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. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material |
WEC Energy Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
WEC Energy Group is one of the nation’s leading energy companies,
with the operational expertise and financial resources to meet the
electricity and natural gas needs of customers across the Midwest.
| WEC Energy Group | P-2 | |
Dear Fellow Stockholders
On behalf of 2018our Board of Directors, I cordially invite you to attend WEC Energy Group’s Annual Meeting of StockholdersStockholders. We look forward to hosting this year’s meeting at the New York Stock Exchange, following their invitation to recognize the company’s long-standing listing on the Exchange.
During 2019, in my role as Executive Chairman, I had the opportunity to meet with investors from across the United States, Europe, Asia and Australia - sharing information about our company and receiving input from our investors. These constructive dialogues informed our Board’s decision making throughout the year.
Record-setting Financial Results Reported record earnings from operations. Achieved a 37% total shareholder return - surpassing the performance of the major market indices. Substantial Progress on Commitment to Deliver Clean Energy Future Met and exceeded our 2030 goal of reducing carbon emissions by 40% below 2005 levels. Set - and are already more than half-way toward meeting - a goal to reduce the rate of methane emissions from our natural gas distribution lines. A key factor in achieving this goal is our ongoing work to modernize Chicago’s natural gas distribution network. Seamless Execution of Board and Management Succession Plans Replaced two independent directors who completed their service with two new, independent board members, reducing the Board’s average tenure and enhancing the diversity of director skills. Maintained active oversight of the succession planning process for executive management to foster a deep talent bench and enable effective leadership succession. Continued, Strong Linkage between Pay and Performance Included challenging financial and ESG metrics in our incentive compensation program. Tied approximately 81% of our CEO’s total direct compensation to the achievement of our short-term and long-term goals, resulting in a substantial portion of pay being “at risk.” An average of 78% of total direct compensation for the other named executive officers was “at risk.” I ask for your support of the three proposals requiring a vote at this year’s Annual Meeting. And, as always, we welcome your continued engagement. Thank you for your confidence in WEC Energy Group.  Gale E. Klappa Executive Chairman | |||
 | |||
 | |||
 | |||
 | |||
 | |||
| WEC Energy Group | P-3 | |
This Page Intentionally Left Blank
| WEC Energy Group | P-4 | |
| P-6 | Notice of 2020 Annual Meeting of Stockholders |
| P-7 | Proxy Summary |
| P-11 | Proxy Statement |
| P-11 | Proposal 1: Election of Directors-Terms Expiring in 2021 |
| P-12 | Director Nomination and Evaluation Process |
| P-12 | Director Qualifications |
| P-13 | Director Independence |
| P-14 | 2020Director Nominees for Election |
| P-20 | Governance |
| P-20 | Stockholder Engagement |
| P-21 | Corporate Governance Framework |
| P-22 | Risk Oversight |
| P-23 | Environmental and Social Governance |
| P-25 | Board Leadership |
| P-25 | Board and Committee Practices |
| P-27 | Board Committees |
| P-29 | Compensation Committee Interlocks and Insider Participation |
| P-29 | Communications with the Board |
| P-30 | Director Compensation |
| P-32 | Proposal 2: Advisory Vote to Approve Compensation of the Named Executive Officers |
| P-33 | Compensation Discussion and Analysis |
| P-33 | Executive Summary |
| P-36 | Components of Our Executive Compensation Program |
| P-38 | Determination of Market Median |
| P-38 | Annual Base Salary |
| P-39 | Annual Cash Incentive Compensation |
| P-41 | Long-Term Incentive Compensation |
| P-45 | Compensation Recoupment Policy |
| P-45 | Stock Ownership Guidelines |
| P-46 | Prohibition on Hedging and Pledging |
| P-46 | Limited Trading Windows |
| P-46 | Retirement Programs |
| P-46 | Other Benefits, Including Perquisites |
| P-47 | Tax Gross-Up Policy |
| P-47 | Severance Benefits and Change in Control |
| P-47 | Impact of Prior Compensation |
| P-47 | Section 162(m) of the Internal Revenue Code |
| P-47 | Compensation Committee Report |
| P-48 | Executive Compensation Tables |
| P-48 | Summary Compensation Table |
| P-50 | Grants of Plan-Based Awards for 2019 |
| P-51 | Outstanding Equity Awards at Year-End 2019 |
| P-52 | Option Exercises and Stock Vested for 2019 |
| P-53 | Pension Benefits at Year-End 2019 |
| P-54 | Retirement Plans |
| P-56 | Nonqualified Deferred Compensation for 2019 |
| P-57 | Potential Payments Upon Termination or Change in Control |
| P-61 | Pay Ratio Disclosure |
| P-61 | Risk Analysis of Compensation Policies and Practices |
| P-62 | Proposal 3: Ratification of Deloitte & Touche LLP as Independent Auditors for 2020 |
| P-63 | Independent Auditors' Fees and Services |
| P-64 | Audit and Oversight Committee Report |
| P-65 | WEC Energy Group Common Stock Ownership |
| P-66 | Delinquent Section 16(a) Reports |
| P-67 | Annual Meeting and Voting Information |
| P-71 | Availability of Form 10-K |
| P-72 | Appendix A - Earnings and Earnings Per Share GAAP Reconciliation |
| WEC Energy Group | P-5 | |
When
Wednesday, May 6, 2020 at 2:30 p.m. Eastern time.
Registration begins at 1:30 p.m.
Where
The New York Stock Exchange
11 Wall St, New York, NY 10005
Voting
(before 11:59 p.m. Eastern time on Tuesday, May 5, 2020)
Your vote is important. Please vote as soon as possible by one of the methods shown below. Make sure you have a proxy card, voting instruction form or notice of the Internet availability in hand and follow the instructions.
 | By telephone In the U.S. or Canada you can vote your shares toll-free by calling 1-800-652-8683. |
 | By internet You can vote your shares online at investorvote.com. |
 | By mail You can vote your shares by marking, dating and signing your proxy card or voting instruction form and returning it in the postage paid envelope. |
 | By tablet or smartphone You can vote your shares with your tablet or smartphone by scanning the QR code. |
Who can vote
Holders of WEC Energy Group common stock at the close of business on Feb. 26, 2020. Each share of common stock is entitled to one vote for each director position and one vote for each of the other proposals.
Stockholders who beneficially hold shares in street name through an intermediary on this date must obtain a legal proxy from their broker, bank or other nominee granting the right to vote.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on
May 6, 2020
The Proxy Statement and 2019 Annual Report are available at www.envisionreports.com/wec.
Items of Business
Proposal 1
Elect 12 directors for terms expiring in 2021.
Proposal 2
Provide advisory vote to approve compensation of the named executive officers.
Proposal 3
Ratify Deloitte & Touche LLP as independent auditors for 2020.
In addition, any other business properly presented may be acted upon at the meeting.
Who can attend
Stockholders who wish to attend the meeting in-person must pre-register. See pages P69-70 for registration instructions and identification requirements. If you are unable to attend, you may view a live webcast on our website at www.wecenergygroup.com/invest/annualmtg.htm.
All stockholders of record may vote in person at the meeting. Beneficial owners may vote in person at the meeting if they have a legal proxy, as described on page P-67.
Date of mailing
On or about March 25, 2020, these proxy materials and WEC Energy Group's annual report are being mailed or made available to stockholders.
Margaret C. Kelsey
Executive Vice President,
General Counsel and Corporate Secretary
March 25, 2020
| WEC Energy Group | P-6 | |
This summary is intendedhighlights selected information related to highlight certain information found within this proxy statement.items to be voted on at the annual meeting of stockholders. This summary does not contain all of the information that you should consider.consider when deciding how to vote. Please read the entire proxy statement before voting.Additional information regarding WEC Energy Group Inc.'s (the "Company" or "WEC Energy Group") 20172019 performance can be found in the Company’sCompany's Annual Report on Form 10-K for the year ended
December 31, 2017.2019.
| Proposal 1 | Election of 12 Directors | |||
| | |||
| | • All candidates are highly regarded executives with • Corporate governance practices consistently recognized with strong governance ratings. | ||
| The Director Nominees at | |||
All director nominees are independent with the exception of Gale E. Klappa and J. Kevin Fletcher, who are employees of the Company.
Barbara L. Bowles and Albert J. Budney, Jr. will complete their service as directors in 2020 and thus are not serving as nominees for election at the 2020 Annual Meeting of Stockholders. The Company sincerely thanks them for their many important contributions, leadership and years of dedicated service.
| WEC Energy Group | P-7 | |
Snapshot of the 2020 Director Nominees (based upon 12 members) | Governance Highlights | ||
| Our diverse and experienced slate of candidates possesses a wide range of skills, expertise and perspectives for enhanced and effective oversight. | Accountability to our stockholders is critical to our long-term success. We routinely evaluate and enhance our governance practices to maintain alignment with evolving best practices. Highlights of our governance framework include the following: Board Practices —————————————————————————— • Ongoing Board refreshment• Annual Board and committee evaluations• Strategy and risk oversight discussion at every regular Board meeting• Ongoing education programs by internal and third-party experts• Stock ownership requirements for directors and executives• Director service on public boards limited to 4 companies• CEOs of public companies limited to director service at 2 public companies totalIndependent Oversight —————————————————————————— • 10 of 12 director nominees are independent• Independent presiding director with specified duties• Independent Audit, Compensation, Finance and Governance Committees• Regular executive sessions of non-employee directorsStockholder Rights —————————————————————————— • Annual election of directors with majority voting standard for uncontested elections• One-share, one-vote standard• Proxy access provision in Bylaws• Annual “say-on-pay” advisory vote• Special meeting provision | ||
 | |||
| *As reported by individual directors; see page P-13 for more information. | |||
| WEC Energy Group | P-8 | |
| C O M M I T T E E S | ||||||||
| Name and Primary Occupation | Director Since | Age | Ind. | A | C | G | E | F |
John F. Bergstrom Chairman and Chief Executive Officer, Bergstrom Corporation | 1987 | 71 | a | l | « | l | ||
Barbara L. Bowles (Presiding Director) Retired Vice Chair, Profit Investment Management | 1998 | 70 | a | l | « | l | ||
William J. Brodsky Chairman, Cedar Street Asset Management LLC | 2015 | 73 | a | l | ||||
Albert J. Budney, Jr. Retired President, Niagara Mohawk Holdings, Inc. | 2015 | 70 | a | l | ||||
Patricia W. Chadwick President, Ravengate Partners, LLC | 2006 | 69 | a | l | l | |||
Curt S. Culver Non-Executive Chairman, MGIC Investment Corporation | 2004 | 65 | a | l | « | |||
Danny L. Cunningham Retired Partner and Chief Risk Officer, Deloitte & Touche LLP | 2018 | 62 | a | l | ||||
William M. Farrow III Chairman, Chief Executive Officer and owner, Winston and Wolfe LLC | 2018 | 62 | a | l | ||||
Thomas J. Fischer Principal, Fischer Financial Consulting LLC | 2005 | 70 | a | « | l | l | ||
Gale E. Klappa Chairman of the Board and Chief Executive Officer, WEC Energy Group, Inc. | 2003 | 67 | « | |||||
Henry W. Knueppel Retired Chairman and Chief Executive Officer, Regal Beloit Corporation | 2013 | 69 | a | l | l | |||
Allen L. Leverett President, WEC Energy Group, Inc. | 2016 | 51 | l | |||||
Ulice Payne, Jr. Managing Member, Addison-Clifton, LLC | 2003 | 62 | a | l | l | l | ||
Mary Ellen Stanek Managing Director & Director of Asset Management, Baird Financial Group | 2012 | 61 | a | l | ||||
Ages as of January 18, 2018 nomination date «Committee Chair Board Committees: A = Audit and Oversight; C = Compensation; G = Corporate Governance; E = Executive; F = Finance | ||||||||
 |  |
| Proposal 2 | Advisory Vote to Approve Compensation of the Named Executive Officers | ||||
• • • | orientation aligned with stockholder interests. | ||||
 | |
strategy.
| Salary | Annual Incentive |  | ||||
| When Granted | Reviewed Annually | |||||
| Performance Type | Short-Term | Long-Term | ||||
| Award Type | Cash | Stock Options | Restricted Stock | |||
| Performance Period | Ongoing | 1 | 3 Years | 3 Year Vesting | 1 or 3 Year Vesting | |
| How Payout is Determined | ||||||
| Role; responsibilities; market data; committee judgment | Formulaic: • Financial (EPS, cash flow, utility net income) • Operational (safety, customer satisfaction, diversity) | Formulaic: • • Authorized | ||||
| * | Performance units are settled in cash. |
| ** | Based upon metrics for Kevin Fletcher. |
A comprehensive discussionbroad overview of our executive compensation program, “Compensation Discussionthe Company's 2019 business, financial and Analysis,”operational performance highlights begins on page P-39 of this Proxy Statement.P-33. Performance highlights linked to our executives’ variable compensation components are summarized below.
Compensation Links Pay to Performance
| Financial | |
Throughout 2019, we maintained heavy focus on financial discipline and successfully executed our financial plan. The Company’s strong financial performance with respect to earnings per share, cash flow and utility net income exceeded target levels.
| WEC Energy Group | ||
| Environmental | |
Our commitment to delivering a clean energy future is evident in our 5-year capital plan, which is comprised of multi-year projects tied to strategic objectives, including:
reshaping our generation fleet with significant investments in low- and no-carbon generation to help meet our carbon emission reduction goals;
upgrading our electric delivery infrastructure through innovative technology developments that help customers manage energy use and reduce environmental impacts; and
modernizing our natural gas infrastructure in the city of Chicago to improve safety and performance, which will also help us achieve our methane reduction goal.
Our executive management team’s successful execution of our financial plan through 2019 resulted in the opportunity to increase our updated 5-year capital plan (2020-2024) by approximately $900 million, which equates to approximately $15 billion of planned investments over the next five years – investments which include capital projects aimed at meeting our greenhouse gas reduction goals.
Our ability to fund this substantial capital plan without issuing additional equity is directly linked with our ability to consistently deliver on our financial plan and meet our earnings per share and cash flow targets, both of which are key financial metrics underlying our short-term incentive compensation.
| Social | |
For more than 15 years, the Compensation Committee has taken a broad perspective on incentive compensation, linking important social metrics to our employees’ performance goals.
Beginning in 2004, incentive compensation has included refreshed annual targets tied to several key social aspects of our corporate strategy, including:
• employee safety • employee and supplier diversity •customer satisfaction
The Compensation Committee sets aggressive performance goals to emphasize a mindset of continuous improvement, which are used to add to or subtract from our executives’ incentive compensation, thereby reinforcing focus on areas tied to our overall corporate strategy.
We are very proud of our employees’ dedication to delivering on these goals over the past year, examples of which are highlighted below.
Named as one of America’s Best Employers for Diversity by Forbes Magazine.
Both of our Wisconsin electric utilities earned PA Consulting's Reliability One Awards for outstanding electric reliability performance in the Midwest.
Peoples Gas earned the Most Trusted Brand Award from Cogent Syndicated Utility Trusted Brand & Customer Engagement Study.
Nearly 22% overall improvement year-over-year in lost-time injuries.
Spent $282.6 million with certified minority-, women-, service-disabled- and veteran-owned businesses.
Received the Above and Beyond Award in recognition of providing employees who serve in a military capacity with additional non-mandated benefits to ease burdens associated with deployment.
Conducted enterprisewide workplace ethics survey to gauge employee perceptions of the company's actions, process and operating style.
| Proposal 3 | Ratification of Deloitte & Touche LLP as Independent Auditors for 2020 | See pages P62-64 for more information. | |
The Board recommends a vote FOR ratification of Deloitte & Touche LLP for 2020 | |||
• The Audit Committee annually evaluates the performance of Deloitte & Touche LLP and confirms that retention is in the best interests of the Company and its stockholders. • Deloitte & Touche LLP is an independent firm with significant industry and financial reporting expertise, and fees that are appropriate for the size and scope of the Company. | |||
| WEC Energy Group | P-10 | 2020 Proxy Statement |
This proxy statement is being furnished to stockholders beginning on or about March 22, 2018,25, 2020, in connection with the solicitation of proxies by the WEC Energy Group, Inc. (“WEC Energy Group” or the “Company”) Board of Directors (the “Board”) to be used at the 2020 Annual Meeting of Stockholders to be held on Thursday,Wednesday, May 3, 2018 (the “Meeting”)6, 2020 at 10:00 a.m., Central2:30 p.m. Eastern time, at Concordia University Wisconsin in the R. John Buuck Field House located at 12800 North Lake Shore Drive, Mequon, Wisconsin 53097,New York Stock Exchange, 11 Wall Street, New York, NY 10005, and at all adjournments or postponements of the Meeting,this meeting, for the purposes listed in the Notice of the 20182020 Annual Meeting of Stockholders.
PROPOSAL 1: ELECTION OF DIRECTORS – TERMS EXPIRING IN 20192021
WEC Energy Group’s bylaws require each director to be elected annuallyto hold office for a one-year term. Because thisThis is an uncontested election,election; therefore, our majority vote standard for election of directors will apply. Under this standard, the director nominees will be elected only if the number of votes cast favoring such nominee’s election exceeds the number of votes cast opposing that nominee’s election, as long as a quorum is present. Therefore, presuming a quorum is present, shares not voted, whether by broker non-vote, abstention, or otherwise, have no effect in the election of directors.
Proxies may not be voted for more than 1412 persons in the election of directors.
| Maria C. Green | |||
| Curt S. Culver | Gale E. Klappa | ||
| Danny L. Cunningham | Henry W. Knueppel | ||
| William M. Farrow III | Thomas K. Lane | ||
| Thomas J. Fischer | |||
Each nominee has consented to being nominated and to serve if elected. In the unlikely event that any nominee becomes unable to serve for any reason, the proxies will be voted for a substitute nominee selected by the Board upon the recommendation of the Corporate Governance Committee of the Board. Information regarding each nominee is included
Factored into the Board’s ongoing succession planning have been discussions related to the fact that a number of directors are expected to complete their service on the following pages.Board in 2020 and 2021, which prompted the Board to actively search for director candidates with specific skills in mind. Two new directors were subsequently elected as part of that succession plan: Maria C. Green effective October 1, 2019, and Thomas K. Lane effective January 1, 2020. The Board elected Ms. Green, in part, due to her having served in the role of general counsel and corporate secretary for several public companies where she gained extensive experience in strategic planning, acquisitions, investor relations and corporate sustainability matters. The Board elected Mr. Lane due to, among other things, his strong financial expertise focused within the energy sector, including investment and growth strategies related to power generation and renewable projects.
During 2019, Director Fischer reached retirement age. Following discussion, the Corporate Governance Committee recommended that the Board nominate Mr. Fischer for one more year of service. The Corporate Governance Committee believes that this extension would provide the Board additional continuity as new members join the Board and, in particular, would assist in the transition of Mr. Fischer's responsibilities as Audit Committee Chair to another independent director in May 2020.
Directors Barbara L. Bowles and Albert J. Budney, Jr. will complete their service as directors at the 2020 Annual Meeting of Stockholders, and thus will not serve as nominees for re-election. The Company sincerely thanks them for their many important contributions, leadership and years of dedicated service.
In selecting the 2020 director nominees, the Corporate Governance Committee and the Board determined that the candidates collectively embody a breadth of characteristics germane to executing the duties of the Board, including the general criteria, qualifications, diversity, and independence reported below.
The Board of Directors recommends that you vote “FOR” all of the director nominees.
| WEC Energy Group | ||
DIRECTOR NOMINEES NOMINATION AND EVALUATION PROCESS
Candidates for director nomination may be proposed in a number of ways, including by stockholders, the Corporate Governance Committee, and Processes Usedother members of the Board. The Corporate Governance Committee may pay a third party to Evaluate Nomineesidentify qualified candidates; however, no such firm was engaged with respect to the nominees listed in this proxy statement.
The Corporate Governance Committee will consider director candidates recommended by stockholders provided that the stockholders submitting recommendations comply with requirements and procedures set forth in our bylaws. Stockholders may also recommend director candidates by following the procedures outlined on P-71. No formal stockholder nominations or recommendations for director candidates were received in connection with the 2020 Annual Meeting of Stockholders.
We recently added two new independent Directors to our Board. Ms. Green and Mr. Lane were recommended by the Corporate Governance Committee for election and were elected to the Board effective October 1, 2019 and January 1, 2020, respectively. Ms. Green and Mr. Lane were initially recommended for consideration by the Corporate Governance Committee Chair and the Chairman, respectively, following which the Corporate Governance Committee undertook the evaluation process described immediately below.
Evaluation Process
The Corporate Governance Committee evaluates director nominees incandidates, including those proposed by stockholders, through the contextlens of the Board as a whole with the goal of recommending nominees with diverse backgrounds and experience that, together, can best perpetuate the success of WEC Energy Group’s business and represent stockholder interests. In addition to evaluatingits ongoing director nominees on the basis of the director candidate criteria, Board diversity, and independence as described on page P-66,succession planning process, whereby the Corporate Governance Committee has determined, through the Board succession planning process,ensures that the Board should consistis composed of candidates that collectively possessdirectors who embody certain minimum criteria, and who, as a group, have the following core competencies in orderskills and experiences to effectively carry out its oversight function. By adhering to this philosophy, the Board avoids director candidates with a narrow focus or set of experiences. Core competencies, qualifications, and experienceoversee management's strategy for each director are listed in their respective biographies under the heading "Nominees for Election to the Board of Directors." Just because a core competency is not associated with a director should not be taken as an indicator such director does not posses those particular skills.
Director Term Limits
The Board does not believe it is appropriate or necessary to limit the number of terms a director may serve. The Board values the participation and insight of directors who have developed an increased understanding of the governance of the Company and the specific issues it faces doing business in a complex, regulated industry, as well as those directors who bring fresh and varied perspectives, resulting in a Board with a balanced tenure.
DIRECTOR QUALIFICATIONS
The Corporate Governance Committee evaluatesand the Board evaluate director nominees in light of the Board’s current members, with the goal of recommending nominees with diverse backgrounds and experiences who, together with the current directors, can best perpetuate the success of WEC Energy Group’s business and represent stockholder interests. By adhering to a philosophy whereby director nominees are evaluated on the basis of certain minimum qualifications, Board diversity, and core competencies, the Board is able to attract director candidates including those proposed by stockholders, using this criteriathat bring a broad range of perspectives and process. The process is designedexperiences, and who will effectively contribute to provideand complement the Board.
Key factors considered in recommending the 2020 director nominees are listed below:
To be eligible for consideration, the Board with a diversity of experience and stability to allow it to effectively meetbelieves that any proposed candidate must demonstrate certain minimum qualifications, which the many challenges WEC Energy Group faces in today’s challenging economic environment.Corporate Governance Committee reviews annually:
• Proven integrity • Ability to objectively appraise problems • Relevant technological, political, economic, or social/cultural experience • Familiarity with national and international issues affecting the Company's business | • Mature and independent judgment • Ability to evaluate strategic options and risks • Social consciousness • Contribution to the Board's desired collective diversity | • Vision and imagination • Sound business experience/acumen • Achievement of prominence in career • Availability to serve for five years before reaching the directors' retirement age of 72 (in the case of new directors) |
| WEC Energy Group | ||
While the Corporate Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees, it strives to cast a wide net and recommend candidates who each bring a unique perspective to the Board in order to contribute to a collective diversity - diversity of knowledge, skills, experiences, thought, gender, race/ethnicity, tenure and maturity.
Directors’ qualifications are also evaluated in the context of the Board’s strategic initiatives, financial and operational performance objectives, and material risks. With that in mind, the Corporate Governance Committee and Board have determined through the Board succession planning process that the Board’s composition should consist of candidates that collectively possess a specific set of core competencies as listed in the Proxy Summary on page P-8, in order to effectively carry out its oversight function.
During the fourth quarter of 2019, the Corporate Governance Committee and Board evaluated and affirmed this set of competencies. Each director then performed a self-assessment of his/her level of knowledge in each skill area using the following 3-point scale: “1” Limited knowledge (e.g., no direct experience, primary exposure comes from Board or Committee reports); “2” Intermediate knowledge (e.g., general managerial/oversight experience or broad exposure as a Board or Committee member); “3” Advanced knowledge (e.g., direct experience; subject matter expert). A summary of the Board’s level of knowledge with respect to each of the core competencies was included in the Proxy Summary on page P-8.
DIRECTOR INDEPENDENCE
The guidelines the Board uses in determining director independence are located in Appendix A of the Corporate Governance Guidelines ("Guidelines"), which are available on the Corporate Governance section of the Company’s website at www.wecenergygroup.com/govern/governance.htm. These Guidelines provide that the Board should consist of at least a two-thirds majority of independent directors. The independence standards found in our Guidelines are not only in compliance with the listing standards of the New York Stock Exchange (“NYSE”), but are actually more stringent than the NYSE rules. In order to be deemed independent, the individual must have no material relationship with the Company that would interfere with the exercise of good judgment in carrying out his or her responsibilities as a director.
Prior to initial and annual election, all directors complete a detailed questionnaire that elicits information that is used to ensure compliance with the Board’s and the NYSE’s standards of independence. The Corporate Governance Committee also reviews potential conflicts of interest, including related-party transactions, interlocking directorships, and substantial business, civic and/or social relationships with other members of the Board that could impair the prospective Board member’s ability to act independently from the other Board members and management. The Board also considers whether a director’s immediate family members meet the independence criteria outlined in the Guidelines, as well as whether a director has certain relationships with WEC Energy Group’s affiliates, when determining the director’s independence.
The Board has affirmatively determined that Directors Bowles, Budney, Chadwick, Culver, Cunningham, Farrow, Fischer, Green, Knueppel, Lane, Payne and Stanek are independent. Directors Klappa and Fletcher are not independent due to their employment with the Company. Allen Leverett resigned from the Board in July 2019; he was also not independent due to his employment with the Company.
Director Stanek. Since 2005, WEC Energy Group has engaged Baird Financial Group primarily to provide consulting services for investments held in the Company’s various benefit plan trusts. Baird also provides certain related administrative services. The Board reviewed the terms of this engagement, including the approximately $729,800 in fees paid to Baird in 2019 (which are less than one-tenth of 1% of Baird’s total revenue), and Ms. Stanek’s position at Baird, and concluded that such engagement is not material and did not impact Ms. Stanek’s independence. Ms. Stanek is not involved with and does not consult on the contract with or recommendations made by Baird and receives no direct financial benefit from these services. WEC Energy Group management evaluates Baird’s services against market standards for overall quality and value on a regular basis. Neither the Board nor Ms. Stanek plays a role in the retention of Baird for these services or any related negotiation of commercial terms. In addition, WEC Energy Group’s pension trusts and other benefit accounts do not hold any investments in Baird funds.
| WEC Energy Group | P-13 | 2020 Proxy Statement |
The following 1412 individuals have been nominated for election to the Board of Directors at the WEC Energy Group Annual Meeting. Biographical information for each director nominee is set forth below. Ages are as of January 18, 2018,16, 2020, the date each person was designated as a nominee of the Board for election at the Meeting.
 | |
 | |
 | |
 | |
  | Patricia W. Chadwick Age: Director Since: 2006 Board Committees: Audit and Oversight; Finance |
Ravengate Partners, LLC - President since 1999. Ravengate Partners, LLC provides businesses and not-for-profit institutions with advice about the financial markets, business management, and global economics.
Director of AMICAAmica Mutual Insurance Company since 1992; Director of VOYAVoya Mutual Funds (previously ING Mutual Funds) since 2006; Director of The Royce Funds since 2009.
Director of WEC Energy Group since 2006; Director of Wisconsin Electric Power Company (subsidiary of WEC) from 2006 to June 2015.
Ms. Chadwick, who is a Chartered Financial Analyst, brings to our Board of Directors extensive investment management expertise gained from 30more than 35 years of experience as an investment professional/professional, portfolio manager or principal. As founder and President of Ravengate Partners, a firm that has been educating and advising businesses and not-for-profit institutions about the financial markets independent research, and global economic activitymacro economy since 1999, Ms. Chadwick's insights into what the investment industryindustry’s perspectives is thinking and discussing is of great valuevaluable to the Board as it contemplates itsBoard’s financial planplanning and strategy.strategy discussions. Her knowledge onof capital markets is particularly helpful to WEC Energy Group and its subsidiaries, which operate in a capital intensive industry and must consistently access the capital markets. Ms. Chadwick serves as a director and committee member on the boards of two registered investment companies, VOYAVoya Mutual Funds and The Royce Funds, through which afford her a perspective on current issuesshe has developed extensive governance experience with respect to audit oversight and concerns of today's investors, and she isfinancial reporting. As a board director and Finance Committee member of AMICAAmica Mutual Insurance Company, where she has gained a deep understanding of insurance risk management matters;and oversight matters, which is valuable experience that she applies these to her role on the WEC Energy Group Finance Committee and Audit and Oversight Committee.
  | Curt S. Culver Age: Director Since: 2004 Board Committees: Corporate Governance; Executive; Finance (Chair) |
MGIC Investment Corporation - Non-Executive Chairman of the Board since March 2015. Served as Chairman from 2005 to February 2015, CEO from 2000 to February 2015, and President from 1999 to 2006. MGIC Investment Corporation is the parent of Mortgage Guaranty Insurance Corporation.
Mortgage Guaranty Insurance Corporation - Non-Executive Chairman of the Board since March 2015. Served as Chairman from 2005 to February 2015, CEO from 1999 to February 2015, and President from 1996 to 2006. Mortgage Guaranty Insurance Corporation is a private mortgage insurance company.
Director of MGIC Investment Corporation since 1999.
Director of WEC Energy Group since 2004; Director of Wisconsin Electric Power Company (subsidiary of WEC) from 2004 to June 2015.
Having served for 15 years as the CEO of Mortgage Guaranty Insurance Corporation and its parent company, MGIC Investment Corporation, Mr. Culver brings to our Board of Directors a strong working knowledge of the strategic, economic and compliancepublic policy issues facing a large, publicly-tradedregulated, publicly-held company headquartered in Milwaukee, Wisconsin. AsHis expertise in risk management and oversight is particularly valuable in his service as chair of the Finance Committee, he provides expertise in the financial markets and risk assessment and management;while his experience in the insurance industry alsoexperience puts him in a position to advise onlead the Committee’s evaluation of the Company's insurance program and its effect on overall risk management.management program. Mr. Culver's broad corporate governance experience, developed from his extensive past and present service on the MGIC boards, as well as those of several highly-visible Milwaukee-area non-profit entities and two private for-profit organizations, is of great value to the Board.Board as it carries out its oversight responsibilities.
| WEC Energy Group | ||
  | Danny L. Cunningham Age: Director Since: 2018 Board |
Deloitte & Touche LLP - Retired Partner and Chief Risk Officer. Served as Partner from 2002 to 2015 and as Chief Risk Officer from 2012 to 2015. Deloitte & Touche LLP is an industry-leading audit, consulting, tax and advisory firm.
Director of Enerpac Tool Group Corp. (formerly known as Actuant CorporationCorporation) since 2016.
Director of WEC Energy Group since January 2018.
Mr. Cunningham brings to our Board of Directors more than 30 years of experience serving public audit clients in a broad array of industries, including manufacturing, printing, process, software and financial services, as well as a deep understanding of the business, economic, compliance and governmental environment in which the Company and many of the Company's major customers operate. Mr. Cunningham’s strong expertise in financial reporting, internal controls and audit functions are of great value to the Board as it fulfills its responsibility for oversight of the Company's accurate preparation of financial statements and disclosures, and compliance with legal and regulatory requirements. Having served as chief risk officer at Deloitte & Touche LLP, he gained keen insights into the complexities of risk management, through which he applies his expertise in assessing the effectiveness of the Company's practices and policies to mitigate enterprise-wide risks. Mr. Cunningham’s multi-national experience brings the added diversity of a global perspective to the Board as it evaluates its strategic objectives, while his past service on the boards of several major Milwaukee-area not-for-profit organizations equips him to contribute thoughtful insights on issues impacting the city’s culture, workforce and economic vitality.
  | William M. Farrow III Age: Director Since: 2018 Board Committees:Compensation; Corporate Governance; Finance |
Winston and Wolfe, LLC - Chairman and Chief Executive Officer.Officer since 2010. Winston and Wolfe LLC is a privately held technology development and advisory company.
Urban Partnership Bank - RetiredServed as President and CEO.CEO from August 2010 until retirement in January 2018. UPB provides financial services in moderate income communities located in Chicago, Detroit and Cleveland.
Director of CBOE Global Markets Inc. since 2016; Director of Echo Global Logistics Inc. since 2017.
Director of WEC Energy Group since January 2018.
Mr. Farrow brings to our Board of Directors more than 3940 years of senior leadership experience in managing business operations, technology development, enterprise risk and strategy. His extensive professional experience in the banking and financial markets, accompanied by knowledge acquired from his service on the boards of CBOE Global Markets and the Federal Reserve Bank of Chicago, enables him to add significant value to the Board’s oversight of the Company’s financial management strategy.His first-hand experience and perspectives in addressing advances in information technology, as well as the experience he’she has gained as a current board member on the Audit Committee for both CBOE Global Markets and Echo Global Logistics, is particularly valuable to the Board as WEC Energy Group companies address complex risks, including those associated with protecting operating systems and assets against physical and cyber threats. Having spent his career in the City of Chicago, Mr. Farrow is also able to provide the Board with economic and public policy insight as it relates to conducting business in the City,Chicago, which is further enhanced by the strong relationships he has developed with key leaders while serving on the boards of several highly-visible Chicago-area private, not-for-profit and community organizations. This is especially important given the sizable, long-term construction project that is underway by the Company’s Illinois utility subsidiary to modernize the natural gas infrastructure in the Citycity of Chicago, which requires ongoing collaboration with city and state government officials and regulatory agencies.
| WEC Energy Group | ||
  | Thomas J. Fischer Age: Director Since: 2005 Board Committees: Audit and Oversight (Chair); Compensation; Executive |
Fischer Financial Consulting LLC - Principal since 2002. Fischer Financial Consulting LLC provides consulting on corporate financial, accounting, and governance matters.
Director of Enerpac Tool Group Corp. (formerly known as Actuant CorporationCorporation) from 2003 to January 2017; Director of Badger Meter, Inc. since 2003; Director of Regal Beloit Corporation since 2004.
Director of WEC Energy Group since 2005; Director of Wisconsin Electric Power Company (subsidiary of WEC) from 2005 to June 2015.
Mr. Fischer provides our Board of Directors with significant expertise in accounting and auditing matters, including financial reporting and regulatory compliance, risk assessment and management and corporate governance issues. His experience in these areas comes from 33 years of work at Arthur Andersen, a large, international independent accounting firm, where for 22 years, he served as a partner responsible for services provided to large, complex public and private companies and several public utility audits. Since 2002, Mr. Fischer has provided consulting services to companies in the areas of corporate financial, accounting, and governance matters. Mr. Fischer, who is a Certified Public Accountant, brings extensive knowledge and experience to his responsibilities as WEC Energy Group's Audit and Oversight Committee Chair as a result of his past and present service on several other audit committees at public companies based in Wisconsin. His significant expertise is invaluable to WEC Energy Group's Board as it navigates a complex and evolving regulatory compliance landscape.
  | J. Kevin Fletcher Age: 61 Director Since: 2019 |
WEC Energy Group - CEO since February 2019; President since October 2018.
Wisconsin Electric Power Company (subsidiary of WEC Energy Group) - Chairman of the Board and Chief Executive Officer since February 2019; President from May 2016 to November 2018; Executive Vice President-Customer Service and Operations from June 2015 to May 2016; Senior Vice President-Customer Operations from October 2011 to June 2015.
Director of WEC Energy Group since February 2019; Director of Wisconsin Electric Power Company since June 2015.
Mr. Fletcher also serves as an executive officer and/or director of several other major subsidiaries of WEC Energy Group.
Core competencies, qualifications and experience
Mr. Fletcher has more than 40 years of experience working in the public utility industry, including 25 years at a senior leadership level. Prior to joining the Company in 2011, Mr. Fletcher served as Vice President-Community and Economic Development at Georgia Power, the largest subsidiary of The Southern Company, a public utility holding company primarily serving the southeastern United States. During his 34-year career with Southern Co., 16 of those years as an officer, Mr. Fletcher held leadership positions in operations, customer service, marketing and sales. When he first joined WEC Energy Group, he served as Senior Vice President-Customer Operations of its utility subsidiaries, with overall responsibility for the planning, engineering, construction, operation and maintenance of the Company’s electric and natural gas distribution systems in Wisconsin and Michigan’s Upper Peninsula. In May 2016, he was appointed to serve as President of the Company’s Wisconsin utility subsidiaries, and assumed responsibilities as President of the Company’s Minnesota and Michigan utility subsidiaries in September 2018. In October 2018, Mr. Fletcher was appointed President of WEC Energy Group, followed by his appointment to CEO in February 2019, whereby he has financial and operational responsibility for all of the Company's utility subsidiaries. He also has held responsibility for the supplier diversity initiative across all of the Company’s utilities. With his extensive experience in business operations, customer service and senior leadership of publicly regulated utilities, Mr. Fletcher contributes substantive insight into the Company’s industry and customers, to the management team and to the Board.
| WEC Energy Group | P-16 | 2020 Proxy Statement |
 | Maria C. Green Age: 67 Director Since: 2019 Board Committee: Corporate Governance |
Ingersoll Rand Inc. - Retired Senior Vice President and General Counsel, having served in those roles from 2015 to June 2019. Ingersoll Rand Inc. is a diversified industrial manufacturer with market-leading brands serving customers in global commercial, industrial and residential markets.
Illinois Tool Works Inc. - Senior Vice President and General Counsel, 2012 to 2015. Illinois Tool Works Inc. produces engineered fasteners and components, equipment and consumable systems, and specialty products.
Director of Tennant Company since May 2019; Director of Littelfuse since February 2020.
Director of WEC Energy Group since October 2019.
Core competencies, qualifications and experience
Ms. Green brings to our Board senior leadership experience accumulated during her 35-year career in law and business, including extensive public company experience in strategic planning, acquisitions, enterprise risk management and shareholder relations. She has substantial experience with respect to corporate sustainability matters, including oversight responsibility for environmental compliance and corporate responsibility reporting, as well as engagement with investors on these matters. Having served in the role of corporate secretary for several public companies, Ms. Green’s deep corporate governance experience is of tremendous value to the Board as it carries out its evolving oversight responsibilities. Ms. Green also contributes valuable insights into the economic, educational and social matters impacting the greater Chicago community, where the Company has two utility subsidiaries. In particular, these insights come from having served for 18 years at Illinois Tool Works, a Fortune 200 global diversified manufacturing company headquartered in the northern suburbs of Chicago, and as a member (and past chairman) of the Chicago Urban League executive committee.
 | Gale E. Klappa Age: Director Since: 2003 Board Committee: Executive (Chair) |
WEC Energy Group Inc. –- Executive Chairman since February 2019; Chairman of the Board and Chief Executive OfficerCEO from 2004 to May 2016 and October 2017 to present;February 2019; Non-Executive Chairman of the Board from May 2016 to October 2017; President from 2003 to August 2013.
Wisconsin Electric Power Company –(subsidiary of WEC) - Chairman of the Board from 2004 to May 2016 and January 2018 to present; Chief Executive OfficerFebruary 2019; CEO from 2003 to May 2016 and January 2018 to present;February 2019; President from 2003 to June 2015.
Director of Associated Banc-Corp since 2016;2016 and Director of Badger Meter, Inc. since 2010;2010, both headquartered in Wisconsin; Director of Joy Global Inc. from 2006 to 2017.
Director of WEC Energy Group Inc. since 2003; Director of Wisconsin Electric Power Company (subsidiary of WEC Energy Group) from 2003 to May 2016 and January 2018 to present.
Mr. Klappa also serves as an executive officer and/ora director of several other major subsidiaries of WEC Energy Group.
Mr. Klappa has more than 40 years of experience working in the public utility industry, including more than 25 at a senior executive level. He retired as the Company's CEO in May 2016, at which time he assumed the role of Non-Executive Chairman of the Board. Prior to joining the Company in 2003, Mr. Klappa served in various executive leadership roles at The Southern Company, a public utility holding company primarily serving the southeastern United States. Under his leadership, WEC Energy Group successfully completed its 2015 acquisition of Integrys Energy Group, which nearly doubled the employee and customer population, and increased the Company’s geographic footprint to four states. With his extensive experience in the business operations and C-suite leadership of publicly regulated utilities, his service as a board member for several other public companies, and his contributions to significant economic development initiatives in southeastern Wisconsin, Mr. Klappa has led the Board with a deep understanding of the financial investment decisions and public policy issues facing large public companies in the utility sector.companies. In October 2017, after the Company’s then-CEO Allen Leverett, suffered a stroke. In response,stroke, the Board appointed Mr. Klappa to serve in the role of CEO, while also having him retain his role of Board Chairman. With the appointment of Mr. Fletcher as CEO effective February 2019, Mr. Klappa now serves as Executive Chairman. Mr. Klappa’s deep knowledge of the Company’s industry, customers, stockholders and management team has allowed for strong continuity during Mr. Leverett’s absence.is of great value to the Board.
| WEC Energy Group | ||
  | Henry W. Knueppel Age: Director Since: 2013 Board Committees: Audit and Oversight; Corporate Governance |
Regal Beloit Corporation - Retired Chairman of the Board and CEO. Served as CEO from 2005 to 2011 and as Chairman from 2006 to 2011. Regal Beloit Corporation is a leading manufacturer of electric motors, mechanical and electrical motion controls, and power generation products.
Harsco Corporation - Independent, Non-Executive Chairman of the Board from September 2012 until September 2014. Served as Interim Chairman and CEO from February 2012 to September 2012.2012 and Director from 2008 to April 2016. Harsco Corporation is a diversified, worldwide industrial services company.
Director of Regal Beloit Corporation since 1987; Director of Snap-on Incorporated since 2011.
Director of WEC Energy Group since 2013; Director of Wisconsin Electric Power Company (subsidiary of WEC Energy Group) from 2013 to June 2015.
With more than 30 years of senior management experience at Regal Beloit Corporation, including five years as the combined Chairman of the Board and CEO, Mr. Knueppel brings extensive executive management experience to our Board, of Directors.including strategic planning, financial strategy and talent management perspective. Regal Beloit Corporation is a Wisconsin-based manufacturer of electrical motors, mechanical and electrical motion controls, and power generation products, which gives Mr. Knueppel knowledge of key equipment used in the Company's operations. He currently servesHis current and former service on the boards of several large, publicly-tradedpublicly traded industrial companies and provides the Board with perspective on operational and customer service matters the Company faces with ourin serving its large commercial and industrial customers. Mr. Knueppel also brings to the Board a wide range of knowledge and experience in boardcorporate governance, having served for more than 30 years as a director for several publicly-tradedpublicly traded companies, including his role as the independent, nonexecutivenon‑executive chairman of the board of Harsco Corporation.
Corporation.
  | Age: Director Since: Board |
Director of Summit Midstream Partners, LP since August 2013; Executive Vice President from 2004 through July 2013; Chief Financial Officer ("CFO") from 2003 until 2011. Mr. Leverett also served as the principal executive officer2009; Director of WEC Energy Group’s generation operations from 2011 to May 2016.
Director of WEC Energy Group since January 2016; Director of Wisconsin Electric Power Company from June 2015 to January 2018.2020.
financial plan.
| WEC Energy Group | ||
  | Ulice Payne, Jr. Age: Director Since: 2003 Board Committees: |
Addison-Clifton, LLC - Managing Member since 2004. Addison-Clifton, LLC provides global trade compliance advisory services.
Director of Foot Locker, Inc. since December 2016; Director of Manpower Group since 2007; Trustee of The Northwestern Mutual Life Insurance Company since 2005.from 2005 to 2018.
Director of WEC Energy Group since 2003; Director of Wisconsin Electric Power Company (subsidiary of WEC Energy Group) from 2003 to June 2015.
Mr. Payne brings to our Board of Directors strong businesssenior leadership and public service experience within the localgreater Milwaukee community and State of Wisconsin, having previously servingserved in roles that included the Securities Commissioner for the stateState of Wisconsin, managing partner of the Milwaukee law office of the law firm Foley & Lardner LLP and president and CEO of the Milwaukee Brewers Baseball Club, Inc. In addition, Mr. Payne is and has been involved in numerous Milwaukee-area non-profit entities, making him well-positioned to provide the Board with perspective on the economic and social issues affecting the greater Milwaukee area, as well as a broad spectrum of the Company's customers. As founder and President of Addison-Clifton, LLC, which provides global trade compliance consulting, Mr. Payne understands the importance of providing clients with exceptional customer service, a focus that is critical to execution of WEC Energy Group's strategic initiatives. Mr. Payne also contributes valuable financial and risk assessment insights gained throughout his career, including from his past and present service on the boards of several public companies.companies, for which he has served as a member of the Audit, Finance, and/or Corporate Governance committees.
  | Mary Ellen Stanek Age: Director Since: 2012 Board Committee: Finance |
Baird Financial Group - Managing Director and Director of Asset Management since 2000. Baird Financial Group provides wealth management, capital markets, private equity, and asset management services to clients worldwide.
Baird Advisors - Chief Investment Officer since 2000. Baird Advisors is an institutional fixed income investment advisor.
Baird Funds, Inc. - President since 2000. Baird Funds is a publicly registered investment company.
Trustee of The Northwestern Mutual Life Insurance Company since 2009.
Director of Journal Media Group, Inc. and its predecessor companies from 2002 to April 2016.
Director of WEC Energy Group since 2012; Director of Wisconsin Electric Power Company (subsidiary of WEC Energy Group) from 2012 to June 2015.
Ms. Stanek, who is a Chartered Financial Analyst, brings to our Board of Directors her extensive financial and investment strategy expertise, resulting from over 3540 years of investment management experience. As Managing Director and Director of Asset Management of Baird Financial Group, a position she has held since 2000, Ms. Stanek's expertise in fixed income investments provides the Board and management with invaluable financial strategy insight relative to WEC Energy Group and its subsidiaries, which customarily issue debt securities as a means of raising capital. As a member of the WEC Energy Group Finance Committee, she also offers valuable perspective on insurance risk matters, having served for 15 years as a director of West Bend Mutual Insurance Company. In addition to her recognition as a prominent business leader in Milwaukee's financial community, Ms. Stanek has dedicated significant time to serving on the boards of a large number of Milwaukee-area non-profit organizations, through which she has developed strong relationships with key community leaders and stakeholders. From these experiences, she brings the Board insightful perspectives on issues impacting the culture and viability of the workforce, as well as customer concerns.today’s workforce.
| WEC Energy Group | ||
Governance
Accountability to stockholders is critical to the Company’s long-term success. We have mechanisms in place to ensure that management and the Board hear, understand, and consider the issues that matter most to our stockholders. This ongoing engagement provides valuable insight into how our stockholders view the Company’s practices and policies, shapes the processes used to evaluate goals and expectations, and identifies emerging issues that may affect our corporate governance and compensation practices.
STOCKHOLDER ENGAGEMENT
Under the Board’s oversight, Company leadership, including the Executive Chairman, regularly engages with investors to discuss business results, strategic direction and corporate governance and compensation practices through a year-round stockholder engagement program, which provides valuable feedback to the Board about its governance practices.
Opportunities for investors to interact with the Company took many forms during 2019:
Proactively communicated with stockholders representing more than 40% of the Company's outstanding common stock about issues of interest, including corporate strategy, financial and operational performance, corporate governance, executive compensation and matters related to environmental, social and governance ("ESG") risks and opportunities. Key take-aways are reported to the Board and are taken into consideration when reviewing and modifying overall governance practices, policies and disclosures.
Investor presentations conducted at analyst meetings and investor conferences across the U.S., Canada, Europe, Asia and Australia.
Access to webcasts of the Annual Meeting of Stockholders and quarterly earnings conference calls, and to timely disclosures including the annual report, news releases, filings with the Securities and Exchange Commission ("SEC") and other significant corporate publications on our Website.
With respect to the Annual Meeting of Stockholders, opportunity to attend and voice opinions, submit stockholder proposals and director nominees, formally nominate director candidates using proxy access as permitted under our bylaws, elect directors by majority vote in uncontested elections, and vote on our executive compensation program ("say-on-pay").
Process for stockholders to directly correspond with individual directors via the Corporate Secretary (see page P-29).
Below is a summary of our yearly corporate governance practices related to stockholder engagement on executive compensation matters and ESG topics.
| SUMMER | FALL | WINTER | SPRING |
• Review results from the Annual Meeting of Stockholders • Engage with stockholders to discuss voting results • Conduct annual assessment of corporate governance and executive compensation practices to identify potential areas of focus • Discuss voting results, investor feedback, and annual assessment with Board | • Meet with investors to discuss executive compensation practices and ESG topics • Consider enhancements to our practices and disclosures based on investor feedback • Share investor feedback and recommendations for changes in practices and disclosures with Board committees and full Board | • Continue meeting with investors to discuss executive compensation practices and ESG topics • Board approves, as needed, any changes or enhancements to practices and disclosures • Develop disclosures for the proxy statement | • Publish annual disclosure documents (Form 10-K, Annual Report, Proxy Statement) • Hold Annual Meeting of Stockholders |
| WEC Energy Group | P-20 | 2020 Proxy Statement |
CORPORATE GOVERNANCE FRAMEWORK
Corporate Governance Guidelines
For more than 20 years, WEC Energy Group has maintained a formal set of Corporate Governance Guidelines, which have been modified over the years in response to evolving governance best practices and stockholder expectations. To maintain effective guidelines, the Corporate Governance Committee annually reviews the Company’s governance practices, taking into consideration input from stockholders, best practices, industry surveys, rating agency reports, and benchmarking studies, as well as governance guidelines published by institutional investors and proxy advisors.
Key governance practices exercised by the Board, which align with the recommendations contained in the Commonsense Principals 2.0 of Corporate Governance, a governance framework that was first published in 2016 by a group of business and investment leaders, include:
| GOVERNANCE PRINCIPLES | WEC ENERGY GROUP PRACTICES | |
| Board composition | ü | • 10 out of 12 independent directors (based on director nominees) • Diverse representation of skills and competencies, as well as professional and personal attributes • Comprehensive, ongoing Board succession planning process • Regular Board refreshment and balanced mix of tenure |
| Board leadership | ü | • Separate CEO/Chair roles • Presiding independent director with defined duties • Chairman active in stockholder engagement and communications |
| Board governance practices | ü | • Expectation that directors will dedicate sufficient time to perform duties; limit on number of outside public company directorships • Annual performance evaluations of Executive Chairman, CEO, Board and Board committees • 100% independent Audit, Compensation, Finance and Governance Committees • Board participation in critical activities, including agenda setting for Board meetings and strategic planning • Complete access for Board members to management and outside advisors • Stock ownership requirements for directors and executives • Regular executive sessions of independent directors at Board and committee meetings • Expectation that directors participate in the annual meeting with stockholders |
| Stockholder voting rights | ü | • Annual election of directors with majority voting standard • One-share, one-vote standard (dual class voting is not practiced) • Proxy access provision • Annual "say-on-pay" advisory vote • Special meeting provision |
| Executive compensation | ü | • Aligned with long-term performance and business strategy • Utilizes short- and long-term metrics, cash, and equity components; substantial portion is at risk • Public disclosure of peer groups, benchmarks, and performance measurements • Independent compensation consultant • Clawback policies for cash and equity • Prohibition of hedging and pledging of Company securities |
Business Conduct and Ethics
WEC Energy Group’s Code of Business Conduct (“Code”) is the foundation of the Company’s Ethics and Compliance program, as it sets the standards for creating and sustaining a culture of ethics and integrity. The Compliance Officer oversees the management and operations of the program, for which he provides regular update reports to the Board’s Audit and Oversight Committee. All WEC Energy Group directors, executive officers and employees, including the principal executive, financial and accounting officers, have a responsibility to comply with the Code, to seek advice in doubtful situations and to report suspected violations.
| WEC Energy Group | P-21 | 2020 Proxy Statement |
The Code addresses expectations for Company culture, including among other things: non-retaliation for raising concerns; safety; diversity and inclusion; conflicts of interest; confidentiality; fair dealing; protection and proper use of Company resources, assets and information; and compliance with laws, rules and regulations (including insider trading laws). For more information, see the Governance section of our website: www.wecenergygroup.com/govern/codeofbusinessconduct.pdf
The Company has several ways individuals can report concerns and raise questions concerning the Code and other Company policies. As one reporting mechanism, the Company has contracted with an independent service so that individuals can confidentially and anonymously report suspected violations of the Code or other concerns, including those regarding accounting, internal accounting controls or auditing matters. The Company has not provided any waiver to the Code for any director, executive officer or other employee.
Related Party Transactions/Conflicts of Interest
The Code addresses, among other things, how to identify and report potential conflicts of interest, including those from related-party transactions. The Code lists the following as examples of potentially problematic situations: (1) family members who are a supplier, contractor or customer of the Company or work for one; (2) obtaining any financial interest in or participating in any business relationship with any company, individual or concern doing business with WEC Energy Group or any of its subsidiariesthat might influence the individual’s decisions or job performance; (3) participating in any joint venture, partnership or other business relationship with WEC Energy Group or any of its subsidiaries; and (4) serving as an officer or member of the board of any substantial, outside for-profit organization.
Because the Board is mindful of the expectation of its directors to devote the time necessary to carefully fulfill their fiduciary duties, the Corporate Governance Guidelines contain additional requirements for directors seeking to join other boards. For example, all directors must notify the Company’s Corporate Secretary before accepting a nomination for a position on the board of another public company and the CEO must obtain the approval of the full Board before accepting such a position.
To further backstop such discussions and approvals, every year all directors, director nominees and executive officers are required to complete a questionnaire that asks about any business relationship that may give rise to a conflict of interest and all transactions in which the Company or one of its subsidiaries is involved and in which the director, director nominee or executive officer or a relative or affiliate of such director, nominee or executive officer has a direct or indirect material interest.The Corporate Secretary discusses the results of this diligence with the Corporate Governance Committee.
Since January 1, 2019, there have been no related-party transactions, and there are no currently proposed related-party transactions, required to be disclosed pursuant to SEC rules.
RISK OVERSIGHT
The Board has overall responsibility for risk oversight and, in that capacity, oversees the Company's risk environment and associated management practices as part of its evaluation of the Company's ongoing operations and strategic direction. To carry out its oversight function, the Board is organized into five standing committees with specific duties and risk-monitoring responsibilities: Audit and Oversight, Compensation, Corporate Governance, Executive and Finance. With the exception of the Executive Committee, each of the Board’s committees meets regularly throughout the year, and receives regular briefings prepared by management and outside advisors on specific areas of current and emerging risks to the enterprise, as captured through the Company's enterprise risk management framework.
The Company has an Enterprise Risk Steering Committee ("ERSC"), comprised of senior-level management employees whose purpose is to foster an enterprise-wide approach to identifying and managing risk. The Audit Services department conducts an annual enterprise risk assessment, whereby business leaders identify existing, new or emerging issues or changes within their business areas that could have enterprise implications. Risk areas are then mapped to create a cumulative assessment of their significance and likelihood, taking into consideration industry benchmarking information, as appropriate. The mapping also identifies lines of responsibility for managing the risks to ensure accountability and focus. On a regular basis, the ERSC discusses findings of this assessment, holds in-depth discussions with members of management on identified subjects, and tracks progress and status of mitigation efforts. Senior management is tasked with ensuring that these risks and opportunities are appropriately addressed. The results of these risk management efforts are reported to the executive leadership team and are the subject of regular reports to the Board and its committees.
| WEC Energy Group | P-22 | 2020 Proxy Statement |
The committees routinely report to the full Board on matters that fall within the designated areas of responsibility, as described in their respective charters. Examples of risk monitoring activity that have been designated to committees are shown in the chart below. More information on the committees' duties and responsibilities begins on page P-25.
While the Board delegates specified duties to its committees, the Board retains collective responsibility for comprehensive risk oversight, including short- and long-term critical risks that could impact the Company's sustainability. The Board believes that certain risks should be contemplated by the full Board. Examples include the Board's (i) oversight of environmental and social risks, including the potential impact of climate change on the utility sector, (ii) review and approval of mergers and acquisitions, and (iii) review and approval of significant capital projects and investments.
Executive sessions for the non-management directors are generally held at every regularly scheduled board and committee meeting, during which directors have direct access to, and meet as needed with, Company representatives to discuss matters related to risk management. Outside of scheduled meetings, the Board, its committees and individual Board members have full access to senior executives and other key employees, including the CEO, CFO, General Counsel, Chief Audit Officer, Compliance Officer, Chief Information Officer and Controller. They are also free to engage with the leaders of our utility companies and our corporate center departments, including customer service, environmental, external affairs, human resources, investor relations, tax and treasury.
The Board believes that its leadership structure, in combination with management's enterprise risk management program, effectively supports the risk oversight function of the Board.
ENVIRONMENTAL AND SOCIAL GOVERNANCE
The Board is vigilant in its oversight of management’s strategic decision-making as it navigates important developments in the utility industry. This includes oversight of the approach we take in fulfilling environmental and social stewardship matters. The Board is mindful of its responsibility to provide safe, reliable and affordable energy, preserve the Company’s long-term value and make choices that take into account the interests of our stakeholders and well-being of our communities, now and in the future.
Examples of ways in which the Company demonstrated its commitment to strong environmental and social stewardship in 2019 are spotlighted below.
Commitment to delivering a clean energy future:
Met and exceeded our 2030 goal of reducing carbon emissions by 40% below 2005 levels. Given our progress, we are re-evaluating our longer-term carbon reduction goals.
Continued to execute on our generation reshaping plan, retiring the Presque Isle Power Plant, which was an older, less efficient coal-fired generating plant, and constructing 180 MW of natural gas-fueled generation in the Upper Peninsula of Michigan. We have retired 40% of our coal generation since 2014.
| WEC Energy Group | P-23 | 2020 Proxy Statement |
Broke ground on two major solar initiatives in Wisconsin, with Wisconsin Public Service Corporation owning 100 megawatts of each project.
Filed with the Public Service Commission of Wisconsin (“PSCW”) for approval for Wisconsin Electric Power Company (“WE”) to partner with an unaffiliated utility on one additional solar project, where WE will own 100 megawatts of the output from the project.
Received PSCW approval for WE to participate in two renewable energy pilot programs that could add up to a total of 185 megawatts of renewables to WE’s portfolio.
Set a new long-term goal to reduce the rate of methane emissions from our natural gas distribution lines by 30% per mile from a 2011 baseline by 2030. By the end of 2019, we were more than halfway toward achieving that goal.
Commitment to our stakeholders:
Named as one of America’s Best Employers for Diversity by Forbes Magazine.
Conducted enterprisewide workplace ethics survey to gauge employee perceptions of the company's actions, process and operating style.
Received the Above and Beyond Award in recognition of providing employees who serve in a military capacity with additional non-mandated benefits to ease burdens associated with deployment.
Both of our Wisconsin electric utilities earned PA Consulting's Reliability One Awards for outstanding electric reliability performance in the Midwest.
WEC Energy Group was named best in the U.S. by J.D. Power in their 2019 Large Customer Satisfaction study (Top 2 box).
Recognized as second-largest corporate charitable contributor in Wisconsin by Milwaukee Business Journal.
Spent $282.6 million with certified minority-, women-, service-disabled- and veteran-owned businesses.
2019 Priority Sustainability Issues Assessment Project
During 2019, the Company partnered with the Electric Power Research Institute to conduct a rigorous analysis of the Company's sustainability priorities, looking for insights and validation from internal and external stakeholders. Findings from this project are being used to inform our sustainability strategy and disclosures, beginning with our upcoming Corporate Responsibility Report.
2019 Climate Report
In April 2019, the Company issued its first climate report, Pathway to a Cleaner Energy Future, to illustrate the approach we are taking to reduce greenhouse gas emissions and to present an analysis of factors that could affect our future decision-making. We collaborated with the Electric Power Research Institute to evaluate potential climate scenarios and better understand the related risks, opportunities and uncertainties. The report was prepared in conformity with the Task Force on Climate-Related Financial Disclosures (TCFD).
Commitment to Reporting Transparency
We value the importance our stakeholders place on understanding how we manage risks and opportunities associated with sustaining our enterprise. In addition to engaging directly with stakeholders on environmental and social issues, we are committed to continually enhancing our transparency on these matters through a variety of reporting mechanisms, including those noted below. Further, we routinely respond to data verification and survey requests from a substantial number of third party organizations seeking input regarding our ESG performance, programs and policies.
See the Corporate Responsibility section of our website for more details: www.wecenergygroup.com/csr
| WEC Energy Group | P-24 | 2020 Proxy Statement |
BOARD LEADERSHIP
Leadership Structure
Consistent with WEC Energy Group's bylaws and Corporate Governance Guidelines, the Board retains the right to exercise its discretion in combining or separating the offices of the Chief Executive Officer and Chairman of the Board. As part of the Board's executive succession plan, effective February 1, 2019, the Board appointed J. Kevin Fletcher as CEO and named Mr. Klappa as Executive Chairman of the Board, thereby separating the CEO and Chair positions. The Board believes this leadership structure is in the best interests of the Company's stockholders at this time. Separating these positions allows Mr. Fletcher to focus on implementing the Company's operating plans and leading the day-to-day management of our seven customer-facing utilities, and allows Mr. Klappa to lead the board in its oversight, advisory and risk management roles, with added leadership responsibility for Company strategy, capital allocation, investor relations and economic development matters.
Independent Presiding Director
Our Corporate Governance Guidelines detail the specific duties to be performed by the Board’s Independent Presiding Director, a position that is currently held by Director Bowles, Chair of the Corporate Governance Committee. Duties of this role include:
presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the
non-management directors;
serves as liaison between the CEO and the independent directors under most circumstances, although each individual director has full access to the CEO;
has authority to call meetings of the independent directors;
reviews and approves meeting agendas for the Board and its committees;
reviews and approves meeting schedules to assure there is sufficient time for discussion of all agenda items;
reviews all proposed changes to committee charters; and
leads the annual Board evaluation.
The Board expects that Ms. Bowles will continue to serve in this capacity until the 2020 Annual Meeting of Stockholders, when she will complete her service as a director. The Board is committed to appointing a fully independent director to assume this position.
BOARD AND COMMITTEE PRACTICES
Board Meetings
During 2019, the Board met seven times and executed four written unanimous consents. All directors attended more than 75% of the total number of meetings of the Board and Board committees on which he or she served, with average director attendance at more than 94%. Generally, all directors are expected to attend the Company’s Annual Meetings of Stockholders. With the exception of Mr. Leverett, all of the director nominees who were standing for election at the 2019 Annual Meeting of Stockholders held on May 2, 2019 were in attendance.
Executive Sessions
At every regularly scheduled Board and committee meeting, executive sessions are scheduled, and are generally held, for the non-management directors to meet without management present. An executive session of independent directors was held at every regularly scheduled Board meeting in 2019.
Director Orientation and Continuing Education
Management takes seriously its responsibility to onboard new directors and provide ongoing education for existing directors on the unique and complex issues inherent in operating a public company in the regulated utility industry.
Management has created a robust orientation program that introduces new directors to the Company’s organizational structure, businesses, strategies, risks and opportunities, which includes in-house and field programs such as walking tours of the Company's generating facilities and project sites, senior management presentations and individual sessions with senior leaders. These activities assist new directors in developing and/or enhancing their Company and industry knowledge to optimize their service on the Board.
Ongoing opportunities to participate in continuing education are provided to the directors in the form of internally developed materials and presentations, programs presented by third parties and financial support to attend qualifying academic or other independent programs, which help our directors enhance the skills and knowledge needed to carry out their responsibilities. During 2019, management facilitated numerous educational programs in which both Company and third-party experts presented to and discussed with the directors a variety of strategic and industry-related topics. In addition, all of our directors are members of the National Association of Corporate Directors.
| WEC Energy Group | P-25 | 2020 Proxy Statement |
Succession Planning
Board Succession Planning
The Board is regularly engaged in rigorous discussions on Board succession planning, taking into consideration matters such as: current inventory of director skills; diversity, including gender, race/ethnicity, retirement age and tenure; and future competencies needed to support appropriate oversight of the Company's strategic initiatives, financial and operational performance, and enterprise risks. During 2019, these discussions took into consideration (1) the impact of Directors Bowles and Budney completing their service on the Board at the 2020 Annual Meeting of Stockholders, (2) the benefits of Director Fischer continuing service for one additional year and (3) the fact that two other directors are expected to complete their service at the 2021 Annual Meeting of Stockholders.
Two New Director Nominees
The election of Directors Green and Lane, effective October 2019 and January 2020, respectively, strategically replaced and enhanced skills essential for carrying out the Board's evolving oversight responsibilities, and also fulfilled our commitment to retaining the Board's gender diversity. The Board's decision to nominate Director Fischer for one additional year of service beyond retirement age is intended to provide additional continuity as new members join the Board, and in particular, provide valued assistance with the planned rotation of his Audit and Oversight Committee Chair role to an independent director following the 2020 Annual Meeting of Stockholders.
Management Succession Planning
Company leaders have the responsibility to continually develop the talent across the organization through the broadening and deepening of business and leadership knowledge. As an ongoing strategic initiative, succession planning and internal talent development are integral components of our workforce planning process, which includes discussions at all levels of the organization, including with the Board. Throughout 2019, the Board was actively engaged in oversight of the senior and executive management succession planning process and spent considerable time discussing executive management's plans to foster a deep talent bench and plan for senior leadership succession. The Compensation Committee, which has responsibility for reviewing organizational changes that have a significant impact on the Company, as well as reviewing succession plans for executive officers, held numerous discussions throughout 2019 to discuss the Company's recruiting and development programs, which included updates on key talent, as well as workforce demographics across the organization.
Annual Performance Evaluations
CEO Performance
The Compensation Committee, on behalf of the Board, annually evaluates the performance of the CEO and reports the results to the Board. The CEO is evaluated in a number of areas including leadership, vision, financial stewardship, strategy development and execution, management development, effective communication with constituencies, demonstrated integrity and effective representation of the Company in community and industry affairs.
As part of this practice, the Compensation Committee Chair individually obtains from each non-management director his or her input on the CEO’s performance, which is summarized and discussed with the Compensation Committee members and next in executive session with all non-management directors. The Compensation Committee Chair then shares the evaluation results with the CEO. This procedure allows the Board to evaluate the CEO and to communicate the Board’s expectations. The Compensation Committee considers the input of all non-management directors in determining appropriate compensation for the CEO. This process was completed for Mr. Fletcher in December 2019.
Executive Chairman Performance
Under the same process and timing as the CEO evaluation, the Compensation Committee Chair facilitated the annual performance evaluation of Mr. Klappa in his role as Executive Chairman, and thereafter approved a 2020 compensation package for Mr. Klappa in December 2019.
Board Performance
Led by the Independent Presiding Director, the Board annually evaluates its own performance using a framework of questions developed by the National Association of Corporate Directors. In advance of one-on-one interviews scheduled between the Independent Presiding Director and each board director, the directors are instructed to consider several “reflection” questions, in addition to a list of questions that fall within five broad categories: (i) board composition and leadership; (ii) board committees; (iii) board meetings; (iv) overall effectiveness of the Board; and (v) overall effectiveness of the Board with regard to management.
Using this interview process provides each Board member an opportunity to speak candidly. At the conclusion of the individual feedback sessions, the Independent Presiding Director first leads the Corporate Governance Committee, and then the Board, through a group discussion of key takeaways. This evaluation process was conducted in December of 2019. The Corporate Governance Committee and the Board discussed the board evaluation results at their meetings in January 2020. It is standard
| WEC Energy Group | P-26 | 2020 Proxy Statement |
practice for the Corporate Governance Committee to use the results of this process to foster continuous improvement of the Board's governance activities.
Committee Performance
Each committee, except the Executive Committee, conducts an annual performance evaluation of its own activities and reports the results to the Board. During this evaluation, each committee compares its performance against the requirements of its charter and its annual planning calendar; contemplates a series of questions related to the qualifications and performance of committee members; considers the quality and quantity of information provided to the committee in advance of its meetings; and evaluates the effectiveness of the processes the committee uses to carry out its oversight responsibilities. The results of the annual evaluations are used by each committee to identify its strengths and areas where its governance practices can be improved. Each committee may recommend changes to its charter to the full Board based upon the evaluation results.
It is also standard practice for the Corporate Governance Committee annually to conduct a holistic review of all of the Committees' charters and annual planning calendars, taking into consideration evolving and new best practices with respect to risk oversight. Recommendations are routed to the appropriate Committee Chair, as needed, for consideration.
BOARD COMMITTEES
The Board of Directors has the following committees: Audit and Oversight, Compensation, Corporate Governance, Executive and Finance. Each committee, except the Executive Committee, operates under a charter approved by the Board, which can be found on our website at www.wecenergygroup.com/govern/committee-comp.htm. With the exception of the Executive Committee, only independent directors serve on the standing committees.
Directors Barbara Bowles and Albert Budney will complete their service as directors in May 2020, and thus are not serving as nominees for re-election at the 2020 Annual Meeting of Stockholders. Mr. Budney currently serves as a member of the Corporate Governance Committee. Ms. Bowles currently chairs the Corporate Governance Committee, is a member of the Audit and Oversight Committee and the Executive Committee, and also serves as the Independent Presiding Director.
Following the 2020 Annual Meeting of Stockholders, the Board will appoint an independent director to serve as both the Corporate Governance Committee Chair and as the Independent Presiding Director.
The Board will also appoint an independent director to serve as Audit and Oversight Committee Chair immediately following the 2020 Annual Meeting of Stockholders; if re-elected, Director Fischer will remain on the Audit and Oversight Committee to provide continuity during this leadership transition, and he will also remain a member of the Compensation Committee.
| Members | |
Thomas J. Fischer, Chair Barbara L. Bowles Patricia W. Chadwick Danny L. Cunningham Henry W. Knueppel 2019 Meetings: 6 | • Oversee the integrity of the financial statements. • Oversee management compliance with legal and regulatory requirements. • Review the Company's environmental and compliance programs. • Review, approve, and evaluate the independent auditors’ services. • Oversee the performance of the internal audit function and independent auditors. • Discuss risk management and major risk exposures and steps taken to monitor and control such exposures. • Establish procedures for the submission and treatment of complaints and concerns regarding the Company’s accounting controls and auditing matters. • Prepare the audit committee report required by the SEC for inclusion in the proxy statement. |
| The Audit and Oversight Committee | |
| WEC Energy Group | P-27 | 2020 Proxy Statement |
| Compensation | |
| Members | Key Responsibilities |
Ulice Payne, Jr., Chair William M. Farrow III Thomas J. Fischer 2019 Meetings: 7* | • • • Review and approve the compensation paid to select employees, including certain senior officers and executive officers (including base salaries, incentive compensation, and benefits). • Establish and administer the CEO and Executive Chairman compensation packages. • Set performance goals • Annually evaluate • Oversee succession planning and assignments to key executive officers. • Prepare the report required by the SEC for inclusion in the proxy statement. • Review the results of the most recent stockholder advisory vote on compensation of the named executive officers ("NEOs"). |
*Included one joint meeting with the Corporate Governance Committee. The Compensation Committee The Compensation Committee is charged with administering the compensation package of WEC Energy Group’s non-management directors. The Compensation Committee meets with the Corporate Governance Committee annually to review the compensation package of WEC Energy Group’s non-management directors and to determine the appropriate amount of such compensation. The Compensation Committee, which has authority to retain advisers, including compensation consultants, at WEC Energy Group’s expense, retained Frederic W. Cook & Co., Inc. ("FW Cook") to analyze and help develop the Company’s executive compensation program, and to assess whether the compensation program is competitive and supports the Committee’s objectives. FW Cook also assesses and provides recommendations on non-management director compensation, as discussed in In connection with its retention of FW Cook, the Compensation Committee reviewed FW Cook’s independence, including: (1) the amount of fees received by FW Cook from WEC Energy Group as a percentage of FW Cook’s total revenue; (2) FW Cook’s policies and procedures designed to prevent conflicts of interest; and (3) the existence of any business or personal relationships that could impact independence. After reviewing these and other factors, the Compensation Committee determined that FW Cook is independent and the engagement did not present any conflicts of interest. FW Cook also determined that it was independent from the Company’s management, which was confirmed in a written For more information regarding our executive and director compensation processes and procedures, please refer to “Compensation Discussion and Analysis” beginning on page P-33 and to "Director Compensation" beginning on page P-30, respectively. | |
| Corporate Governance | |
| Members | Key Responsibilities |
Barbara L. Bowles, Chair Albert J. Budney, Jr. Curt S. Culver William M. Farrow III Maria C. Green Henry W. Knueppel 2019 Meetings: 5* | • Establish and annually review the Corporate Governance Guidelines to verify that the Board is effectively performing its fiduciary responsibilities to stockholders. • Establish and annually review director candidate selection criteria. • Identify and recommend candidates to be named as nominees of the Board for election as directors. • Lead the Board in its annual review of the Board’s performance. |
The Corporate Governance Committee | |
| WEC Energy Group | P-28 | 2020 Proxy Statement |
| Executive | |
| The Board also has an Executive Committee, which may exercise all powers vested in the Board except action regarding dividends or other distributions to stockholders, filling Board vacancies, and other powers which by law may not be delegated to a committee or actions reserved for a committee comprised of independent directors. The members of the Executive Committee are Gale E. Klappa (Chair), Barbara L. Bowles, | |
| Finance | |
| Members | Key Responsibilities |
Curt S. Culver, Chair | |
William M. Farrow III Thomas K. Lane Ulice Payne, Jr. Mary Ellen Stanek 2019 Meetings: 3 | • Review and monitor the Company’s current and long-range financial policies and strategies, including our capital structure and dividend policy. • Authorize the issuance of corporate debt within limits set by the Board. • Discuss policies and financial programs with respect to • Approve the Company’s financial plan, including the capital budget. |
| The Finance Committee | |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Board except action regarding dividends or other distributions to stockholders, filling Board vacancies, and other powers which by law may not be delegated to a committee or actions reserved for a committee comprised of independent directors. Thepersons who served as members of the ExecutiveCompensation Committee are Gale E. Klappa (Chair), John F. Bergstrom, Barbara L. Bowles, Thomas J. Fischer, Allen L. Leverett, and Ulice Payne, Jr. The Executiveduring 2019 was an officer or employee of the Company during 2019 or at any time in the past nor had reportable transactions with the Company.
During 2019, none of our executive officers served as a member of the Compensation Committee met twice in 2017.or as a director of another entity, one of whose executive officers served on the Compensation Committee or as a director of the Company.
COMMUNICATIONS WITH THE BOARD
Correspondence may be sent to the numberdirectors, including the non-management directors, in care of committee meetings listed in the preceding table,Corporate Secretary, Margaret C. Kelsey, at the Company’s principal business office, 231 W. Michigan Street, PO Box 1331, Milwaukee, Wisconsin 53201. All communications received as set forth above will be opened by the Corporate Secretary for the sole purpose of confirming the contents represent a message to the Company’s directors. Pursuant to instructions from the Board, met nine times in 2017all communication, other than advertising, promotion of a product or service, or patently offensive material, will be forwarded promptly to the addressee.
Where to find more information on governance
You can find our Corporate Governance Guidelines, Code of Business Conduct, and executed three written unanimous consents. With the exceptionother corporate governance materials, including WEC Energy Group’s Restated Articles of Mr. Leverett, all directors attended more than 75% of the total number of meetings of theIncorporation, Bylaws, Board committee charters and Board committeescontact information, on which he or she served. Leading up to October when Mr. Leverett suffered a stroke and took a leavethe Corporate Governance section of absence to recover, his attendance rate was 100%;our website at year-end, it was 55.6%. The average Board meeting attendance duringwww.wecenergygroup.com/govern/governance.htm. You can request copies of these materials from the year, which reflects Mr. Leverett’s attendance to October, is over 92%.Corporate Secretary at the address provided above in “Communications with the Board."
| WEC Energy Group | ||
DIRECTOR COMPENSATION
Consistent with its charter, the Compensation Committee seeks to maintain a competitive director compensation program that enables the Company to attract and retain key individuals and to motivate them to help the Company achieve the Company’sits short- and long-term goals. As such, the committee is responsible for reviewing key market-based trends in director compensation and benefits packages and for recommending changes to the Board, as appropriate, that will attract and retain quality directors. The Committee’s charter authorizes it to engage consultants or advisors in connection with its review and analysis of director compensation. The Compensation Committee used Frederic W.FW Cook & Co., Inc. ("FW Cook") during 20172019 for this purpose. Directors who are also serve as executivesemployees of the Company do not receive additional compensation for service as a director.
The following table describes the components of the non-management director compensation program during 2017.2019. The Compensation Committee believes that this program:
is equitable based upon the work required of directors serving an entity of the Company’s size and scope, and
ties the majority of director compensation to stockholder interests because the value of the equity awards fluctuates depending upon the Company’s stock price.
| Compensation Element | |
| Annual Cash Retainer | |
| $100,000 | |
| Annual Equity Retainer | |
| $ | |
| Annual Committee Chair Fees | |
Ÿ Audit and Oversight | $20,000 paid in $5,000 quarterly increments |
Ÿ Compensation | $15,000 paid in $3,750 quarterly increments |
Ÿ Corporate Governance | $ |
Ÿ Finance | $ |
| Board and Committee Meeting Fees | None |
| Stock Ownership Guideline | Ownership of common stock or deferred stock units that have a value |
Insurance is also provided by the Company for director liability coverage, fiduciary and employee benefit liability coverage, and travel accident coverage for director travel on Company business. The premiums paid for this insurance are not included in the amounts reported in the table below.located on the next page.
The Company reimburses directors for all out-of-pocket travel expenses. These reimbursed amounts are also not reflected in the table below.located on the next page.
Legacy Charitable Awards Program.Directors elected prior to January 1, 2007 participate in a Directors’ Charitable Awards Program under which the Company intends to contribute up to $100,000 per year for 10 years to one or more charitable organizations chosen by each participating director, including employee directors, following the director’s death. Charitable donations under the program will be paid out of general corporate assets. Directors derive no financial benefit from the program, and all income tax deductions accrue solely to the Company. The tax deductibility of these charitable donations mitigatesmay mitigate the net cost to the Company. The Directors’ Charitable Awards Program has been eliminated for any new directors elected after January 1, 2007. Current Directors already participating as of that datein the program are Messrs. Bergstrom, Culver, Fischer, Klappa, and Payne, and Mmes. Bowles and Chadwick.
| WEC Energy Group | ||
Director Compensation Table. The following table summarizes the total compensation received during 2019 by each director serving as a non-management director of WEC Energy Group’s non-management directors during 2017. Messrs. Cunningham and Farrow were elected to the BoardGroup in 2019.
| Name | Fees Earned or Paid In Cash | (1) Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | Fees Earned or Paid In Cash | (1) Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | ($) |
| John F. Bergstrom | 115,000 | 125,000 | — | 20,608 | 260,608 | 107,500 | 286,873 (3) | — | 23,374 | 417,747 | ||||
| Barbara L. Bowles | 110,000 | 125,000 | — | 26,639 | 261,639 | 115,000 | 135,000 | — | 21,947 | 271,947 | ||||
| William J. Brodsky | 100,000 | 125,000 | — | 225,000 | 100,000 | 286,873 (3) | — | 386,873 | ||||||
| Albert J. Budney, Jr. | 100,000 | 125,000 | — | 225,000 | 100,000 | 135,000 | — | 235,000 | ||||||
| Patricia W. Chadwick | 100,000 | 125,000 | — | 28,924 | 253,924 | 100,000 | 135,000 | — | 20,608 | 255,608 | ||||
| Curt S. Culver | 110,000 | 125,000 | — | 20,711 | 255,711 | 115,000 | 135,000 | — | 22,730 | 272,730 | ||||
| Danny L. Cunningham | 100,000 | 135,000 | — | — | — | 235,000 | ||||||||
| William M. Farrow III | 100,000 | 135,000 | — | 235,000 | ||||||||||
| Thomas J. Fischer | 120,000 | 125,000 | — | 20,608 | 265,608 | 120,000 | 135,000 | — | 23,374 | 278,374 | ||||
Paul W. Jones (2) | 100,000 | 430,512(3) | — | 530,512 | ||||||||||
Gale E. Klappa (4) | — | — | — | — | — | |||||||||
| Maria C. Green | 25,000 | — | 25,000 | |||||||||||
| Henry W. Knueppel | 100,000 | 125,000 | — | 225,000 | 100,000 | 135,000 | — | 235,000 | ||||||
Allen L. Leverett (4) | — | — | ||||||||||||
| Ulice Payne, Jr. | 100,000 | 125,000 | — | 15,141 | 240,141 | 107,500 | 135,000 | — | 16,710 | 259,210 | ||||
| Mary Ellen Stanek | 100,000 | 125,000 | — | 225,000 | 100,000 | 135,000 | — | 235,000 | ||||||
(1) | Other than Mr. |
(2) |
(3) | In |
(4) |
Fees Earned or Paid in Cash.The amounts reported in the Fees Earned or Paid in Cash column include annual cash-based retainers for each non-management director and applicable annual committee chair fees earned during 20172019 regardless of whether such retainers and fees were paid in cash or deferred.
Stock Awards.On January 3, 2017,2, 2019, each current non-management director received his or her 20172019 annual equity retainer in the form of restricted stock equal to a value of $125,000.
$135,000. The amounts reported in the Stock Awards column reflect the aggregate grant date fair value, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, excluding estimated forfeitures, of the restricted stock awarded. Each reported restricted stock award vests in full one year from the grant date.
All Other Compensation.All amounts reported in the All Other Compensation column represent costs attributed to the director for the Directors’ Charitable Awards Program. See “Legacy Charitable Awards Program” above for additional information.
In December 2017,2019, the Compensation Committee completed its annual review of director compensation and determined that, based upon research provided by FW Cook, total non-management director compensation wasdelivered in cash based retainers and in equity, as well as the Compensation Committee Chair fee, were below market median. As a result, the Compensation Committee recommended and the Board approved an increase of $10,000$15,000 in total non-management director compensation to be delivered entirelyas $10,000 in cash-based retainers and $5,000 in equity. As a result, the annual cash-based retainer was increased from $100,000 to $110,000 and the value of the annual restricted stock equity award was increased from $125,000$135,000 to $135,000$140,000 effective January 1, 2018.2020. In addition, the Board approved the recommendation to increase the annual Compensation Committee recommended and the Board approved increasing the annual chair fees for the Corporate Governance and Finance Committees from $10,000Chair fee to $15,000 each, effective January 1, 2018. The$20,000. The Compensation Committee concluded that it was appropriate for all other committee chair fees to remain unchanged from the approved 20172019 levels.
Director Payne recused himself from the discussions and decision regarding the increase in the Compensation Committee Chair fee.
| WEC Energy Group | ||
PROPOSAL 2: RATIFICATION OF DELOITTE & TOUCHE LLP
| 2017 | 2016 | ||||||
Audit Fees (1) | $ | 5,064,125 | $ | 4,886,950 | |||
Audit-Related Fees (2) | — | — | |||||
Tax Fees (3) | 20,000 | — | |||||
All Other Fees (4) | 7,095 | 7,946 | |||||
| Total | $ | 5,091,220 | $ | 4,894,896 | |||
OF THE NAMED EXECUTIVE OFFICERS
Pursuant to Section 14A of the Securities Exchange Act, of 1934, the Company seeks your advisory vote on the approval of the compensation paid to our named executed officers (commonly referred to as "Say-on-Pay") as described in the Compensation Discussion and Analysis and the related tables included in this proxy statement. Approval, on a non-binding, advisory basis, of the compensation of the named executed officers requires the affirmative vote of a majority of the votes cast in person or by proxy at the Meeting.2020 Annual Meeting of Stockholders. Presuming a quorum is present, shares not voted, whether by broker non-vote, abstention, or otherwise, have no effect on the outcome of this matter. Because your vote is advisory, it will not be binding on the Board or the Company. However, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.
As described in the Compensation Discussion and Analysis on pages P-30P-33 through P-45P-47 of this proxy statement, the Compensation Committee has structured the Company’s executive compensation program with the following objectives in mind:
offer a competitive, performance-based plan;
enable the Company to attract and retain key individuals;
reward achievement of the Company’s short-term and long-term goals; and
align with the interest of the Company’s stockholders and customers.
As described in this proxy statement, the Company believes that the compensation paid to our named executed officers in 20172019 was well-tailored to achieve these objectives, tying a significant portion of total pay to performance and aligning the interests of the named executed officers with those of stockholders and customers. We encourage you to carefully review the Compensation Discussion and Analysis and related tables included above,in this proxy statement, which describe in greater detail WEC Energy Group’s compensation philosophy and programs, as well as the 20172019 compensation levels, in connection with approval of the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Proxy Statement for the 20182020 Annual Meeting.Meeting of Stockholders.”
The Board of Directors recommends that you vote “FOR”
the advisory vote on Executive Compensation.
| WEC Energy Group | ||
The following discussion provides an overview and analysis of our executive compensation program, including the role of the Compensation Committee of our Board, the elements of our executive compensation program, the purposes and objectives of these elements, and the manner in which we established the compensation of our named executive officers ("NEOs") for fiscal year 2017.2019.
References to “we,” “us,” “our,” "Company," and “WEC Energy Group” in this discussion and analysis mean WEC Energy Group, Inc. and its management, as applicable.
EXECUTIVE SUMMARY
Overview
The primary objective of our executive compensation program is to provide a competitive, performance-based plan that enables the Company to attract and retain key individuals and to reward them for achieving both the Company’s short-term and long-term goals without creating an incentive for our NEOs to take excessive risks. Our program has been designed to provide a level of compensation that is strongly dependent upon the achievement of short-term and long-term goals that are aligned with the interests of our stockholders and customers. To that end, a substantial portion of pay is at risk, and generally, the value will only be realized upon strong corporate performance.
2019 Business Highlights
| • | World-class reliability | • | Operating efficiency | • | Employee safety | |||
| • | Financial discipline | • | Exceptional customer care | |||||
Commitment to Stockholder Value Creation. Financially, WEC Energy Group again delivered solid earnings growth, generated strong cash flow, and increased the dividend for the 1416th consecutive year. In January 2017,2019, the Board raised the quarterly dividend 5.1%6.8% to $0.5200$0.59 per share, equivalent to an annual rate of $2.08$2.36 per share. In January 2018,2020, the Board again increased the quarterly dividend 7.2% to $0.5525$0.6325 per share, which is equivalent to an annual rate of $2.21$2.53 per share, in line with our plan to maintain a dividend payout ratio of 65% to 70% of earnings. TheOverall, the Company also turned in aggregate above targetstrong performances in customer satisfaction, supplier diversity and network reliability during 2017.2019. Our employees demonstrated their resiliency as we responded to severe storms that hit Wisconsin in July 2019, impacting more than 290,000 customers in our Wisconsin service areas.
| WEC Energy Group | ||
Specific Company achievements during 20172019 include:
• WEC Energy Group delivered solid earnings growth again, generated strong cash flow, and increased the dividend for the • We achieved fully diluted earnings per share • Each of our regulated utility subsidiaries earned its allowed rate of return, with our Wisconsin utilities earning their fully allowed rate of return. • We returned approximately • Our common stock • In January |   (1) For 2017, excludes a one-time $0.65 per share gain related to a revaluation of our deferred taxes as a result of the Tax Cuts and Jobs Act of 2017. For 2016 | |
PA Consulting Group named We Energies the most reliable utility in the United States in 2017, and in the Midwest for the seventhninth year in a row.
Set a new long-term goal to reduce the rate of Wisconsin approvedmethane emissions from our natural gas distribution lines by 30% per mile from a base rate freeze2011 baseline by 2030.
Continued to execute on our generation reshaping plan, retiring the Presque Isle power plant, which is an older, less efficient coal fired generating plant, and constructing 180 megawatts of natural gas-fueled generation in the Upper Peninsula of Michigan.
Named as one of America’s Best Employers for our Wisconsin utilities, keeping base rates flat through 2019 for our Wisconsin customers.Diversity by Forbes Magazine.
| • |
Peoples Gas Light and Coke Company was named as a 2019 Most Trusted Utility Brand by the Cogent Syndicated Utility Trusted Brand & Customer Engagement study.
| • | All major utility subsidiaries either met or exceeded our overall customer satisfaction targets.(2) |
Broke ground on two major solar projects.
Filed with the PSCW for approval for Wisconsin Electric Power Company ("WE") to partner with an unaffiliated utility on one additional solar project, where WE will own 100 megawatts of the output from the project.
Received PSCW approval for WE to participate in two renewable energy pilot programs that could add up to a total capacity of 129 MWs. The aggregate purchase price is $174 million,185 megawatts of which Wisconsin Public Services’ proportionate share is 44.6%, or approximately $78 million.renewables to WE's portfolio.
(2)This measure is a component of our short-term incentive compensation program.
| WEC Energy Group | ||
Long-Term Stockholder Returns
Over the past decade, WEC Energy Group has consistently delivered among the best total returns in the industry and did so again in 2017.2019.
 |  |
(1) The Five-Year Cumulative Return Chart shows a comparison of the cumulative total return, assuming reinvestment of dividends, over the last five years had $100 been invested at the close of business on December 31, | Source: Bloomberg; assumes all dividends are reinvested and returns are compounded daily. |
Consideration of 20172019 Stockholder Advisory Vote and Stockholder Outreach
At the 20172019 Annual Meeting of Stockholders, the Company’s stockholders approved the compensation of our named executive officers with almost 95%92.5% of the votes cast. The Compensation Committee considered this outcome as well as the feedback received during meetings we again held with a numbermany of our institutional stockholders. During 2017,2019, we talkedcommunicated with 30 stockholders representing approximately 45%42% of the Company’s outstanding common stock about our environmental, social, governance and compensation practices. InThe Compensation Committee is always looking for ways to refine our compensation program. However, in light of the significant stockholder support our executive compensation program received in 2017,2019 and the payout levels under our performance-based program for 2017, and the changes previously made to the program in 2016,2019, the Compensation Committee continues to believebelieves that the current compensation program is competitive, aligned with our financial and operational performance goals, and in the best interests of the Company, stockholders, and customers.
| WEC Energy Group | ||
COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
We have three primary elements of total direct compensation: (1) base salary; (2) annual incentive awards; and (3) long-term incentive awards consisting of a mix of performance units, stock options, and restricted stock. The Compensation Committee again retained Frederic W. Cook & Co., Inc. ("FW Cook") as its independent compensation consultant to advise the Compensation Committee with respect to our executive compensation program. The Compensation Committee generally relied onupon the recommendations of FW Cook as it developed the 20172019 program.
As shown in the charts below, 88%81% of Mr. Leverett’s 2017Fletcher's 2019 total direct compensation and an average of 76%78% of the other NEO’s (other than Mr. Klappa) 2017NEOs’ 2019 total direct compensation is tied to Company performance and is not guaranteed.
In addition to the components of total direct compensation mix does not include Mr. Klappa’sidentified above, our retirement programs are another important component of our compensation as his compensation was based upon his service as CEO for less than a quarter of the year and under very unusual circumstances, and would significantly change the reported NEO mix in a way we believe would not be representative of the Company's executive compensation program. If Mr. Klappa is included in the calculation of the other NEOs total compensation mix, the amounts reported in the chart above would change as follows: Annual Base Salary (38%); Annual Cash Incentive (29%); and Long-Term Equity Incentive (33%).
To the extent feasible, we believe it is important that the Company’s compensation program not dilute the interests of current stockholders. Therefore, we currently use open marketopen-market purchases to satisfy our benefit plan obligations, including the exercise of stock options and vestingawarding of restricted stock.
This Compensation Discussion and Analysis contains a more detailed discussion of each of the above components for 2017,2019, including FW Cook'sCook’s recommendations with respect to each component.
Compensation Governance and Practices
The Compensation Committee annually reviews and considers the Company’s compensation policies and practices to ensure our executive compensation program aligns with our compensation philosophy. Highlighted below is an overview of our current compensation practices.
| WEC Energy Group | P-36 | 2020 Proxy Statement |
| What We Do | ||
• Our compensation program focuses on key Company results (financial, safety, customer satisfaction, diversity) that are aligned with our strategic goals. • A substantial portion of compensation is at risk and tied to Company performance. • The compensation program has a long-term orientation aligned with stockholder interests. • We include ESG metrics in our compensation program. • The Compensation Committee retains an independent compensation consultant to help design the Company’s compensation program and determine competitive levels of pay. • The Compensation Committee's independent compensation consultant reviews competitive employment market data from two general industry surveys and a comparison group of companies similar to WEC Energy Group. • We have • Annual incentive-based compensation contains multiple, pre-established performance metrics aligned with stockholder and customer interests. u P-39 | • The Performance Unit Plan award payouts (including dividend equivalents) are based on stockholder return as compared to an appropriate peer group and Additional Performance Measure(s), selected by the Compensation Committee.u P-41 • The Performance Unit Plan requires a separation from service following a change in control for award vesting to occur. u P-44 • Equity award and other benefit plan obligations are satisfied through • Meaningful stock ownership levels are required for senior executives. u P-45 • Ongoing engagement with investors takes place to ensure that compensation practices are responsive to stockholder interests. • We prohibit hedging and pledging of WEC Energy Group common stock. • We prohibit entry into any new arrangements that obligate the Company to pay directly or reimburse individual tax liability for benefits provided by the Company. u P-47 • We prohibit repricing of stock options without stockholder approval. | |
Competitive Benchmarking
As a general matter, we believe the labor market for WEC Energy Group executive officers is consistent with that of general industry. Although we recognize our business is focused on the energy services industry, our goal is to have an executive compensation program that will allow us to be competitive in recruiting the most qualified candidates to serve as executive officers of the Company, including individuals who may be employed outside of the energy services industry. Further, in order to retain top performing executive officers, we believe our compensation practices must be competitive with those of general industry.
To confirm that our annual executive compensation is competitive with the market, FW Cook reviewed the2019 general industry executive compensation survey data obtained from Willis Towers Watson's 2017 Executive Compensation Data Bank as well as similar data fromWatson and Aon Hewitt.
FW Cook also analyzed the compensation data from a peer group of 18 companies similar to WEC Energy Group in size and business model. The methodology used by FW Cook to determine the peer group of companies is described below.
FW Cook started with U.S. companies in the Standard & Poor’s database, and then limited those companies to the same line of business as WEC Energy Group as indicated by the Global Industry Classification Standards. This list of companies was then further limited to companies with revenues between $2.45$2.5 billion and $22$24 billion (approximately one- thirdone-third to three times the size of WEC Energy Group’s revenues), and that were within a reasonable size range in various other measures such as operating income, total assets, total employees, and market capitalization. From this list, FW Cook selected companies similar in overall size to WEC Energy Group with consideration given to companies that met one or more of the following criteria:
Diversified, technically sophisticated utility operations (e.g., multiple utilities, electric utilities);
Minimal non-regulated business; and/or
Operates in the Midwest.
These criteria resulted in a comparison group of 18 companies with median revenues and market capitalization of approximately $8.7$10.6 billion and $15.2$17 billion, respectively.
| WEC Energy Group | ||
The comparison group utilized for purposes of 20172019 compensation includes the same companies as the previous year’s comparison group, except that Dominion Resourcesand was removed based upon FW Cook’s recommendation that it no longer meets the applicable criteria. The comparison group consistedcomprised of the 18 companies listed below.
| • Alliant Energy Corporation | • Consolidated Edison, Inc. | • FirstEnergy Corp. | • SCANA Corporation |
| • Ameren Corporation | • DTE Energy Co. | • NiSource Inc. | • The Southern Company |
| • American Electric Power Company | • Edison International | • PG&E Corporation | • Xcel Energy Inc. |
| • CMS Energy Corporation | • Entergy Inc. | • PPL Corp. | |
| • CenterPoint Energy | • Eversource Energy | • Pinnacle West Capital Corp. | |
The Compensation Committee approved this revised comparison group.
DETERMINATION OF MARKET MEDIAN
In order to determine the “market median” for our NEOs, FW Cook recommended that the survey data from Willis Towers Watson and Aon Hewitt receive a 75% weighting and the comparison group of 18 companies receive a 25% weighting. The Compensation Committee agreed with this recommendation. The survey data received a higher weighting because we consider the labor market for our executives to be consistent with that of general industry. Using this methodology, FW Cook recommended, and the Compensation Committee approved, the appropriate market median for each of our NEOs.
The comparison of each component of compensation with the appropriate market median when setting the compensation levels of our NEOs generally drives the allocation of cash versus non-cash compensation and short-term versus long-term incentive compensation.
ANNUAL BASE SALARY
The annual base salary component of our executive compensation program provides each executive officer with a fixed level of annual cash compensation. We believe that providing annual cash compensation through a base salary is an established market practice and is a necessary component of a competitive compensation program.
Based upon the market data analyzed by FW Cook, we generally target base salaries to be within (plusat or minus) 15% ofnear the market median for each NEO. However, the Compensation Committee may, in its discretion, adjustset base salaries outside of this 15% bandat a different amount when the Compensation Committee deems it appropriate.
Actual salary determinations are made taking into consideration factors such as the relative levels of individual experience, performance, responsibility, market compensation data and contribution to the results of the Company’s operations. At the beginning of each year, our CEO develops a list of goals for WEC Energy Group and our employees to achieve during the upcoming year. At the end of the year, our CEO measures the performance of the Company against each stated goal and reports the results to the Board. The Compensation Committee then takes the Company’s performance into consideration when establishing our CEO’s compensation for the upcoming year. Our CEO undertakes a similar process with the other NEOs, who develop individual goals related to the achievement of the Company’s goals developed by our CEO. At the end of the year, each officer’s performance is measured against these goals. Compensation recommendations and determinations for the upcoming year for each executive officer also take into consideration the level of such performance. Upon separation of the offices of CEO and Chairman, the Compensation Committee began establishing the Chairman's salary.
Mr. Klappa, who was CEO until February 1, 2019, developed the 2019 goals with significant input from Mr. Fletcher who assumed the CEO role on that date. Mr. Klappa and Mr. Fletcher continue to work together to establish the Company’s goals.
Regarding 2019 salaries, in recognition of Mr. Fletcher’s appointment to President and Chief Executive Officer of WEC Energy Group, the Compensation Committee increased Mr. Leverett’shis annual base salary to $1,161,000$1,004,000. Also, in connection with Mr. Klappa’s appointment to Executive Chairman, he entered into a written agreement with the Company for 2017,his 2019 compensation, which was within our targeted rangeapproved by the Compensation Committee. Pursuant to the terms of the market median.letter agreement, Mr. Klappa’s 2019 annual base salary was set at $1,000,000, effective February 1, 2019.
With respect to each other NEO (other than Mr. Klappa),the 2019 salaries of the remaining NEOs, in December 2016,2018, Mr. LeverettKlappa, who was CEO at the time, recommended an annual base salarysalaries to the Compensation Committee based upon a review of the market compensation data provided by FW Cook and the other factors described above. The Compensation Committee approved the recommendations, which represented an average increase in annual base salary of approximately 3%4.5% for Messrs. KeyesLauber, Kuester and Fletcher,Garvin, and Ms. Martin, and an increase in annual base salary of approximately 16% for Mr. Lauber.
| WEC Energy Group | ||
ANNUAL CASH INCENTIVE COMPENSATION
We provide annual cash incentive compensation through our Short-Term Performance Plan (“STPP”). The STPP provides for annual cash awards to NEOs based upon the achievement of pre-established stockholder-, customer-, and employee- focused objectives. All payments under the STPP are at risk. Payments are made only if performance goals are achieved, and awards may be less or greater than targeted amounts based upon actual performance. Payments under the STPP are intended to reward achievement of short-term goals that contribute to stockholder and customer value, as well as individual contributions to successful operations.
Effective February 1, 2019, the target award level for Mr. Fletcher was increased to 125% of base salary in recognition of his appointment to President and Chief Executive Officer of WEC Energy Group. Therefore, Mr. Fletcher’s STPP payout level reflects a 90% target level for January 2019 and a 125% target level for February through the remainder of 2019. Also effective February 1, 2019, Mr. Klappa’s target award level was set at 100% of base salary in recognition of Mr. Fletcher succeeding Mr. Klappa as CEO and Mr. Klappa’s appointment to Executive Chairman. Therefore, Mr. Klappa’s STPP payout level reflects a 120% target level for one month and a 100% target level for the remainder of the year.
The year-end 20172019 target awards for each NEO (other than Mr. Klappa)Messrs. Fletcher and Klappa, who are discussed above) are set forth in the chart below.
| Executive Officer | Target STPP Award as a Percentage of Base Salary |
| Mr. | |
| 80% | |
| Mr. | 85% |
| Ms. Kelsey | 75% |
The target award levels of each officer named in the tableNEO above reflect median incentive compensation practices as indicated by the market data. The Compensation Committee increased Mr. Leverett's and Mr. Lauber’s targets to move them into the median target range for their positions. Mr. Klappa did not participate in the STPP in 2017.
For 2017,2019, the possible payout for any NEO ranged from 0% of the target award to 210% of the target award, based upon performance.
In January 2017,2019, the Compensation Committee approved the performance goals under the STPP for WEC Energy Group’s earnings per share as set forth in the chart below.
| Earnings Per Share Performance Goal | Earnings Per Share CAGR | Payout Level |
| $2.96 | 4.3% | 25% |
| $2.98 | 4.7% | 50% |
| $3.00 | 5.0% | 100% |
| $3.06 | 6.1% | 135% |
| $3.12 | 7.1% | 200% |
| Earnings Per Share Performance Goal | Earnings Per Share CAGR | Payout Level |
| $3.38 | 3.0% | 25% |
| $3.41 | 4.0% | 50% |
| $3.45 | 5.2% | 100% |
| $3.48 | 6.1% | 135% |
| $3.52 | 7.3% | 200% |
If the Company’s performance falls between these levels, the payout level with respect to earnings per share is determined by interpolating on a straight line basis the appropriate payout level.
The Company’s growth plan, which has been communicated to the public, calls for a long-term compound annual growth rate (“CAGR”) in earnings per share of 5.0% to 7.0% off of a 2015 base of $2.72 per share.. At the time the Compensation Committee was establishing targets for 2017, we believed2019, this CAGR was measured off a 2018 base of $3.28 per share, which represented the mid-point of the original 2018 annual earnings guidance. We believe that this CAGR, plus our continued growth in dividends, would supportsupports a premium valuation as compared to the Company’s peers. Therefore,In order to further motivate management, the Compensation Committee tied the target (100%) payout level to achievement of the low end of the target CAGR range (5.0%), and the above target payout level to the mid-point of the target range (6.1%). The Compensation Committee tied the maximum payout level (200%) to achievement of a 7.1% CAGR. The Compensation Committee determined that the Company’s CAGRtarget and maximum payout levels should exceed the low and high endends of the 5.0% to 7.0% CAGR growth plan. Therefore, the target range to achieve the(100%) and maximum payout level.levels (200%) were tied to 5.2% and 7.3% CAGRs, respectively. The Compensation Committee tied the above-target payout level to achievement of a 6.1% CAGR.
| WEC Energy Group | ||
In January 2017,2019, the Compensation Committee approved the performance goals under the STPP for WEC Energy Group’s cash flow as set forth in the chart below ($ in millions).
| Cash Flow | Payout Level |
| $1,750 | 25% |
| $1,800 | 50% |
| $1,850 | 100% |
| $1,900 | 135% |
| $2,000 | 200% |
If the Company'sCompany’s performance falls between these levels, the payout level with respect to cash flow is determined by interpolating on a straight linestraight-line basis the appropriate payout level.
The Compensation Committee used a different process to establishbased the cash flow targets for 2017, basing the performance level goals on WEC Energy Group’s funds from operations (“FFO”). FFO is calculated by taking “cash provided by operating activities” and eliminating certain accruals and other items related to capital spending. Generally accepted accounting principles (GAAP) requireGAAP requires these items to be recorded as part of cash from operations, but management views them as related to the Company’s capital expenditure program. The Compensation Committee believes that basing the cash flow performance goals on FFO provides a more accurate measurement of the cash generated by the Company’s operations that is available for capital investment, which is the Company’s primary driver for earnings growth. FFO is not a measure of financial performance under GAAP, and the Company's calculation may differ from similarly titled measures used by other companies or securities rating agencies.
| Net Income | Weighted Return on Equity | Payout Level |
| $550 | 9.81% | 25% |
| $556 | 9.91% | 50% |
| $562 | 10.01% | 100% |
| $570 | 10.15% | 135% |
| $580 | 10.32% | 200% |
WEC Energy Group’s 20172019 financial performance satisfied the maximum payout level established for earnings per share and cash flow, and net income for the Wisconsin utilities.flow. WEC Energy Group’s GAAP earnings per share and adjusted earnings per share were $3.79$3.58 for 2019, and $3.14, respectively, for 2017. Our adjusted earnings exclude a one-time $0.65 per share gain related to a revaluation of our deferred taxes as a result of the Tax Cuts and Jobs Act of 2017. WEC Energy Group’sits cash flow, based on FFO, was $2,113.0 million, and the Wisconsin utilities’ net income was $582.6 million for 2017. Net income is measured against the net income from WEC Energy Group’s Wisconsin segment excluding contributions to the Wisconsin utilities’ charitable foundations and net costs related to the coal plant closings we announced in 2017.$2,396 million. Our adjusted earnings per share, cash flow and net income areresult is not measuresa measure of financial performance under GAAP.
By satisfying the maximum payout level with respect to these financial measures, the NEOs earned 200% of the target award from the financial goal component of the STPP.
The Compensation Committee recognizesmeasures customer satisfaction levels based upon the importanceresults of strong operational resultssurveys that an independent third party conducts of customers who had direct contact with our utilities during the year, which measure (i) customers’ satisfaction with the respective utility overall, and (ii) customers’ satisfaction with respect to the successparticular transactions with the applicable utility. Safety is measured based upon performance against the number of lost time injuries and OSHA recordable incidents. In the Company and has identified these three operational areas in particular as being critical to that success.
The operational performance measures are based upon recommendations from management and take into consideration both current yearcurrent-year performance and our longer-term objective of achieving top quartile performance.performance of all of our principal utilities. The Compensation Committee reviews management's recommendations and may make adjustments to the performance measures if it feelsdetermines changes are necessary. The following table provides the operational goals approved by the Compensation Committee for 2017,2019, as well as WEC Energy Group’s performance against these goals:
| Operational Measure | Below Goal | Goal | Above Goal | Final Result |
| Customer Satisfaction Percentage of "Highly Satisfied": | -5.00% | 0.00% | +5.00% | |
| Company | <68.6% | 68.6% - 74.7% | >74.7% | 78.0% |
| Transaction | <76.0% | 76.0% - 81.4% | >81.4% | 80.7% |
| Safety: | -2.50% | 0.00% | +2.50% | |
| Lost Time Injury - Incidents | >67 | 39 - 67 | <39 | 63 |
| OSHA Recordable - Incidents | >206 | 135 - 206 | <135 | 225 |
| Near Miss / Unsafe Condition Reports | <14,590 | 14,590 - 18,910 | >18,910 | 22,927 |
| Diversity: | -2.50% | 0.00% | +2.50% | |
| Supplier ($ in Millions) | <155.4 | 155.4 - 180.2 | >180.2 | 248.9 |
| Workforce - Assessment | Not Met | Met | Exceeded | Met |
| Operational Measure | Below Goal | Goal | Above Goal | Final Result |
| Customer Satisfaction Percentage of "Highly Satisfied": | -5.00% | 0.00% | +5.00% | |
| Company | <72.0% | 72.0% - 78.0% | >78.0% | 80.8% |
| Transaction | <79.1% | 79.1% - 85.1% | >85.1% | 82.9% |
| Safety: | -2.50% | 0.00% | +2.50% | |
| Lost Time Injury - Incidents | >25 | 13 - 25 | <13 | 23 |
| OSHA Recordable - Incidents | >105 | 65 - 105 | <65 | 118 |
| Near Miss / Unsafe Condition Reports | <13,100 | 13,100 - 15,750 | >15,750 | 22,927 |
| Diversity: | -2.50% | 0.00% | +2.50% | |
| Supplier ($ in Millions) | <90.0 | 90.0 - 104.0 | >104.0 | 132.8 |
| Workforce - Assessment | Not Met | Met | Exceeded | Met |
| WEC Energy Group | ||
| Operational Measure | Below Goal | Goal | Above Goal | Final Result |
| Customer Satisfaction Percentage of "Highly Satisfied": | -5.00% | 0.00% | +5.00% | |
| Company | <77.1% | 77.1% - 80.0% | >80.0% | 80.5% |
| Transaction | <80.9% | 80.9% - 83.5% | >83.5% | 82.7% |
| Safety: | -2.50% | 0.00% | +2.50% | |
| Lost Time Injury - Incidents | >54 | 33 - 54 | <33 | 43 |
| OSHA Recordable - Incidents | >182 | 128 - 182 | <128 | 197 |
| Diversity: | -2.50% | 0.00% | +2.50% | |
| Supplier ($ in Millions) | <221.9 | 221.9 - 250.8 | >250.8 | 282.6 |
| Workforce - Assessment | Not Met | Met | Exceeded | Met |
Based on the operational results listed in the table above, WEC Energy Group’s performance with respect to operational goals generated a 2.5% increase to the compensation awarded under the STPP for 2019 for financial results.
Based upon the Company’s performance against the financial and operational goals established by the Compensation Committee, Mr. LeverettFletcher received annual incentive cash compensation under the STPP of $2,956,922$2,433,884 for 2017.2019. This represented 255%249% of his annual base salary. Messrs. Klappa, Lauber, Keyes,Kuester, and Fletcher,Garvin, and Ms. Martin,Kelsey, each received annual cash incentive compensation for 20172019 under the STPP equal to 163%207%, 153%162%, 172%, 143%, and 143%152% of their respective annual base salaries, representing 203.75%202.50% of the target award for each officer.
The Compensation Committee retains the right to exercise discretion in adjusting awards under the STPP when it deems appropriate. In light of Mr. Garvin's significant individual contributions and commitment to advancing the Company's legislative and regulatory matters in all four state jurisdictions, the Compensation Committee increased Mr. Garvin's 2019 total award.
LONG-TERM INCENTIVE COMPENSATION
The Compensation Committee administers our 1993 Omnibus Stock Incentive Plan, amended and restated effective January 1, 2016, which is a stockholder-approved, long-term incentive plan designed to link the interests of our executives and other key employees to creating long-term stockholder value. It allows for various types of awards tied to the performance of our common stock, including stock options, stock appreciation rights, and restricted stock. The Compensation Committee also administers the WEC Energy Group Performance Unit Plan, under which the Compensation Committee may award performance units. The Compensation Committee primarily uses (1) performance units, including dividend-equivalents, (2) stock options, and
(3) restricted stock to deliver long-term incentive opportunities.
Performance Units. Each year, the Compensation Committee makes annual grants of performance units under the Performance Unit Plan. The performance units are designed to provide a form of long-term incentive compensation that aligns the interests of management with those of a typical utility stockholder who is focused not only on stock price appreciation but also on dividends. Payouts are based upon the Company’s level of “total stockholder return” (stock price appreciation plus reinvested dividends) in comparison to a peer group of companies over a three-year performance period, and beginning with the 2017 grants may be adjusted based upon the Company’s performance against anone or more Additional Performance Measure(s).Measures. The performance units are settled in cash.
Selection of Additional Performance Measure(s). “Additional Performance Measure” is defined as the performance criterion or criteria (if any) that the Compensation Committee selects, in its sole discretion, based upon the attainment of specific levels of performance by WEC Energy Group. Performance units will continue to vest in an amount between 0% and 175% of the target award based upon WEC Energy Group’s comparative total stockholder return over a three-year performance period. However, the vesting percentage may be adjusted based upon WEC Energy’s performance against the Additional Performance Measure(s). The Additional Performance Measure(s), if any, must be selected by the Compensation Committee at the beginning of the three-year performance period. For each year during the performance period, the Compensation Committee will select the target(s) for the Additional Performance Measure(s) and the potential adjustment to the vesting percentage for that year based upon achievement of the Additional Performance Measure(s) relative to the selected target(s). The actual adjustment, if any, to the vesting percentage based upon the Additional Performance Measure(s) will be determined annually. In no event will any adjustment cause the vesting percentage over the three-year performance period to be less than zero.
Short-Term Dividend Equivalents. We increase the number of unvested performance units as of any date that we declare a cash dividend on our common stock by the amount of short-term dividend equivalents a participant is entitled to receive. Short-term dividend equivalents are calculated by multiplying (a) the number of unvested performance units held by a plan participant as of the related dividend record date by (b) the amount of cash dividend payable by the Company on a share of common stock; and (c) dividing the result by the closing price for a share of the Company's common stock on the dividend payment date. In
| WEC Energy Group | P-41 | 2020 Proxy Statement |
effect, short-term dividend equivalents are credited and accumulated as reinvested dividends on each performance unit so that the performance units and accumulated dividends will be paid out at the end of the three-year performance period, rather than paying out the dividend equivalents annually on unearned performance units.
Short-term dividend equivalents are treated as additional unvested performance units and are subject to the same vesting, forfeiture, payment, termination, and other terms and conditions as the original performance units to which they relate. In addition, outstanding short-term dividend equivalents are treated as unvested performance units for purposes of calculating future short-term dividend equivalents.
Stock Options. Each year, the Compensation Committee also makes annual stock option grants as part of our long-term incentive program. These stock options have an exercise price equal to the fair market value of our common stock on the date of grant and expire on the 10th anniversary of the grant date. Since management benefits from a stock option award only to the extent our stock price appreciates above the exercise price of the stock option, stock options align the interests of management with those of our stockholders in attaining long-term stock price appreciation.
Restricted Stock. The Compensation Committee also awards restricted stock as part of the long-term incentive plan, consistent with market practice. Similar to performance units, restricted stock aligns the interests of management with a typical utility stockholder who is focused on stock price appreciation and dividends.
Aggregate 20172019 Long-Term Incentive Awards. InGenerally, when establishing the target value of long-term incentive awards and the appropriate mix of performance units, stock options, and restricted stock for each NEO, in 2017 (other than Mr. Klappa, who did not receive long-term incentive awards in 2017), the Compensation Committee reviewedreviews the market compensation data and analysis provided by FW Cook. Based upon FW Cook’s analysis, for 2019 the Compensation Committee determined that the long-term incentive awards would be weighted 65% performance units, 20% stock options, and 15% restricted stock. These targetstock for Messrs. Fletcher, Lauber, and Garvin, and Ms. Kelsey. Target values also were presented to and approved by the Compensation Committee in December 2016.2018.
With respect to Messrs. Klappa and Kuester, after consultation with FW Cook, the Compensation Committee determined that their long-term incentive awards would be weighted 80% restricted stock and 20% stock options. At the time, there had not yet been a determination as to the duration of Messrs. Klappa’s and Kuester’s tenure with the Company other than it would likely be shorter than the other executive officers. Since the vesting percentage of performance units is based upon WEC Energy Group’s total stockholder return over a three-year period, the Compensation Committee determined that performance units would not accurately reflect the contributions of Messrs. Klappa and Kuester to the success of the Company over a shorter period of time.
Based upon the market data provided by FW Cook, we customarily target the long-term incentive award to be within (plusat or minus) 20% ofnear the market median value of long-term incentive compensation. Allcompensation for each executive officer’s position. Other than Mr. Kuester, all of the NEO’sNEOs’ long-term incentive awards were within this target range for 2017.2019. The value of Mr. Kuester’s 2019 long-term incentive award was set at the same level as his 2018 award, consistent with the commitment the Company made to Mr. Kuester when he agreed to return to the Company.
These stock options have a term of 10 years and vest 100% on the third anniversary of the date of grant. The vesting of the stock options may be accelerated in connection with a change in control or an executive officer’s termination of employment under certain circumstances. See “Potential Payments upon Termination or Change in Control” beginning on page P-57 for additional information. Subject to the limitations of the 1993 Omnibus Stock Incentive Plan, the Compensation Committee has the power to amend the terms of any option (with the participant’s consent). However, the Committee may not reduce the exercise price of existing options or cancel outstanding options and grant replacement options having a lower exercise price without stockholder approval.
For purposes of determining the appropriate number of options to grant to a particular NEO, the value of an option was determined based upon the Black-Scholes option pricing model. We use the Black-Scholes option pricing model for purposes of the compensation valuation. The following table provides the number of options granted to each NEO in 2017:2019:
| WEC Energy Group | P-42 | 2020 Proxy Statement |
| Executive Officer | Options Granted | |
| Mr. | ||
| Mr. Klappa | 33,180 | |
| Mr. Lauber | ||
| Mr. | ||
| Ms. | ||
| Mr. | ||
For financial reporting purposes, the stock options granted on January 3, 20172, 2019 had a grant date fair value of $7.91$8.60 per option for Messrs. Leverett, Lauber, Keyes, and Fletcher, and a grant date fair value of $6.40 for Ms. Martin. Ms. Martin is considered to be “retirement eligible.” Therefore, her options are presumed to have a shorter expected life, which results in a lower option value.option.
The vesting of the restricted stock may be accelerated in connection with a termination of employment due to a change in control, death or disability, or by action of the Compensation Committee. Messrs. Klappa’s and Kuester’s restricted stock also fully vested if they resigned for “good reason,” defined as a material diminution in their authority, duties or responsibilities, including, but not limited to, the Company’s appointment of a successor Chief Executive Officer. See “Potential Payments upon Termination or Change in Control” beginning on page P-57 for additional information. Tax withholding obligations related to vesting may be satisfied, at the option of the executive officer, by withholding shares otherwise deliverable upon vesting or by cash. The NEOs have the right to vote the restricted stock and to receive cash dividends when the Company pays a dividend to our stockholders.
For purposes of determining the appropriate number of shares of restricted stock to grant to a particular NEO, the Compensation Committee used a value of $57.043$73.86 per share. This value was based upon the volume weightedvolume-weighted price of WEC Energy Group’s common stock for the ten trading days beginning on December 5, 2016,November 30, 2018, and ending on December 16, 2016.14, 2018. The Compensation Committee uses the volume-weighted price in order to minimize the impact of day-to-day volatility in the stock market.
The measurement period is customarily early- to mid-December for annual awards in order to shorten the timeframe between the calculation of the awards and the actual grant date. The following table provides the number of shares of restricted stock granted to each NEO in January 2017:2019:
| Executive Officer | Restricted Stock Granted | |
| Mr. | ||
| Mr. Klappa | 15,434 | |
| Mr. Lauber | ||
| Mr. | ||
| Ms. | ||
| Mr. | ||
Upon vesting, the performance units will be settled in cash in an amount determined by multiplying the number of performance units that have vested by the closing price of the Company’s common stock on the last trading day of the performance period.
| WEC Energy Group | P-43 | 2020 Proxy Statement |
The 20172019 performance unit peer group against which WEC Energy Group's performance will be measured includes:originally included:
• Alliant Energy Corporation | • DTE Energy Co. | • | • SCANA Corporation |
• Ameren Corporation | • Duke Energy Corp. | • NiSource Inc. | • The Southern Company |
• American Electric Power Company | • Edison International | • OGE Energy Corp. | • Xcel Energy Inc. |
• CMS Energy Corporation | • Eversource Energy | • PG&E Corporation | |
• Consolidated Edison, Inc. | • | • Pinnacle West Capital Corp. | |
The peer group is chosen by the Compensation Committee, based upon management’s recommendation and with the concurrence of FW Cook. This peer group was chosen because we believe these companies are similar to WEC Energy Group in terms of business model and long-term strategies, with a primary focus on regulated utility operations rather than a non-regulated business model. There is significant overlap between the performance unit peer group and the comparison group developed by FW Cook for purposes of benchmarking compensation levels. However, there are several companies that are different among the two groups because FW Cook places significant weight on the financial metrics of the companies included in its comparison group, whereas we focus more on operational measures for the performance unit peer group.
In January 2019, the Compensation Committee determined that SCANA Corporation should be removed from the custom peer group for the outstanding 2017-2019 performance unit awards, and should not be included in any future peer groups. On January 2, 2019, SCANA Corporation was acquired by Dominion Energy, Inc. As a result, SCANA Corporation is no longer a public company. This action is consistent with the Compensation Committee’s past decisions to adjust the peer group to account for the impact of mergers and acquisitions.
The required percentile ranking for total stockholder return and the applicable vesting percentage are set forth in the chart below.
| Performance Percentile Rank | Vesting Percent |
< 25th Percentile | 0% |
25th Percentile | 25% |
Target (50th Percentile) | 100% |
75th Percentile | 125% |
90th Percentile | 175% |
If the Company’s rank is between the benchmarks identified above, the vesting percentage will be determined by interpolating on a straight line basis the appropriate vesting percentage. Unvested performance units generally are immediately forfeited upon a NEO’s cessation of employment with WEC Energy Group prior to completion of the three-year performance period. However, the performance units will vest immediately at the target 100% rate upon the termination of the NEO’s employment (1) by reason of disability or death or (2) after a change in control of WEC Energy Group. In addition, a prorated number of performance units (based upon the target 100% rate) will vest upon the termination of employment of the NEO by reason of retirement prior to the end of the three-year performance period.
| If Actual Annual | The Annual Adjustment is | ROE Ranges |
| ≤ 20 bp below the Authorized ROE | + 3.33% | ≥ |
| 21 - 30 bp below the Authorized ROE | 0% | |
| > 30 bp below the Authorized ROE | (3.33)% | < |
WEC Energy Group'sGroup’s utility subsidiaries achieved a weighted average authorized ROE of 10.25%10.34% for 2017.2019. This resulted in a 3.33% increase in the vesting percentage of the performance units awarded in January 2019, January 2018 and January 2017.
| WEC Energy Group | P-44 | 2020 Proxy Statement |
For purposes of determining the appropriate number of performance units to grant to a particular NEO, the Compensation Committee used a value of $57.043$73.86 per unit, the same value used for the restricted stock granted in January 2017.2019.
The following table provides the number of performance units granted to each NEO effective January 3, 2017,2, 2019, at the 100% target level:
| Executive Officer | Performance Units Granted | |
| Mr. | ||
| Mr. Klappa | — | |
| Mr. Lauber | ||
| Mr. | ||
| Ms. | ||
| Mr. | ||
Payouts under the 20152017 performance units were based upon our total stockholder return for the three-year performance period ended December 31, 20172019 against the same group of peer companies used for the 2019 performance unit awards. The peer group for the 2017 performance unit awards exceptoriginally included Great Plains Energy, Inc., which combined with Westar Energy, Inc. on June 4, 2018 in a merger of equals that the 2015 peer group included Avista, but did not include Edison International. However, in December 2017,created Evergy, Inc. As a result, the Compensation Committee determined that Avistareplaced Great Plains Energy, Inc. with Evergy, Inc. in the 2017 peer group. Also, as stated above, SCANA Corporation should bewas removed from the custom2017 - 2019 peer group for the 2015 performance unit award. On July 19, 2017, Hydro One Limited and Avista announced that they had entered into an agreement whereby Hydro One will purchase Avista. Upon this announcement, there was a significant increase in Avista’s stock price, which we believe was not the result of ongoing operating performance. This action is consistent with the Compensation Committee’s past decisions to adjust the peer group to account for the impact of mergers and acquisitions.groups.
COMPENSATION RECOUPMENT POLICY
Accountability is a fundamental value of WEC Energy Group. To reinforce this value through the Company’s executive compensation program, the Compensation Committee has adopted a clawback policy that provides for the recoupment of incentive-based compensation in the event WEC Energy Group is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws (other than restatements permitted as a result of changes in accounting principles or interpretation). Pursuant to the policy, the Compensation Committee will recover from any current or former executive officer who has received incentive-based compensation during the three-year period preceding the date on which WEC Energy Group is required to prepare the accounting restatement, any portion of the incentive-based compensation paid in excess of what would have been paid to the executive officer under the restated financial results. The Company may also recover incentive-based compensation if an executive officer’s employment is terminated for cause, or the executive officer violates a noncompetition or other restrictive covenant.
STOCK OWNERSHIP GUIDELINES
The Compensation Committee believes that an important adjunct to the long-term incentive program is significant stock ownership by officers who participate in the program, including the NEOs. Accordingly, the Compensation Committee has implemented stock ownership guidelines requiring officers who participate in the long-term incentive program to hold an amount of Company common stock and other equity-related Company securities that varies depending upon such officer's level.
In addition to shares owned outright, holdings of each of the following are included in determining compliance with our stock ownership guidelines: restricted stock; WEC Energy Group phantom stock units held in the Executive Deferred Compensation Plan; WEC Energy Group stock held in the WEC Energy Group's 401(k) plans; performance units at target; and shares held in a brokerage account, jointly with an immediate family member or in a trust.
| WEC Energy Group | P-45 | 2020 Proxy Statement |
value ranging from 250% to 600% of base salary. The Compensation Committee believes these stock ownership guidelines discourage unreasonable risk takingrisk-taking by Company officers.
The Compensation Committee annually reviews whether executive officers are in compliance with these guidelines. The last review was completed in October 2017.2019. The Compensation Committee determined that Mr. Leverett isall NEOs are in compliance, with the ownership guidelines, and all of the other NEOs, including Mr. Klappa who is again subject to the ownership guidelines, are inor making sufficient progress towards compliance, with these guidelines.
PROHIBITION ON HEDGING AND PLEDGING
WEC Energy Group'sGroup’s Corporate Securities Trading Policy prohibits the use of any strategies or products, including derivatives and short-selling techniques, to hedge against potential changes in the value of WEC Energy Group’s common stock. The policy, which is applicable to all directors and active employees of the Company, including the NEOs, also prohibits the holding of WEC Energy Group securities in a margin account, as well as the pledging of WEC Energy Group securities as collateral for a loan.
LIMITED TRADING WINDOWS
Officers, including the NEOs, other keyidentified employees, and the Company’s directors may only transact in WEC Energy Group securities during approved trading windows after satisfying mandatory pre-clearance requirements.
RETIREMENT PROGRAMS
We also maintain retirement plans in which our NEOs participate: a defined benefit pension plan of the cash balance type, a supplemental executive retirementpension plan, individual letter agreements with some of the NEOs, a 401(k) plan, and a 401(k)non-qualified retirement savings plan. We believe our retirement plans are a valuable benefit in the attraction and retention of our employees, including the NEOs. We believe that providing a foundation for long-term financial security for our employees, beyond their employment with the Company, is a valuable component of our overall compensation program which will inspire increased loyalty and improved performance. For more information about our retirement plans, see "Pension Benefits at Fiscal Year-End 2017"2019" and "Retirement Plans."
OTHER BENEFITS, INCLUDING PERQUISITES
We provide our executive officers, including the NEOs, with employee benefits and a limited number of perquisites. Except as specifically noted elsewhere in this proxy statement, the employee benefits programs in which executive officers participate
The perquisites made available to executive officers include financial planning, membership in a service that provides health care and safety management when traveling outside the United States, reimbursement for expenses related to annual physical exam costs not covered by insurance, and limited spousal travel for business purposes. The Company also pays periodic dues and fees for club memberships for certain of the NEOs and other designated officers.
We customarily review market data regarding executive perquisite practices on an annual basis. Following our acquisition of Integrys Energy Group, the Compensation Committee undertook a thorough review of WEC Energy Group’s perquisite practices with FW Cook. At that time, FW Cook recommended to the Compensation Committee that the Company retain our current package of perquisites. For 2017,2019, the Compensation Committee again reviewed our package of perquisites with FW Cook and decided not to make any changes. WEC Energy Group has a legacy group of executives who are still eligible for gross-ups. We reimburse those executives for taxes paid on income attributable to the financial planning benefits provided to the executives only if the executive uses the Company’s identified preferred provider, AYCO. We believe the use of the preferred financial adviser provides administrative benefits and eases communication between Company personnel and the financial adviser.
We pay periodic dues and fees for certain club memberships as we have found that the use of these facilities helps foster better customer and community relationships. Officers, including the NEOs, are expected to use clubs for which the Company pays dues primarily for business purposes. We do not pay any additional expenses incurred for personal use of these facilities, and officers are required to reimburse the Company to the extent that it pays for any such personal use. The total annual club dues are included in the "Summary Compensation Table." We do not permit personal use of the airplane utilized byavailable to the Company. We do allow spousal travel if an executive’s spouse is accompanying the executive on business travel and the airplane is not fully utilized by Company personnel. There is no incremental cost to the Company for this travel, other than the reimbursement for taxes paid on imputed income attributable to the executives for this perquisite, as the airplane cost is the same regardless of whether or not an executive’s spouse travels. Any tax reimbursement is subject to the Company'sCompany’s Tax Gross-Up Policy discussed below.
In addition, each of our executive officers is eligible to participate in an officer life insurance benefit. If an executive officer chooses to participate, upon such officer’s death while employed by the Company, a benefit is paid to his or her designated beneficiary in an amount equal to the value of three times the officer’s base salary at the time of death.
| WEC Energy Group | P-46 | 2020 Proxy Statement |
TAX GROSS-UP POLICY
The Compensation Committee adopted a formal policy that prohibits entry into any contract, agreement, or arrangement with any officer of the Company that obligates the Company to pay directly or reimburse the officer for any portion of the officer’s individual tax liability for benefits provided by the Company. Excluded from this policy are (1) agreements or arrangements entered into prior to December 2014 when the policy was adopted, (2) agreements or arrangements entered into prior to, and assumed by the Company in connection with, any merger or acquisition, or (3) plans or policies applicable to Company employees generally.
This policy formalizesformalized the Compensation Committee’s policy that had been in place since July 2011 to eliminate tax gross-ups on perquisites provided by the Company to its officers (except to officers who were already receiving gross-ups as of July 2011). Of the NEOs, Messrs. Leverett and Lauber and Ms. Martin,Garvin were receiving gross-ups from the Company prior to July 2011.
In light of Mr. Klappa’s retirementand Mr. Kuester's retirements in May 2016 and January 2013, respectively, and subsequent return to the Company as executive Chairman of the Board and CEO of WEC Energy Group effective May 1, 2016, and his subsequent re-appointment as CEOofficers in 2017 and 2018, respectively, both Mr. Klappa isand Mr. Kuester were deemed a new employeeemployees for benefits purposes and isare not eligible to receive gross-ups as CEO.gross-ups.
SEVERANCE BENEFITS AND CHANGE IN CONTROL
In addition, our supplemental pension plan provides that in the event of a change in control, each NEO (other than Mr. Klappa)participants will be entitled to a lump sum payment of amounts due under the plan if employment is terminated within 18 months of the change in control.
IMPACT OF PRIOR COMPENSATION
The Compensation Committee does not believe it is appropriate to consider the amounts realized or realizable from prior incentive compensation awards when establishing future levels of short-term and long-term incentive compensation.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
In the past, certain components of the Company’s compensation program were designed to ensure the deductibility of compensation based on tax regulations in effect at the time the compensation was awarded, including Section 162(m). Section 162(m) of the Internal Revenue Code limits the deductibility of certain executives’ compensation that exceeds $1 million$1,000,000 per year. For tax years prior to 2018, compensation over $1 million$1,000,000 per year could be deducted by the Company if such compensation was performance-based under Section 162(m) and issued through a plan that had been approved by stockholders. AlthoughStarting with compensation awarded in 2018, the Compensation Committee historically took into considerationTax Cuts and Jobs Act of 2017 eliminated the provisions of Section 162(m), it believes that maintaining tax deductibility is only one consideration among many in the design of an effective executive compensation program. With respect to 2017 compensation for the NEOs, the stock option grants under the 1993 Omnibus Stock Incentive Plan have been structured to qualify as performance-based compensation exception under Section 162(m). The remaining components of the 2017 for compensation program do not qualify for tax deductibility under Section 162(m).
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-KS‑K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
| The Compensation Committee | |
William M. Farrow III Thomas J. Fischer | |
| WEC Energy Group | ||
The following table summarizes total compensation awarded to, earned by, or paid to WEC Energy Group’s Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), and each of the other individuals identified in the table below (the “NEOs”).
SUMMARY COMPENSATION TABLE
| (8) | ||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | (5) Stock Awards | (6) Option Awards | (7) Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | (9)(10) All Other Compensation | Total | Total Without Change in Pension Value | ||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||
Allen L. Leverett(1) President | 2017 | 1,161,000 | — | 4,034,706 | 1,033,362 | 3,018,251 | 4,224,896 | 170,022 | 13,642,237 | 9,437,265 | ||||||||
| 2016 | 941,667 | — | 2,939,251 | 769,144 | 2,162,593 | 4,549,812 | 140,512 | 11,502,979 | 6,963,294 | |||||||||
| 2015 | 799,155 | — | 2,762,955 | 481,762 | 1,680,500 | 925,639 | 132,014 | 6,782,025 | 5,858,590 | |||||||||
Gale E. Klappa(1) Chairman of the Board and Chief Executive Officer | 2017 | 2,225,000(2) | — | 250,012 | — | — | 2,529,057 | 27,102 | 5,031,171 | 2,593,579 | ||||||||
| 2016 | 589,043 | — | 7,427,755 | 816,752 | 1,179,632 | 925,719 | 210,435 | 11,149,336 | 10,250,269 | |||||||||
| 2015 | 1,324,739 | — | 5,388,193 | 809,646 | 3,454,116 | 2,573,492 | 276,582 | 13,826,768 | 11,260,113 | |||||||||
Scott J. Lauber(3) Executive Vice President and Chief Financial Officer | 2017 | 467,321 | — | 534,890 | 137,001 | 764,441 | 93,343 | 66,124 | 2,063,120 | 1,977,525 | ||||||||
| 2016 | 351,784 | — | 158,886 | 38,371 | 513,010 | 65,818 | 38,116 | 1,165,985 | 1,103,685 | |||||||||
J. Patrick Keyes Executive Vice President, Strategy | 2017 | 562,792 | — | 920,228 | 235,718 | 885,736 | 122,780 | 73,214 | 2,800,468 | 2,682,669 | ||||||||
| 2016 | 546,400 | — | 889,965 | 215,067 | 904,320 | 111,973 | 73,034 | 2,740,759 | 2,630,909 | |||||||||
| 2015 | 531,002 | — | 1,121,231 | 201,993 | 911,839 | 90,080 | 71,410 | 2,927,555 | 2,837,539 | |||||||||
Susan H. Martin(4) Executive Vice President | 2017 | 530,450 | — | 650,451 | 134,816 | 771,436 | 108,918 | 64,827 | 2,260,898 | 2,156,824 | ||||||||
| 2016 | 515,000 | — | 587,165 | 106,358 | 779,035 | 102,117 | 113,108 | 2,202,783 | 2,103,032 | |||||||||
| 2015 | 475,000 | — | 824,278 | 87,032 | 741,831 | 86,748 | 58,343 | 2,273,232 | 2,186,678 | |||||||||
J. Kevin Fletcher(3) President - WE, WG and WPS | 2017 | 436,800 | — | 535,648 | 137,199 | 633,095 | 1,198,310 | 44,062 | 2,985,114 | 1,800,225 | ||||||||
| 2016 | 411,345 | — | 336,818 | 81,425 | 606,866 | 671,274 | 39,869 | 2,147,597 | 1,482,133 | |||||||||
| (7) | ||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | (4) Stock Awards | (5) Option Awards | (6) Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | (8)(9) All Other Compensation | Total | Total Without Change in Pension Value | ||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||
J. Kevin Fletcher President and Chief Executive Officer | 2019 | 975,939 | — | 1,421,449 | 385,495 | 2,433,884 | 3,958,141 | 87,193 | 9,262,101 | 5,349,308 | ||||||||
| 2018 | 504,733 | — | 521,122 | 109,816 | 792,078 | 739,652 | 52,100 | 2,719,501 | 2,023,895 | |||||||||
| 2017 | 436,800 | — | 535,648 | 137,199 | 633,095 | 1,198,310 | 44,062 | 2,985,114 | 1,800,225 | |||||||||
Gale E. Klappa(1) Executive Chairman | 2019 | 1,039,231 | — | 1,052,213 | 285,348 | 2,147,112 | 3,319,763 | 360,277 | 8,203,944 | 5,012,243 | ||||||||
| 2018 | 1,425,000 | — | 3,763,383 | 793,166 | 3,541,124 | 158,568 | 181,752 | 9,862,993 | 9,862,993 | |||||||||
| 2017 | 2,225,000 | — | 250,012 | — | — | 2,529,057 | 27,102 | 5,031,171 | 2,593,579 | |||||||||
Scott J. Lauber Senior Executive Vice President and CFO | 2019 | 624,904 | — | 969,107 | 262,816 | 1,012,500 | 179,895 | 93,413 | 3,142,635 | 2,983,624 | ||||||||
| 2018 | 574,711 | — | 858,790 | 229,716 | 952,418 | 22,857 | 76,186 | 2,714,678 | 2,714,678 | |||||||||
| 2017 | 467,321 | — | 534,890 | 137,001 | 764,441 | 93,343 | 66,124 | 2,063,120 | 1,977,525 | |||||||||
Frederick D. Kuester(2) Senior Executive Vice President | 2019 | 804,846 | — | 1,634,632 | 443,330 | 1,385,606 | 1,321,225 | 151,184 | 5,740,823 | 4,448,830 | ||||||||
| 2018 | 638,481 | — | 1,476,294 | 297,827 | 1,267,350 | 33,485 | 266,998 | 3,980,435 | 3,980,435 | |||||||||
Margaret C. Kelsey(2) Executive Vice President, General Counsel and Corporate Secretary | 2019 | 540,651 | — | 638,867 | 173,264 | 821,263 | 162 | 123,830 | 2,298,037 | 2,298,037 | ||||||||
| 2018 | 515,000 | — | 596,445 | 159,538 | 746,535 | 41 | 88,223 | 2,105,782 | 2,105,782 | |||||||||
Robert M. Garvin Executive Vice President - External Affairs | 2019 | 457,956 | 50,000(3) | 473,476 | 128,407 | 602,869 | 95,348 | 79,102 | 1,887,158 | 1,795,310 | ||||||||
| 2018 | 441,462 | — | 477,354 | 127,639 | 594,226 | 75,976 | 74,203 | 1,790,860 | 1,717,450 | |||||||||
| 2017 | 428,604 | — | 437,987 | 112,203 | 578,855 | 80,450 | 66,394 | 1,704,493 | 1,624,043 | |||||||||
Note: In order to show the effect that the year-over-year change in pension value had on total compensation, as determined under applicable SEC rules, we have included an additional column to show total compensation minus the change in pension value. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation. Total Without Change in Pension Value represents total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. The change in pension value is subject to many external variables, such as interest rates, that are not related to Company performance. Therefore, we do not believe a year-over-yearthat total compensation minus the change in pension value isprovides helpful in evaluating compensationadditional information for comparative purposes.
(1) |
(2) |
(3) | Reflects the adjustment made by the Compensation Committee to Mr. |
(4) |
The value of the performance unit awards as of the grant date, assuming achievement of the highest level of performance and excluding any performance units resulting from short-term dividend equivalents and the Additional Performance Measure, for each of Messrs. Leverett,
Fletcher, Lauber, Keyes, and Fletcher,Garvin, and Ms. Martin,Kelsey, is $5,736,862, $760,647, $1,308,597, $761,697,$2,021,184, $1,378,021, $673,228, and $924,951,$908,432, respectively, for the 20172019 awards. The value of the performance unit awards as of the grant date, assuming achievement of the highest level of performance and excluding any performance units resulting from short-term dividend equivalents and the Additional Performance Measure, for each of Messrs. Leverett,Fletcher, Lauber Keyes, and Fletcher,,and Garvin, and Ms. Martin,Kelsey, is $4,179,276, $225,903, $1,265,486, $479,001,$741,084, $1,221,145, $678,700, and $835,068,$847,963, respectively, for the 20162018 awards. See “Option Exercises and Stock Vested For Fiscal Year 2017”2019” for the amount of the actual payout with respect to the 20152017 award of performance units. Mr. Klappa’s 2015 and 2016 grants of performance units vested pursuant to the terms of the Company’s Performance Unit Plan upon his retirement on May 1, 2016. Not included are the performance unit awards resulting from short-term dividend equivalents and/or the Additional Performance Measure that may increase or, in the case of the Additional Performance Measure, decrease these amounts.
| WEC Energy Group | P-48 | 2020 Proxy Statement |
| The amounts reported reflect the aggregate grant date fair value, as computed in accordance with FASB ASC Topic 718 excluding estimated forfeitures, of options awarded to each NEO in the respective year for which such amounts are reported. The actual value received by the executives from these awards may range from $0 to greater than the reported amounts, depending upon Company performance. In accordance with FASB ASC Topic 718, we made certain assumptions in our calculation of the grant date fair value of the stock options. See “Stock Options” in Note 1(l) -- Stock-Based Compensation, in the Notes to Consolidated Financial Statements in our |
(6) | Consists of the |
(7) |
| Name | Annual Incentive Award | Short-Term Dividend Equivalents | Total | |||
| ($) | ($) | ($) | ||||
| Allen L. Leverett | 2,956,922 | 61,329 | 3,018,251 | |||
| Gale E. Klappa | — | — | — | |||
| Scott J. Lauber | 760,250 | 4,191 | 764,441 | |||
| J. Patrick Keyes | 860,017 | 25,719 | 885,736 | |||
| Susan H. Martin | 756,554 | 14,882 | 771,436 | |||
| J. Kevin Fletcher | 622,986 | 10,109 | 633,095 | |||
| The amounts reported for |
| Name | Change in Pension Value | Non-Qualified Deferred Compensation Earnings | Total | Change in Pension Value | Non-Qualified Deferred Compensation Earnings | Total | ||||||
| ($) | ($) | ($) | ($) | |||||||||
| Allen L. Leverett | 4,204,972 | 19,924 | 4,224,896 | |||||||||
| J. Kevin Fletcher | 3,912,793 | 45,348 | 3,958,141 | |||||||||
| Gale E. Klappa | 2,437,592 | 91,465 | 2,529,057 | 3,191,701 | 128,062 | 3,319,763 | ||||||
| Scott J. Lauber | 85,595 | 7,748 | 93,343 | 159,011 | 20,884 | 179,895 | ||||||
| J. Patrick Keyes | 117,799 | 4,981 | 122,780 | |||||||||
| Susan H. Martin | 104,074 | 4,844 | 108,918 | |||||||||
| J. Kevin Fletcher | 1,184,889 | 13,421 | 1,198,310 | |||||||||
| Frederick D. Kuester | 1,291,993 | 29,232 | 1,321,225 | |||||||||
| Margaret C. Kelsey | — | 162 | 162 | |||||||||
| Robert M. Garvin | 91,848 | 3,500 | 95,348 | |||||||||
For 2017, 2016,2019, 2018, and 2015,2017, the applicable discount rate used to value pension plan liabilities moved from 4.15%4.30% to 3.65%3.40%, 4.45%3.65% to 4.15%4.30%, and 4.15% to 4.45%3.65%, respectively. As the discount rate decreases, the Company’s pension funding obligation increases, and vice versa. The changes in the actuarial present values of the NEOs’ pension benefits do not constitute cash payments to the NEOs.
The pension values reported represent only WEC Energy Group’s obligation of the aggregate change in the actuarial present value of each NEO’s accumulated benefit under all defined benefit plans. Messrs. Leverett,Fletcher, Klappa, and FletcherKuester are entitled to receive pension benefits from prior employers. To the extent such prior employers are unable to pay their pension obligations, WEC Energy Group may be obligated to
pay the total amount.
| During |
| For Mr. Klappa, the amount reported in All Other Compensation for |
All Other Compensation for Messrs. Leverett,Fletcher, Klappa, Lauber, Keyes, and Fletcher,Garvin, and Ms. Martin,Kelsey, for 20172019 also consists of:
Employer matching of contributions into the WEC Energy Group 401(k) plan in the amount of $10,350$11,200 for each NEO;
Employer contributions into the WEC Energy Group 401(k) plan in the amount of $16,800 for Messrs. LeverettKlappa and Keyes; $10,800Kuester, and Ms. Kelsey, and into the WEC Energy Group Non-Qualified Retirement Savings Plan in the amount of $259,002 for Mr. Lauber; $7,841Klappa, $107,439 for Mr. Fletcher;Kuester, and $6,112$60,372 for Ms. Martin;Kelsey. These payments are in lieu of participation in the Company’s pension plan;
“Make-whole” payments under the Executive Deferred Compensation Plan that provides a match at the same level as the WEC Energy Group 401(k) plan (4% for up to 7% of wages) for all deferred salary and bonus not otherwise eligible for a match in the amounts of $115,273$59,053 for Mr. Leverett, $27,293Fletcher, $32,415 for Mr. Klappa, $51,854 for Mr. Lauber, $44,863$17,758 for Ms. Kelsey, and $30,862 for Mr. Keyes, $29,471 for Mr. Fletcher, and $39,528 for Ms. Martin;Garvin; and
Tax reimbursements or “gross-ups” for all applicable perquisites in the amountsamount of $21,452, $4,255,$13,963 and $11,397$16,603 for Messrs. Leverett, Klappa,Lauber and Lauber, respectively. Mr. Klappa received his tax reimbursement as Non-Executive Chairman. As further discussed in the Compensation Discussion and Analysis, Mr. Klappa is not eligible to receive tax gross-ups as CEO.Garvin.
| WEC Energy Group | ||
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 20172019
The following table shows additional data regarding incentive plan awards to the NEOs in 2017.2019.
| Name | Grant Date | Action Date (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (4) (#) | All Other Option Awards (5) | Grant Date Fair Value of Stock and Option Awards ($) | ||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Number of Securities Underlying Options (#) | Exercise or Base Price (6) ($/Sh) | Closing Market Price ($/Sh) | |||||||
| Allen L. Leverett | 1/19/17 | — | 362,813 | 1,451,250 | 3,047,625 | — | — | — | — | — | — | — | — | ||
| 1/19/17 | — | — | 61,329 | — | — | — | — | — | — | ��� | — | — | |||
| 1/3/17 | 12/1/16 | — | — | — | 14,056 | 56,225 | 98,394 | — | — | — | — | 3,278,199 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | 12,975 | — | — | — | 756,507 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | — | 130,640 | 58.305 | 58.49 | 1,033,362 | |||
| Gale E. Klappa | 1/3/17 | 12/1/16 | — | — | — | — | — | — | 4,288 | — | — | — | 250,012 | ||
| Scott J. Lauber | 1/19/17 | — | 93,282 | 373,129 | 783,571 | — | — | — | — | — | — | — | — | ||
| 1/19/17 | — | — | 4,191 | — | — | — | — | — | — | — | — | — | |||
| 1/3/17 | 12/1/16 | — | — | — | 1,864 | 7,455 | 13,046 | — | — | — | — | 434,664 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | 1,719 | — | — | — | 100,226 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | — | 17,320 | 58.305 | 58.49 | 137,001 | |||
| J. Patrick Keyes | 1/19/17 | — | 105,524 | 422,094 | 886,397 | — | — | — | — | — | — | — | — | ||
| 1/19/17 | — | — | 25,719 | — | — | — | — | — | — | — | — | — | |||
| 1/3/17 | 12/1/16 | — | — | — | 3,206 | 12,825 | 22,444 | — | — | — | — | 747,762 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | 2,958 | — | — | — | 172,466 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | — | 29,800 | 58.305 | 58.49 | 235,718 | |||
| Susan H. Martin | 1/19/17 | — | 92,829 | 371,315 | 779,762 | — | — | — | — | — | — | — | — | ||
| 1/19/17 | — | — | 14,882 | — | — | — | — | — | — | — | — | — | |||
| 1/3/17 | 12/1/16 | — | — | — | 2,266 | 9,065 | 15,864 | — | — | — | — | 528,535 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | 2,091 | — | — | — | 121,916 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | — | 21,065 | 58.305 | 58.49 | 134,816 | |||
| J. Kevin Fletcher | 1/19/17 | — | 76,440 | 305,760 | 642,096 | — | — | — | — | — | — | — | — | ||
| 1/19/17 | — | — | 10,109 | — | — | — | — | — | — | — | — | — | |||
| 1/3/17 | 12/1/16 | — | — | — | 1,866 | 7,465 | 13,064 | — | — | — | — | 435,247 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | 1,722 | — | — | — | 100,401 | |||
| 1/3/17 | 12/1/16 | — | — | — | — | — | — | — | 17,345 | 58.305 | 58.49 | 137,199 | |||
| Name | Grant Date | Action Date (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (4) (#) | All Other Option Awards (5) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Number of Securities Underlying Options (#) | Exercise or Base Price (6) ($/Sh) | Closing Market Price ($/Sh) | ||||||
| J. Kevin Fletcher | 1/17/19 | — | 300,480 | 1,201,918 | 2,524,028 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | 4,235 | 16,941 | 29,647 | — | — | — | — | 1,154,953 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 3,909 | — | — | — | 266,496 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 44,825 | 68.175 | 67.58 | 385,495 | ||
| Gale E. Klappa | 1/17/19 | — | 265,076 | 1,060,302 | 2,226,634 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 15,434 | — | — | — | 1,052,213 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 33,180 | 68.175 | 67.58 | 285,348 | ||
| Scott J. Lauber | 1/17/19 | — | 125,000 | 500,000 | 1,050,000 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | 2,888 | 11,550 | 20,213 | — | — | — | — | 787,421 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 2,665 | — | — | — | 181,686 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 30,560 | 68.175 | 67.58 | 262,816 | ||
| Frederick D. Kuester | 1/17/19 | — | 171,063 | 684,250 | 1,436,925 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 23,977 | — | — | — | 1,634,632 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 51,550 | 68.175 | 67.58 | 443,330 | ||
| Margaret C. Kelsey | 1/17/19 | — | 101,391 | 405,562 | 851,680 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | 1,904 | 7,614 | 13,325 | — | — | — | — | 519,084 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 1,757 | — | — | — | 119,783 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 20,147 | 68.175 | 67.58 | 173,264 | ||
| Robert M. Garvin | 1/17/19 | — | 74,428 | 297,713 | 625,197 | — | — | — | — | — | — | — | — | |
| 1/2/19 | 12/6/18 | — | — | — | 1,411 | 5,643 | 9,875 | — | — | — | — | 384,712 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | 1,302 | — | — | — | 88,764 | ||
| 1/2/19 | 12/6/18 | — | — | — | — | — | — | — | 14,931 | 68.175 | 67.58 | 128,407 | ||
(1) | On December |
(2) | Non-equity incentive plan awards consist of annual incentive awards under WEC Energy Group’s |
(3) | Consists of performance units awarded under the WEC Energy Group Performance Unit Plan. |
(4) | Consists of restricted stock awarded under the 1993 Omnibus Stock Incentive Plan. For a more detailed description of the terms of the restricted stock, see the Compensation Discussion and Analysis. |
(5) | Consists of non-qualified stock options to purchase shares of WEC Energy Group common stock pursuant to the 1993 Omnibus Stock Incentive Plan. For a more detailed description of the terms of the options, see the Compensation Discussion and Analysis. |
(6) | The exercise price of the option awards is equal to the fair market value of WEC Energy Group’s common stock on the date of grant. Fair market value is the average of the high and low prices of WEC Energy Group common stock, which is listed on the New York Stock Exchange, reported by Bloomberg, LLP on the grant date. |
| WEC Energy Group | ||
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 20172019
The following table reflects the number and value of exercisable and unexercisable options as well as the number and value of other equity awards held by the NEOs at fiscal year-end 2017.2019.
| Name | Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||
Number of Securities Underlying Unexercised Options: Exercisable (#) | Number of Securities Underlying Unexercised Options: Unexercisable (1) (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (2) (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (3) ($) | Number of Securities Underlying Unexercised Options: Exercisable (#) | Number of Securities Underlying Unexercised Options: Unexercisable (1) (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (2) (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (3) ($) | |
| Allen L. Leverett | 112,250 | — | 34.875 | 1/3/22 | — | — | ||||||||||||
| 197,360 | — | 37.46 | 1/2/23 | — | — | |||||||||||||
| 134,055 | — | 41.025 | 1/2/24 | — | — | |||||||||||||
| — | 77,955 | — | 52.895 | 1/2/25 | — | — | ||||||||||||
| — | 82,455 | — | 50.925 | 1/4/26 | — | — | ||||||||||||
| — | 42,679 | — | 58.325 | 5/2/26 | — | — | ||||||||||||
| — | 130,640 | — | 58.305 | 1/3/27 | 27,866 | 1,851,138 | — | — | ||||||||||
| — | 83,720 | 5,561,520 | ||||||||||||||||
| — | 103,556 | 6,879,225 | ||||||||||||||||
| J. Kevin Fletcher | — | 17,345 | — | 58.305 | 1/3/27 | — | — | — | — | |||||||||
| — | 16,055 | — | 66.015 | 1/2/28 | — | — | — | — | ||||||||||
| — | 44,825 | — | 68.175 | 1/2/29 | — | — | — | — | ||||||||||
| — | — | — | 5,469 | 504,406 | — | |||||||||||||
| — | — | — | — | — | — | — | 12,167 | 1,122,162 | ||||||||||
| — | 31,063 | 2,864,940 | ||||||||||||||||
| Gale E. Klappa | 426,928 | — | 37.46 | 1/2/23 | — | — | 50,000 | — | 52.895 | 1/2/25 | — | — | — | — | ||||
| 302,535 | — | 41.025 | 1/2/24 | — | — | 190,830 | — | 50.925 | 1/4/26 | — | — | — | — | |||||
| 176,010 | — | 52.895 | 1/2/25 | — | — | — | 115,960 | — | 66.015 | 1/2/28 | — | — | — | — | ||||
| 190,830 | — | 50.925 | 1/4/26 | — | — | — | 33,180 | — | 68.175 | 1/2/29 | — | — | — | — | ||||
| — | 7,146 | 474,709 | — | — | — | — | — | — | 15,434 | 1,423,478 | — | — | ||||||
| Scott J. Lauber | 3,650 | — | 34.875 | 1/3/22 | — | — | 5,000 | — | 41.025 | 1/2/24 | — | — | — | — | ||||
| 6,360 | — | 37.46 | 1/2/23 | — | — | 5,330 | — | 52.895 | 1/2/25 | — | — | — | — | |||||
| 9,560 | — | 41.025 | 1/2/24 | — | — | 6,720 | — | 50.925 | 1/4/26 | — | — | — | — | |||||
| — | 5,330 | — | 52.895 | 1/2/25 | — | — | — | 17,320 | — | 58.305 | 1/3/27 | — | — | — | — | |||
| — | 6,720 | — | 50.925 | 1/4/26 | — | — | — | 26,465 | — | 66.015 | 1/2/28 | — | — | — | — | |||
| — | 17,320 | — | 58.305 | 1/3/27 | 3,515 | 233,501 | — | — | — | 30,560 | — | 68.175 | 1/2/29 | — | — | — | ||
| — | 4,741 | 314,945 | — | 4,864 | 448,607 | — | — | |||||||||||
| — | 13,678 | 908,630 | — | 20,047 | 1,848,935 | |||||||||||||
| J. Patrick Keyes | 10,460 | — | 34.875 | 1/3/22 | — | — | ||||||||||||
| 95,265 | — | 37.46 | 1/2/23 | — | — | |||||||||||||
| 57,335 | — | 41.025 | 1/2/24 | — | — | |||||||||||||
| — | 32,685 | — | 52.895 | 1/2/25 | — | — | ||||||||||||
| — | 37,665 | — | 50.925 | 1/4/26 | — | — | ||||||||||||
| — | 29,800 | — | 58.305 | 1/3/27 | 8,237 | 547,184 | — | — | ||||||||||
| — | 26,555 | 1,764,049 | ||||||||||||||||
| — | 23,622 | 1,569,209 | ||||||||||||||||
| Susan H. Martin | — | 18,920 | — | 52.895 | 1/2/25 | — | — | |||||||||||
| — | 24,850 | — | 50.925 | 1/4/26 | — | — | ||||||||||||
| — | 21,065 | — | 58.305 | 1/3/27 | 6,511 | 432,526 | — | — | ||||||||||
| — | 17,523 | 1,164,053 | ||||||||||||||||
| — | 16,695 | 1,109,049 | ||||||||||||||||
| J. Kevin Fletcher | 18,260 | — | 34.875 | 1/3/22 | — | — | ||||||||||||
| 33,670 | — | 37.46 | 1/2/23 | — | — | |||||||||||||
| 20,525 | — | 41.025 | 1/2/24 | — | — | |||||||||||||
| — | 12,845 | — | 52.895 | 1/2/25 | — | — | ||||||||||||
| — | 14,260 | — | 50.925 | 1/4/26 | — | — | ||||||||||||
| — | 17,345 | — | 58.305 | 1/3/27 | 3,993 | 265,255 | — | — | ||||||||||
| — | 10,052 | 667,754 | ||||||||||||||||
| — | 13,749 | 913,346 | ||||||||||||||||
| Scott J. Lauber | — | 21,178 | 1,953,247 | |||||||||||||||
| — | 50,055 | — | 59.99 | 3/1/28 | — | — | — | — | ||||||||||
| — | 51,550 | — | 68.175 | 1/2/29 | — | — | — | |||||||||||
| — | 23,977 | 2,211,399 | — | |||||||||||||||
| — | 18,380 | — | 66.015 | 1/2/28 | — | — | — | — | ||||||||||
| — | 20,147 | — | 68.175 | 1/2/29 | — | — | — | |||||||||||
| — | 2,887 | 266,268 | — | — | ||||||||||||||
| — | 13,921 | 1,283,934 | ||||||||||||||||
| — | 13,961 | 1,287,623 | ||||||||||||||||
| Robert M. Garvin | 33,910 | — | 37.46 | 1/2/23 | — | — | ||||||||||||
| 24,665 | — | 41.025 | 1/2/24 | — | — | |||||||||||||
| 14,270 | — | 52.895 | 1/2/25 | — | — | |||||||||||||
| 17,210 | — | — | 50.925 | 1/4/26 | — | — | ||||||||||||
| — | 14,185 | — | 58.305 | 1/3/27 | — | — | ||||||||||||
| — | 14,705 | — | 66.015 | 1/2/28 | — | — | — | — | ||||||||||
| — | 14,931 | — | 68.175 | 1/2/29 | — | — | — | — | ||||||||||
| — | 2,675 | 246,715 | — | — | ||||||||||||||
| — | 11,142 | 1,027,627 | ||||||||||||||||
| — | 10,347 | 954,304 | ||||||||||||||||
(1) | All options reported in this column were granted ten years prior to their respective expiration date and vest 100% on the third anniversary of the grant date. |
(2) | Effective January |
(3) | The number of performance units reported were awarded in |
| WEC Energy Group | P-51 | 2020 Proxy Statement |
2019. The number and value of the 2019 performance units includes performance units resulting from the grant of short-term dividend equivalents and achievement of the Additional Performance Measure in 2019.
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 20172019
This table shows the number and value of (1) stock options that were exercised by the NEOs, (2) restricted stock awards that vested, and (3) performance units that vested in 2017.2019.
| Name | Option Awards | Stock Awards | Option Awards | Stock Awards | ||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | Number of Shares Acquired on Vesting (2) (#) | Value Realized on Vesting (3)(4) ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | Number of Shares Acquired on Vesting (2) (#) | Value Realized on Vesting (3)(4) ($) | |
| Allen L. Leverett | 29,715 | 860,951 | 14,115 | 830,790 | ||||
| — | 31,136 | 2,068,375 | ||||||
| J. Kevin Fletcher | 27,105 | 1,188,037 | 1,480 | 100,574 | ||||
| — | — | 15,169 | 1,399,079 | |||||
| Gale E. Klappa | 449,672 | 13,809,484 | — | — | 608,855 | 25,174,929 | 60,164 | 4,131,697 | — |
| Scott J. Lauber | 9,390 | 379,139 | 1,791 | 105,056 | 14,570 | 671,125 | 1,581 | 107,521 |
| — | 2,128 | 141,352 | — | — | 15,149 | 1,379,204 | ||
| J. Patrick Keyes | — | 5,332 | 313,035 | |||||
| — | 13,057 | 867,406 | ||||||
| Susan H. Martin | 48,175 | 1,257,291 | 4,353 | 255,443 | ||||
| — | 7,556 | 501,924 | ||||||
| J. Kevin Fletcher | — | 2,268 | 133,124 | |||||
| — | 5,132 | 340,929 | ||||||
| Frederick D. Kuester | — | 24,609 | 1,867,945 | |||||
| — | — | |||||||
| Margaret C. Kelsey | — | 565 | 38,519 | |||||
| — | — | |||||||
| Robert M. Garvin | — | 1,420 | 96,498 | |||||
| — | 12,406 | 1,144,189 | ||||||
(1) | Value realized upon the exercise of options is determined by multiplying the number of shares received upon exercise by the difference between the market price of WEC Energy Group common stock at the time of exercise and the exercise price. |
(2) | Reflects the number of shares of restricted stock that vested in |
(3) | Restricted stock value realized is determined by multiplying the number of shares of restricted stock that vested by the fair market value of WEC Energy Group common stock on the date of vesting. We compute fair market value as the average of the high and low prices of WEC Energy Group common stock reported by Bloomberg, LLP on the vesting date. |
(4) | Performance units value realized is determined by multiplying the number of performance units that vested by the closing market price of WEC Energy Group common stock on December |
| WEC Energy Group | ||
PENSION BENEFITS AT FISCAL YEAR-END 20172019
The following table sets forth information for each NEO regarding their pension benefits at fiscal year-end 20172019 under WEC Energy Group’s three different retirement plans discussed below.
| Name | Plan Name | Number of Years Credited Service (1) (#) | Present Value of Accumulated Benefit (3)(4) ($) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (1) (#) | Present Value of Accumulated Benefit (5)(6) ($) | Payments During Last Fiscal Year(7) ($) | |||
| Allen L. Leverett | WEC Energy Group Plan | 14.5 | 325,820 | — | |||||||
| SERP | 14.5 | 2,106,717 | — | ||||||||
| Individual Letter Agreement | 29 | 12,231,485 | — | ||||||||
| J. Kevin Fletcher | WEC Energy Group Plan | 8.17 | 168,404 | — | |||||||
| SERP | 8.17 | 406,447 | — | ||||||||
| Individual Letter Agreement | 42.75 | 9,114,487 | — | ||||||||
Gale E. Klappa(2) | WEC Energy Group Plan | 13 | 278,067 | 22,174 | WEC Energy Group Plan | 13.0 | 286,130 | — | |||
| SERP | 13 | 3,565,578 | 263,731 | SERP | — | 3,403,143 | 263,731 | ||||
| Individual Letter Agreement | 38.67 | 25,006,666 | 1,849,639 | Individual Letter Agreement | 38.67 | 23,867,452 | 1,849,639 | ||||
| Scott J. Lauber | WEC Energy Group Plan | 27.5 | 548,682 | — | WEC Energy Group Plan | 29.50 | 612,353 | — | |||
| SERP | 27.5 | 178,153 | — | SERP | 29.50 | 217,531 | — | ||||
| Individual Letter Agreement | — | — | Individual Letter Agreement | — | — | — | |||||
| J. Patrick Keyes | WEC Energy Group Plan | 6.67 | 128,857 | — | |||||||
| SERP | 6.67 | 366,693 | — | ||||||||
| Individual Letter Agreement | 6.67 | 147,352 | — | ||||||||
| Susan H. Martin | WEC Energy Group Plan | 17.75 | 295,686 | — | |||||||
| SERP | 17.75 | 414,467 | — | ||||||||
| Individual Letter Agreement | — | — | |||||||||
| J. Kevin Fletcher | WEC Energy Group Plan | 6.17 | 121,168 | — | |||||||
| SERP | 6.17 | 232,155 | — | ||||||||
| Individual Letter Agreement | 40.75 | 4,727,616 | — | ||||||||
Frederick D. Kuester(3) | WEC Energy Group Plan | — | — | — | |||||||
| SERP | 9.17 | 913,465 | 61,740 | ||||||||
| Individual Letter Agreement | 40.33 | 9,791,300 | 661,782 | ||||||||
Margaret C. Kelsey(4) | WEC Energy Group Plan | — | — | — | |||||||
| SERP | — | — | — | ||||||||
| Individual Letter Agreement | — | — | — | ||||||||
| Robert M. Garvin | WEC Energy Group Plan | 8.67 | 179,963 | — | |||||||
| SERP | 8.67 | 366,364 | — | ||||||||
| Individual Letter Agreement | 8.67 | 79,432 | — | ||||||||
(1) | Years of service are computed as of December 31, |
(2) | Upon his retirement in May 2016, Mr. Klappa’s ILA terminated. At that time, the number of years of credited service and the accumulated benefit effectively transferred to the WEC Energy Group Plan and the SERP. Payments related to the ILA were actually paid under the WEC SERP. Mr. Klappa is not accruing additional benefits under these plans in connection with his current |
(3) | Upon his retirement in January 2013, Mr. Kuester’s ILA terminated. At that time, the number of years of credited service and the accumulated benefit effectively transferred to the WEC Energy Group Plan and the SERP. Payments related to the ILA were actually paid under the WEC SERP. Mr. Kuester is not accruing additional benefits under these plans in connection with his current service. |
(4) | Ms. Kelsey is not eligible to receive pension benefits under the WEC Energy Group Plan. |
(5) | The key assumptions used in calculating the actuarial present values reflected in this column are: |
Earliest projected unreduced retirement age based upon projected service:
| – | For |
| – | For |
| – | For 60. |
| – | For Mr. Kuester, age 62.42 (actual age at retirement in 2013). |
| – | For Mr. Garvin, age 54.75. |
Discount rate of 3.65%3.40%.
Cash balance interest crediting rate of 5.00%.
Form of payment:
| – |
| – |
| – | Mr. Lauber: WEC Energy Group Plan |
| – | Mr. Kuester's actual form of payment elected at retirement: WEC Energy Group Plan - Lump Sum; SERP and ILA - 50% Joint & Survivor annuity |
| – | Mr. |
MP2019 projection.
WEC Energy Group’s pension benefit obligations to Messrs. |
(7) | Messrs. Klappa and Kuester continued to receive retirement benefits under the SERP; however, payments under the WEC Energy Group Plan were suspended for Mr. Klappa at the time he resumed his role as an executive officer with the Company. Mr. Kuester’s entire WEC Energy Group Plan balance was previously paid in the form of a lump sum; therefore no further benefit exists for him in this plan. |
| WEC Energy Group | ||
RETIREMENT PLANS
WEC Energy Group maintains four different plans providing for retirement payments and benefits for the NEOs: a defined benefit pension plan of the cash balance type (“WEC Energy Group Plan”); a supplemental executive retirement plan (“SERP”); ILAs; and the WEC Energy Group Retirement Savings Plan, which is a 401(k) plan.plan, for those individuals who are not eligible to participate in the WEC Energy Group Plan. The compensation currently considered for purposes of the retirement plans (other than the WEC Energy Group Plan and SERP) for Messrs. Leverett andMr. Fletcher is $2,610,356 and $924,226, respectively. These amounts represent$1,300,835. This amount represents the average compensation (consisting of base salary and annual incentive compensation) for the 36 highest consecutive months. For Messrs. Lauber and Keyes, and Ms. Martin,Garvin, the compensation considered for purposes of the retirement plans (other thanis $1,577,322 and $1,052,182, respectively, of which $280,000 is applied to the WEC Energy Group Plan) is $952,339, $1,391,596,Plan and $1,258,194, respectively.the remainder to the SERP. These amounts represent their 20172019 base salary, plus their 20162018 STPP award paid in 2017.2019. As of December 31, 2017,2019, Messrs. Leverett,Fletcher, Lauber, Keyes, and Fletcher, and Ms. Martin,Garvin currently have or are considered to have 29, 27.50, 6.67, 40.75,42.75, 29.5, and 17.758.67 credited years of service, respectively, under the various plans described below. Messrs. Lauber and Keyes, and Ms. Martin,Garvin were not granted additional years of credited service.
See below for a discussion of Mr. Klappa’s retirement benefits.the contributions made to the WEC Energy Group Retirement Savings Plan on behalf of Messrs. Klappa and Kuester, and Ms. Kelsey, who do not participate in the WEC Energy Group Plan.
The WEC Energy Group Plan
Most regular full-time and part-time employees, including several of the NEOs, participate in the WEC Energy Group Plan. The WEC Energy Group Plan bases a participant’s defined benefit pension on the value of a hypothetical account balance. For individuals participating in the WEC Energy Group Plan as of December 31, 1995, a starting account balance was created equal to the present value of the benefit accrued as of December 31, 1994, under the plan benefit formula prior to the change to a cash balance approach. That formula provided a retirement income based on years of credited service and average compensation (consisting of base salary and annual incentive compensation) for the 36 highest consecutive months, with an adjustment to reflect the Social Security integrated benefit. In addition, individuals participating in the WEC Energy Group Plan as of
December 31, 1995, received a special one-time transition credit amount equal to a specified percentage varying with age multiplied by credited service and 1994 base pay.
The present value of the accrued benefit as of December 31, 1994, plus the transition credit, was also credited with interest at a stated rate. For 1996 through 2007, a participant received annual credits to the account equal to 5% of base pay (including WEC Energy Group 401(k) plan pre-tax deferrals and other items), plus an interest credit on all prior accruals equal to 4% plus 75% of the annual time-weighted trust investment return for the year in excess of 4%. From 2008 through 2013, the interest credit percentage was set at either the long-term corporate bond third segment rate, published by the Internal Revenue Service, or 4%, whichever was greater.
Effective January 1, 2014, participants receive an annual credit to the account equal to 6% of base pay (including WEC Energy Group 401(k) plan pre-tax deferrals and other items), plus an interest credit on all prior accruals equal to a 5% fixed rate. For participants in the WEC Energy Group Plan on December 31, 2007 and December 31, 2013, their WEC Energy Group Plan benefit will never be less than the benefit accrued as of December 31, 2007 and December 31, 2013, respectively. The WEC Energy Group Plan benefit will be calculated under all three formulas to provide participants with the greater benefit; however, in calculating a participant’s benefit accrued as of December 31, 2007 and December 31, 2013, interest credits as defined under each of the prior WEC Energy Group Plan formulas will be taken into account but not any additional pay credits.
Participants who were “grandfathered” as of December 31, 1995, as discussed below, will still receive the greater of the grandfathered benefit or the cash balance benefit.
The life annuity payable under the WEC Energy Group Plan is determined by converting the hypothetical account balance credits into annuity form.
Individuals who were participants in the WEC Energy Group Plan on December 31, 1995 were “grandfathered” so that they will not receive any lower retirement benefit than would have been provided under the formula in effect through December 31, 1995, had it continued. This amount continued to increase until December 31, 2010, at which time it was frozen. Upon retirement, participants will receive the greater of this frozen amount or the accumulated cash balance.
For Messrs. Leverett andMr. Lauber, estimated benefits under the grandfathered formula are higher than under the cash balance plan formula. Messrs. Keyes and Fletcher and Ms. Martin,Garvin do not participate in the grandfathered formula. Although all of the NEOs participate in the cash balance plan formula, pursuant to the agreement discussed below, Mr. Leverett’s total retirement benefits would be determined by the prior plan benefit formula if he were to retire at or after age 60. Mr. Leverett's agreement also provides that the prior plan benefit formula will continue to be applied until retirement, with no amounts frozen as of December 31, 2010. Mr. Leverett would receive the cash balance in his account if he was to terminate employment prior to attaining the age of 60.
Under the WEC Energy Group Plan, participants receive unreduced pension benefits upon reaching one of the following three thresholds: (1) age 65; (2) age 62 with 30 years of service; or (3) age 60 with 35 years of service.
Pursuant to the Internal Revenue Code, only $270,000$280,000 of pension eligible earnings (base pay and annual incentive compensation) maycould be considered for purposes of the WEC Energy Group Plan.Plan in 2019.
| WEC Energy Group | P-54 | 2020 Proxy Statement |
Supplemental Executive Retirement Plans and Individual Letter Agreements
Designated officers of WEC Energy Group, including all of the NEOs (other than Ms. Kelsey) participate in the SERP, which is part of the Supplemental Pension Plan (the “SPP”) adopted to comply with Section 409A of the Internal Revenue Code. The SERP provides monthly supplemental pension benefits to participants, which will be paid out of unsecured corporate assets, or the grantor trust described below, in an amount equal to the difference between the actual pension benefit payable under the WEC Energy Group Plan and what such pension benefit would be if calculated without regard to any limitation imposed by the Internal Revenue Code on pension benefits or covered compensation, including amounts deferred to the WEC Energy Group Executive Deferred Compensation Plan. Except for a “change in control” of WEC Energy Group, as defined in the SPP, and pursuant to the terms of the ILAs discussed below, no payments are made until after the participant’s retirement at or after age 60 or death. If a participant in the SERP dies prior to age 60, his or her beneficiary is entitled to receive retirement benefits under the SERP. Although Mr.Messrs. Klappa remains a participantand Kuester remain participants in the SPP, hethey no longer accruesaccrue any benefits under the plan as a result of his retirement in 2016.
their earlier retirements.
WEC Energy Group entered into an agreement with Mr. Fletcher when he first commenced employment in 2011 to provide him with supplemental retirement benefits upon his retirement, provided he completed one year of service with the Company. The supplemental retirement payments are intended to make the total retirement benefits payable to Mr. Fletcher comparable to that which would have been received under his prior employer’s defined benefit pension plan, calculated without regard to Internal Revenue Code limits, and as if Mr. Fletcher’s employment continued with the prior employer and the defined benefit formula then in effect under the prior employer’s plan continued to his retirement. The retirement benefits payable as a result of this agreement will be offset by the value of any qualified and non-qualified defined benefit pension plan of the prior employer.
WEC Energy Group entered into an individual letter agreement with Mr. Klappa when he first commenced employment in 2003 to provide him with supplemental retirement benefits upon retirement at or after age 60. The supplemental retirement payments are intended to make the total retirement benefits payable to Mr. Klappa comparable to that which would have been received under the WEC Energy Group Plan as in effect on December 31, 1995, had the defined benefit formula then in effect continued until his retirement, calculated without regard to Internal Revenue Code limits, and as if Mr. Klappa had started participation in the WEC Energy Group Plan at age 27. As a result, pursuant to the terms of the agreement, which terminated upon Mr. Klappa’s retirement in May 2016, Mr. Klappa had 38.67 years of credited service under the WEC Energy Group Plan and the SERP upon his retirement in May 2016.
WEC entered into an individual letter agreement with Mr. Kuester when he first commenced employment in 2003 that was similar to Mr. Klappa’s agreement to provide him with supplemental retirement benefits upon retirement at or after age 60. Pursuant to the terms of the agreement, which terminated upon Mr. Kuester’s retirement in January 2013, Mr. Kuester’s benefits under the WEC Energy Group Plan and the SERP are being paid under the prior plan benefit formula as in effect on December 1, 1995, and as if Mr. Kuester had started with WEC Energy Group at age 22. As a result, Mr. Kuester had 40.33 years of credited service under the WEC Energy Group Plan and the SERP upon his retirement in January 2013.
The Company entered into an agreement with Mr. Garvin when he was hired in April 2011 that provides for a supplemental pension benefit account, which was credited with $50,000. This account is credited with interest annually at the same rate as the WEC Energy Group Plan. The account balance will vest at the earliest to occur of Mr. Garvin attaining age 60 or completion of 10 years of service.
The purpose of these agreements was to ensure that Messrs. Leverett,Fletcher, Klappa, Keyes, and FletcherGarvin did not lose pension earnings by joining the executive management team at WEC Energy Group they otherwise would have received from their former employers. Without providing a means to retain these pension benefits, it would have been difficult for WEC Energy Group to attract these officers.
The SPP provides for a mandatory lump sum payment upon a change in control if the executive’s employment is terminated within 18 months after the change in control. The Wisconsin Energy Corporation 2014 Rabbi Trust, a grantor trust, funds certain non-qualified benefits, including the SPP and the ILAs, as well as the Executive Deferred Compensation Plan and the Directors’ Deferred Compensation Plan. See “Potential Payments upon Termination or Change in Control” later in this proxy statement for additional information.
WEC Energy Group Retirement Savings Plan
Effective January 1, 2015, all newly hired management employees, including executive officers, will receive an annual contribution equal to 6% of pension eligiblepension-eligible wages from the Company into WEC Energy Group’s 401(k) plan rather than participate in the WEC Energy Group Plan. Pension eligiblePension-eligible wages consist of annual base salary and STPP payouts. In connection with this plan, the Compensation Committee adopted the WEC Energy Group Non-Qualified Retirement Savings Plan which provides “make-whole” benefits to address Internal Revenue Code limits on the amount of money that can be contributed to a 401(k) plan.
Since Mr.Messrs. Klappa isand Kuester are considered a new employee, heemployees, they will no longer accrue additional benefits under the WEC Energy Group Plan; however, Mr.Messrs. Klappa isand Kuester, along with Ms. Kelsey, are entitled to receive Company contributions to the 401(k) plan and Non-Qualified Retirement Savings Plan.
| WEC Energy Group | P-55 | 2020 Proxy Statement |
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 20172019
The following table reflects activity by the NEOs during 20172019 in WEC Energy Group’s Executive Deferred Compensation Plan discussed below.
| Name | Executive Contributions in Last Fiscal Year (1) | Registrant Contributions in Last Fiscal Year (1) | Aggregate Earnings In Last Fiscal Year | Aggregate Withdrawals / Distributions | Aggregate Balance at Last Fiscal Year-End (2) | Executive Contributions in Last Fiscal Year (1) | Registrant Contributions in Last Fiscal Year (1) | Aggregate Earnings In Last Fiscal Year | Aggregate Withdrawals / Distributions | Aggregate Balance at Last Fiscal Year-End (2) | ($) | |||||||||
| Allen L. Leverett | 363,270 | 115,272 | 607,067 | — | 5,655,363 | |||||||||||||||
| J. Kevin Fletcher | 492,464 | 59,053 | 170,491 | — | 3,525,522 | |||||||||||||||
| Gale E. Klappa | 79,430 | — | 315,455 | 898,292 | 7,186,337 | 59,231 | 32,415 | 358,874 | 998,326 | 6,174,391 | ||||||||||
| Scott J. Lauber | 94,498 | 27,293 | 82,980 | — | 1,402,853 | 199,595 | 51,854 | 164,607 | — | 2,109,120 | ||||||||||
| J. Patrick Keyes | 1,012,713 | 44,864 | 886,344 | — | 5,192,261 | |||||||||||||||
| Susan H. Martin | 514,088 | 39,528 | 331,605 | — | 2,869,597 | |||||||||||||||
| J. Kevin Fletcher | 335,349 | 29,471 | 79,688 | — | 2,112,425 | |||||||||||||||
| Frederick D. Kuester | — | — | 60,595 | 300,482 | 901,445 | |||||||||||||||
| Margaret C. Kelsey | 37,776 | 17,758 | 86,828 | — | 364,688 | |||||||||||||||
| Robert M. Garvin | 73,608 | 30,862 | 197,623 | — | 1,029,106 | |||||||||||||||
(1) | All of the amounts are reported as compensation in the "Summary Compensation Table" of this proxy statement. |
(2) | $ |
Executive Deferred Compensation Plan
WEC Energy Group maintains two executive deferred compensation plans in which the NEOs participate: the Legacy WEC Energy Group Executive Deferred Compensation Plan (the “Legacy EDCP”), and the WEC Energy Group Executive Deferred Compensation Plan (the “EDCP”) adopted effective January 1, 2005 to comply with Section 409A of the Internal Revenue Code. The Legacy EDCP provides that (1) amounts earned, deferred, vested, credited, and/or accrued as of December 31, 2004 are preserved and frozen (subject to appreciation in value of such amounts) so that these amounts are exempt from Section 409A and (2) no new employees may participate in the Legacy EDCP as of January 1, 2005. Since January 1, 2005, all deferrals have been made to the EDCP. The provisions of the EDCP as in effect on December 31, 20172019 are described below, as are the payout provisions of the Legacy EDCP.
The EDCP. Under the plan, a participant may defer up to 50% of his or her base salary, annual incentive compensation and vested awards of performance units. Stock option gains and vested restricted stock and short-term dividend equivalents may not be deferred into the EDCP. Generally, deferral elections are made annually by each participant for the upcoming plan year. The Company maintains detailed records tracking each participant’s “account balance.” In addition to deferrals made by the participants, the Company may also credit each participant’s account balance by matching a certain portion of each participant’s deferral. Such deferral matching is determined by a formula taking into account the matching rate applicable under the Company’s 401(k) plan, the percentage of compensation subject to such matching rate, the participant’s gross compensation eligible for matching, and the amount of eligible compensation actually deferred. Also, in our discretion, the Company may credit any other amounts, as appropriate, to each participant’s account.
Participants may elect to participate in the Company’s stock measurement fundWEC Energy Group Common Stock Fund and/or the Prime Rate Fund. The Company tracks each participant’s account balance as though the balance was actually invested in these funds. Fund elections are not actual investments, but are elections chosen only for purposes of calculating market gain or loss on deferred amounts for the duration of the deferral period. Each participant may select the amount of deferred compensation to be allocated among the two measurement funds. Contributions and deductions may be made to each participant’s account based on the performance of the measurement fund(s) elected.
The annual rate of return for the calendar year ended December 31, 20172019 for the WEC Energy Group Common Stock Fund and the Prime Rate Fund was 13.3%33.2% and 4.19%5.31%, respectively.
Each participant’s account balance is debited or credited periodically based on the performance of the measurement fund(s) elected by the participant. Subject to certain restrictions, participants may periodically make changes to their measurement fund elections by notice to the committee administering the plan.
elections.
At the time of his or her deferral election, each participant may designate a prospective payout election for any or the entire amount deferred, plus any amounts debited or credited to the deferred amount as of the designated payout. Amounts deferred into the EDCP may not be withdrawn at the discretion of the participant and a change to the designated payout delays the initial payment at least five years beyond the originally designated payout date. In addition, the Company may not limit payout amounts in order to deduct such amounts under Section 162(m) of the Internal Revenue Code.
| WEC Energy Group | P-56 | 2020 Proxy Statement |
The balance of a participant’s account is payable on his or her retirement in either a lump sum payout or in annual installments, at the election of the participant. Upon the death of a participant after retirement, payouts are made to the deceased participant’s beneficiary in the same manner as though such payout would have been made to the participant had the participant survived. In the event of a participant’s termination of employment prior to retirement, the participant may elect to receive a payout beginning the year after termination in the amount of his or her account balance as of the termination date either in a lump sum or in annual installments over a period of five years. Disability is not itself a payment event until the participant terminates employment with WEC Energy Group or its subsidiaries. A participant’s account balance will be paid out in a lump sum if the participant separates from service with WEC Energy Group or its subsidiaries within 18 months after a change in control of WEC Energy Group, as defined in the plan. The deferred amounts will be paid out of the general corporate assets or the assets of the Wisconsin Energy Corporation 2014 Rabbi Trust.
The Legacy EDCP. At the time of his or her deferral election, each participant designated a prospective payout election for any or the entire amount deferred, plus any amounts debited or credited to the deferred amount as of the designated payout. A participant may elect, at any time, to withdraw part (a minimum of $25,000) or all of his or her account balance, subject to a withdrawal penalty of 10%. Payout amounts may be limited to the extent to which they are deductible by the Company under Section 162(m) of the Internal Revenue Code.
The balance of a participant’s account is payable on his or her retirement in either a lump sum payout or in annual installments, at the election of the participant. Upon the death of a participant after retirement, payouts are made to the deceased participant’s beneficiary in the same manner as though such payout would have been made to the participant had the participant survived. In the event of a participant’s termination of employment prior to retirement, the participant may elect to receive a payout beginning the year after termination in the amount of his or her account balance as of the termination date either in a lump sum or in annual installments over a period of five years. Any participant who suffers from a continued disability will be entitled to the benefits of plan participation unless and until the committee administering the plan determines that the participant has been terminated for purposes of continued participation in the plan. Upon any such determination, the disabled participant is paid out as though the participant had retired. Except in certain limited circumstances, participants’ account balances will be paid out in a lump sum (1) upon the occurrence of a change in control, as defined in the plan, or (2) upon any downgrade of the Company’s senior debt obligations to less than “investment grade.” The deferred amounts will be paid out of the general corporate assets or the assets of the Wisconsin Energy Corporation 2014 Rabbi Trust.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below reflect the amount of compensation payable to each of our NEOs (other than Mr. Klappa) in the event of termination of each executive’s employment. These amounts are in addition to each NEO’s aggregate balance in the EDCP at fiscal year-end 2017,2019, as reported in the "Aggregate Balance at Last Fiscal Year-End" column under “Nonqualified Deferred Compensation for Fiscal Year 2017.2019.” The amount of compensation payable to each NEO (other than Mr. Klappa) upon voluntary termination, normal retirement, for-cause termination, involuntary termination (by the Company for any reason other than cause, death or disability or by the executive for “good reason”), termination following a “change in control,” disability, and death are set forth below. The amounts shown assume that such termination was effective as of December 31, 20172019 and include amounts earned through that date, and are estimates of the amounts which would be paid out to the NEOs upon termination. The amounts shown under “Normal Retirement” assume the NEOs were retirement eligible with no reduction of retirement benefits. The amounts shown under “Termination Upon a Change in Control” assume the NEOs terminated employment as of December 31, 2017,2019, which was within 18 months of a change in control of WEC Energy Group. The amounts reported in the row titled “Retirement Plans” in each table below are not in addition to the amounts reflected under “Pension Benefits at Fiscal Year-End 2017.2019.” The actual amounts to be paid out can only be determined at the time of an officer’s termination of employment.
Payments Made Upon Voluntary Termination or Termination for Cause, Death or Disability
In the event a NEO voluntarily terminates employment or is terminated for cause, death, or disability, the officer will receive:
accrued but unpaid base salary and, for termination by death or disability, prorated annual incentive compensation;
401(k) plan and EDCP account balances;
the WEC Energy Group Plan cash balance;
in the case of death or disability, full vesting in all outstanding stock options, restricted stock, and performance units (otherwise, the ability to exercise already vested options within three months of termination) as well as vesting in the SERP and ILAs; and
if voluntary termination occurs after age 60, such termination is treated as a normal retirement.
NEOs are also entitled to the value of unused vacation days, if any, and for termination by death, benefits payable under the officer life insurance benefit if the NEO participates in such benefit.
| WEC Energy Group | P-57 | 2020 Proxy Statement |
Payments Made Upon Normal Retirement
In the event of the retirement of a NEO, the officer will receive:
•accrued but unpaid base salary and prorated annual incentive compensation;
•full vesting in all outstanding stock options and a prorated amount of performance units;
•full vesting in all retirement plans, including the WEC Energy Group Plan, SERP, and ILAs; and
•401(k) plan and EDCP account balances.balances; and
Payments Made Under Employment AgreementsAgreement Upon a Change in Control, Involuntary Termination, or Termination for Good Reason
WEC Energy Group has entered into a written employment agreement with Mr. Leverett, which provides for certain severance benefits as described below.Fletcher effective October 31, 2011. The Compensation Committee did not amend or otherwise modify Mr. Leverett'sFletcher’s employment agreement dated as of December 28, 2008, in any way in connection with his serviceappointment as CEO.
CEO. Pursuant to the terms of thethis agreement, with Mr. Fletcher is entitled to severance benefits are provided if his employment is terminated (1) by the Company for any reason other than cause, death, or disability, or (2) by Mr. Fletcher for good reason. Upon termination, Mr. Fletcher'sFletcher’s agreement provides for (1) a lump sum payment equal to 2.99 times his annual base salary for the fiscal year in which termination occurs, and (2) health, life and other welfare benefits (excluding disability benefits) for a period of three years following termination.
Generally, pursuant to Mr. Fletcher’s ILA, good reason means:
(1) a material reduction in Mr. Fletcher's base compensation;
(2) a material change in the geographic location at which Mr. Fletcher must perform services; or
(3) a material breach of the agreement by the Company.
WEC Energy Group also entered into a written employment agreement with Ms. Kelsey effective September 18, 2017. Pursuant to the terms of this agreement, Ms. Kelsey is entitled to severance benefits if her employment is involuntarily terminated by the Company for any reason other than performance prior to September 18, 2020. Upon termination, Ms. Kelsey’s agreement provides for a lump sum payment equal to 1.5 times her then current annual base salary plus target annual incentive. After this benefit expires on September 18, 2020, Ms. Kelsey will be eligible to participate in the Severance Pay Plan, in which all management employees are eligible to participate.
The employment agreements Messrs. Klappa and Kuester entered into upon commencement of their employment with WEC Energy Group in 2003 terminated upon their retirements in May 2016 and January 2013, respectively.
In addition, pursuant to the terms of the SPP and ILAs,(and for Mr. Fletcher, his ILA) retirement benefits are paid to theall participating NEOs upon termination of employment within 18 months of a change in control. Participants inappointed by the SPP,Company, including the NEOs, are also eligible to receive a supplemental disability benefit pursuant to the terms of the WEC Energy Group Supplemental Long Term Disability Plan, in an amount equal to the difference between the actual amount of the benefit payable under the long-termlong term disability plan applicable to all employees and what such disability benefit would have been if calculated without regard to any limitation imposed by the broad-based plan on annual compensation recognized thereunder.
Payments under the Severance Pay Plan
Messrs. Klappa, Lauber, Kuester, and Keyes, and Ms. Martin,Garvin have not entered into any agreement that currently provides for severance benefits upon a change in control or otherwise. All threeThese officers are eligible to participate in the Company’s Severance Pay Plan, in which all management employees are eligible to participate. In the event a participant is involuntarily terminated, other than for cause, death, disability, retirement, or resignation, the participant is entitled to receive severance pay in an amount equal to the sum of: (1) 4% of the participant’s annual base salary and target bonus, plus (2) 4% of the participant’s annual base salary and target bonus multiplied by his or her completed years of service with the Company. The maximum amount of severance pay that can be received under the plan is twelve months of a participant’s annual base salary and target bonus.
| WEC Energy Group | P-58 | 2020 Proxy Statement |
Potential Payments to Named Executive Officers Upon Termination or Change in Control of the Company
The following tables show the potential payments upon termination or a change in control of the Company for:
Executive Benefits and Payments Upon Separation | Voluntary Termination ($) | Normal Retirement ($) | For Cause Termination ($) | Involuntary Termination ($) | Termination Upon Change in Control ($) | Disability ($) | Death ($) | |||||||
| J. Kevin Fletcher | ||||||||||||||
| Compensation: | ||||||||||||||
| Cash Severance | — | — | — | 3,001,960 | 3,001,960 | — | — | |||||||
| Additional Pension Credited Service | — | — | — | — | — | — | — | |||||||
| Additional 401(k) and EDCP Match | — | — | — | — | — | — | — | |||||||
| Long-Term Incentive Compensation: | ||||||||||||||
| Performance Units | — | 955,042 | — | — | 2,235,840 | 2,235,840 | 2,235,840 | |||||||
| Restricted Stock | — | — | — | — | 504,406 | 504,406 | 504,406 | |||||||
| Options | — | 2,087,576 | — | — | 2,087,576 | 2,087,576 | 2,087,576 | |||||||
| Benefits & Perquisites: | ||||||||||||||
| Retirement Plans | 9,689,338 | 9,689,338 | 9,689,338 | 9,689,338 | 9,689,338 | 9,689,338 | 5,564,750 | |||||||
| Health and Welfare Benefits | — | — | — | 56,131 | 56,131 | — | — | |||||||
| Excise Tax Gross-Up | — | — | — | — | — | — | — | |||||||
| Financial Planning | — | — | — | — | — | — | — | |||||||
| Outplacement | — | — | — | — | — | — | — | |||||||
| Death Benefit | — | — | — | — | — | — | 3,012,000 | |||||||
| Total | 9,689,338 | 12,731,956 | 9,689,338 | 12,747,429 | 17,575,251 | 14,517,160 | 13,404,572 | |||||||
| Gale E. Klappa | ||||||||||||||
| Compensation: | ||||||||||||||
| Cash Severance | — | — | — | 1,318,593 | 1,318,593 | — | — | |||||||
| Additional Pension Credited Service | — | — | — | — | — | — | — | |||||||
| Additional 401(k) and EDCP Match | — | — | — | — | — | — | — | |||||||
| Long-Term Incentive Compensation: | ||||||||||||||
| Performance Units | — | — | — | — | — | — | — | |||||||
| Restricted Stock | — | — | — | — | 1,423,478 | 1,423,478 | 1,423,478 | |||||||
| Options | — | 3,838,036 | — | — | 3,838,036 | 3,838,036 | 3,838,036 | |||||||
| Benefits & Perquisites: | ||||||||||||||
| Retirement Plans | 27,556,725 | 27,556,725 | 27,556,725 | 27,556,725 | 27,556,725 | 27,556,725 | — | |||||||
| Health and Welfare Benefits | — | — | — | 9,355 | 9,355 | — | — | |||||||
| Excise Tax Gross-Up | — | — | — | — | — | — | — | |||||||
| Financial Planning | — | — | — | — | — | — | — | |||||||
| Outplacement | — | — | — | — | — | — | — | |||||||
| Death Benefit | — | — | — | — | — | — | — | |||||||
| Total | 27,556,725 | 31,394,761 | 27,556,725 | 28,884,673 | 34,146,187 | 32,818,239 | 5,261,514 | |||||||
| Scott J. Lauber | ||||||||||||||
| Compensation: | ||||||||||||||
| Cash Severance | — | — | — | 1,125,000 | 1,125,000 | — | — | |||||||
| Additional Pension Credited Service | — | — | — | — | — | — | — | |||||||
| Additional 401(k) and EDCP Match | — | — | — | — | — | — | — | |||||||
| Long-Term Incentive Compensation: | ||||||||||||||
| Performance Units | — | 1,056,310 | — | — | 2,132,081 | 2,132,081 | 2,132,081 | |||||||
| Restricted Stock | — | — | — | — | 448,607 | 448,607 | 448,607 | |||||||
| Options | — | 2,016,482 | — | — | 2,016,482 | 2,016,482 | 2,016,482 | |||||||
| Benefits & Perquisites: | ||||||||||||||
| Retirement Plans | 829,884 | 829,884 | 829,884 | 829,884 | 829,884 | 829,884 | 754,123 | |||||||
| Health and Welfare Benefits | — | — | — | 9,355 | 9,355 | — | — | |||||||
| Excise Tax Gross-Up | — | — | — | — | — | — | — | |||||||
| Financial Planning | — | — | — | — | — | — | — | |||||||
| Outplacement | — | — | — | — | — | — | — | |||||||
| Death Benefit | — | — | — | — | — | — | — | |||||||
| Total | 829,884 | 3,902,676 | 829,884 | 1,964,239 | 6,561,409 | 5,427,054 | 5,351,293 | |||||||
| WEC Energy Group | P-59 | |
Executive Benefits and Payments Upon Separation | Voluntary Termination ($) | Normal Retirement ($) | For Cause Termination ($) | Involuntary Termination ($) | Termination Upon Change in Control ($) | Disability ($) | Death ($) | Voluntary Termination ($) | Normal Retirement ($) | For Cause Termination ($) | Involuntary Termination ($) | Termination Upon Change in Control ($) | Disability ($) | Death ($) | ||||||||||||||
| Allen L. Leverett | ||||||||||||||||||||||||||||
| Frederick D. Kuester | Frederick D. Kuester | |||||||||||||||||||||||||||
| Compensation: | ||||||||||||||||||||||||||||
| Cash Severance | — | 6,392,458 | 9,588,687 | — | — | 714,840 | 714,840 | — | ||||||||||||||||||||
| Additional Pension Credited Service | — | 4,090,055 | 4,440,982 | — | — | |||||||||||||||||||||||
| Additional 401(k) and EDCP Match | — | 255,698 | 383,547 | — | — | |||||||||||||||||||||||
| Long-Term Incentive Compensation: | ||||||||||||||||||||||||||||
| Performance Units | — | 3,404,538 | — | 7,035,601 | 7,035,601 | 7,035,601 | 7,035,601 | — | ||||||||||||||||||||
| Restricted Stock | — | 1,851,138 | 1,851,138 | 1,851,138 | 1,851,138 | — | 2,211,399 | 2,211,399 | 2,211,399 | |||||||||||||||||||
| Options | — | 3,740,949 | — | 3,740,949 | 3,740,949 | 3,740,949 | 3,740,949 | — | 2,853,808 | — | 2,853,808 | 2,853,808 | 2,853,808 | |||||||||||||||
| Benefits & Perquisites: | ||||||||||||||||||||||||||||
| Retirement Plans | 325,820 | 14,664,022 | 325,820 | 9,531,327 | 9,556,472 | 14,664,022 | 5,482,505 | 10,704,765 | 10,704,765 | 10,704,765 | 10,704,765 | 10,704,765 | 10,704,765 | 5,424,705 | ||||||||||||||
| Health and Welfare Benefits | — | 34,489 | 63,995 | — | — | 9,355 | 9,355 | — | ||||||||||||||||||||
| Excise Tax Gross-Up | — | — | ||||||||||||||||||||||||||
| Financial Planning | — | 54,000 | 54,000 | — | — | |||||||||||||||||||||||
| Outplacement | — | 30,000 | 30,000 | — | — | |||||||||||||||||||||||
| Death Benefit | — | — | ||||||||||||||||||||||||||
| Total | 325,820 | 21,809,509 | 325,820 | 33,015,715 | 36,745,371 | 27,291,710 | 18,110,193 | 10,704,765 | 13,558,573 | 10,704,765 | 11,428,960 | 16,494,167 | 15,769,972 | 10,489,912 | ||||||||||||||
| Scott J. Lauber | ||||||||||||||||||||||||||||
| Compensation: | ||||||||||||||||||||||||||||
| Cash Severance | — | 869,294 | 869,294 | — | ||||||||||||||||||||||||
| Additional Pension Credited Service | — | |||||||||||||||||||||||||||
| Additional 401(k) and EDCP Match | — | |||||||||||||||||||||||||||
| Long-Term Incentive Compensation: | ||||||||||||||||||||||||||||
| Performance Units | — | 289,834 | — | 689,477 | 689,477 | 689,477 | ||||||||||||||||||||||
| Restricted Stock | — | 233,501 | 233,501 | 233,501 | ||||||||||||||||||||||||
| Options | — | 317,060 | — | 317,060 | 317,060 | 317,060 | ||||||||||||||||||||||
| Benefits & Perquisites: | ||||||||||||||||||||||||||||
| Retirement Plans | 726,835 | 726,835 | 726,835 | 726,835 | 726,835 | 726,835 | 522,152 | |||||||||||||||||||||
| Health and Welfare Benefits | — | 8,622 | 8,622 | — | ||||||||||||||||||||||||
| Excise Tax Gross-Up | — | |||||||||||||||||||||||||||
| Financial Planning | — | |||||||||||||||||||||||||||
| Outplacement | — | |||||||||||||||||||||||||||
| Death Benefit | — | |||||||||||||||||||||||||||
| Total | 726,835 | 1,333,729 | 726,835 | 1,604,751 | 2,844,789 | 1,966,873 | 1,762,190 | |||||||||||||||||||||
| J. Patrick Keyes | ||||||||||||||||||||||||||||
| Compensation: | ||||||||||||||||||||||||||||
| Cash Severance | — | 275,768 | 275,768 | — | ||||||||||||||||||||||||
| Additional Pension Credited Service | — | |||||||||||||||||||||||||||
| Additional 401(k) and EDCP Match | — | — | — | |||||||||||||||||||||||||
| Long-Term Incentive Compensation: | ||||||||||||||||||||||||||||
| Performance Units | — | 965,294 | — | 1,887,941 | 1,887,941 | 1,887,941 | ||||||||||||||||||||||
| Restricted Stock | — | — | 547,184 | 547,184 | 547,184 | |||||||||||||||||||||||
| Options | — | 1,268,512 | — | 1,268,512 | 1,268,512 | 1,268,512 | ||||||||||||||||||||||
| Benefits & Perquisites: | ||||||||||||||||||||||||||||
| Retirement Plans | 128,857 | 642,902 | 128,857 | 642,902 | 642,902 | 642,902 | 615,786 | |||||||||||||||||||||
| Health and Welfare Benefits | — | 8,622 | 8,622 | — | ||||||||||||||||||||||||
| Excise Tax Gross-Up | — | |||||||||||||||||||||||||||
| Financial Planning | — | |||||||||||||||||||||||||||
| Outplacement | — | |||||||||||||||||||||||||||
| Death Benefit | — | — | ||||||||||||||||||||||||||
| Total | 128,857 | 2,876,708 | 128,857 | 927,292 | 4,630,929 | 4,346,539 | 4,319,423 | |||||||||||||||||||||
