr. Pohl, $212,258; and Ms. Schroeppel, $146,400.
(3) Mr. Rowe’s elective contributions under the deferred compensation plan are $4,584,407, in the aggregate, all of which were reported as compensation in the Summary Compensation Table for prior years.
Termination or Change in Control Arrangements
We do not have any severance agreements or golden parachute agreements. However, we do provide a Key Employee Severance Plan to certain employees, including our named executive officers, covering involuntary terminations without cause, and our Equity Compensation Plan includes change-in-control provisions. Details regarding these arrangements follow.
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.
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.
NorthWestern Energy | Proxy Statement | Page 40 | ||
| Executive Pay | ||
The severance benefits payable to our Named Executive Officers 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 $12,000 of outplacement services during the 12-month period following the participant’s termination date.
The table below shows the amount of potential cash severance that would have been payable, based on an assumed termination date of December 31, 2017,2021, under the normal severance provisions of the Key Employee Severance Plan, including the amount that each named executive officer would be entitled to be reimbursed for outplacement expenses and reimbursement of costs for continuing coverage and other benefits under our group health, dental, and life insurance plans. Severance benefits are not provided in connection with terminations for cause.
| Name | Base Salary ($) | Targeted Annual Incentive ($) | 2x Base Salary + 2x Targeted Annual Incentive ($) | Interrupted Annual Bonus ($) (1) | COBRA Premiums ($) (2) | Outplacement Services ($) | Amount of Potential Severance Benefit ($) | 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 ($) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Robert C. Rowe | 611,956 | 611,956 | 2,447,824 | 560,960 | 13,020 | 12,000 | 3,033,804 | Robert C. Rowe | 676,754 | 676,754 | 2,707,016 | 620,358 | 33,344 | 12,000 | 3,372,718 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Brian B. Bird | 423,280 | 211,640 | 1,269,840 | 194,003 | 42,280 | 12,000 | 1,518,123 | Brian B. Bird | 500,000 | 375,000 | 1,750,000 | 343,750 | 46,070 | 12,000 | 2,151,820 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Heather H. Grahame | 370,634 | 166,785 | 1,074,838 | 152,886 | 45,334 | 12,000 | 1,285,058 | Heather H. Grahame | 441,475 | 242,811 | 1,368,573 | 222,577 | 36,077 | 12,000 | 1,639,226 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Crystal D. Lail | Crystal D. Lail | 375,000 | 187,500 | 1,125,000 | 171,875 | 33,344 | 12,000 | 1,342,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Curtis T. Pohl | 287,620 | 115,048 | 805,336 | 105,461 | 29,386 | 12,000 | 952,183 | Curtis T. Pohl | 318,076 | 127,230 | 890,613 | 116,628 | 32,662 | 12,000 | 1,051,903 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | 265,810 | 93,034 | 717,688 | 85,281 | 43,215 | 12,000 | 858,184 | Bobbi L. Schroeppel | 301,999 | 120,800 | 845,597 | 110,733 | 47,958 | 12,000 | 1,016,288 | |||||||||||||||||||||||||||||||||||||||||||||||||
(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, 2021.
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 shallwill accelerate so that awards shallwill vest as to the shares that otherwise would have been unvested, or the Compensation Committee shallwill 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, | Name | Value of Accelerated Stock Vesting ($) | ||||||||||||
| Robert C. Rowe | ||||||||||||||
| Brian B. Bird | ||||||||||||||
| Heather H. Grahame | ||||||||||||||
| Crystal D. Lail | 774,404 | |||||||||||||
| Curtis T. Pohl | ||||||||||||||
| Bobbi L. Schroeppel | ||||||||||||||
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.
NorthWestern Energy | Proxy Statement | Page 41 | ||
| Executive Pay | ||
Death, Disability, and DisabilityRetirement Benefits
Our executives are covered by the standard death and disability benefits that are available to substantially all employees. In addition, upon the death, disability, or disabilityretirement 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. In the case of death or disability, the pro rata portion is based on the target award. In the case of retirement, the pro rata portion will be paid at the end of the performance period based upon the level of satisfaction of the applicable performance goals. 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, 2017,2021, each named executive officer would have received the same payout of the earned annual cash incentive award for 20172021 that is set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 32.36. 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, 20172021 as reflected in the “Stock Awards - Value Realized” on LTIP Vesting column in the 20212017 Stock Vested Table onpage 34.38. 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)(a) the applicable named executive officer terminated his or her employment as a result of death, disability or retirement on December 31, 2017, (2)2021, (b) the applicable goals for such performance units were subsequently satisfied at target levels, and (3)(c) the price of the Company's Common Stock was $59.70$57.16 (the closing price on December 31, 2017)2021) at the time payouts of such performance units and restricted share units occurred.
| Future Vesting Date | Assumed 12/31/21 Death / Disability | Assumed 12/31/21 Retirement | ||||||||||||||||||||||||||||||||||||||||||||||||
| Original Grant (#) | Percent to Vest (%) | Vesting Value ($) (1) | Original Grant (#) | Percent to Vest (%) | Vesting Value ($) (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Robert C. Rowe | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | ERRP | 12/31/2025 | 9,380 | 100.0 | % | 536,161 | 9,380 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 29,689 | 33.3 | % | 565,674 | 29,689 | 33.3 | % | 565,674 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 8,976 | 100.0 | % | 513,068 | 8,976 | 20.0 | % | 102,614 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 17,755 | 66.7 | % | 676,922 | 17,755 | 66.7 | % | 676,922 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 6,414 | 100.0 | % | 366,624 | 6,414 | 40.0 | % | 146,650 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 6,976 | 100.0 | % | 398,748 | 6,976 | 60.0 | % | 239,249 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 5,862 | 100.0 | % | 335,072 | 5,862 | 80.0 | % | 268,058 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 3,392,269 | TOTAL | $ | 1,999,166 | |||||||||||||||||||||||||||||||||||||||||||||
| Brian B. Bird | ||||||||||||||||||||||||||||||||||||||||||||||||||
| President and Chief Operating Officer | ERRP | 12/31/2025 | 3,465 | 100.0 | % | 198,059 | 3,465 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 13,853 | 33.3 | % | 263,946 | 13,853 | 33.3 | % | 263,946 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 2,587 | 100.0 | % | 147,873 | 2,587 | 20.0 | % | 29,575 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 6,141 | 66.7 | % | 234,130 | 6,141 | 66.7 | % | 234,130 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 1,849 | 100.0 | % | 105,689 | 1,849 | 40.0 | % | 42,276 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 2,011 | 100.0 | % | 114,949 | 2,011 | 60.0 | % | 68,969 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 2,027 | 100.0 | % | 115,863 | 2,027 | 80.0 | % | 92,691 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 1,180,509 | TOTAL | $ | 731,586 | |||||||||||||||||||||||||||||||||||||||||||||
| Heather H. Grahame | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General Counsel and Vice President - Regulatory & Federal Gov't Affairs | ERRP | 12/31/2025 | 2,550 | 100.0 | % | 145,758 | 2,550 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 7,747 | 33.3 | % | 147,606 | 7,747 | 33.3 | % | 147,606 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 1,952 | 100.0 | % | 111,576 | 1,952 | 20.0 | % | 22,315 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 5,212 | 66.7 | % | 198,711 | 5,212 | 66.7 | % | 198,711 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 1,395 | 100.0 | % | 79,738 | 1,395 | 40.0 | % | 31,895 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 1,474 | 100.0 | % | 84,254 | 1,474 | 60.0 | % | 50,552 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 1,420 | 100.0 | % | 81,167 | 1,420 | 80.0 | % | 64,934 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 848,810 | TOTAL | $ | 516,014 | |||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 42
| Executive Pay | ||
| Future Vesting Date | Assumed 12/31/21 Death / Disability | Assumed 12/31/21 Retirement | ||||||||||||||||||||||||||||||||||||||||||||||||
| Original Grant (#) | Percent to Vest (%) | Vesting Value ($) (1) | Original Grant (#) | Percent to Vest (%) | Vesting Value ($) (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Crystal D. Lail | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President and Chief Financial Officer | ERRP | 12/31/2025 | 2,166 | 100.0 | % | 123,809 | 2,166 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 6,679 | 33.3 | % | 127,257 | 6,679 | 33.3 | % | 127,257 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 1,260 | 100.0 | % | 72,022 | 1,260 | 20.0 | % | 14,404 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 1,412 | 66.7 | % | 53,834 | 1,412 | 66.7 | % | 53,834 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 638 | 100.0 | % | 36,468 | 638 | 40.0 | % | 14,587 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 694 | 100.0 | % | 39,669 | 694 | 60.0 | % | 23,801 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 699 | 100.0 | % | 39,955 | 699 | 80.0 | % | 31,964 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 493,013 | TOTAL | $ | 265,847 | |||||||||||||||||||||||||||||||||||||||||||||
| Curtis T. Pohl | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President - Retail Operations | ERRP | 12/31/2025 | 1,470 | 100.0 | % | 84,025 | 1,470 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 3,721 | 33.3 | % | 70,897 | 3,721 | 33.3 | % | 70,897 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 1,406 | 100.0 | % | 80,367 | 1,406 | 20.0 | % | 16,073 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 2,504 | 66.7 | % | 95,467 | 2,504 | 66.7 | % | 95,467 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 1,005 | 100.0 | % | 57,446 | 1,005 | 40.0 | % | 22,978 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 1,093 | 100.0 | % | 62,476 | 1,093 | 60.0 | % | 37,486 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 1,102 | 100.0 | % | 62,990 | 1,102 | 80.0 | % | 50,392 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 513,668 | TOTAL | $ | 293,293 | |||||||||||||||||||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President - Customer Care, Communications and HR | ERRP | 12/31/2025 | 1,395 | 100.0 | % | 79,738 | 1,395 | — | % | — | ||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2022 | 3,239 | 33.3 | % | 61,714 | 3,239 | 33.3 | % | 61,714 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2024 | 1,335 | 100.0 | % | 76,309 | 1,335 | 20.0 | % | 15,262 | |||||||||||||||||||||||||||||||||||||||||
| LTIP | 12/31/2021 | 1,965 | 66.7 | % | 74,917 | 1,965 | 66.7 | % | 74,917 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2023 | 710 | 100.0 | % | 40,584 | 710 | 40.0 | % | 16,233 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2022 | 772 | 100.0 | % | 44,128 | 772 | 60.0 | % | 26,477 | |||||||||||||||||||||||||||||||||||||||||
| ERRP | 12/31/2021 | 764 | 100.0 | % | 43,670 | 764 | 80.0 | % | 34,936 | |||||||||||||||||||||||||||||||||||||||||
| TOTAL | $ | 421,060 | TOTAL | $ | 229,539 | |||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||
Compensation to our non-employee directors consistsin 2021 consisted of cash and stock. Each Board member receives an annual cash retainer and an annual unrestricted stock award; our Board chair receives a higher cash retainer and stock award to reflect the additional duties as Board chair. In addition, each committee member receives an annual committee member cash retainer, and each committee chair receives an additional annual cash retainer to cover the duties as committee chair.
The Board established its compensation levels for 2021 based upon the chairperson of each committeeanalysis and advice of the Compensation Committee’s independent compensation consultant, Willis Towers Watson, who reviewed the competitive market data concerning Board compensation from peer company comparisons and meeting attendance fees. Non-employeeprovided recommendations to the Board. The table below presents the 2021 compensation schedule for our non-employee directors are not eligible to participate(which will remain unchanged in our retirement plans. 2022).
| 2021 Non-Employee Director Compensation Schedule | Cash ($) | Shares (#) | ||||||
| New Member Initial Stock Grant | — | 1,000 | ||||||
| Board Chair Annual Retainer (1) | 150,000 | 3,750 | ||||||
| Board Member Annual Retainer | 50,000 | 2,750 | ||||||
| Committee Chair Annual Retainer | 10,000 | — | ||||||
| Committee Member Annual Retainer | 10,000 | — | ||||||
| (1) The Board chair does not receive the Board Member annual cash and stock retainers. | ||||||||
NorthWestern Energy | Proxy Statement | Page 43 | ||
| Executive Pay | ||
The company also reimburses non-employee directors for the cost of participation in certainapproved continuing education programs and the expense of traveling tofor Board and committee meetings. Employee directors are not compensated for service on the Board.
| In 2017, the Compensation Committee asked Willis Towers Watson to update its review of the competitive market data concerning Board compensation from peer company comparisons so that the Compensation Committee could determine 2018 compensation levels for non-employee directors. Based upon this review, the Compensation Committee made no changes to the compensation provided to our non-employee directors. The table to the right presents the 2018 compensation schedule for non-employee directors. | Cash ($) | Shares (#) | |||||
| Annual Retainer | |||||||
| New Member Initial Stock Grant | — | 1,000 | |||||
| Board Chair | 125,000 | 3,750 | |||||
| Board Member | 25,000 | 2,750 | |||||
| Committee Chair | 10,000 | — | |||||
Meeting Fees (Board Chair does not receive meeting fees) | |||||||
| Board Meeting | 2,000 | — | |||||
| Committee Meeting | 2,000 | — | |||||
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. 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
over a designated number of years (not to exceed ten10 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 below sets forth the 2017 compensation received by our non-employee directors.directors in 2021.
| Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | Total ($) | |||||||||||||||
Dana J. Dykhouse, Board Chair, Compensation Chair (2) | 115,000 | 157,190 | 272,190 | ||||||||||||||
Stephen P. Adik, Board Chair (2) | 75,000 | 204,263 | 279,263 | ||||||||||||||
| Anthony T. Clark | 70,000 | 149,793 | 219,793 | ||||||||||||||
Jan R. Horsfall, Operations Chair | 80,000 | 157,190 | 237,190 | ||||||||||||||
Julia M. Johnson, Governance Chair (2) | 40,000 | 157,190 | 197,190 | ||||||||||||||
| Britt E. Ide | 70,000 | 157,190 | 227,190 | ||||||||||||||
Linda G. Sullivan, Audit Chair (3) | 80,000 | 149,793 | 229,793 | ||||||||||||||
Mahvash Yazdi, Compensation Chair | 75,000 | 149,793 | 224,793 | ||||||||||||||
Jeffrey W. Yingling, Governance Chair (2) | 75,000 | 149,793 | 224,793 | ||||||||||||||
(1) 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 15 to the consolidated financial statements in our 2021 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 2021 was (a) $54.47 per share for deferred awards elected by Directors Adik, Clark, Sullivan, Yazdi, and Yingling,and (b) $57.16 for undeferred awards received by Directors Dykhouse, Horsfall, Ide and Johnson. The 2021 stock awards were deferred by Directors Adik, Clark, Sullivan, Yazdi and Yingling under the deferred compensation plan described above. The total deferred share units outstanding as of December 31, 2021 (rounded down to the nearest whole number), are as follows: Mr. Adik – 3,980; Mr. Clark – 13,681, Ms. Sullivan – 15,272, Ms. Yazdi – 5,031 and Mr. Yingling – 7,457.
(2) Effective April 22, 2021, Mr. Adik and Ms. Johnson retired from our Board. Mr. Dykhouse succeeded Mr. Adik as our independent Board chair, and Mr. Yingling succeeded Ms. Johnson as chair of our Governance Committee. When Mr. Dykhouse assumed the Board chair role, Ms. Yazdi succeeded him as chair of our Compensation Committee.
(3) Ms. Sullivan deferred (under the Director Deferred Plan) all of her fees earned or paid in cash for 2021.
| Fees Earned or Paid in Cash (1) ($) | Stock Awards (2) ($) | Total ($) | |||||||
E. Linn Draper Jr., Board Chair | 125,000 | 214,163 | 339,163 | ||||||
Stephen P. Adik, Audit Chair | 67,000 | 157,053 | 224,053 | ||||||
| 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 | 67,000 | 156,750 | 223,750 | ||||||
| Jan R. Horsfall | 57,000 | 156,750 | 213,750 | ||||||
| Britt E. Ide (joined April 27, 2017) | 30,700 | 159,666 | 190,366 | ||||||
Julia L. Johnson, Governance Chair | 67,000 | 157,053 | 224,053 | ||||||
| Linda G. Sullivan (joined April 27, 2017) | 30,700 | 159,666 | 190,366 | ||||||
| Director Pay | ||
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 writtenour Corporate Governance Guidelines that set forthestablish the company’s corporate governance philosophy and the governance policies and practices that the company has established to assist inwe follow while 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 CompanyAbout Us / Investor RelationsInvestors / Corporate Governance.
•Corporate Governance Guidelines | and Senior Financial Officers •Insider Trading Policy •Related Persons Transactions Policy •Complaint Procedures for the Audit Committee of the Board | |||||
We are committed to strong corporate governance. As governance standards have evolved, we have enhanced our governance standardspractices as appropriate to best serve the interests of our shareholders. Our commitment to corporate governance best practices has been nationally recognized. Forbes has recognized us three times on its list of America’s Most Trustworthy Companies, a distinction awarded, according to Forbes, for transparent accountingMoody’s Investment Services rated our governance practices as 5th best among 50 publicly traded North American utility and solid corporate governance practices.power companies in 2019. Our proxy disclosures also have been recognized by Corporate Secretary magazine and the NYSE Governance ServicesServices. Our 2014 and 2019 proxy statements received Corporate Secretary magazine. In June of 2015,Secretary’s Best Proxy Statement (mid-cap) award, and our 2014 proxy statement also received NYSE's Exemplary CD&A award. That proxy statementWe also received Corporate Secretary’s Best Proxy Statement (small to mid-cap) award, and we werehave been a finalist for Corporate Secretary’s Best Proxy Statement in 2012, 2013, 2016, 2017, and 2017. Glass Lewis and C-Suite magazine also have recognized our say-on-pay disclosures.
2018.
| 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, governance, and | ||||||
•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 (2x to 6x) and | ||||||
NorthWestern Energy | Proxy Statement | Page 45 | ||
| 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 current Board has eight members. However, our bylaws authorize a Board consisting of five to 11 directors, as determined by our Board from time to time. Our Board currently has nine members. As previously noted, our current Chair will be retiring at the end of his current term and is not seeking re-election at our 2018 annual meeting. Accordingly, we will be reducing the size of the Board to eight members effective with his retirement at the end of his current term.
Board. Board members 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 for the remainder of that term 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 of our directors has exceeded the stock ownership requirements established by our Corporate Governance Guidelines and continues to hold stock in excess of the ownership requirements. For a summary of our stock ownership guidelines, please see the Stock Information / Who owns our stock / Stock Ownership Guidelines section of this proxy statement. Each director is also has been recognized as a Governance Fellow or Leadership Fellow by the National Association of Corporate Directors (NACD) and six of our eight directors are NACD Directorship CertifiedTM.
Our Board is actively engaged both inside and outside of the boardroom. Our Board members have knowledge and insight that enablesenable them to provide guidance concerning our business, with particular focus on corporate strategy, ESG matters, operational and financial performance, succession planning, corporate strategy, executive compensation, risk management and operating performance. OurPrior to the COVID-19 pandemic, our Board members spendspent time in our service territory interacting with our employees, customers and community leaders.leaders and look forward to doing so again when it is safe. They seek and participate in learning opportunities to stay abreast of the latest industry and corporate governance developments affecting their role as directors.
Our Board considers attendance at Board and Shareholder 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 six7 meetings in 2017.2021. 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 2017. Allserved. The company encourages its directors to attend the annual meeting of our currentshareholders and expects its directors attendedto attend whenever reasonably possible. At our last annual meeting of shareholders in April 2017.
2021, all but one of our directors were in attendance for the virtual meeting.
NorthWestern Energy | Proxy Statement | Page 46 | ||
| 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. 2020 Women on Boards previously has recognized our Board’s gender diversity. As depicted below, our slate of eight director nominees demonstrates diversity.
 | ||
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.
is below.
| Clark | Dykhouse | Horsfall | Ide | Rowe | Sullivan | Yazdi | Yingling | |||||||||||||||||||||
| Utility | l | l | l | l | l | l | ||||||||||||||||||||||
| Finance | l | l | l | l | l | l | ||||||||||||||||||||||
| Executive | l | l | l | l | l | l | l | l | ||||||||||||||||||||
| Regulatory | l | l | l | l | l | |||||||||||||||||||||||
| Engineering | l | |||||||||||||||||||||||||||
| Tech / Info / Cyber | l | l | l | l | ||||||||||||||||||||||||
| Service Territory | l | l | l | |||||||||||||||||||||||||
| Legal / | l | l | l | l | ||||||||||||||||||||||||
| Marketing | l | l | ||||||||||||||||||||||||||
| Board | l | l | l | l | l | l | l | l | ||||||||||||||||||||
| NACD | l | l | l | l | l | l | l | l | ||||||||||||||||||||
| Diversity | Female | Female | Female; Middle Eastern descent | |||||||||||||||||||||||||
Nasdaq Director Diversity Disclosure
Nasdaq Board Diversity Rules
On August 6, 2021, the Securities and Exchange Commission approved two Nasdaq Stock Market LLC (Nasdaq) proposed rules concerning board diversity. Nasdaq Rule 5605 requires each Nasdaq-listed company to either have a diverse board or explain why it does not. To be a diverse board, Rule 5605 requires the board to have one “diverse” director by the time of the company’s annual meeting in 2023 and two diverse directors by the 2025 annual meeting.
The second Nasdaq director diversity rule, Rule 5606, requires each Nasdaq-listed company to disclose its board diversity on an annual basis pursuant to a template Nasdaq has provided for such disclosure that may not be
NorthWestern Energy | Proxy Statement | Page 47 | ||
| Corporate Governance | ||
modified by the company. Although Rule 5606 mandates a specific template for the form of required disclosure, it also allows a company the option to provide additional diversity disclosure.
Nasdaq Diversity
Nasdaq opted to follow the United States Census Bureau’s classifications of underrepresented demographics to define diversity. While Nasdaq’s use of a common standard for diversity likely will lead to uniform disclosures, we believe the classifications neglect various underrepresented minorities in the United States.
To be “diverse,” Rule 5605 requires (a) at least one director who self identifies as female, and (b) at least one other director who self-identifies as an underrepresented demographic. The underrepresented demographics include: African American or Black; Alaskan Native or Native American; Asian; Hispanic or Latinx; Native Hawaiian or Pacific Islander; LGBTQ+; and anyone identifying with two or more demographics. We agree with these classifications. However, Nasdaq’s White classification (which is not an underrepresented demographic) includes a person having origins in the Middle East or North Africa. While the Nasdaq and the U.S. Census Bureau do not include Middle Eastern or North African individuals as an underrepresented demographic, other classification systems do.
Based on Nasdaq Rule 5605, our Board includes three directors who self identify as females. Thus we currently meet the Rule’s 2023 requirement for one diverse director. However, we do not currently meet the Rule’s 2025 diversity requirement of two diverse directors because our director of Middle Eastern descent (who has an incredible life story) does not satisfy Nasdaq’s underrepresented demographics classification. As part of our Board’s ongoing succession planning efforts, our Board will evaluate whether we will seek to add one of Nasdaq’s underrepresented demographics or choose to explain why we believe our diversity is appropriate.
Nasdaq Rule 5606 Disclosure
| NorthWestern Corporation Board Diversity Matrix (as of March 7, 2022) | ||||||||||||||
| Total Number of Directors | 8 | |||||||||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | |||||||||||
| Part I: Gender Identity | ||||||||||||||
| Directors | 3 | 5 | 0 | 0 | ||||||||||
| Part II: Demographic Background | ||||||||||||||
| African American or Black | 0 | 0 | 0 | 0 | ||||||||||
| Alaskan Native or Native American | 0 | 0 | 0 | 0 | ||||||||||
| Asian | 0 | 0 | 0 | 0 | ||||||||||
| Hispanic or Latinx | 0 | 0 | 0 | 0 | ||||||||||
| Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | ||||||||||
| White | 3 | 5 | 0 | 0 | ||||||||||
| Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | ||||||||||
| LGBTQ+ | 0 | |||||||||||||
| Did not disclose Demographic Background | 0 | |||||||||||||
NorthWestern Energy | Proxy Statement | Page 48 | ||
| Corporate Governance | ||
Individual Directors
The biographies of our eight individual Board nominees, each of whom is currently serving as a member of the Board, are provided on the following pages.below.
  | |||||||||||||||||
 | ||||||||||||||
Anthony T. Clark Director since 2016 Age: | ||||||||||||||
| Senior Advisor, Wilkinson Barker; former Commissioner, FERC and NDPSC | ||||||||||||||
Biography: Mr. Clark is a Senior Advisor with Wilkinson Barker Knauer, 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, and in 2022 the National Association of Corporate Directors recognized him as NACD Directorship CertifiedTM, demonstrating his commitment to boardroom excellence. | ||||||||||||||
Experience Highlights: Utility, Executive, Regulatory, Legal/Public Policy, Board, and NACD Independent Director NorthWestern Committees: Compensation, Governance Other Public Boards: None | ||||||||||||||
 | |||||||||||||||||
Dana J. Dykhouse Director since 2009 Age: | |||||||||||||||||
| 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 reputation as a respected civic, community and professional leader in South Dakota. Mr. Dykhouse has served as chief executive officer of a | |||||||||||||||||
Experience Highlights: Finance, Executive, Service Territory, Board, and NACD Independent Director NorthWestern Committees: Other Public Boards: None | |||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 49 | ||
| Corporate Governance | ||
 | |||||||||||||||||
Jan R. Horsfall Director since 2015 Age: | |||||||||||||||||
Biography: Mr. Horsfall is the 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 | |||||||||||||||||
Experience Highlights: Finance, Executive, Marketing, Tech / Info / Cyber, Pub Policy, Board, and NACD Governance Fellow Independent Director NorthWestern Committees: Audit, Other Public Boards: None | |||||||||||||||||
 | |||||||||||||||||
 | |||||||||||||||||
Britt E. Ide Director since 2017 Age: | |||||||||||||||||
| President, Ide Energy & Strategy | |||||||||||||||||
Biography: Ms. Ide is the President of Ide Energy & Strategy (since 2011) 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, her technology background, and, as a resident of our service territory, her local perspective on relevant regulatory, political and community issues. Ms. Ide has been an NACD | |||||||||||||||||
Experience Highlights: Utility, Executive, Regulatory, Engineering, Tech / Info / Cyber, Service Territory, Independent Director NorthWestern Committees: Compensation, Governance Other Public Boards: | |||||||||||||||||
 | |||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 50 | ||
| Corporate Governance | ||
 | ||||||||||||||||||
Robert C. Rowe Director since 2008 Age: | ||||||||||||||||||
| Chief Executive Officer, NorthWestern Corporation | ||||||||||||||||||
Biography: Mr. Rowe is the Skills and Qualifications: Our Board concluded that Mr. Rowe is qualified to serve as a Board member because of his position as | ||||||||||||||||||
Experience Highlights: Utility, Finance, Executive, Regulatory, Service Territory, Legal / Public Policy, Board, and NACD Non-Independent Director NorthWestern Committees: None Other Public Boards: None | ||||||||||||||||||
 | |||||||||||||||||
 | |||||||||||||||||
Linda G. Sullivan Director since 2017 Age: | |||||||||||||||||
| Retired Executive Vice President and Chief Financial Officer of American Water | |||||||||||||||||
Biography: Ms. Sullivan is a member of the Board of Directors of AltaGas Ltd., a North American energy infrastructure business (TSE: ALA), serving on its Audit Committee (chair as of March 5, 2022) and Human Resources and Compensation Committee. She is the retired executive vice president and chief financial officer (CFO) of American Water Works Company, Inc., the largest publicly traded U.S. water and wastewater utility Skills and Qualifications: Our Board concluded that Ms. Sullivan is qualified to serve as a Board member on our Board because of her | |||||||||||||||||
Experience Highlights: Utility, Finance, Executive, Regulatory, Tech / Info / Cyber, Board, and NACD Independent Director NorthWestern Committees: Audit (chair), Operations Other Public Boards: | |||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 51 | ||
| Corporate Governance | ||
 | |||||||||||||||||
Mahvash YazdiDirector since 2019 Age: 70 | |||||||||||||||||
| President, Feasible Management Consulting | |||||||||||||||||
Biography: Ms. Yazdi is the President of Feasible Management Consulting, a company that provides strategic consulting in energy, innovation, technology, and telecommunication (since 2012). As a nationally known leader, she continues to bring her expertise and insights to the publicly held, private and non-profit company boards on which she serves. She is currently on the board of Anterix (Nasdaq: ATEX), a telecommunication company with the largest licensed 900MHZ spectrum in the United States. She is the Chair of Prologis (NYSE: PLD) Energy Advisory Board, focusing on transportation and energy for one of the world’s largest logistic companies and also is a member of the Advisory Board of Infosys Corporation and serves in a strategic advisory role for Energy Capital Ventures. As the former senior vice president of business integration and chief information officer (1997-2012) of Edison International and Southern California Edison, she successfully oversaw business transformation initiatives and technology implementations of smart meter and smart grid programs. She was also the co-chair of the Edison Electric Institute’s CIO advisory council, leading the energy industry activities in cyber security and privacy. Prior to that role, she held various roles at Hughes Electronics (1980-1997), including vice president and CIO, where she was a member of the executive committee and engaged in business transformation and M&A activities. Skills and Qualifications: Our Board concluded that Ms. Yazdi is qualified to serve as a Board Member because of her significant experience as a leader in multiple industries. She is nationally recognized for her expertise in corporate information technologies and has served on the boards of multiple technology companies. She has extensive experience and know-ledge of the utility/power industry, where she was charged with setting strategies and leading people to achieve greater growth, efficiency and performance. As former board member in the telecommunications and healthcare industries, she has been an active member of various board committees, including, Audit, Compensation, Governance, and Environmental/Safety/Operations/Technology. The National Association of Corporate Directors recognizes Ms. Yazdi as a NACD Leadership Fellow and NACD Directorship CertifiedTM, demonstrating her commitment to boardroom excellence. | |||||||||||||||||
Experience Highlights: Utility, Finance, Executive, Regulatory, Tech / Info / Cyber, Board, and NACD Leadership Fellow and NACD Directorship CertifiedTM Independent Director NorthWestern Committees: Compensation (Chair), Operations Other Public Boards: Anterix, Inc. | |||||||||||||||||
 | |||||||||||||||||
Jeffrey W. YinglingDirector since 2019 Age: 62 | |||||||||||||||||
| Partner, Energy Capital Ventures | |||||||||||||||||
Biography: Mr. Yingling is a founding Partner of Energy Capital Ventures, a strategic venture fund formed to invest in early stage energy companies (since 2020). Immediately prior to forming this fund, he was a Senior Advisor in Investment Banking at Guggenheim Securities, LLC, specializing in power, energy and renewables (2017-20). From 2006-2017, he held various roles at J.P. Morgan Securities LLC, most recently as Managing Director and Head of Midwest Investment Banking where he also served as a member of the Midwest Operating Committee, led the Corporate Investment Banking practice in the region, and was the Relationship Manager for many of the firm's top power, utility and large corporate clients. He also spent more than 15 years at Morgan Stanley and was Co-Head of Dean Witter Reynolds' Public Utility Group prior to the firm's merger with Morgan Stanley. Mr. Yingling is a member of the board of directors of LendingPoint Consolidated, Inc., a data and technology platform that originates unsecured personal loans both direct to consumer online and at the point of sale and a member of the advisory board of Agentis Energy, a technology company revolutionizing the way utilities engage and empower businesses to manage energy usage. He previously served on the board of directors of Navigant Consulting, Inc. (formerly NYSE: NCI) (2018-19), before it was acquired by another company. Skills and Qualifications: Our Board concluded that Mr. Yingling is qualified to serve as a Board member on our Board because of his 35+ years of financial, managerial and strategy experience gained from his experience in senior executive and management positions at leading international financial institutions and in the professional service sector, particularly with respect to the power and energy industry. The National Association of Corporate Directors recognizes Mr. Yingling as a NACD Leadership Fellow and NACD Directorship CertifiedTM, demonstrating his commitment to boardroom excellence. | |||||||||||||||||
Experience Highlights: Utility, Finance, Executive, Tech / Info / Cyber, and NACD Leadership Fellow and NACD Directorship CertifiedTM Independent Director NorthWestern Committees: Audit, Governance (Chair) Other Public Boards: None | |||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 52 | ||
| Corporate Governance | ||
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 thirdnearing 15 years of their 15-year term limitservice 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 the tenure limits regardingof each existing Board member and discussed potential timing for inviting new members to join the Board. With that background analysis, theThe Governance Committee began developingthen developed a general transition timeline and assemblingassembled 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 has proved beneficial with the retirement of twoseven directors since April of 20162016.
The Governance Committee will continue to review 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’sevolve its director succession planning work will continue.process to meet the Board’s and the Company’s ongoing needs.
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 (with equal importance placed on gender, age, ethnicity, skills and background, as well as location of residence) 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,acumen, 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
NorthWestern Energy | Proxy Statement | Page 53 | ||
| Corporate Governance | ||
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 weBoard. We believe this provides optimum accountability between the Board and our management team. We believeIn our view, it is beneficial to have an independent Chair whose sole responsibility is leading our Board members as they provide leadership to our executive team.
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.
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) NYSENasdaq 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
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| Corporate Governance | ||
submitted on an annual basis by each director, the company’s relevant business records, publicly available information and the applicable SEC and NYSENasdaq requirements.
Based on its review, the Board determined that all of the non-employee directors (Messrs. Adik, Clark, Draper, Dykhouse, Horsfall, and HorsfallYingling and Mses. Ide, JohnsonSullivan, and Sullivan)Yazdi) 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 •Nominating and Governance; and | 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: | |||||||||||||||||||||||
| 5 | Meetings in | ||||||||||||||||||||||
| Members | |||||||||||||||||||||||
| Jan R. Horsfall | |||||||||||||||||||||||
| (continued on next page) | |||||||||||||||||||||||
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| Corporate Governance | ||
Financial Expertise, Financial Literacy, and Independence The Board determined that each member of the Audit Audit Committee Report Audit Committee Charter The Audit Committee operates pursuant to a charter that is reviewed annually and was last amended in October | |||||||||||||||||||||||
“The Audit Committee Linda G. Sullivan, Audit Committee Chair | |||||||||||||||||||||||
| Governance Committee | |||||||||||||||||||||||
Primary Responsibilities Our •Reviewing public policy and public image matters, including government relations and community support; •Monitoring a process to assess Board effectiveness; and The Governance Committee also reviews and oversees our position on corporate social responsibilities, such as Independence Each member of our Governance Committee meets the independence requirements under the The | |||||||||||||||||||||||
| 5 | Meetings in | ||||||||||||||||||||||
| Members | |||||||||||||||||||||||
| Anthony T. Clark | |||||||||||||||||||||||
| Britt E. Ide | |||||||||||||||||||||||
“Corporate governance is Governance Committee Chair | |||||||||||||||||||||||
NorthWestern Energy | Proxy Statement | Page 56 | ||
| 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: 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 Compensation Committee Report Compensation Committee Charter We call | |||||||||||||||||||||||
| 5 | Meetings in | ||||||||||||||||||||||
| Members | |||||||||||||||||||||||
“ 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 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. (continued on next page) | |||||||||||||||||||||||
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| 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. | |||||||||||
| Operations Committee | |||||||||||||||||||||||
Primary Responsibilities Our Board has delegated to our Safety, Environmental, Technology, and Operations Committee (Operations Committee) the following areas of oversight: •Safety; •Environmental compliance practices; •Security (including physical and cyber security, and business continuity); •Operations; and •Innovation, including emerging or competing technologies and alternative energy resources. Independence Each member of our Operations Committee is independent. Operations Committee Charter The Operations Committee was created in early 2020 to allow the Board, through this committee, to devote more time to safety, environmental, technology, and operations matters. The Operations Committee operates pursuant to a charter that is reviewed annually and was last amended in October 2021. The Charter is available on our website at NorthWesternEnergy.com under About Us / Investors / Corporate Governance. | |||||||||||||||||||||||
| 5 | Meetings in 2021 | ||||||||||||||||||||||
| Members | |||||||||||||||||||||||
Jan R. Horsfall (Chair) | |||||||||||||||||||||||
| Linda G. Sullivan | |||||||||||||||||||||||
| Mahvash Yazdi | |||||||||||||||||||||||
“After the advent of the Safety, Environmental, Technology and Operations Committee two years ago, we've been able to delve much deeper into the critical issues within these areas.” Jan R. Horsfall, Operations Committee Chair | |||||||||||||||||||||||
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| Corporate Governance | ||
Other Governance Practices
Code of Conduct
Our Board adopted a Code of Conduct and Ethics (Code of Conduct) which it reviews annually and requires each employee to certify 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 CompanyAbout Us / Investor RelationsInvestors / 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, control, response, and controldisclosure of key strategic, operational, financial, regulatory, compliance, employee, 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 Compensation Committee oversees risks in human capital and compensation plans, the Governance Committee oversees risks in corporate governance and social responsibilities, and the Operations Committee addresses risks regarding environmental, health, security (cyber and physical), operational and safety matters.
The Board oversees the company’s risk management, and our CEO and executive Enterprise Risk Management Committee act to ensure that our enterprise risk management and business continuity programs (ERM) achieve their objectives. In addition, the Audit Committee ensures that the company’s key risks are reviewed in the various responsible committees on at least an annual basis. 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 direct 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.
Cyber and Physical Security Oversight
Our company provides critical infrastructure to meet the needs of states, communities, and customers we serve. We recognize the importance of maintaining the trust and confidence of our customers, employees, regulators, and shareholders, and our Board devotes significant time and attention to oversight of cyber and physical security risk. From 2016 to early 2020, our Audit Committee had oversight responsibilities concerning cyber and physical security, as well as steps taken by management to understand and mitigate such risks. In early 2020, our Board established the Operations Committee and moved cyber and physical security oversight to this new committee. In 2021, our Audit Committee received quarterly updates on cyber security risk, which updates we anticipate will continue in the Operations Committee. Our Board and Operations Committee each receive regular reporting on cyber and physical security topics, and cyber security was the focus of four of our previous NACD-provided director education sessions.
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. Specifically, the Audit Committee considers whether (1) the transaction is on terms comparable to those that could be obtained in arms-length dealing with an unrelated third party, (2) there are business reasons to enter into the
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| Corporate Governance | ||
transactions, (3) the transaction could impair the independence of a director, and (4) the transaction would present an improper conflict of interest. No material related person transactions were identified during 2017.2021.
Under the policy, a “related person” is an officer, director, director nominee, or five percent or more shareholder of the company as(as well as any immediate family member of such individuals or any entity which is owned or controlled by any of such individuals;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 by the Audit Committee or the Company 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 CompanyAbout Us / Investor RelationsInvestors / Corporate Governance.
Hedging and Pledging Our Securities
Our Insider Trading Policy prohibits all of our directors, officers, and employees from engaging in certain transactions involving our securities, including hedging or other monetization transactions and publicly traded options. Specifically, the policy prohibits transactions involving publicly traded options, such as puts, calls, and other derivative securities, as well as hedging and monetization transactions, such as zero-cost collars and forward sales contracts. Our policy aims to align the interests of a director, officer, or employee with our and our shareholders’ interests and prohibits publicly traded option and hedging and monetization transactions because such transactions could create the appearance that a director, officer, or employee is trading on material non-public information, is focused on short-term performance, or otherwise misaligned. The Insider Trading Policy also prohibits our directors, officers, 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 CompanyAbout Us / Investor RelationsInvestors / 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 CompanyAbout Us / Investor RelationsInvestors / 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.
NorthWestern Energy | Proxy Statement | Page 60 | ||
| Corporate Governance | ||
Audit Committee Report In the performance of the Audit Committee’s oversight function, and in connection with the December 31, 2021, 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 the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. 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, 2021, filed with the SEC. | ||||||||
Audit Committee Linda G. Sullivan, Chair Jan R. Horsfall Jeffrey W. Yingling | ||||||||
NorthWestern Energy | Proxy Statement | Page 61 | ||
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 26, 2018,December 31, 2021, 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 | |||||||||||||||||||||||||||||
| 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 (%) | ||||||||||||||||||||||||
| Anthony T. Clark | 250 | — | 13,681 | 13,931 | * | ||||||||||||||||||||||||
| Dana J. Dykhouse | 34,000 | — | — | 34,000 | * | ||||||||||||||||||||||||
| Jan R. Horsfall | 4,105 | — | — | 4,105 | * | ||||||||||||||||||||||||
| Britt E. Ide | 57 | — | 9,464 | 9,521 | * | ||||||||||||||||||||||||
| Linda G. Sullivan | 74 | — | 15,273 | 15,347 | * | ||||||||||||||||||||||||
| Mahvash Yazdi | 1,990 | — | 5,031 | 7,021 | * | ||||||||||||||||||||||||
| Jeffrey W. Yingling | 1,000 | — | 7,458 | 8,458 | * | ||||||||||||||||||||||||
| Robert C. Rowe | 7,230 | — | 177,747 | 184,977 | * | ||||||||||||||||||||||||
| Brian B. Bird | 96,435 | — | 8,548 | 104,983 | * | ||||||||||||||||||||||||
| Heather H. Grahame | 17,656 | — | 6,145 | 23,801 | * | ||||||||||||||||||||||||
| Crystal D. Lail | 7,194 | — | 755 | 7,949 | * | ||||||||||||||||||||||||
| Curtis T. Pohl | 14,450 | — | 4,826 | 19,276 | * | ||||||||||||||||||||||||
| Bobbi L. Schroeppel | 22,159 | — | 3,275 | 25,434 | * | ||||||||||||||||||||||||
Directors and Executive Officers as a Group (16 persons) | 216,130 | — | 288,530 | 504,660 | * | ||||||||||||||||||||||||
| *Less than one percent | |||||||||||||||||||||||||||||
| 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 (%) | ||||||||
| Stephen P. Adik (1) | — | 20,000 | 70,735 | 90,735 | * | ||||||||
| E. Linn Draper Jr. | — | — | 129,031 | 129,031 | * | ||||||||
| Anthony T. Clark | — | — | 6,635 | 6,635 | * | ||||||||
| Dana J. Dykhouse | 25,750 | — | — | 25,750 | * | ||||||||
| Jan R. Horsfall | 6,955 | — | — | 6,955 | * | ||||||||
| Britt E. Ide | — | — | 5,420 | 5,420 | * | ||||||||
| Julia L. Johnson | — | — | 85,647 | 85,647 | * | ||||||||
| Linda G. Sullivan | 5,420 | 5,420 | * | ||||||||||
| Robert C. Rowe | 11,953 | — | 137,044 | 148,997 | * | ||||||||
| Brian B. Bird | 64,797 | — | 2,268 | 67,065 | * | ||||||||
| Heather H. Grahame | 23,938 | — | 1,647 | 25,585 | * | ||||||||
| Curtis T. Pohl | 36,156 | — | 1,297 | 37,453 | * | ||||||||
| Bobbi L. Schroeppel | 17,920 | — | 859 | 18,779 | * | ||||||||
| Directors and Executive Officers as a Group (16 persons) | 201,984 | 20,000 | 469,271 | 691,255 | 1.40 | ||||||||
| *Less than one percent | |||||||||||||
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 CompanyAbout Us / Investor RelationsInvestors / Corporate Governance.
Under our stock ownership guidelines and as shown on the table on the next page, each non-employee director must retain at least tenfive times the value of his or her annual cash Board and committeemember or Board chair retainer(s)retainer in common stock or deferred stock units within five years of commencing service on our Board.
For executives, the stock ownership guidelines range from sixtwo to twosix 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.
NorthWestern Energy | Proxy Statement | Page 62 | ||
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 named executive officers have satisfied the applicable stock ownership guideline.
| 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. 26, 2018 (1) (%) | Percent of Guideline Achieved Last Year (2) (%) | |||||||||||||
| Directors | |||||||||||||||||||
E. Linn Draper Jr., Board Chair | $125,000 | 10x | 1,250,000 | 129,031 | 6,676,064 | 534 | % | 557 | % | ||||||||||
Stephen P. Adik, Audit Chair | $35,000 | 10x | 350,000 | 90,735 | 4,694,629 | 1,341 | % | 1,419 | % | ||||||||||
| Anthony T. Clark | $25,000 | 10x | 250,000 | 6,635 | 343,295 | 137 | % | 87 | % | ||||||||||
Dana J. Dykhouse, Comp. Chair | $35,000 | 10x | 350,000 | 25,750 | 1,332,305 | 381 | % | 381 | % | ||||||||||
| Jan R. Horsfall | $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 | 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 | 148,997 | 7,709,105 | 216 | % | 208 | % | ||||||||||
| Brian B. Bird | $411,951 | 4x | 1,647,804 | 67,065 | 3,469,943 | 211 | % | 185 | % | ||||||||||
| Heather H. Grahame | $360,714 | 3x | 1,082,142 | 25,585 | 1,323,768 | 122 | % | 123 | % | ||||||||||
| Curtis T. Pohl | $279,922 | 3x | 839,766 | 37,453 | 1,937,818 | 231 | % | 115 | % | ||||||||||
| Bobbi L. Schroeppel | $258,068 | 2x | 516,136 | 18,779 | 971,625 | 188 | % | 170 | % | ||||||||||
| Satisfaction of Stock Ownership Guidelines | ||||||||||||||||||||||||||||||||||||||
| Pay Subject to Multiple ($) | Multiple Required | Stock Ownership Requirement ($) | Number of Shares and DSUs Owned (#) | Value of Shares and DSUs Owned ($) (1) | Percent of Guideline Achieved as of Dec. 31, 2021 (1) | |||||||||||||||||||||||||||||||||
| Directors | ||||||||||||||||||||||||||||||||||||||
| Anthony T. Clark | 50,000 | 5x | 250,000 | 13,931 | 796,296 | 319 | % | |||||||||||||||||||||||||||||||
Dana J. Dykhouse, Board Chair | 150,000 | 5x | 750,000 | 34,000 | 1,943,440 | 259 | % | |||||||||||||||||||||||||||||||
| Jan R. Horsfall | 50,000 | 5x | 250,000 | 4,105 | 234,642 | 94 | % | (2) | ||||||||||||||||||||||||||||||
| Britt E. Ide | 50,000 | 5x | 250,000 | 9,521 | 544,220 | 218 | % | |||||||||||||||||||||||||||||||
Linda G. Sullivan, Audit Chair | 50,000 | 5x | 250,000 | 15,347 | 877,235 | 351 | % | |||||||||||||||||||||||||||||||
Mahvash Yazdi, Compensation Chair | 50,000 | 5x | 250,000 | 7,021 | 401,320 | 161 | % | |||||||||||||||||||||||||||||||
Jeffrey W. Yingling, Governance Chair | 50,000 | 5x | 250,000 | 8,458 | 483,459 | 193 | % | |||||||||||||||||||||||||||||||
| Executives | ||||||||||||||||||||||||||||||||||||||
| Robert C. Rowe | 676,754 | 6x | 4,060,524 | 184,977 | 10,573,285 | 260 | % | |||||||||||||||||||||||||||||||
| Brian B. Bird | 500,000 | 5x | 2,500,000 | 104,983 | 6,000,828 | 240 | % | |||||||||||||||||||||||||||||||
| Heather H. Grahame | 441,475 | 3x | 1,324,425 | 23,801 | 1,360,465 | 103 | % | |||||||||||||||||||||||||||||||
| Crystal D. Lail | 375,000 | 4x | 1,500,000 | 7,949 | 454,365 | 30 | % | |||||||||||||||||||||||||||||||
| Curtis T. Pohl | 318,076 | 3x | 954,228 | 19,276 | 1,101,816 | 115 | % | |||||||||||||||||||||||||||||||
| Bobbi L. Schroeppel | 301,999 | 2x | 603,998 | 25,434 | 1,453,807 | 241 | % | |||||||||||||||||||||||||||||||
(1)Value of shares and DSUs owned and percent of percent of guideline achieved are calculated as of December 31, 2021, using a closing stock price of $57.16.
(2)As of publication of this proxy statement, Mr. Horsfall owns 6,855 shares valued at $391,832 based on 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).December 31, 2021, closing stock price of $57.16. His current percent of guideline achieved is 157 percent.
Largest Shareholders
The table on the following pagebelow 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 26, 2018.stock. 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.Act as of February 28, 2022.
| Name of Beneficial Owner | Shares of Common Stock Beneficially Owned (#) | Percent of Common Stock (%) | ||||||||||||
BlackRock, Inc. (1) | 8,778,356 | 16.2 | ||||||||||||
55 East 52nd Street, New York, NY 10022 | ||||||||||||||
The Vanguard Group (2) | 5,525,331 | 10.2 | ||||||||||||
| 100 Vanguard Blvd., Malvern, PA 19355 | ||||||||||||||
American Century Investment Management, Inc. (3) | 3,721,613 | 6.9 | ||||||||||||
| 4500 Main Street, 9th Floor, Kansas City, MO 64111 | ||||||||||||||
T. Rowe Price Associates, Inc. (4) | 2,833,636 | 5.2 | ||||||||||||
| 100 E. Pratt Street, Baltimore, MD 21202 | ||||||||||||||
(1) Reflects shares beneficially owned by BlackRock, Inc. as of December 31, 2021, according to a statement on Schedule 13G/A filed with the SEC on January 26, 2022, 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 8,404,351 shares and sole dispositive power with respect to 8,778,356 shares. The beneficial owner
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| Stock | ||
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 The Vanguard Group, as of December 31, 2021, according to a statement on Schedule 13G/A filed with the SEC on February 9, 2022, which indicates that the beneficial owner, an investment adviser in accordance with Rule 13d-1, has sole voting power with respect to 0 shares and sole dispositive power with respect to 5,413,128 shares. The beneficial owner has shared voting power with respect to 64,884 shares and shared dispositive power with respect to 112,203 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.
| Name of Beneficial Owner | Shares of Common Stock Beneficially Owned (#) | Percent of Common Stock (%) | ||
BlackRock, Inc. (1) | 8,688,874 | 17.9 | ||
55 East 52nd Street, New York, NY 10022 | ||||
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 | ||||
(4) Reflects shares beneficially owned by T. Rowe Price Associates, Inc., as of December 31, 2021, according to a statement on Schedule 13G filed with the SEC on February 14, 2022, which indicates that the beneficial owner, an Investment Adviser registered under Section 203 of the Investment Advisers Act of 1940, has sole voting power with respect to 982,159 shares and sole dispositive power with respect to 2,833,636 shares. The beneficial owner has shared voting or dispositive 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 below presents summary information about our Equity Compensation Plan, as of the close of business on December 31, 2017:2021:
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 15 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.2021.
| 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) | ||||||||||||||||||||
| Equity compensation plans approved by security holders (1) | 249,842 | (2) | $55.57 | (3) | 828,486 | (4) | |||||||||||||||||
| Equity compensation plans not approved by security holders | — | — | — | ||||||||||||||||||||
| Total | 249,842 | 828,486 | |||||||||||||||||||||
(1) Consists of the Equity Compensation Plan, which is the company’s only equity compensation plan.
(2) Consists of (a) 162,523 unvested performance units, with a weighted average grant date fair value of $58.76, granted to employees who participate in our LTIP, and (b) 87,319 unvested restricted share units, with a weighted average grant date fair value of $49.63, granted to executive officers under our ERRP. For descriptions of our LTIP and ERRP, please see the Compensation Discussion and Analysissection 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.
| 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) | |||||||
| Equity compensation plans approved by security holders (1) | 243,008 | (2) | $47.44 | (3) | 822,695 | (4) | ||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||
| Total | 243,008 | 822,695 | ||||||||
NorthWestern Energy | Proxy Statement | Page 64 | |||
Annual Meeting Information
Voting Procedures
Appointment of Proxy Holders
Our Board asks you to appoint our independent Board Chair, Dr. E. Linn Draper, Jr.,Dana J. Dykhouse, 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.
Record Date and Voting
All shareholders of record as of the close of business on the record date, February 26, 2018,28, 2022, are entitled to receive notice of and to vote, in persononline or by proxy, at the virtual 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.
| : | 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. | ||||||||||
| ) | 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. | ||||||||||
| + | 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. | ||||||||||
NorthWestern Energy | Proxy Statement | Page 65 | ||
| ? | Voting | ||||||||||
| r | 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 | ||||||||||
Quorum
At the close of business on the record date, there were 49,406,77854,132,943 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 persononline at the virtual meeting or represented by proxy. Abstentions and broker non-votes are included for determining whether a quorum is present. 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 theNasdaq 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 and 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 theNasdaq 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. 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 and in accordance with the recommendations of our Board on any other matters properly brought before the annual meeting for a vote.
NorthWestern Energy | Proxy Statement | Page 66 | ||
| Annual Meeting Information | ||
| Item of Business | Board Recommendation | Voting Approval Standard | Effect of Abstention | Effect of Broker Non-Vote | ||||||||||
Proposal 1: Election of Directors | FOR election of each director nominee | If a quorum exists, the 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 effect | No effect | ||||||||||
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm | FOR | If a quorum exists, the majority of votes present | Vote against | Not 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 This advisory vote is not binding on the Board, but the Board will consider the vote results when making future executive compensation decisions. | Vote against | No 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 virtual 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 WebcastVirtually
The annual meeting will be held at www.virtualshareholdermeeting.com/NWE2022. Only shareholders of record or their legal proxy holders as of the record date orand our invited guests may attendparticipate in the virtual annual meeting in person.meeting. If you wish to attend the virtual annual meeting and your shares are held in street name at a brokerage firm, bank, or other nominee, you will need to bringhave the 16-digit control number that can be found on your notice or a copy of your brokerage statement or other documentation reflecting your stock ownership asnotice.
A webcast of the record date. You mayAnnual Meeting will be asked to provide photo identification, such as a driver’s license.
available on our website at NorthWesternEnergy.com under About Us / Investors / Presentations, Webcasts & Reports through April 29, 2023.
NorthWestern Energy | Proxy Statement | Page 67 | ||
| Annual Meeting Information | ||
 | ||
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 20182022 or in the future, he or she may call (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 CompanyAbout Us /Investors / Investor RelationsFinancials / 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 2019,2023, shareholder proposals submitted under Exchange Act Rule 14a-8 must be received by the corporate secretary of NorthWestern Corporation not later than November 7, 2018.2022. 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.
Other Shareholder Proposals for Presentation at the 20192023 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 20192023 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, 201830, 2022 and January 25, 2019.29, 2023.
Universal Proxy Card. To comply with the universal proxy rules (once effective), shareholders who intend to solicit proxies of director nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 28, 2023.
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
NorthWestern Energy | Proxy Statement | Page 68 | |||
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 Officer (605) 978-2945 | or | Emily 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.
NorthWestern Energy | Proxy Statement | Page 69 | ||
| Annual Meeting Information |
Proxy Statement Glossary
The list below defines the various terms, abbreviations, and acronyms used in this proxy statement.
| AGA | American Gas Association | ||||
| Board | Board of Directors of NorthWestern Corporation | ||||
| CD&A | Compensation Discussion and Analysis | ||||
| CEO | |||||
| CFO | |||||
| COBRA | Consolidated Omnibus Budget Reconciliation Act | ||||
| Code of Conduct | Code of Conduct and Ethics | ||||
| Company | NorthWestern Corporation d/b/a NorthWestern Energy | ||||
| Compensation Committee | Human Resources Committee | ||||
| Deloitte | Deloitte & Touche LLP | ||||
| Director Deferred Plan | NorthWestern Corporation 2005 Deferred Compensation Plan for Non-Employee Directors | ||||
| Equity Compensation Plan or Plan | NorthWestern Corporation Amended and Restated Equity Compensation Plan (f/k/a NorthWestern Corporation Amended and Restated 2005 Long-Term Incentive Plan) | ||||
| EPS | Earnings per share | ||||
| ERM | Enterprise Risk Management and Business Continuity Programs | ||||
| ERRP | Executive Retention / Retirement Program | ||||
| ESG | Environmental, social, and governance | ||||
| Exchange Act | Securities and Exchange Act of 1934, as amended | ||||
| Executive Officer | The Named Executive Officers and other executives responsible for company policy, strategy and operations. For | ||||
| GAAP | Generally accepted accounting principles | ||||
| Governance Committee | |||||
| Key Employee Severance Plan | NorthWestern Corporation Key Employee Severance Plan, effective Oct. 19, 2016 | ||||
| LTIP | Long-Term Incentive Program | ||||
| NACD | National Association of Corporate Directors | ||||
| Named Executive Officer | |||||
| Nasdaq | The Nasdaq Stock Market LLC | ||||
| NorthWestern, our, us, or we | NorthWestern Corporation d/b/a NorthWestern Energy | ||||
| NYSE | New York Stock Exchange | ||||
| Officer Deferred Plan | NorthWestern Corporation 2009 Officer Deferred Compensation Plan | ||||
| OSHA | Occupational Safety and Health Administration | ||||
| Our | NorthWestern Corporation d/b/a NorthWestern Energy | ||||
| PCAOB | Public Company Accounting Oversight Board | ||||
| Record Date | February | ||||
| ROAE | Return on average equity | ||||
| SAIDI | System Average Interruption Duration Index | ||||
| SEC | Securities and Exchange Commission | ||||
| TSR | Total shareholder return | ||||
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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 | ||||||||||||
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VOTING CARD
[Front Side]
 NORTHWESTERN CORPORATION 3010 W. 69TH STREET SIOUX FALLS, SD 57108 | VOTE BY INTERNET Before the Meeting - Go to www.proxyvote.com or scan the QR Barcode above 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 You may attend the 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 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 | ||||||||
| 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 DIRECTORS | For All | Withhold All | For All Except | To withold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Board of Directors recommends that you vote FOR the following nominees: | o | o | o | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vote on Directors 1. Election of Directors Nominees: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
01) 02) Dana J. Dykhouse | 04) Britt E. Ide | 05) Linda G. Sullivan 07) Mahvash Yazdi 08) Jeffrey W. Yingling | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vote on Proposals | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | o | o | o | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Board of Directors recommends that you vote FOR Proposal 3: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3. Advisory vote to approve named executive officer compensation. | o | o | o | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Board of Directors recommends that you vote FOR Proposal 4: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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. | o | o | o | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) | Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 The undersigned hereby appoints 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. Continued and to be signed on the reverse side | ||||||||