UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
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Exelon Corporation
EXELON CORPORATION
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NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS AND 2019 PROXY STATEMENT | 1 | |
PROXY STATEMENT SUMMARY | 2 | |
BOARD AND CORPORATE GOVERNANCE MATTERS | 8 |
2018 Exelon Recognition and Partnerships | Back cover |
NEW IN THIS YEAR’S PROXY STATEMENT | |||
How we measure performance against our Purpose | page 5 | ||
Biographical information about two new independent directors | page 6-7, 12 and 17 | ||
An updated skills matrix | page 9 | ||
Also see “Acronyms Used” on theinside back coverfor a guide to the acronyms used throughout our proxy statement. |
Cautionary Statements Regarding Forward-Looking Information This proxy statement contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation include those factors discussed herein, as well as (1) the items discussed in Exelon’s 2018 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 23 and (2) other factors discussed in filings with the SEC by Exelon. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this proxy statement. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this proxy statement. |
Notice of the Annual Meeting of Shareholders and 2019 Proxy Statement
March 16, 201620, 2019
AND 2016 PROXY STATEMENT
To the shareholders of Exelon Corporation:
Our annual meeting of shareholders will be held on Tuesday, April 26, 2016 at 9:00 a.m. Eastern Time in Energy Hall at PECO Energy Company headquarters, 2301 Market Street, Philadelphia, Pennsylvania to:
Logistics
When | Where | Who Can Vote |
Items of Business
Board Recommendation | Page | |||||
1 | Elect | FOReach Director nominee | ► 8 |
Ratify appointment of PricewaterhouseCoopers LLP as Exelon’s independent auditor for | FOR | ► 27 |
Say on pay: advisory vote on the compensation of | FOR | ► 29 |
Shareholder Proposal from Burn More Coal
AGAINST | ► 60 |
Shareholders of record as of March 4, 2016 are entitled to vote atwill also conduct any other business properly presented before the annual meeting.
On or about March 16, 2016, we will mail to our shareholders a Notice Regarding the AvailabilityThe Board of Proxy Materials, which will indicate how to access our proxy materials on the Internet. By furnishing the Notice Regarding the Availability of Proxy Materials we are lowering the costs and reducing the environmental impact of our annual meeting.
Bruce G. Wilson
Senior Vice President,
Deputy General Counsel and Corporate Secretary
Your vote is important. We encourage you to vote promptly.
Internet and telephone voting are available through 11:59 p.m.
Eastern Time on April 25, 2016.
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We are providing these proxy materials in connection with the solicitation by the board of directors of Exelon Corporation (“Exelon,” the “company,” “we,” “us,” or “our”), a Pennsylvania corporation, of proxies to be voted at our 2016 annual meeting of shareholders and at any adjournment or postponement. The annual meeting of shareholders will take place on April 26, 2016 at 9:00 a.m. Eastern Time in Energy Hall at PECO Energy Company headquarters, 2301 Market Street, Philadelphia, Pennsylvania.
MATTERS FOR SHAREHOLDER VOTING
At this year’s annual meeting, we are asking our shareholders to vote on the following matters:
Proposal 1: Election of Directors
The board of directors recommends a vote FOR the election of the director nominees named in this proxy statement. See pages 1-18 for further information on the nominees.
Proposal 2: Appointment of PricewaterhouseCoopers LLP as independent auditor for 2016
The board of directors recommends a vote FOR this proposal. See page 40 for details.
Proposal 3: Advisory Approval of Executive Compensation
The board of directors recommends a vote FOR this proposal. See page 41-87 for details.
Proposal 4: Approve Management Proposal to Amend Exelon’s Bylaws to Provide Proxy Access
The board of directors recommends a vote FOR this proposal. See pages 88-91 for details.
The board of directors knows of no other matters to be presented for action at the annual meeting. If any matter is presented from the floor of the annual meeting, the individuals serving as proxies intend towill vote on thesesuch matters in the best interest of all shareholders. Your signed proxy card gives this authority to Darryl M. BradfordThomas S. O’Neill and Bruce G. Wilson.Carter C. Culver.
Please refer to the materialAdvance Voting(before 11:59 p.m. Eastern Time on pages 94-97 for information about how to cast your votes, who may attend the meeting, and other frequently asked questions.
April 29, 2019)
Use the internet at | Call toll-free | Mark, date, sign and mail your |
Date of Mailing:On or about March 20, 2019, these proxy materials and our annual report are being mailed or made available to shareholders.
Shareholders of Record:As of March 4, 2019, there were 969,952,166 shares of common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the meeting.
Thomas S. O’Neill
Senior Vice President,
General Counsel and Corporate Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 30, 2019
The Notice of 2019 Annual Meeting, Proxy Statement, and 2018 Annual Report and the means to vote by Internet are available at www.proxyvote.com.
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This summary highlights selected information about the items to be voted on at the annual meeting of shareholders. This summary does not contain all of the information that you should consider in deciding how to vote. Please read the entire proxy statement before voting. | |
About Exelon: An Industry Leader
$23B Being invested in utilities through 2022 for the benefit of our customers | Exelon is a FORTUNE 100 company | |||
Operating revenue in 2018 | #1 zero-carbon energy producer in America | 33,500 employees | ||
More than 32,000 MW total power generation capacity |
| 10M | ||
Exelon’s utilities serve 10M electric and natural gas customers, the most in the U.S. | $51M | |||
~2M Exelon’s Constellation business serves residential, public sector and business customers | 11,470 transmission line miles for utilities |
Note: All numbers reflect year-end 2018
2 Exelon 2019 Proxy Statement
Proxy Statement Summary
GOVERNANCE HIGHLIGHTS
Exelon is committedAmerica’s Leading Energy Provider
We are the nation’s leading competitive power provider and a FORTUNE 100 company that works in key facets of the power business: power generation, competitive energy sales, transmission and delivery.
The Exelon Family of Companies
Generation | Energy Sales & Service | Transmission & Delivery | ||
Exelon is the largest competitive U.S. power generator, with more than 32,000 megawatts of nuclear, gas, wind, solar and hydroelectric generating capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets and the largest producer of zero-carbon energy in the U.S. | The Company’s Constellation business unit provides energy products and services in competitive markets to approximately 2 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. | Exelon’s utilities deliver electricity and natural gas to approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey and Pennsylvania through its Delmarva Power, Pepco, ComEd, BGE, Atlantic City Electric and PECO subsidiaries. |
Learn more atwww.exeloncorp.com
Our Strategy
As the energy industry undergoes rapid changes, Exelon is executing a strategy to maintainingembrace those changes while growing the highest standards of corporate governance. Strong corporate governance practices help us achieve our performance goals and maintainCompany. We’re making investments to meet the trust and confidenceneeds of our investors, employees, customers regulatory agencies and other stakeholders. Our corporate governance practices are describedtargeted investments in more detail on pages 19-33 and in our Corporate Governance Principles which are available onpromising technologies with the potential to reshape the energy landscape.
The Exelon website atwww.exeloncorp.com on the corporate governance page under the Investors tab.
Strategic Plan
| Focus on Cash Flow | Optimize Exelon Generation value
| Retain a Strong Balance Sheet | Return Cash to Shareholders and |
(1) | Quarterly dividends are subject to declaration by the Board of |
Learn more athttp://www.exeloncorp.com/company/business-strategy
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Proxy Statement Summary
2018 Performance Highlights
“2018 was another record-breaking year for Exelon, with our Utility and Generation businesses demonstrating best-ever performances in multiple categories thanks to the hard work of our employees, who also surpassed their previous record for volunteerism. Our ongoing strategy to invest in advanced technology and infrastructure resulted in improved resiliency, reliability, and customer satisfaction at our electric and gas companies. In 2019, we will grow our dividend by 5 percent and seek fair compensation for the zero-carbon power that our nuclear fleet provides. We will also modernize the electric grid to address the challenges of climate change and provide customers with clean, affordable power.” Christopher Crane, CEO |
Strong Financial and Operational Performance |
✓ | Achieved 2018 GAAP earnings per share (EPS) of $2.07 and adjusted (non-GAAP) operating EPS of $3.12 (see Appendix at page 69 for reconciliation) |
✓ | Invested $5.5 billion in the electric grid to replace aging infrastructure and improve reliability for the benefit of our customers in 2018 |
✓ | Announced commitment in 2018 to lower costs by $200 million gross on an annual run-rate basis by 2021 |
✓ | Continued commitment to increase the annual dividend growth rate by 5% annually from 2018 through 2020 |
✓ | Maintained industry leading operational excellence |
● | All four Utilities achieved first quartile performance for the System Average Interruption Frequency Index (SAIFI) measuring outage frequency |
● | Commonwealth Edison Company (ComEd) and Pepco Holdings, LLC (PHI) scored in the top decile for service level, with Baltimore Gas and Electric Company (BGE) and PHI achieving “best on record” performances |
● | Top decile gas odor response for the 6th consecutive year for BGE and PECO Energy Company and 2nd consecutive year for PHI |
● | ComEd, BGE, and PHI had best performances on record in Call Center Satisfaction |
✓ | Record nuclear output of 159 TWhs, achieved best ever record for average refueling days, and a capacity factor of 94.6% |
✓ | Achieved 18.33% total shareholder return (TSR) in 2018 and outperformed the PHLX Utility Sector Index (UTY) by 14.81 percentage points |
● | Continued to build on Exelon’s three-year TSR of 80.80%, compared to the UTY three-year TSR of 37.10% for the 2016-2018 period |
Regulatory & Policy |
✓ | Prevailed on legal challenges to the New York and Illinois zero emission credits (ZEC) programs in Second and Seventh Circuit Courts |
✓ | ZEC legislation enacted in New Jersey |
✓ | Successfully completed eight distribution rate cases, including the first regulatory settlements since the 1980s in two jurisdictions |
✓ | Returned more than $675 million of annual savings from tax reform to our ten million customers |
Exelon 2018 Summary Annual Report |
✓Learn more about Exelon from our 2018 Summary Annual Report at www.exeloncorp.com |
4 Exelon 2019 Proxy Statement
Proxy Statement Summary
Measuring our Performance: How Exelon is powering a cleaner and brighter future for our customers and communities
We believe that reliable, clean, and affordable energy is essential to a brighter, more sustainable future. That’s why we’re committed to providing innovation, best-in-class performance and thought leadership to help drive progress for our customers and communities.
We bring our vision to life by adhering to five core values. 2018 highlights include:
We are dedicated to safety | |
●Exelon continued to maintain a first-decile OSHA recordable rate in 2018 as compared to the Edison Electric Institute (EEI) company benchmark. ●Exelon continues to engage with the National Safety Council and the Campbell Institute to drive best practices development and benchmarking. ●Nonetheless our performance was not at the level we target, and we have increased focus on prevention of serious injuries and fatalities through partnerships with EEI, the Electric Power Research Institute, and the Campbell Institute. ●Exelon continued efforts in 2018 to utilize new technologies and business information and data analytics to drive safety performance improvement. | |
We actively pursue excellence | |
●Exelon has been named to the Dow Jones Sustainability North America Index for 13 consecutive years. ●Exelon Generation is the largest zero carbon generator in the United States with the lowest carbon intensity out of the 20 biggest investor owned generation companies in the United States. ●Exelon is the largest producer of zero-carbon energy in the United States, responsible for one-ninth of all clean energy produced. ●All four Exelon utilities ended the year in the top quartile for SAIFI (outage frequency) and all utilities demonstrated strong performance in CAIDI (outage duration) and customer satisfaction. | |
We innovate to better serve our customers | |
●Exelon hosted its seventh Innovation Expo in Washington, D.C. to engage employees and stakeholders around new technologies and innovation. Over 3,300 attended the Expo and 270 employees presented ideas for technology and innovation applications for Exelon. ●Through December 2018, Exelon utilities had upgraded over 10 million smart electric and gas meters, aiding system efficiency and reliability and more rapid recovery after storm events. As a result, over 1.1 million connect/disconnect service trips were also avoided by smart meters in 2018, saving time and cost and avoiding associated service vehicle GHG emissions. ●In 2018, Constellation Distributed Energy’s portfolio grew to 484 Megawatts, 78% of which was solar. ●Exelon Utility customers saved 21.9 million MWh and avoided 9.9 million metric tons of CO2e. | |
We act with integrity and are accountable to our communities and the environment | |
●Exelon corporate and Exelon Foundation giving totaled more than $51 million in 2018. ●Exelon Employees volunteered almost 241,000 hours and contributed nearly $13 million to charity. ●Exelon operations-driven GHG emission reduction goal to reduce 15% from a 2015 baseline by 2022 is on track. ●Exelon scored A- on the 2018 CDP Water Survey, the highest level achieved by a United States electric utility. ●Exelon scored A- on the 2018 CDP Climate Survey, the highest level achieved by a United States electric utility. ●Exelon has over 32,500 acres managed under Wildlife Habitat Council and/or National Wildlife Federation certifications. | |
We succeed as an inclusive and diverse team | |
●Exelon adopted the Equal Pay Pledge in 2016. As part of this commitment, Exelon ensures extensive annual reviews are completed including an internal review of hiring and promotion processes and an independent third party review of gender pay levels. In addition, Exelon joined the United Nations HeForShe campaign in 2017. ●Exelon implemented an industry-leading enhanced paid leave policy for new parents in 2017. ●Through Exelon’s University Intern Program, we hire hundreds of professionals and technical interns each summer, which helps to build our talent pipeline by attracting young, diverse candidates. ●Our diversity and inclusion efforts have been recognized by organizations, including Exelon being named to the DiversityInc Top 50 Companies for Diversity and as one of the Human Rights Campaign Best Places to Work. Exelon also received the G.I. Jobs Military Friendly Employer Award. |
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Proxy Statement Summary
6 Exelon 2019 Proxy Statement
Proxy Statement Summary
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Proxy Statement Summary
2015 EXECUTIVE COMPENSATION HIGHLIGHTS
1 STRONG FINANCIAL AND OPERATIONAL PERFORMANCE
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2 STRONG PAY FOR PERFORMANCE ALIGNMENT ON 2013-2015 PERFORMANCE SHARE AWARD PAYOUTThe Exelon Board of Directors
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3 CEO TARGET TOTAL DIRECT COMPENSATION (TDC) INCREASED SLIGHTLY FROM PRIOR YEARDirector Qualifications and Nomination
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4 KEY STRATEGIC INTIATIVES
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Proxy Statement Summary
5 COMMITMENT TO SHAREHOLDER ENGAGEMENT
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Cautionary Statements Regarding Forward-Looking Information
This proxy statement contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 23 and (2) other factors discussed in filings with the SEC by Exelon. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this proxy statement. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this proxy statement.
Election of Directors
PROPOSAL 1: ELECTION OF DIRECTORS
The corporate governance committee regularly assesses the size of the board of directors. The committee believes that the current size of the board is appropriate for Exelon, considering the size and geographic scope of the company and our need to access a wide range of views and backgrounds to reflect the diversity and complexity of our business and the markets we serve. In recent years, the size of the board has ranged from 13 to 15. With the retirement of John Canning at the 2016 annual meeting, there are 13 nominees for director.
The board of directors held eight meetings during 2015. The board also attended a two-day strategy retreat with the senior officers of Exelon and subsidiary companies. All directors attended at least 75% of all board and committee meetings that they were eligible to attend, with an average attendance of approximately 96.38% across all directors for all board and committee meetings. Although Exelon does not have a formal policy requiring attendance at the annual shareholders meeting, all directors generally attend the annual meeting and all directors attended the 2015 annual shareholders meeting.
DIRECTOR QUALIFICATIONS AND NOMINATION
Exelon believes that effective development and executionEffective oversight of Exelon’s strategic direction requires our Board to be composed of diverse individuals who possess attributes and core competencies important to our Company. The Corporate Governance Committee identifies and recommends Director nominees for election to the Board and periodically retains a board search firm to assist with the identification of directorspotential candidates.
The Board values the diversity of thought that includes individuals who bring diverse experiences, skills,arises from Directors possessing different backgrounds, viewpointsgender, age, race, and perspectives in order to represent effectivelygeographic experiences. The Board also deeply values the long-term interests of the publicenhanced and our shareholders. The board of directors seeks to maintain an appropriatethoughtful deliberations resulting from a balance of diversity, skillsshort- and tenure on the board. Freshlong-tenured Directors who provide a mix of fresh perspectives and new ideas are essential to maintain a nimblewith deep and strategic board, while long-serving directors can bring important experience to board deliberations.utility, regulated industry and business cycle experiences.
The corporate governance committee serves as the nominating committee and recommends director nominees. The board of directors receives the proposed nominations from the corporate governance committee and approves the nominees to be included in the Exelon proxy materials that are distributed to shareholders. The board believes that cognitive diversity among directors is an important consideration in selecting candidates for nomination. When considering candidates, the corporate governance committeeCorporate Governance Committee and the full board take into account each candidate’s race, ethnicity, gender, age, cultural background, professional experience and other attributes relevant to our business and strategy. The corporate governance committee and the full boardBoard determine the appropriate mix of skills and characteristics required to best fillmeet the needs of the boardBoard as a whole, taking into account the short- and periodically reviewlong-term strategies of the Company to determine the current and updatefuture skills and experiences required of the criteria as deemed necessary in light of Exelon’s strategic direction.Board. All candidates are considered in light ofshould demonstrate the following standards and qualificationsattributes to qualify for director that are contained in the Exelon Corporate Governance Principles:
Board service:
✓ | Highest personal and professional ethics, integrity and values; |
✓ | An inquiring and independent |
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✓ | Broad training and experience at the policy-making level in business, government, education or technology; |
✓ | Expertise that is useful to |
Directors; | ✓ ✓ | Willingness to devote the required amount of time to carrying out the duties and responsibilities of |
| ✓A commitment to representing the long-term interests of shareholders, customers, employees and |
communities served by the Company and its subsidiaries; and ✓ | Involvement only in activities or interests that do not |
8 Exelon 2019 Proxy Statement
Board and Corporate Governance Matters
And in addition, the Board as a whole, should reflect core competencies in the following areas that are described below in our skills matrix. The satisfaction of these criteriamatrix identifies the primary skills, core competencies and other attributes that each independent Director brings to bear in their service to Exelon’s Board and Committees. Each Director possesses numerous other skills and competencies that are not identified below, however, we believe identifying primary skills is assessed by the corporate governance committee and the board. Alla more meaningful presentation of the nominees for director meetkey contributions and value that each independent Director brings to their service on the standards listed above. In addition, all of the nominees demonstrate an appreciation for diversity among directors.Board and to Exelon shareholders.
SUMMARY OF INDIVIDUAL DIRECTOR PRIMARY SKILLS, CORE COMPETENCIES AND OTHER ATTRIBUTES
The following matrix identifies theprimary skills, core competencies and other attributes that each independent Director brings to bear in their service to Exelon’s Board and Committees. | ||||||||||||||
Accounting– Accounting and financial reporting experience are important to accurately and transparently measure and report financial and operating performance, ensure compliance with applicable law and assess financial merits of strategic opportunities. | ● | ● | ● | ● | ● | ● | ||||||||
Finance– Corporate finance and capital management experience is important to effectively oversee the financial affairs of Exelon’s businesses and operations. | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||
Executive– CEO/executive management leadership skills are important to gain a practical understanding of organizations, corporate governance, and drivers of individual growth and development. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||
Compensation– Human capital management and executive compensation knowledge and experience help Exelon recruit, retain, and develop key talent essential to Company operations. | ● | ● | ● | ● | ● | ● | ● | |||||||
Technology– Innovation and technology experience is important in overseeing Exelon’s business in the rapidly changing energy markets and physical and cyber threats. | ● | ● | ● | ● | ||||||||||
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Election of Directors
The corporate governance committee and the board of directors regularly consider the company’s strategy and the particular skills, experiences and other qualifications that should be represented on the board as a whole in order to achieve Exelon’s strategic direction. Listed below are summaries of specific qualifications that the corporate governance committee and the board believe must be represented on the board.
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Exelon uses a wide range of financial metrics to measure its operating performance and strategic opportunities. Accurate and transparent financial reporting, measurement of operating performance, and assessment of the financial merits of strategic opportunities are critical to the company’s success.
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Exelon believes that directors who have significant senior leadership experience are better able to recognize and develop leadership skills in others and are more likely to have a practical understanding of organizations and drivers of individual growth and development.
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Exelon engages in a complex business with significant
Policy– Government, public policy and public safety implications. The development and execution of effective strategy at Exelon depends on directors who have experience with issues of public policy and economics, energy markets, technology, nuclear power, renewable energy, and electric and gas transmission and distribution infrastructure. As the largest operator of nuclear power plants in the country and one of the largest in the world, it is important that the Exelon board include individuals with experience in the operation and oversight of nuclear power facilities.
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The industry in which Exelon conducts its business is changing rapidly with the development of new technologies, changing energy policy and environmental regulation, rapid changes in energy markets, and physical and cyber threats against the security of assets and systems. Exelon recognizes the importance of representation on the board of directors by individuals who possess experience in these areas.
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Exelon is engaged in a business subject to extensive regulation by multiple state and federal regulatory authorities. Experience with and understanding of government regulation is critical to Exelon’s ability to help shape public policy and government regulation that has a direct effect on Exelon’s business.
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Exelon’s business is subject to a number of highly varied risks that could have a significant effect on public safety and shareholder value. An understanding of the most significant risks facing Exelon is a critical skill that must be represented on the board of directors.
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Exelon must assure strong alignment with its investors in setting strategy and direction. For this reason, the Exelon board of directors must include individuals who have an understanding of investments and the investment decision-making process in order to focus management and the board on significant value drivers.
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Election of Directors
Risk– Risk oversight and management experience inform Exelon’s enterprise risk management of key risks with potential to impact public safety, operations and shareholder value including its environmental impacts. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||
Investor perspective– Investor relations and investment management experience ensures strong alignment with investors and informs decision making on value-adding initiatives. | ● | ● | ● | ● | ● | ● | ● | ||||||||
Engineering & Manufacturing– Engineering, manufacturing, construction, | ● | ● | ● | ||||||||||||
Diversity– Diverse attributes reflect the Company’s commitment to diversity and inclusion through age, ethnicity, gender, race and sexual orientation. | ● | ● | ● | ● | |||||||||||
Director Independence
The Board has determined that all non-employee Directors who served on the Board in 2018 and all nominees for election, except for Mr. Crane as Exelon’s President and Chief Executive Officer, are independent according to applicable law and the listing standards of the New York Stock Exchange (NYSE), as incorporated into the Independence Standards for Directors in Exelon’s Corporate Governance Principles. In accordance with the Independence Standards for Directors, the Board determined that certain categories of relationships as set forth in the Appendix do not create a conflict of interest that would impair a Director’s independence. The Board also determined that the members of the Audit, Compensation and Leadership Development, and Corporate Governance Committees are independent within the meaning of applicable laws, NYSE listing standards, and the Independence Standards for Directors.
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Board and Corporate Governance Matters
When assessing the independence of Director nominees, the Corporate Governance Committee considers the impact that tenure may have on the independence of certain longer-tenured incumbent Board nominees. The Board determined that the independence of our longer-tenured Directors had not been diminished, and that such members continued thoughtfully to challenge and provide reasoned, balanced, and insightful guidance to management. The Board values the perspectives that such Directors contribute to Board discussions, having served Exelon during various industry developments, mergers, and with different management teams over the years.
Related Person Transactions
Exelon invests billionshas adopted a written policy for the review and approval or ratification of dollars each year on maintenancerelated person transactions. Under the policy, the Board reviews transactions, arrangements, or relationships with related persons in which the amount involved exceeds $120,000 and growth investments to improve reliabilityin which any related person had, has, or will have a direct or indirect material interest. In general, related persons are directors and executive officers and their immediate family members, as well as stockholders beneficially owning 5% or more of Exelon’s electricoutstanding stock. The Office of Corporate Governance presents relevant information on transactions, arrangements, and gas transmissionrelationships disclosed to Exelon’s General Counsel for a determination as to the existence of a related person transaction as defined by SEC rules and distribution systems and enhance customer service. Exelon also invests substantial sums each yearthe policy. Identified related person transactions are submitted to the Board for maintenanceapproval. The Board may approve any related person transactions deemed to not be contrary to the best interests of complex machinery in the generation portfolio and in development and construction of generation assets. Experience with these complex processes is importantExelon. There were no related person transactions identified for the board of directors to provide appropriate decision-making and oversight related to complex capital projects and large and complex organizations and systems.2018.
DIRECTOR NOMINEESDirector Nominees
Upon the recommendation of the corporate governance committee, the board nominatedThe Board nominates the 13 candidates named below for electionre-election as directors,Directors. If elected by shareholders, each toDirector will serve a term ending with the 2020 annual meeting in 2017.meeting. Each of the nomineesnominee has agreed to be named in this proxy statement and to serve as a director,Director, if elected. If any directorDirector is unable to stand for election at the boardannual meeting, the Board may reduce the number of directorsDirectors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director.Director. Exelon does not expect that any directorDirector nominee will be unable to serve.
John Rogers announced his decision to not stand for election at the 2019 annual shareholders meeting. The corporate governance committeeBoard is deeply appreciative of John’s valued contributions and insights into Exelon’s business and strategy and fulfillment of responsibilities to shareholders, employees, customers and communities.
In addition to the skills, characteristics, core competencies and other attributes previously described, the Corporate Governance Committee also considers whether each nominee has the time available, in light of other business and personal commitments, to effectively serve on Exelon’s Board. Among the criteria the Committee considers is the degree to which any incumbent Director nominee demonstrates effective and productive preparedness and engagement. The Board has adopted limits for service on other boards, providing that Directors who serve as the CEO of a public company should not serve on more than two other public company boards in addition to Exelon and its subsidiary boards. Other Directors should not serve on the boards of more than four other public companies in addition to the Exelon Board and its subsidiary boards.
The Board is aware that some institutional investors have adopted vote policies that include board service limits more restrictive than Exelon’s limits based on 1) resource challenges that make it impractical for investors to assess thousands of individual director nominees or 2) a risk assessment involving statistical data measuring average time required for board service and especially in the event of a crisis. Such investor policies apply a one-size-fits-all approach that may not take into account all relevant facts and circumstances for a particular individual director, including the results of a robust individual director assessment process, such as Exelon has in place for its directors. Exelon’s individual director assessment process provides for peer reviews by each director and by four members of senior management that regularly interact with the Board (see page 23). The individual director assessment conducted of Stephen Steinour in 2019 reflected heightened attention to this known concern and the boardresults are included as part of Mr. Steinour’s biographical information on page 16.
The Corporate Governance Committee and the Board believe the skills and experiences listeddetailed above are adequatelywell represented among the Director nominees for director and that the nominees have a wide diversity of experiences that fill the needs of the board and its committees. For example, ten nominees are current or former CEOs of corporations and three others have senior executive leadership experience. Two directors have extensive nuclear experience. Six directors have experience in banking and investment management. Two have served in government or government regulation and one has flag officer military experience. Individual directors have experience or expertise in accounting, auditing, information technology, innovation, utility regulation and operations, and environmental matters, law, the economics of energy, and government affairs. Included in each director nominee’s biographical information is a listing of the key qualifications, skills and experience of each nominee. Each nominee has other qualifications, skills and experiences that are not specifically listed.
The corporate governance committee believes that the nominees for director representreflect an effective mix of directors in terms of the range of backgrounds, and experience and diversity. The nominees consist
10 Exelon 2019 Proxy Statement
Table of directors who range in age from 50 to 71, with an average age of 62Contents
Board and a median age of 61. The tenure of the nominees as directors is similarly varied, with one director having served since the company’s creation in 2000, one since 2002, two since 2007, one since 2009, five since 2012, one since 2013, one joining in 2015, and one joining in 2016. Four directors come from the Chicago area and one from the Philadelphia area, while eight come from other parts of the country including major metropolitan areas such as New York and Washington, D.C.
A brief summary of the qualifications of all of the nominees as a group is presented below.
Corporate Governance Matters
Age:63
Committee Memberships: ●Audit (Chair) ●Finance and ●Generation Oversight |
Election of Directors
Election of Directors
The board of directors unanimously recommends a vote “FOR” each of the director nominees below.
Election of Directors
| Anthony K. Anderson
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Board Service
Mr. Anderson’s experience as the vice chair of a global professional services firm and his training and experience as an audit partner and certified public accountant enhance his contribution to the Exelon Current Public Boards: ●Exelon Corporation ●AAR Corp. ●Avery Dennison ●Marsh & McLennan Companies |
Primary Skills & Core Competencies: | |||||||||||||||
Accounting |
Election of Directors
| Executive | Compensation | Risk |
Age:66 Director since:2012 Committee Memberships: ●Finance and Risk (Chair) ●Audit | Ann C. Berzin INDEPENDENT Career Highlights Board Service
Ms. Berzin has broad business and executive leadership experience, as well as expertise in the financial services sector, which is particularly valuable for her service on the Current Public Boards: ●Exelon Corporation ●Ingersoll-Rand plc |
Primary Skills & Core Competencies: | |||||||||||||||
Accounting | Finance | Executive | Risk | Investors |
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ElectionTable of DirectorsContents
Board and Corporate Governance Matters
Age:61 Director since:2018 Committee Memberships: ●Audit ●Finance and Risk | ||
| Laurie Brlas Career Highlights Board Service With 16 years of experience as a chief financial officer at global, capital-intensive companies, Ms. Brlas’s proven leadership skills bring valuable knowledge and a diverse perspective to Exelon’s Board and to her service on the Audit and Finance and Risk Committees. Current Public Boards: ●Exelon Corporation ●Albemarle Corporation ●Graphic Packaging Holding Company |
Primary Skills & Core Competencies: | |||||||||||||
Accounting | Finance | Executive | Compensation | Investors |
Age:60
Director since:2012
Committee
●Generation Oversight
●Investment Oversight
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| Christopher M. Crane Career Highlights Board Service Mr. Crane previously served as vice chairman of the Nuclear Energy Institute, the nation’s nuclear industry trade association Mr. Crane also serves as Current Public Boards:
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Primary Skills & Core Competencies: | ||||||||||||||||||
Accounting | Finance | Executive | Compensation | Technology | Safety & Security |
Industry | Policy | Risk | Investors | Engineering & Manufacturing |
12 Exelon 2019 Proxy Statement
ElectionTable of DirectorsContents
Board and Corporate Governance Matters
Age:72
Director since:2012
●Compensation and Leadership Development
●Corporate Governance ●Finance and Risk | | Yves C. de Balmann INDEPENDENT Career Highlights Board Service
Mr. de Balmann has extensive experience in corporate finance, including the derivatives and capital markets as well as industry experience as a former director of Constellation Energy Group Current Public Boards: ●Exelon Corporation ●ESI Group |
Primary Skills & Core Competencies: | |||||||||||||||
Finance | Executive | Compensation | Risk | Investors |
Election of Directors
Age:73 Director since:2002 Committee Memberships: ●Corporate Governance ●Finance and Risk ●Generation Oversight | |||
| Nicholas DeBenedictis Career Highlights
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Board Service
As a leader in the greater Philadelphia business community, Mr. DeBenedictis has deep knowledge of the communities and local economies served by PECO. Mr. DeBenedictis’ Current Public Boards: ●Exelon ●Aqua America ●MISTRAS Group ●P.H. Glatfelter, Inc. |
Primary Skills & Core Competencies: | |||||||||||||||
Finance |
Election of Directors
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Policy | Risk |
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ElectionTable of DirectorsContents
Board and Corporate Governance Matters
Age:53 Director since:2015 Committee Memberships: ●Compensation and Leadership Development ●Finance and Risk | |||
| Linda P. Jojo Career Highlights
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Board Service
Ms. Current Public Boards: ●Exelon Corporation |
Primary Skills & Core Competencies: | |||||||||||
Compensation | Technology | Safety & Security | Industry | ||||||||
Election of Directors
Age:71 Director since:2007 Committee Memberships: ●Audit ●Finance & Risk ●Investment Oversight | |||
| Paul L. Joskow, Ph. D.
| Dr. Joskow Dr. Joskow has served on the U.S. Environmental Protection Agency’s Board Service
Dr. Joskow’s extensive background in economics and energy and his experience as a Current Public Boards: ●Exelon Corporation |
Primary Skills & Core Competencies: | |||||||||||||
Executive | Technology | Industry | Policy | Investors |
14 Exelon 2019 Proxy Statement
ElectionTable of DirectorsContents
Board and Corporate Governance Matters
Age:72
Director since:2012 Committee Memberships:
●Compensation and Leadership Development | | Robert J. Lawless INDEPENDENT Career Highlights Board Service
Mr. Lawless has extensive executive leadership and strategic planning experience. As a former chief executive officer of a public company, he Current Public Boards: ●Exelon Corporation |
Primary Skills & Core Competencies: | |||||||||||||
Accounting | Executive | Compensation | Investors | Engineering & Manufacturing |
Age:74 Director since:2009 Committee Memberships: ●Generation Oversight (Chair) ●Audit ●Finance and |
Election of Directors
| Richard W. Mies
| Admiral Mies is President and Chief Executive Officer of The Mies Group, Ltd, a private consulting firm, Board Service Admiral Mies’ extensive educational background in mechanical engineering and mathematics,
Current Public Boards: ●Exelon Corporation ●BWX Technologies, Inc. |
Primary Skills & Core Competencies: | |||||||||||||
Executive | Technology | Safety & Security | Industry | Risk |
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ElectionTable of DirectorsContents
Board and Corporate Governance Matters
Age:64 Director since:2012 Committee Memberships: ●Investment Oversight | |||
| Mayo A. Shattuck III
| Mr.
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Election of Directors
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Mr. Shattuck is the past Board Service
Mr. Shattuck’s Current Public Boards: ●Exelon Corporation ●Gap, Inc. ●Capital One Financial Corporation ●Alarm.com Holdings, Inc. |
Primary Skills & Core Competencies: | |||||||||||||
Finance | Executive | Compensation | Industry | Risk |
Election of Directors
Age:60 Director since:2007 Committee Memberships: ●Finance and Risk ●Compensation and Leadership Development | |||
| Stephen D. Steinour
| Mr. Steinour Board Service Mr. Steinour’s experience has provided him with a strong background in mergers and acquisitions, business development, creation, and partnerships. His deep background in banking, credit and risk management, and capital markets provides experience important to Exelon and its businesses. Mr. Steinour was named to the 2016 “Directorship 100” list issued by the National Association of Corporate Directors. In conducting the individual director assessment of Mr. Steinour in January 2019 that includes the input of peers and members of management (see page 23), the Board was mindful of certain investor vote policies imposing board service limits that are more restrictive than Exelon’s (see page 18 for more). The unanimous consensus of the peer/management input was that Mr. Steinour continues to demonstrate the highest degree of engagement and accessibility, and consistently offers valued advice and guidance. Mr. Steinour stepped out of the Finance and Risk Committee chair role in June 2018 when he also rotated from The results of Exelon’s robust assessment process demonstrate Mr. Steinour importance to Exelon’s Board and clearly support his nomination as a director. Current Public Boards: ●Exelon Corporation ●Huntington Bancshares Inc. ●L Brands, Inc. |
Primary Skills & Core Competencies: | |||||||||||||
Accounting | Finance | Executive | Risk | Investors |
16 Exelon 2019 Proxy Statement
Board and Corporate Governance Matters
Age:62 Director since:2018 Committee Memberships: ●Finance and Risk ●Generation Oversight | John F. Young INDEPENDENT Career Highlights Board Service Mr. Mr. Young’s extensive leadership, operational expertise, deep industry knowledge, and financial background bring valuable and broad industry insights to our Company’s Board of Current Public Boards:
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Primary Skills & Core Competencies: | ||||||||||||
Finance | Executive | Safety & Security | Industry | Risk | ||||||||
Corporate Governance at Exelon
DIRECTOR INDEPENDENCE
Under Exelon’s Corporate Governance Principles, a substantial majority of the board must be composed of independent directors, as defined by the NYSE. In addition to complying with the NYSE rules, Exelon monitors the independence of audit and compensation and leadership development committee members under rules of the SEC (for members of the audit committee and compensation and leadership development committee) and the Internal Revenue Service (for members of the compensation and leadership development committee). The board has adopted independence criteria corresponding to the NYSE rules for director independence and the following categorical standards to address those relationships that are not specifically covered by the NYSE rules:
Each year, directors are requested to provide information about their business relationships with Exelon, including other boards on which they may serve, and their charitable, civic, cultural and professional affiliations. We also gather information on significant relationships between their immediate family members and Exelon. All relationships are evaluated by Exelon’s Office of Corporate Governance for materiality. Data on transactions between Exelon and companies for which an Exelon director or an immediate family member serves as a director or executive officer are presented to the corporate governance committee, which reviews the data and makes recommendations to the full board regarding the materiality of such relationships for the purpose of assessing director independence. The same information is considered by the full board in making the final determination of independence.
Mr. Crane is not considered an independent director because of his employment as president and chief executive officer of Exelon. Each of the other current Exelon directors was determined by our board of directors to be “independent” under applicable guidelines presented above. The amounts involved in the transactions between Exelon and its subsidiaries, on the one hand, and the companies with which a director or an immediate family member is associated, on the other hand, all fell below the thresholds specified by the NYSE rules and the categorical standards specified in the company’s Corporate Governance Principles. Because Exelon provides utility services through its subsidiaries BGE, ComEd, PECO and Constellation and many of its directors live in areas served by the Exelon subsidiaries, many of the directors are affiliated with businesses and charities that receive utility services from Exelon’s subsidiaries. The corporate governance committee does not review transactions pursuant to which Exelon sells gas or electricity to these businesses or charities at tariffed rates. Similarly, because Exelon and its subsidiaries are active in their communities and make substantial charitable
www.exeloncorp.com 17
Board and 2016 Proxy Statement
Corporate Governance at Exelon
contributions, and many of Exelon’s directors live in communities served by Exelon and its subsidiaries and are active in those communities, many of Exelon’s directors are affiliated with charities that receive contributions from Exelon and its subsidiaries. None of the directors or their immediate family members is an executive officer of any charitable organizations to which Exelon or its subsidiaries contribute. All such payments to charitable organizations were immaterial under the applicable independence criteria.
We describe below various transactions and relationships considered by the board in assessing the independence of Exelon directors.Matters
Ann C. BerzinThe Board’s Role and Responsibilities
Ms. Berzin serves as a director of a public company that provides equipment and services to Exelon Generation. In 2015, Exelon paid that company approximately $238,000.
Nicholas DeBenedictis
Mr. DeBenedictis serves as the chairman, president and chief executive officer of a public water utility company that received approximately $11,800,000 from Exelon for water supplies. Exelon made these purchases under tariffed utility rates. Mr. DeBenedictis serves as a director of a not-for-profit company that received approximately $4,000,000 from Exelon for health care coverage for Exelon employees. Mr. DeBenedictis serves as a director of a company that Exelon paid $1,500,000 in 2015 for Renewable Energy Credits. Mr. DeBenedictis also serves on the Advisory Board of a company which provides financial services for which Exelon paid $7,200,000 in 2015.
Linda P. Jojo
Ms. Jojo is an employee of a commercial airline. In 2015, Exelon paid that company approximately $5,400,000.
Richard W. Mies
Admiral Mies serves as the director of a public company that provides services to Exelon Generation. In 2015, Exelon paid that company approximately $3,900,000.
John W. Rogers, Jr.
Mr. Rogers serves as a director of a company that is a customer of Exelon. The company paid Exelon approximately $18,700,000 in 2015.
Mayo A. Shattuck III
Mr. Shattuck serves as a director of a company that provides service fees and hosting and maintenance fees in connection with analytic services. In 2015, Exelon paid that company approximately $1,800,000 as a result of a competitive bidding process.
Stephen D. Steinour
Mr. Steinour is the chairman, president and chief executive officer of a company that provided financial services to Exelon. In 2015, Exelon paid that company approximately $1,100,000. For additional information, see Related Person Transactions below.
Corporate Governance at Exelon
RELATED PERSON TRANSACTIONS
Exelon has a written policy for the review and approval or the ratification of related person transactions. Transactions covered by the policy include commercial transactions for goods and services and the purchase of electricity or gas at non-tariffed rates from Exelon or any of its subsidiaries by an entity affiliated with a director or officer of Exelon. The retail purchase of electricity or gas from BGE, ComEd or PECO at rates set by tariff, and transactions between or among Exelon or its subsidiaries are not considered. Charitable contributions approved in accordance with Exelon’s Charitable Contribution Guidelines are deemed approved or ratified under the Related Persons Transaction policy and do not require separate consideration and ratification.
As required by the policy, the board reviewed all commercial, charitable, civic and other relationships with Exelon in 2015 that were disclosed by directors and executive officers of Exelon, BGE, ComEd and PECO, and by executive officers of Exelon Generation that required separate consideration and ratification. The Office of Corporate Governance collected information about each of these transactions, including the related persons and entities involved and the dollar amounts either paid by or received by Exelon. The Office of Corporate Governance also conducted additional due diligence, where required to determine the specific circumstances of the particular transaction, including whether it was competitively bid or whether the consideration paid was based on tariffed rates.
The corporate governance committee and the board reviewed the analysis prepared by the Office of Corporate Governance, which identified those related person transactions which required ratification or approval, under the terms of the policy, or disclosure under the SEC regulations. The corporate governance committee and the board considered the facts and circumstances of each of these related person transactions, including the amounts involved, the nature of the director’s or officer’s relationship with the other party to the transaction, whether the transaction was competitively bid and whether the price was fixed or determined by a tariffed rate.
The committee recommended that the board ratify all of the transactions. On the basis of the committee’s recommendation, the board did so. Several transactions were ratified because the related person served only as a director of the affiliated company, was not an officer or employee of the affiliated company and did not have a pecuniary or material interest in the transaction. For some of these transactions, the value or cost of the transaction was very small, and the board considered the de minimis nature of the transaction as further reason for ratifying it. The board approved and ratified other transactions that were the result of a competitive bidding process, and therefore were considered fairly priced, or arms-length, regardless of any relationship. The remaining transactions were approved by the board, even though the director is an executive officer of the affiliated company, because the transactions involved only retail electricity or gas purchases under tariffed rates or the price and terms were determined as a result of a competitive bidding process. Only one of the related person transactions is required to be disclosed in this proxy statement.
Huntington Bank is a lender to Exelon and its subsidiaries and participates in their credit facilities. Huntington participates in the credit facilities on the same basis as other participating banks with terms based on a competitive process with a syndicate of banks. In 2015, Exelon and its subsidiaries paid Huntington Bank approximately $1,100,000 in fees for credit facilities and letters of credit. Mr. Steinour, an Exelon director, is also Chairman, President and Chief Executive Officer of Huntington Bancshares, the parent of Huntington Bank.
The corporate governance committee and the Exelon board reviewed Huntington Bank’s participation in the credit facilities as related person transactions and concluded that the transactions were in the best interests of Exelon because Huntington participates in the credit facilities on terms equivalent to those of an unrelated bank. There is no indication that Mr. Steinour was involved in the negotiations of the credit facilities or had any direct or indirect material interest in the transactions or influence over them. As compared to Exelon’s and Huntington’s overall revenues, the transactions are immaterial, individually and in the aggregate.
Corporate Governance at Exelon
CORPORATE GOVERNANCE PRINCIPLES
Exelon is committed to maintaining the highest standards of corporate governance. We believe that strong corporate governance is critical to achieving our performance goals and maintaining the trust and confidence of investors, employees, customers, regulatory agencies and other stakeholders.
Our Corporate Governance Principles, together with the board committee charters, provide the framework for the effective governance of Exelon. The board of directors has adopted our Corporate Governance Principles to address matters including qualifications for directors, standards of independence for directors, election of directors, responsibilities and expectations of directors, and evaluating board, committee and individual director performance. The Corporate Governance Principles also address director orientation and training, the evaluation of the chief executive officer and succession planning. The Corporate Governance Principles are revised from time to time to reflect emerging governance trends and to better address the particular needs of the company as they change over time.
THE BOARD’S FUNCTION AND STRUCTUREOverview
Exelon’s business, property and affairs are managed under the direction of the boardBoard of directors.Directors. The board is elected by shareholders to oversee management of the company in the long-term interest of all shareholders. All directors stand for election annually and in uncontested elections must be elected by a majority of the votes cast. The boardBoard considers the interests of otherall of its constituencies, which includeincludes shareholders, customers, employees, annuitants, suppliers, the communities we serve, and the environment. The boardBoard is committed to ensuring that Exelon conducts business in accordance with the highest standards of ethics, integrity, and transparency.
BOARD LEADERSHIPGovernance Highlights
Exelon’s Board remains committed to maintaining the highest standards of corporate governance. We believe our strong corporate governance practices help us achieve our performance goals and maintain the trust and confidence of our shareholders, employees, customers, regulators, and other stakeholders. A summary of our corporate governance practices are described below and more detail is presented in our Corporate Governance Principles, grantwhich are available on the boardExelon website atwww.exeloncorp.comon the Governance page located under the Investors tab.
Board Accountability & Shareholder Rights | |
✓ | Directors are elected annually by a majority of votes cast in uncontested elections. The average level of vote support for Directors in 2018 was 97%. |
✓ | Eligible shareholders may nominate Directors through Exelon’s “proxy access” bylaws. |
Oversight of Risk Management | |
✓ | The Board regularly reviews management’s systematic approach to identifying and assessing risks faced by Exelon and each business unit, taking into account emerging trends and developments and in connection with capital investments and business opportunities. |
✓ | Our Finance and Risk Committee oversees Exelon’s risk management strategy, policies and practices, financial condition and risk exposures. |
Shareholder Engagement | |
✓ | Exelon has a long-standing practice of engaging with our shareholders on corporate governance matters throughout the year, as may be necessary or helpful, to understand the positions of our institutional investors and to share Exelon’s perspective on matters of mutual interest. |
✓ | Regular and ongoing engagement with our shareholders helps to inform Board and Committee decisions on governance, compensation, environmental stewardship, and other matters. |
✓ | Page 36 in our Compensation Discussion & Analysis section summarizes the input received during 2018 related to our executive compensation program. |
Governance Practices | |
✓ | Our Board and each of the Board’s six Committees undergo annual self-assessments, and individual directors undergo biennial performance assessments that includes input from peers and select members of executive management. (See page 23 for details.) |
✓ | Continuing director education is provided during Board and Committee meetings and the Company encourages Director participation in externally offered director development opportunities. |
✓ | Independent Directors meet regularly in executive sessions without management. |
✓ | Robust stock ownership guidelines require Directors to hold at least 15,000 shares of Exelon common stock within five years after joining the Board; the CEO to hold shares valued at 6X his base salary, and Executive Vice Presidents and higher-level officers to hold shares valued at 3X base salary. Hedging, pledging, and short sales of Exelon stock are prohibited. |
✓ | Directors may not stand for election after age 75. |
✓ | Directors should not serve on the boards of more than four other public companies in addition to Exelon and its subsidiaries and any Director who serves as the CEO of a public company should not serve on more than two other public company boards in addition to Exelon. |
✓ | Transparent political activities and contributions are provided through semi-annual reporting onwww.exeloncorp.com |
18 Exelon 2019 Proxy Statement
Table of directors discretion to separate the roles of chairmanContents
Board and chief executive officer if the board determines that such a separation is in the best interests of Exelon and its shareholders. Upon the completion of the merger between Exelon and Constellation Energy Group in 2012, the board of directors separated the positions of chairman of the board and chief executive officer. Currently, Mayo A. Shattuck III serves as the independent chairman of the board of directors. Christopher M. Crane serves as president and chief executive officer of Exelon.
As specified in the Corporate Governance Principles, in the event the chairman of the board cannot fulfill his duties, the chair of the corporate governance committee would serve as the acting chairman of the board until such time as a chairman of the board is selected.
Exelon’s Corporate Governance Principles establish the position of Lead Director when (1) the positions of chairman of the board and the chief executive officer are held by the same person, or (2) for other reasons the person holding the position of chairman of the board is not an independent director under the applicable director independence standards. Dr. William C. Richardson served as Lead Director during 2015. Exelon’s chairman of the board is currently an independent director, so the board has not appointed a Lead Director. In the absence of appointment of a Lead Director when a Lead Director is required, the Corporate Governance Principles call for the chair of the corporate governance committee to serve as the Lead Director. Exelon’s Corporate Governance Principles specify in detail the responsibilities of the Lead Director.
Matters
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In 2017, we articulated our purpose as a Company—how and why we exist. Thousands of employees from across the Company provided input, and the result was a bold affirmation of our reason for being. Our Purpose statement provided a renewed focus on the impact we have in the communities where we work and live. Our principles serve as our guide. See page 5 for a summary of some of our 2018 achievements. |
Purpose | Powering a cleaner and brighter future for our customers and communities. | |
Principles | ✓ | We practice the highest level of safety and security to reliably deliver energy to our customers and communities. |
✓ | We put customer needs at the center of all we do by fueling innovation to improve the delivery of clean and affordable energy and services. | |
✓ | We return our success to the communities we are privileged to serve. | |
✓ | We adhere to the highest standards–ethically and with uncompromising integrity–to drive value for our customers and shareholders. | |
✓ | Our workforce is the foundation of our success. We succeed as a team of diverse individuals; respected, engaged and inspired to shape our nation’s energy future. |
Environmental, Social and Governance Oversight |
Environmental sustainability has been a core value and business driver for Exelon |
Corporate Governance at Exelon
The board believes that Exelon has in place effective arrangements and structures to ensure that the company maintains the highest standard of corporate governance and board independence and independent board leadership and continued accountability of the chairman and the CEO to the board. These arrangements and structures include:
www.exeloncorp.com.
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DIRECTOR RETIREMENT POLICY
Exelon’s director retirement policy provides that independent directors must retire at the endBoard Oversight of the calendar year in which he or she reaches the age of 75. Dr. William C. Richardson reached age 75 during 2015 and retired from the board effective December 31, 2015. Also, independent directors are required to submit to the board of directors a letter offering to resign if his or her principal occupation or business association changes substantially during his or her tenure as a director. Risk
BOARD OVERSIGHT OF RISK
The companyCompany operates in a complex market and regulatory environment that involves significant risks, many of which are beyond its direct control. The companyExelon has a risk management group consisting of a Chieffully staffed Enterprise Risk Officer, a Chief Commercial Risk Officer, a Chief Credit Officer and a full-time staff of 130. The risk managementManagement group that also draws upon other companyCompany personnel for additional support on various matters related to the identification, assessment, management, mitigation and managementmonitoring of enterprise risks. risks through established key risk indicators.
Exelon’s Enterprise Risk Management group is composed of: | |
✓ | a Chief Enterprise Risk Officer; |
✓ | a Chief Commercial Risk Officer; |
✓ | a Chief Credit Officer; |
✓ | a Vice President of Enterprise Risk Management Operations; |
✓ | a Vice President of Enterprise Risk Management Analytics, and; |
✓ | a full-time staff of approximately 115. |
The companyCompany and its business units/operating companies also has ahave Risk Management Committee comprising companyCommittees composed of select senior officers including the chief executive officers of those business units/operating companies and the Exelon CEO, who meet regularly to discuss matters related to enterprise risk management generally, and particular risks associated with new developments or proposed transactions under consideration. Management ofconsideration, and ensure that processes are in place to identify and assess risks within the company regularly meetsbusiness as well as measure and manage risk exposures in accordance with Exelon’s policies, programs, strategies, and risk appetite as approved by the Exelon Board.
The Chief Enterprise Risk Officer and the Risk Management CommitteeCommittees meet regularly with management of the Company to identify and evaluate the most significant risks of the businesses and appropriate steps to manage and mitigate those risks. In addition, the Chief Enterprise Risk Officer and the risk managementEnterprise Risk Management group perform an annual assessmentregular assessments of enterprise
www.exeloncorp.com 19
Board and Corporate Governance Matters
risks, drawing upon resources throughout the companyCompany for an assessment of the probability and severity of the identified risks. The Chief Enterprise Risk Officer and senior executives of the company discuss those risks with the board’s finance and risk committee as well as control effectiveness. These risk assessments, which also include the audit committeereview of operating company-specific key risk indicators, are discussed at the business unit/operating company Risk Management Committees before being aggregated and discussed with the Board’s Finance and Risk and Audit Committees and, when appropriate, the BGE, ComEd, PECO and PECOPHI boards of directors. In addition, the Exelon board’s generation oversight committee evaluates risks related to the company’s generation business.
The committees of the Exelon boardFinance and Risk, Audit, and Generation Oversight Committees regularly report to the full board on the committees’Committees’ discussions of enterprise risks. In addition,risks to the Exelon boardBoard. Furthermore, the Board regularly discusses enterprise risks in connection with consideration of emerging trends or developments and in connection with the evaluation of capital investments and other business opportunities and business strategies.
Director Attendance
The Board of Directors held five meetings during 2018, including a two-day strategy retreat with senior officers of Exelon and its subsidiary companies. Each incumbent Director nominee attended at least 75% of the combined Board and Committee meetings of which he or she was a member. Attendance at Board and Committee meetings during 2018 averaged 98% for incumbent Directors as a group. While Exelon does not have a formal policy requiring attendance at the annual shareholders meeting, all Directors attended the 2018 annual shareholders meeting. | ||
Attendance |
Corporate Governance at ExelonBoard Structure
Board Leadership
BOARD/COMMITTEE/DIRECTOR EVALUATION
The board has a three-part annual evaluation process that is coordinatedExelon’s bylaws permit the independent members of the Board to determine the leadership structure of the Board including whether the roles of Board Chair and Chief Executive Officer should be performed by the chairsame individual or whether the roles should be performed by separate individuals. As a matter of policy, the Board believes that separation of these functions is not required, and whether to combine the roles or not is a matter for the Board’s sole discretion, taking into consideration the current and anticipated circumstances of the corporate governance committee: committee self-evaluations; a full board evaluation;Company, the skills and the evaluationexperiences of the individual directors. The committee self-evaluations consider whetheror individuals in question, and how well each committee has performed the responsibilities in its charter, whether the committee members possess the right skills and experience to perform their responsibilities or whether additional education or training is required, whether there are sufficient meetings covering the right topics, whether the meeting materials are effective, and other matters. The full board evaluation considers the following factors, among others, in lightleadership composition of the committee self-assessments: (1)Board.
The Board reviews its leadership structure periodically and as circumstances warrant. The Board separated the effectivenessroles of Board Chair and Chief Executive Officer in 2012 upon the board organizationcompletion of its merger with Constellation Energy Group and committee structure; (2)named Mayo Shattuck as Board Chair and Christopher Crane as President and Chief Executive Officer of Exelon. We find that this leadership structure ensures independent oversight and promotes the qualityBoard’s ability to effectively represent the best interests of meetings, agendas, presentationsall shareholders.
The Board is committed to continued independent oversight at all times and meeting materials; (3)our Corporate Governance Principles provide that the effectiveness of director preparation and participation in discussions; (4) the effectiveness of director selection, orientation and continuing education processes; (5) the effectiveness of the process for establishing the CEO’s performance criteria and evaluating his performance; and (6) the quality of administrative planning and logistical support.
Individual director performance assessments are conducted informally as needed and involve a discussion among the chairman and other directors, includingindependent members of the corporate governance committee, usingBoard shall select and elect a Lead Independent Director in the performance expectationsevent the Board Chair and Chief Executive role are held by the same individual, or the person holding the role of Board Chair is not independent under Exelon’s Independence Standards for directors contained inDirectors. At any time during which the position of Lead Independent Director may be required but is vacant due to timing considerations, the Chair of the Corporate Governance Principles. In addition,Committee shall serve as the chairLead Independent Director.
Exelon’s Corporate Governance Principles provide a full outline of the corporate governance committee or the chairmanresponsibilities for each of the board provides individual feedback, as necessary.Board Chair, Chief Executive Officer, and any Lead Independent Director.
DIRECTOR EDUCATIONBoard Committees
The board has a program for orienting new directors and providing continuing education for all directors that is overseen by the corporate governance committee. The orientation program is tailored to the needs of each new director depending on his or her level of experience serving on other boards and knowledge of the company or industry acquired before joining the board. New directors receive materials about Exelon, the board and board policies and operations and attend meetings with the CEO and executive vice presidents and members of their staff for a briefing on the executives’ responsibilities, programs and challenges. New directorsThere are also scheduled for tours of various company facilities, depending on their orientation needs (incumbent directors are also invited to participate in the site visits, if available).
Continuing director education is provided during portions of regular board and committee meetings and focuses on the topics necessary to enable the board to consider effectively issues before them at that time (such as new regulatory or accounting standards). The education often takes the form of “white papers,” covering timely subjects or topics, which a director can review before the meeting and ask questions about during the meeting. The audit committee devotes a meeting each year to educating the committee members about new accounting rules and standards, and topics that are necessary to having a good understanding of our accounting practices and financial statements. The generation oversight committee uses site visits as a regular part of education for its members; the committee holds each meeting at a different generating station (nuclear, fossil or hydro) and the agenda always includes a briefing by local plant management, a tour of the facility and lunch with plant personnel. Continuing director education also involves individual directors’ attendance at director education seminars. The company pays the cost for any director to attend outside director education seminars on corporate governance or other topics relevant to their service as directors.
Corporate Governance at Exelon
INFORMATION ABOUT THE BOARD COMMITTEES
In determining the membership of the committees, the corporate governance committee has sought to have each committee reflect a range of backgrounds and experience and diversity. Every member of the audit committee qualifies as an “audit committee financial expert,” as defined by SEC rules, and most of the members serve or have served on audit committees of other companies. The chairs of the audit and finance and risk committees sit on each other’s committees, and there was significant overlap in the membership of these two committees in 2015. Similarly, the chairs of the corporate governance and compensation and leadership development committees sit on each other’s committees, which is helpful in the company’s process for evaluating the performance and setting the compensation of the CEO. Several members of the corporate governance committee serve or have served on the corporate governance committees of other corporations. Several of the members of the compensation and leadership development committee have served on the compensation committees of other corporations. The investment oversight committee includes members with experience in investment banking and the economics of energy. Effective February 1, 2016, the finance and risk committee includes all members of the board of directors. The finance and risk committee, therefore, includes members with experience in the economics of energy, nuclear operations, and banking and investment management, reflecting experience in dealing with the range of risks that the company faces.
In 2015, six standing committees assistedof the board in carrying out its duties:Board: the audit committee,Audit Committee, the compensationCompensation and leadership development committee,Leadership Development Committee, the corporate governance committee,Corporate Governance Committee, the financeFinance and risk committee,Risk Committee, the generation oversight committeeGeneration Oversight Committee and the investment oversight committee.Investment Oversight Committee. The chairmanBoard Chair and the CEO are invited guests and are welcome togenerally attend all committeeCommittee meetings except for the CEO when the independent directorsand all Committees meet regularly in executive session. The committees, their membership during 2015 and current memberships, changes in committee assignments in 2015 and 2016, and their principal responsibilities are described below:
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Notes to Committee Membership Table:
Corporate Governance at Exelon
AUDIT COMMITTEEsession without management present.
Report of the AuditEach Committee
The audit committee’s primary responsibility is to assist the board of directors in fulfilling its responsibility to oversee and review the quality and integrity of the company’s financial statements and internal controls over financial reporting, the independent auditor’s qualifications and independence, and the performance of the company’s internal audit function and of its independent auditor.
The audit committee is comprised entirely of independent directors and is governed by a board-approved, writtenBoard-approved charter stating its responsibilities. The charterresponsibilities, that is reviewed annually and updated as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback.appropriate. The audit committee charter wascharters were last amended on January 26, 2016,30, 2018 (Finance and isRisk, Generation Oversight and Investment Oversight Committee charters) and July 24, 2018 (Audit, Compensation and Leadership Development, and Corporate Governance Committee charters), and are available on the Exelon website atwww.exeloncorp.comon the corporate governanceGovernance page under the Investors tab, and istab. The charters are available in print to any shareholder who requests a copy from Exelon’s corporate secretaryCorporate Secretary as described on page 9365 of this proxy statement.
The audit committee satisfies the independence, financial experience20 Exelon 2019 Proxy Statement
Board and other qualification requirements of the New York Stock Exchange (NYSE) and applicable securities laws and regulations. The board of directors has determined that each of the members of the audit committee is an “audit committee financial expert” for purposes of the SEC’s rules and also that each of the members of the audit committee is independent as defined by the rules of the NYSE and Exelon’s Corporate Governance Principles.Matters
Under its charter, the audit committee’s principal duties include:
Audit Committee
Meetings in 2018: 6
Mr. Anderson (Chair) Report:Page 28 |
✓Assists Board in the oversight and review of the quality and integrity of the Company’s financial statements and internal controls over financial reporting ✓Appoints, retains, and oversees the independent auditor ✓Oversees the |
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audit function ✓ | With the advice and assistance of the |
risk ✓ |
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The Board of Directors has determined that each of the members of the Audit Committee is an “Audit Committee Financial Expert” for purposes of the SEC’s rules. |
Each member of the audit committee also serves on the financeCompensation and risk committee. On occasion, the audit and finance and risk committees have met jointly to review areas of mutual interest between the two committees.
The audit committee meets outside the presence of management for portions of its meetings to hold separate discussions with the independent auditor, the internal auditors, and the chief legal officer.
The audit committee met eight times in 2015, fulfilling its duties and responsibilities as outlined in its charter, as well as receiving periodic updates on the company’s financial performance and strategic initiatives, as well as other matters germane to its responsibilities.
Management has primary responsibility for preparing the company’s financial statements and establishing effective internal controls over financial reporting. PricewaterhouseCoopers LLP (PwC), the company’s independent auditor, is responsible for auditing those financial statements and expressing an opinion on the conformity of the company’s audited financial statements with generally accepted accounting principles and on the effectiveness of the company’s internal controls over financial reporting based on criteria established in 2013 by theLeadership Development Committee of Sponsoring Organizations of the Treadway Commission.
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Corporate Governance at Exelon
In this context, the audit committee has reviewed and discussed with management and PwC the company’s audited financial statements contained in the 2015 Annual Report on SEC Form 10-K, including the critical accounting policies applied by the company in the preparation of these financial statements. The audit committee discussed with PwC the
requirements of the Public Company Accounting Oversight Board (PCAOB), and had the opportunity to ask PwC questions relating to such matters. These discussions included the quality, and not just the acceptability, of the accounting principles utilized, the reasonableness of significant accounting judgments, and the clarity of disclosures in the financial statements.
At each of its meetings in 2015, the audit committee met with the company’s chief financial officer and other senior members of the company’s financial management. The audit committee reviewed with PwC and the company’s internal auditor the overall scope and plans for their respective audits in 2015. The audit committee also received regular updates from the company’s internal auditor on internal controls and business risks and from the company’s general counsel on compliance and ethics issues.
The audit committee met with the internal auditor and PwC, with and without management present, to discuss their evaluations of the company’s internal controls and the overall quality of the company’s financial reporting. The audit committee also met with the company’s general counsel and deputy general counsel, with and without management present, to review and discuss compliance and ethics matters, including compliance with the company’s Code of Business Conduct.
On an ongoing basis, the audit committee considers the independence, qualifications, compensation and performance of PwC. Such consideration includes reviewing the written disclosures and the letter provided by PwC in accordance with applicable requirements of the PCAOB regarding PwC’s communications with the audit committee concerning independence, and discussing with PwC their independence.
The audit committee is responsible for the approval of audit fees, and the committee reviewed and pre-approved all fees paid to PwC in 2015. The audit committee has adopted a policy for pre-approval of services to be performed by the independent auditor. Further information on this policy and on the fees paid to PwC in 2015 and 2014 can be found in the section of this proxy statement titled “Ratification of PriceWaterhouseCoopers LLP as Exelon’s Independent Auditor for 2016.” The audit committee periodically reviews the level of fees approved for payment to PwC and the pre-approved non-audit services PwC has provided to the company to ensure their compatibility with independence. The audit committee also monitors the company’s hiring of former employees of PwC.
The audit committee monitors the performance of PwC’s lead partner responsible for the audit, oversees the required rotation of PwC’s lead audit partner and, through the audit committee chair, reviews and approves the selection of the lead audit partner. In addition, to help ensure auditor independence, the audit committee periodically considers whether there should be a rotation of the independent auditor.
PwC has served as the company’s independent auditor since the company’s formation in 2000. As in prior years, the audit committee and management have engaged in a review of PwC in connection with the audit committee’s consideration of whether to recommend that shareholders ratify the selection of PwC as the company’s independent auditor for 2016. In that review, the audit committee considered both the continued independence of PwC and whether retaining PwC is in the best interests of the company and its shareholders. In addition to independence, other factors considered by the audit committee included:
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Corporate Governance at Exelon
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The audit committee has concluded that PwC is independent from the company and its management, and has retained PwC as the company’s independent auditor for 2016. The audit committee and the board believe that the continued retention of PwC is in the best interests of the company and its shareholders and have recommended that shareholders ratify the appointment of PwC as the company’s independent auditor for 2016.
In addition, in reliance on the reviews and discussions referred to above, the Exelon audit committee recommended to the Exelon board of directors (and the Exelon board of directors approved) that the audited financial statements be included in Exelon Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, for filing with the SEC.
Members- all independent Mr. de Balmann (Chair)
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COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE
The compensation and leadership development committee is composed entirely of independent directors and is governed by a board-approved charter stating its responsibilities. The charter is reviewed annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback. The compensation and leadership development committee charter was last amended on January 26, 2016, and is available on the Exelon website atwww.exeloncorp.com on the corporate governance page under the Investors tab, and is available in print to any shareholder who requests a copy from Exelon’s corporate secretary as described on page 93 of this proxy statement.
The compensation and leadership development committee met six times in 2015. The committee’s principal duties, as discussed in its charter, include:
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Corporate Governance at Exelon
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Executive officers are involved in evaluation of the performance and development of initial recommendations with respect to compensation adjustments; however, the compensation and leadership development committee (and the independent directors with respect to the compensation of the CEO) makes the final determinations with respect to compensation programs and adjustments. The chairman and the CEO are considered invited guests and are welcome to attend the meetings of the compensation and leadership development committee, except when the committee meets in executive session to discuss, for example, the CEO’s compensation. The chairman and the CEO cannot call meetings of the compensation and leadership development committee.
Management, including the executive officers, makes recommendations as to goals for the incentive compensation programs that are aligned with Exelon’s business plan. The compensation and leadership development committee reviews the recommendations and establishes the final goals. The committee strives to ensure that the goals are consistent with the overall strategic goals set by the board of directors (including the individual goals of subsidiaries, as appropriate), that they are sufficiently difficult to meaningfully incent management performance, and, if the targets are met, that the payouts will be consistent with the design for the overall compensation program. Executive officers take an active role in evaluating the performance of the executives who report to them, directly or indirectly, and in recommending the amount of compensation their subordinate executives receive. Executive officers review peer group compensation data for each of their subordinates in conjunction with their annual performance reviews to formulate a recommendation for base salary and whether to apply an individual performance multiplier to the subordinate executive’s incentive payouts, and if so, the amount of the multiplier.
Executive officers generally do not make recommendations with respect to annual and long-term incentive target percentages or payouts. The CEO reviews all of the recommendations of the executive officers before they are presented to the compensation and leadership development committee. The human resources function provides to the compensation and leadership development committee and the independent directors data showing the history of the compensation of the CEO and data that analyzes the cost of a range of several alternatives for changes to the compensation of the CEO, but the executive officers, the CEO do not make any recommendation to the compensation and leadership development committee or the independent directors with respect to the compensation of the CEO.
The compensation and leadership development committee has delegated to the CEO the authority to make off-cycle equity awards to employees who are not subject to the limitations of Internal Revenue Code Section 162(m), are not executive officers for purposes of reporting under Section 16 of the Securities Exchange Act of 1934, and are not executive vice presidents or higher officers of Exelon, provided that such authority is limited to making grants of up to 600,000 shares in the aggregate, and 20,000 shares per recipient in any year. The compensation and leadership development committee reviews and ratifies these grants.
During fiscal 2015 and as of the date of this proxy statement, none of the members of the compensation and leadership development committee was or is an officer or employee of the company, and no executive officer of the company served or serves on any compensation committee or board of any company that employed or employs any members of the company’s compensation and leadership development committee or board of directors.
Compensation Consultant
Pursuant to the compensation and leadership development committee’s charter, the committee is authorized to retain and terminate, without board or management approval, the services of an independent compensation consultant to provide advice and assistance, as the committee deems appropriate. The committee has the sole authority to approve the consultant’s fees and other retention terms, and reviews the independence of the consultant and any other services that the
Corporate Governance at Exelon
consultant or the consultant’s firm may provide to the company. The chair of the compensation and leadership development committee reviews, negotiates and executes an engagement letter with the compensation consultant. The compensation consultant directly reports to the committee.
The compensation and leadership development committee has engaged Semler Brossy Consulting Group, LLC and its Managing Principal Ms. Blair Jones as its consultant. The committee determined that Semler Brossy offered the strongest and most responsive team and would provide the most reliable and cost-competitive advice through experience, research
and benchmarking. In reviewing the engagement in December 2015, the committee considered the following factors in determining that Ms. Jones and the firm are independent consultants and do not have any conflicts of interest:
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As part of its ongoing services to the compensation and leadership development committee, the compensation consultant supports the committee in executing its duties and responsibilities with respect to Exelon’s executive compensation programs by providing information regarding market trends and competitive compensation programs and strategies. In supporting the committee, the compensation consultant does the following:
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Exelon’s human resources staff and senior management use the data provided by the compensation consultant to prepare documents for use by the compensation and leadership development committee in preparing their recommendations to the full board of directors or, in the case of the CEO, the independent directors, on compensation for the senior executives. In addition to its general responsibilities, the compensation consultant attends the compensation and leadership development committee’s meetings, if requested. The committee, or Exelon’s management on behalf of the committee, may also ask the compensation consultant to perform other executive and non-executive compensation-related projects. The committee has established a process for determining whether any significant additional services will be needed and whether a separate engagement for such services is necessary.
The committee has a formal compensation consultant independence policy that codifies its past practices. The compensation consultant independence policy is available on the Exelon website atwww.exeloncorp.com, on the corporate governance page under the Investors tab. The purpose of the policy is to ensure that the advisers or consultants retained by the committee are independent of the company and its management, as determined by the committee using its reasonable business judgment. The committee considers all facts and circumstances it deems relevant, such as the nature of any relationship between a compensation consultant, the compensation consultant’s firm, and the company and the nature of any services provided by the compensation consultant’s firm to the company that are unrelated to the compensation consultant’s
Corporate Governance at Exelon
work for the committee. Under the policy, a compensation consultant shall not be considered independent if the compensation consultant or the compensation consultant’s firm receives more than one percent of its annual gross revenues for services provided to the company. Under the policy, the compensation consultant reports directly to the chair of the compensation and leadership development committee, and the committee approves the aggregate amount of fees to be paid to the compensation consultant or the compensation consultant’s firm. The policy requires that the compensation consultant and any associates providing services to the compensation and leadership development committee have no direct involvement with any other aspects of the compensation consultant’s firm’s relationship with Exelon (other than any director compensation services that may be performed for the corporate governance committee), and that no element of the compensation consultant’s compensation may be based on any consideration of the revenues for other services that the firm may provide to Exelon. For 2015, no fees were paid to Semler Brossy for additional services beyond its work as consultant to the compensation and leadership development committee.
CORPORATE GOVERNANCE COMMITTEE
The corporate governance committee is composed entirely of independent directors and is governed by a board-approved charter stating its responsibilities. The charter is reviewed annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback. The corporate governance committee charter was last amended on January 26, 2016, and is available on the Exelon website atwww.exeloncorp.com on the corporate governance page under the Investors tab, and is available in print to any shareholder who requests a copy from Exelon’s corporate secretary as described on page 93 of this proxy statement.
The corporate governance committee met five times in 2015. In addition to its other duties described elsewhere in this proxy statement, the corporate governance committee’s principal duties, as discussed in its charter, include:
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✓Retains the Committee’s independent compensation consultant ✓Approves executive compensation program design for executive officers, other than the CEO ✓Reviews Compensation Discussion and ✓Monitors and reviews leadership and succession information for executive roles | ||
Compensation Committee Interlocks and Insider Participation. No member of the |
Corporate Governance Committee
Meetings in 2018: 5
Mr. Lawless (Chair) |
✓Identifies and recommends qualified candidates for election by the Board and shareholders and oversees Board and Committee structure and composition ✓Recommends Corporate Governance Guidelines and advises on corporate governance issues including evaluation processes for the Board, Committees, each Director, the Board Chair and CEO |
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✓Reviews Exelon’s director compensation program and has authority to retain independent compensation consultant ✓Has authority to retain an independent search firm to identify candidates for Director |
www.exeloncorp.com 21
Board and Corporate Governance Matters
Finance and Risk Committee
Meetings in 2018: 4
Ms. Berzin (Chair) |
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The committee may act on behalf of the full board when the board is not in session. The committee utilizes an independent compensation consultant to assist it in evaluating directors’ compensation, and for this purpose it periodically asks the consultant to prepare a study of the compensation of the company’s directors compared to the directors of companies in the same peer group used for executive compensation. This study is used as the basis for the corporate governance committee’s recommendations to the full board with respect to director compensation. The corporate governance committee may utilize other consultants, such as specialized search firms to identify candidates for director.
As part of the corporate governance committee’s role in monitoring and oversight of CEO succession planning, the committee developed an emergency CEO succession plan, which is reviewed by the committee and the full board
Corporate Governance at Exelon
annually. In addition, CEO succession is a topic on the agenda for meetings of the full board at least twice each year. In these discussions, the board reviews the qualifications of several potential internal succession candidates and considers their development opportunities.
FINANCE AND RISK COMMITTEE
The finance and risk committee is composed entirely of independent directors and is governed by a board-approved charter stating its responsibilities. The charter is reviewed annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback. The finance and risk committee charter was last amended on January 26, 2016, and is available on the Exelon website atwww.exeloncorp.com on the corporate governance page under the Investors tab, and is available in print to any shareholder who requests a copy from Exelon’s corporate secretary as described on page 93 of this proxy statement.
The finance and risk committee met five times in 2015. The finance and risk committee’s principal duties, as discussed in its current charter, include:
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Generation Oversight Committee
Meetings in 2018: 4
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GENERATION OVERSIGHT COMMITTEE
The generation oversight committee met four times in 2015.
The generation oversight committee’s principal duties, as discussed in its charter, include:
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Corporate Governance at Exelon
Mr. Rogers (Chair)
Mr. Crane
Dr. Joskow
Mr. Shattuck
INVESTMENT OVERSIGHT COMMITTEE
The investment oversight committee is responsible for general oversight of Exelon’s investment management functions. The committee serves as a resource and advisory panel for Exelon’s management-level investment management team and reports to the board.
The investment oversight committee met three times in 2015.
The investment oversight committee’s principal duties, as discussed in its charter, include:
✓Oversees the management and investment of the assets |
facilities ✓ |
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22 Exelon 2019 Proxy Statement
Board and Corporate Governance Matters
Board, Committee, and Individual Director Evaluations
Exelon has strong evaluation processes for its Board, six Board Committees, and individual Directors. | |||||||||||||||
Board Evaluations | Individual Director Evaluations | ||||||||||||||
The Board conducts an annual assessment of its performance and effectiveness. The process is coordinated by the Board Chair and the chair of the ●overall Board performance and areas of focus including strategic and business issues, challenges, and opportunities; ●Board meeting logistics; ●CEO, senior management and Director succession planning; ●accountability to shareholder views; ●Board Committee structure and composition; ●Board culture; ●Board composition; and ●management performance, including quality of materials, provided to the Directors. Interviews also seek practical input on what the Board should continue doing, start doing, and stop doing. Following such interviews, the Board Chair and chair of the Corporate Governance Committee collaborate to prepare and provide to the Board a summary of the assessment input provided. | All six of the Board’s Committees conduct annual assessments of their performance and take into consideration: ●whether Committee members possess the right skills and experiences or whether additional education or training is required; ●whether there are sufficient meetings covering the right topics; and ●whether meeting materials are effective, among other matters. Assessments also seek practical input on what Committees should continue doing, start doing, and stop doing. A summary of all Committee assessment results is provided to the Corporate Governance Committee and Board for review and discussion. | The process for individual Director evaluations was strengthened in 2017 to provide for individual assessments of all Directors on a biennial basis, which means that each Director is evaluated every other year. Individual Director performance assessments include peer review by all members of the Board as well as input from members of senior management on the contributions and performance of each Director. Directors are interviewed by the Chair of the Corporate Governance Committee or by the Board Chair to provide input on each Director undergoing assessment. In addition, four members of senior management are interviewed to provide input based on their regular interactions with Directors. In 2019, all interviews were conducted by the Board Chair because the chair of the Corporate Governance Committee was in the group undergoing assessment. Topics covered in the interviews included: ●meeting preparedness; ●meaningful and constructive participation and contributions; ●respectful, effective and candid communication skills; ●demonstrated independence; ●Company and industry knowledge; ●strategic foresight; and ●openness to new learnings and training. Interviews also sought practical input on what Directors should continue doing, start doing, and stop doing. After discussing the process and overall results with the Corporate Governance Committee, the Board Chair collaborates with the chair of the Corporate Governance Committee to provide feedback separately to individual Directors for developmental opportunities. |
www.exeloncorp.com 23
Board and Corporate Governance Matters
Director Education
The Board has an orientation and onboarding program for new Directors and provides continuing education for all Directors that is overseen by the Corporate Governance Committee.
New Director | The orientation program is tailored to the needs of each new Director depending on his or her level of experience serving on other boards and knowledge of the Company or industry acquired before joining the Board. Materials provided to new Directors include information on the Company’s vision, strategic direction, financial matters, corporate governance practices, Code of Business Conduct, and other key policies and practices. New Directors also meet with the CEO, senior executives and members of their staff for briefings on the executives’ responsibilities, programs and challenges. New Directors are also invited for tours of various Company facilities, depending on their orientation needs. Incumbent Directors are also invited to participate in site visits. |
Continuing | Continuing director education is provided during portions of Board and Committee meetings and is focused on topics necessary to enable the Board to consider effectively issues before them at that time (such as new regulatory or accounting standards). The education often takes the form of “white papers” covering timely subjects or topics that a Director can review before the meeting. The Audit Committee plans for at least one meeting a year in which a session is devoted to education on new accounting rules and standards and topics deemed to be helpful to having a good understanding of our accounting practices and financial statements. The Generation Oversight Committee uses site visits as a regular part of education for its members by holding each of its meetings at a different generating station (nuclear, fossil or hydro). Each Generation Oversight Committee meeting agenda includes a briefing by local plant management, a tour of the facility, and lunch with plant personnel. |
Director | Continuing director education also involves individual Directors’ attendance at education seminars and programs sponsored by other organizations. The Company covers the cost for any Director who wishes to attend external programs and seminars on topics relevant to their service as Directors. |
Corporate Governance Principles
Our Corporate Governance Principles, together with the articles of incorporation, bylaws, Committee charters, and other policies and practices, provide the framework for the effective governance of Exelon. The Corporate Governance Principles address matters including the Board’s responsibilities and role; Board structure, Director selection, evaluation, and other expectations; Board operations; Board Committees; and additional matters such as succession planning, executive stock ownership requirements, and our recoupment policy. The Corporate Governance Principles are reviewed periodically and were last amended in January 2018 to reflect evolving governance trends and to remain contemporary with the needs of the Company and its stakeholders.
Process for Communicating with the Board
Shareholders and other interested persons can communicate with any Director or the independent Directors as a group by writing to them, c/o Thomas S. O’Neill, Senior Vice President, General Counsel and Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. The Board has instructed the Corporate Secretary to review communications initially and transmit a summary to the Directors and to exclude from transmittal any communications that are commercial advertisements, other forms of solicitation, general shareholder service matters or individual service or billing complaints. Under the Board policy, the Corporate Secretary will forward to the Directors any communication raising substantial issues. All communications are available to the Directors upon request. Shareholders may also report an ethics concern with the Exelon Ethics Hotline by calling 1-800-23-Ethic (1-800-233-8442). You may also report an ethics concern via email to EthicsOffice@ExelonCorp.com.
24 Exelon 2019 Proxy Statement
Board and Corporate Governance Matters
Compensation of Non-Employee Directors
The Corporate Governance Committee is responsible for reviewing and making recommendations to the Board regarding its non-employee Director compensation program. The Committee is authorized to engage outside advisors and consultants in connection with its review and analysis of Director compensation and takes various factors into consideration, including responsibilities of Directors generally, Board leadership roles such as the Board Chair and Committee Chairs, and the form and amount of compensation paid to Directors at comparable companies.
The Board targets total Director compensation to be at the median level of compensation paid at the peer group of companies used to benchmark executive compensation. The non-employee Director compensation program comprises two components -cash fees and equity compensation.Cash Fees
COMPENSATION OF NON-EMPLOYEE DIRECTORS
For their service as directors ofThe following table sets forth the corporationcash compensation paid in 2015,2018 to Exelon’s non-employee directors received the compensation shown in the following table and explained in the accompanying notes. Mr. Crane, not shown in the table, received no additional compensation for his service as a member of the board of directors or its committees.Directors.
Fees Earned or Paid in Cash | Stock Awards (see description below) | All Other (Note 1) | Total | |||||||||||||||||
Annual Board & Committee Retainers | Board & Committee Meeting Fees | |||||||||||||||||||
Anderson | $ | 110,000 | $ | 55,000 | $ | 100,000 | $ | — | $ | 265,000 | ||||||||||
Berzin | 85,000 | 46,000 | 100,000 | 15,000 | 246,000 | |||||||||||||||
Canning | 90,000 | 34,000 | 100,000 | 15,000 | 239,000 | |||||||||||||||
de Balmann | 85,000 | 58,000 | 100,000 | — | 243,000 | |||||||||||||||
DeBenedictis | 85,000 | 54,000 | 100,000 | 15,000 | 254,000 | |||||||||||||||
Diaz 2 | 27,788 | 7,000 | 32,692 | 505,000 | 572,480 | |||||||||||||||
Jojo 3 | 26,739 | 10,000 | 33,152 | — | 69,891 | |||||||||||||||
Joskow | 85,000 | 52,000 | 100,000 | — | 237,000 | |||||||||||||||
Lawless 4 | 90,000 | 46,000 | 100,000 | — | 236,000 | |||||||||||||||
Mies | 110,000 | 58,000 | 100,000 | 15,000 | 283,000 | |||||||||||||||
Richardson 4 | 110,000 | 60,000 | 100,000 | 500,000 | 770,000 | |||||||||||||||
Rogers | 90,000 | 36,000 | 100,000 | 15,000 | 241,000 | |||||||||||||||
Shattuck | 385,000 | 38,000 | 100,000 | 15,000 | 538,000 | |||||||||||||||
Steinour | 95,000 | 40,000 | 100,000 | 15,000 | 250,000 | |||||||||||||||
Total All Directors | 1,474,528 | 594,000 | 1,265,844 | 1,110,000 | 4,444,372 |
Notes:
Annual Cash Retainer $ | |||||
Non-Employee Director | $ | 125,000 |
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Fees Earned or Paid in Cash
In 2015, all directors received an annual retainer of $80,000 paid in cash. In 2015, Dr. Richardson served as the Lead Director and received an additional annual retainer of $25,000. The non-executive chairman of the board received an annual retainer at the rate of $300,000 per year in addition to board and selected committee meeting fees. Committee chairs receive an additional $10,000 retainer per year. In recognition of the additional time commitment and responsibility, members of the audit committee and generation oversight committee, including the committee chairs, receive an additional $5,000 per year for their participation on these committees, and the chairs of these committees receive a $20,000 annual retainer.
Directors receive $2,000 for each meeting of the board that they attend, whether in person or by means of teleconferencing or video conferencing equipment. Directors serving on board committees receive $2,000 for each meeting they attend;
Board Chair | 300,000 | |||
Risk Committee | 25,000 | |||
Chairs of Compensation and Leadership Development Committee, Corporate Governance Committee and Generation Oversight Committee | 20,000 | |||
Chair of Investment Oversight Committee | 15,000 | |||
Generation Oversight Committee Member, including the | 20,000 |
Equity Compensation of Non-Employee Directors
directors serving on the generation oversight committee receive $3,000 for each meeting of that committee they attend due to the additional travel that is required and the length of those meetings. Directors also receive a $2,000 meeting fee for attending the annual shareholders meeting and the annual strategy retreat.
Stock Awards
Rather than paying directors entirely in cash, Exelon pays aA significant portion of directorDirector compensation is paid in the form of deferred stock units.equity to align the interests of Directors receivewith the interests of shareholders. In 2018, Exelon’s non-employee Directors received deferred stock units worth $100,000 per year.valued at $145,000 that are paid quarterly in arrears. Deferred stock units are granted and credited to a notional account maintained on the books of the corporationCompany at the end of each calendar quarter based upon the closing price of Exelon common stock on the day the quarterly dividend is paid. Deferred stock units earn dividend equivalents at the same level and time that dividends available to all holdersare paid on shares of Exelon common stock, whichstock. Dividend equivalents are reinvested in the accountdeferred stock accounts as additional stock units. The deferredDeferred stock units are not paid out to the directors until they retire from the board, leaving these amounts at risk during the director’s entire tenure on the board.
As of December 31, 2015, the directors held the following amounts of deferred Exelon common stock units. The units are valued at the closing pricesettled in shares of Exelon common stock on December 31, 2015, which was $27.77. Legacy plans include those stock units earned from Exelon’s predecessor and merged companies, PECO Energy Company, Unicom Corporation and Constellation Energy Group, Inc. For Mr. Rogers, the legacy deferred stock units reflect accrued benefits from the Unicom 1996 Directors Fee Plan, which was terminated in 2000; for Ms. Berzin, Mr. de Balmann and Mr. Lawless the legacy units reflect accrued benefits from the Constellation Energy Group, Inc. Deferred Compensation Plan for Non-employee Directors, which was terminated on March 12, 2012.
| Year First Elected to the Board | |
| Deferred Stock Units From Legacy Plans # |
| | Deferred Stock Units From Exelon Plan # | |
| Total Deferred Stock Units # |
|
| Fair Market Value as of 12/31/15 $ |
| ||||||
Anthony K. Anderson | 2013 | — | 9,765 | 9,765 | $271,174 | |||||||||||||||
Ann C. Berzin | 2012 | 25,997 | 12,767 | 38,764 | 1,076,476 | |||||||||||||||
John A. Canning | 2008 | — | 23,096 | 23,096 | 641,376 | |||||||||||||||
Yves C. de Balmann | 2012 | 35,897 | 12,767 | 48,664 | 1,351,399 | |||||||||||||||
Nicholas DeBenedictis | 2002 | — | 31,138 | 31,138 | 864,702 | |||||||||||||||
Nelson A. Diaz | 2004 | — | 28,663 | 28,663 | 795,972 | |||||||||||||||
Linda P. Jojo | 2015 | — | 1,221 | 1,221 | 33,907 | |||||||||||||||
Paul L. Joskow | 2007 | — | 24,670 | 24,670 | 685,086 | |||||||||||||||
Robert J. Lawless | 2012 | 39,830 | 12,767 | 52,597 | 1,460,619 | |||||||||||||||
Richard W. Mies | 2009 | — | 21,838 | 21,838 | 606,441 | |||||||||||||||
William C. Richardson | 2005 | — | 28,652 | 28,652 | 795,666 | |||||||||||||||
John W. Rogers, Jr | 2000 | 4,760 | 40,838 | 45,598 | 1,266,256 | |||||||||||||||
Mayo A. Shattuck III | 2012 | — | 9,495 | 9,495 | 263,676 | |||||||||||||||
Stephen D. Steinour | 2007 | — | 25,026 | 25,026 | 694,972 | |||||||||||||||
Total All Directors | 106,484 | 282,703 | 389,187 | $10,807,722 |
Compensation of Non-Employee Directors
Deferred Compensation
Directors may elect to defer any portion of their meeting fees and cash retainers as described above in a non-qualified multi-fund deferred compensation plan. Each director has an unfunded account where the dollar balance can be invested in one or more of several mutual funds, including one fund composed entirely of Exelon common stock. Fund balances (including those amounts invested in the Exelon common stock fund) will be settled in cash and may be distributed in a lump sum or in annual installment paymentsinstallments upon a director’s reaching age 65, age 72, or upon retirementa Director’s departure from the board. These funds are identical to those that are available to company employees who participateBoard.
Based upon the Corporate Governance Committee’s review of peer benchmarking completed in December 2018, the Board approved an increase in the Exelon Employee Savings Plan.value of directors’ deferred stock units to $155,000 per year, effective January 2019 and made no other changes.
Other CompensationBenefits Provided
From time to time, Exelon has a board expense reimbursement policy under which directorsDirectors are reimbursed for reasonable travelinvited to and from their primary or secondary residence and lodging expenses incurred when attending board and committee meetings or other events on behalf of Exelon (including director’s orientation or continuing education programs, facility visits or other business related activities for the benefit of Exelon). Under the policy, Exelon will arrange for its corporate aircraft to transport groups of directors, or when necessary, individual directors, to meetings in order to maximize the time available for meetings and discussion. Directors may bring their spouses or guests on Exelon’s corporate aircraft when theyto Exelon or industry related events. When such invitations are invited to anextended, Exelon event,covers the cost of spousal or guest travel, meals, lodging and therelated activities. The value of thisspousal or guest related travel is calculated according to IRS regulations isand imputed to the directorDirector as additional taxable income.
Exelon pays Directors also receive reimbursement to cover the cost of a director’s spouse’s travel, meals, lodging and related activities when the spouses are invited to attend company or industry related events where it is customary and expected that directors attend with their spouses. The cost ofadditional taxes owed on such travel, meals and other activities is imputed to the director as additional taxable income. However, in most cases there is no direct incremental cost to Exelon of providing transportation and lodging for a director’sDirector’s spouse or guest when he or she accompanies the director,Director, and the only additional costs to Exelon are those for meals and activities and to reimburse the directorDirector for the taxes on the imputed income. In 2015, Exelon incurred2018, there were no direct incremental costcosts to provide these perquisitesthe Company for such benefits and the aggregate amountreimbursements paid to all directors as a group (14 directors) for reimbursement ofcover additional taxes on imputed income was $525.
Exelon has a matching gift program available to directors, officers and employees that matches their contributions to eligible not-for-profit organizations up to $15,000 per year for directors; $10,000 per year for executives and up to $5,000 per year for other employees.
Compensation Philosophy
The Exelon board has a policy of targeting their compensationare detailed in footnote 1 to the median board compensation2018 Director Compensation table below.
www.exeloncorp.com 25
STOCK OWNERSHIP REQUIREMENTS FOR DIRECTORS AND OFFICERS
Under Exelon’sBoard and Corporate Governance Principles, all directors are required to own, within five years after election to the board, at least 15,000 shares of Exelon common stock or deferred stock units or shares accrued in the Exelon common stock fund of the directors’ deferred compensation plan. The board amended the corporate governance principles in July 2013 to increase the ownership requirement from 5,000 shares to 15,000 shares. The corporate governance committee utilized an independent compensation consultant who determined that, compared to its peer group, Exelon’s ownership requirement is reasonable.Matters
To strengthen the alignment of executives’ interests with those of shareholders, the compensation and leadership development committee establishes stock ownership requirements for officers of the company. Officers, other than the CEO, are required to own, within the later of five years after their employment or September 30, 2012, stock having a market value (based on the 60-day average stock price as of September 30, 2012) equal to or greater than multiples of their base salary or fixed numbers of shares as shown in the table below. The CEO is required to own six times his base salary. The compensation and leadership development committee has determined that stock options are not considered for purposes of satisfying this requirement. Unvested restricted shares, restricted stock units, and shares held in the Exelon Stock Deferral Plan will count toward the stock ownership requirement, as will certificates and dividend reinvestment plans; shares held in 401(k) Employee Savings Plans; shares held by spouses or children; broker accounts held in street name; and IRAs and trust accounts in which the executive is a beneficiary. These guidelines may be equitably adjusted in the case of promotions in the discretion of the Senior Vice President and Chief Human Resources Officer.
The following table shows the status of each currently-employed NEO against the new ownership targets as of January 31, 2016.
Name | | Stock Ownership Target (Shares) [A] | | | Total Shares and Share Equivalents Held as of January 31, 2016 [B] | | | Stock Ownership Percentage [B]/[A] | | |||
Crane | 188,062 | 468,294 | 249% | |||||||||
Thayer | 53,148 | 160,792 | 303% | |||||||||
Cornew | 57,236 | 159,840 | 279% | |||||||||
Von Hoene | 57,236 | 161,404 | 282% | |||||||||
O’Brien | 59,280 | 149,051 | 251% |
Ownership of Exelon Stock
BENEFICIAL OWNERSHIP TABLE2018 Director Compensation
The following table showssummarizes the ownershipcompensation paid for each of Exelon common stockour non-employee Directors who served as a member of the Board and its Committees in 2018.
Name | Annual Board & Committee Retainers $ | Stock Awards $ | All Other Compensation (Note 1) $ | Total Compensation $ | ||||
Anderson | $170,000 | $145,000 | $3,423 | $318,423 | ||||
Berzin(2) | 139,560 | 145,000 | 15,000 | 299,560 | ||||
Brlas(3) | 31,250 | 36,250 | — | 67,500 | ||||
de Balmann | 145,000 | 145,000 | 17,792 | 307,792 | ||||
DeBenedictis | 145,000 | 145,000 | 15,000 | 305,000 | ||||
Gioia(3) | 48,599 | 48,599 | — | 97,198 | ||||
Jojo | 125,000 | 145,000 | 15,000 | 285,000 | ||||
Joskow | 125,000 | 145,000 | — | 270,000 | ||||
Lawless | 145,000 | 145,000 | — | 290,000 | ||||
Mies | 165,000 | 145,000 | 15,000 | 325,000 | ||||
Rogers | 140,000 | 145,000 | 515,000 | 800,000 | ||||
Shattuck | 433,352 | 145,000 | 15,000 | 593,352 | ||||
Steinour(2) | 135,440 | 145,000 | 15,000 | 295,440 | ||||
Young(3) | 69,348 | 69,348 | 15,861 | 154,557 | ||||
Total All Directors | $2,017,549 | $1,749,197 | $642,076 | $4,408,822 |
(1) | Values reflect matching contributions made by Exelon or the Exelon Foundation to qualified not-for-profit organizations and represent charitable contributions made by directors to such organizations under Exelon’s matching gift program. For Mr. Rogers, the amount also includes charitable contributions approved by the Corporate Governance Committee and the Board in connection with Mr. Roger’s retirement in honor of his long-standing service to Exelon and its shareholders. Exelon’s matching gift program provides up to $15,000 per year in matched contributions made by Directors. Amounts reported for Messrs. Anderson, de Balmann, and Young also reflect $3,423, $2,792, and $861, respectively, for the reimbursement of income taxes incurred on approved spousal travel benefits. |
(2) | Amounts reported for Ms. Berzin and Mr. Steinour each include pro-rated Finance and Risk Committee Chair fees. Ms. Berzin assumed the Finance and Risk Chair role from Mr. Steinour on June 1, 2018. |
(3) | Prorated retainers were paid to Ms. Brlas and Mr. Young upon their elections to the Board on October 1, 2018, and July 9, 2018, respectively, and to Ms. Gioia, who retired from the Board on May 1, 2018. |
Outstanding Equity Awards as of JanuaryDecember 31, 2016 by each director, each named executive officer in2018
As of December 31, 2018, the Summary Compensation Table, and for all directors and executive officers as a group.
[A] | [B] | [C] | [D]=[A]+[B]+[C] | [E] | [F]=[D]+[E] | |||||||||||||||||||
Directors (Note 3) | | Beneficially Owned Shares | | | Shares Held in Company Plans (Note 1) | | | Vested Stock Options and Options that Vest Within 60 days | | | Total Shares | | | Share Equivalents to be Settled in Cash (Note 2) | | | Total Share Interest | | ||||||
Anthony K. Anderson4 | — | 9,765 | — | 9,765 | — | 9,765 | ||||||||||||||||||
Ann C. Berzin | — | 38,764 | — | 38,764 | 12,957 | 51,721 | ||||||||||||||||||
John A. Canning, Jr. | 5,000 | 23,096 | — | 28,096 | 1,152 | 29,248 | ||||||||||||||||||
Yves, C. de Balmann | 1,910 | 48,664 | — | 50,574 | — | 50,574 | ||||||||||||||||||
Nicholas DeBenedictis | 5,000 | 31,138 | — | 36,138 | — | 36,138 | ||||||||||||||||||
Linda P. Jojo4 | — | 1,221 | — | 1,221 | — | 1,221 | ||||||||||||||||||
Paul L. Joskow | 2,000 | 24,670 | — | 26,670 | 6,285 | 32,955 | ||||||||||||||||||
Robert J. Lawless | 3,273 | 52,597 | — | 55,870 | 11,812 | 67,682 | ||||||||||||||||||
Richard W. Mies | — | 21,838 | — | 21,838 | — | 21,838 | ||||||||||||||||||
William C. Richardson | 1,786 | 28,652 | — | 30,438 | — | 30,438 | ||||||||||||||||||
John W. Rogers, Jr. | 11,374 | 45,598 | — | 56,972 | 14,325 | 71,297 | ||||||||||||||||||
Mayo A. Shattuck III | 491,436 | 9,495 | 2,955,520 | 3,456,451 | — | 3,456,451 | ||||||||||||||||||
Stephen D. Steinour | 5,001 | 25,026 | — | 30,027 | 30,751 | 60,778 | ||||||||||||||||||
Christopher M. Crane | 240,157 | 222,126 | 544,000 | 1,006,283 | 6,011 | 1,012,294 | ||||||||||||||||||
Jonathan W. Thayer | 70,784 | 90,008 | 650,366 | 811,158 | — | 811,158 | ||||||||||||||||||
Kenneth W. Cornew | 62,844 | 95,394 | 143,700 | 301,938 | 1,602 | 303,540 | ||||||||||||||||||
William A. Von Hoene, Jr. | 87,509 | 70,766 | 251,200 | 409,475 | 3,129 | 412,604 | ||||||||||||||||||
Denis P. O’Brien | 79,364 | 63,913 | 249,700 | 392,977 | 5,774 | 398,751 | ||||||||||||||||||
Total | ||||||||||||||||||||||||
Directors & Executive Officers as a group (23 people) See Note 3 | 1,242,880 | 1,020,478 | 5,018,886 | 7,282,244 | 93,798 | 7,376,042 |
non-employee Directors held the following amounts of deferred stock units.
Name | Total Deferred Stock Units (Note 1) (#) | |
Anderson | 22,080 | |
Berzin | 54,251 | |
Brlas | 771 | |
de Balmann | 65,235 | |
DeBenedictis | 45,792 | |
Gioia | 8,782 | |
Jojo | 12,602 | |
Joskow | 38,616 | |
Lawless | 69,597 | |
Mies | 35,475 | |
Rogers | 61,833 | |
Shattuck | 21,781 | |
Steinour | 39,010 | |
Young | 1,518 | |
Total All Directors | 477,343 |
(1) |
|
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26 Exelon 2019 Proxy Statement
Ownership of Exelon Stock
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OTHER SIGNIFICANT OWNERS OF EXELON STOCK
Shown in the table below are those owners who are known to Exelon to hold more than 5% of the outstanding common stock. This information is based on the most recent Schedule 13Gs filed with the SEC by BlackRock, Inc. on February 10, 2016, Capital Research Global Investors on February 16, 2016, FMR LLC on February 12, 2016, The Vanguard Group on February 10, 2016, and State Street Corporation on February 12, 2016.
Name and address of beneficial owner | | Amount and nature of beneficial ownership | | | Percent of class | | ||
BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 66,693,581 | 7.25% | ||||||
Capital Research Global Investors (2) 333 South Hope Street Los Angeles, CA 90071 | 60,495,735 | 6.58% | ||||||
The Vanguard Group(3) 100 Vanguard Blvd. Malvern, PA 19355 | 57,627,572 | 6.26% | ||||||
FMR LLC(4) 245 Summer Street Boston, MA 02210 | 53,391,732 | 5.80% | ||||||
State Street Corporation(5) State Street Financial Center One Lincoln Street Boston, MA 02111 | 52,883,925 | 5.75% |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon signed affirmations received from directors and officers, as well as administrative review of company plans and accounts administered by private brokers on behalf of directors and officers which have been disclosed to Exelon by the individual directors and officers, Exelon believes that its directors and officers made all required filings on a timely basis during 2015.
Exelon’s Independent Auditor for 2016
PROPOSAL 2: THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS EXELON’S INDEPENDENT AUDITOR FOR 2016
The audit committee and the board of directors have concluded
The Audit Committee and the Board of Directors have determined that retaining PricewaterhouseCoopers LLP (PwC) to be the independent auditor is in the best interests of the Company and its shareholders based on consideration of the factors set forth below.
PwC has served as the Company’s independent auditor since the Company’s formation in 2000. During this time, PwC has become deeply familiar with the Company’s operations and businesses, accounting policies and practices, and internal control over financial reporting. The Committee believes this experience and expertise to be valuable to the Company and its shareholders.
Representatives of PwC will attend the annual meeting to answer questions and will have the opportunity to make a statement.
The Board recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Exelon’s Independent Auditor for 2019.
The Audit Committee considers the independence, qualifications, compensation and performance of the independent auditor on an ongoing basis. In 2018, as part of a continued focus on its governance of its assessment process, management developed a framework to assist the Audit Committee with its assessment of the independent audit firm and to ensure the appropriateness of the firm’s fees.
As part of its annual review of the retention of PwC as the Company’s independent auditor, the Audit Committee considers both the continued independence of PwC and whether retaining PwC is in the best interests of the companyCompany and its shareholders based on consideration ofshareholders. Using the factors set forth in the Report offramework developed by management, the Audit Committee assessed the following matters:
Quality of the independent audit firm and audit process | ●The independent audit firm’s role in identifying restatements, material weaknesses and significant deficiencies and the quality of the Audit Committee’s ongoing discussions with PwC. ●The risk associated with the audit firm, based on their financial stability, compliance with applicable laws and professional standards, and any pending litigation or judgment against the firm. ●External information on audit quality and performance, including recent Public Company Accounting Oversight Board (PCAOB) reports on PwC and its peer firms. |
Level of service provided by the independent audit firm | ●Results of surveys conducted by management with personnel that have high interactions with the independent audit firm to determine the firm’s expertise and capability in handling the accounting, internal control, process and system risks and practices present in the Company’s utility and energy generation businesses. ●The quality, quantity, and geographic location of PwC staff, and PwC’s ability to provide responsive service. |
Alignment with Exelon’s core values | ●Whether the independent audit firm’s onsite team demonstrates a commitment to diversity that aligns with the Company’s core values. ●Survey results as it relates to the independent audit firm’s performance and commitment to transparency, integrity, and compliance. |
Good faith negotiation of fees | ●Assessment of the appropriateness of PwC’s fees, relative to the Company’s financial statement risk, the size and complexity of its business and related internal control environment, and as compared to fees incurred by peer companies. ●Periodic review of fees approved as compared with annually approved fees and fee estimates and fees for pre-approved non-audit services provided to the Company to ensure their compatibility with independence. |
www.exeloncorp.com 27
Audit Committee Matters
Based on pages 26-28the results of this proxy statement. Representatives of PwC will attend the annual meetingevaluation, the Audit Committee found PwC to answer appropriate questions,be independent from the Company and may makeits management, and appointed PwC as its independent auditor for 2019. If shareholders fail to ratify the appointment, the Audit Committee will reconsider the appointment, but no assurance can be given that the Audit Committee will change the appointment.
The Audit Committee has a statement if they desire.
The Exelon audit committee policy for the pre-approval of audit and non-audit services to be performed by the independent auditor is available on the Exelon website atwww.exeloncorp.com on the corporate governance page under the Investors tab.services. Under this policy, the audit committeeAudit Committee pre-approves all audit and non-audit services to be provided by the independent auditor taking into account the nature, scope, and projected fees of each service as well any potential implications onfor auditor independence. The policy specifically sets forth services that the independent auditor is prohibited from performing by applicable law or regulation. Further, the audit committeeAudit Committee may determine to prohibit other services that in its view may compromise, or appear to compromise, the independence and objectivity of the independent auditor. Predictable and recurring audit and permitted non-audit services are considered for pre-approval by the audit committeeAudit Committee on an annual basis.
For any services not covered by these initial pre-approvals, the audit committeeAudit Committee has delegated authority to the committee’s chairAudit Committee Chair to pre-approve any audit or permitted non-audit service with fees in amounts less than $500,000. Services with fees exceeding $500,000 require full committeeCommittee pre-approval. The audit committeeAudit Committee receives quarterly reports on the actual services provided by and fees incurred with the independent auditor. None of theNo services provided by the independent auditor waswere provided pursuant to the de minimis exception to the pre-approval requirements contained in the SEC’s rules.
The following table presents fees for professional audit services rendered by PricewaterhouseCoopersPwC for the audit of Exelon’s annual financial statements for the years ended December 31, 20152018 and 2014,2017, and fees billed for other services rendered by PricewaterhouseCoopersPwC during those periods.
Year Ended December 31, | ||||||||
(in thousands) | 2015 | 2014 | ||||||
Audit fees(a) | $18,287 | $17,751 | ||||||
Audit related fees(b) | 2,392 | 1,607 | ||||||
Tax fees(c) | 1,250 | 1,562 | ||||||
All other fees(d) | 160 | 37 |
Year Ended December 31, | ||||
(in thousands) | 2018 | 2017 | ||
Audit fees(1) | $27,719 | $28,483 | ||
Audit related fees(2) | 1,442 | 2,207 | ||
Tax fees(3) | 1,087 | 1,205 | ||
All other fees(4) | 380 | 379 |
Audit fees include financial statement audits and reviews under statutory or regulatory requirements and services that generally only the auditor reasonably can provide, including issuance of comfort letters and consents for debt and equity issuances and other attest services required by statute or regulation. |
Audit related fees consist of assurance and related services that are traditionally performed by the auditor such as accounting assistance and due diligence in connection with proposed acquisitions or sales, consultations concerning financial accounting and reporting standards and audits of stand-alone financial statements or other assurance services not required by statute or regulation. |
Tax fees consist of tax compliance, tax planning and tax advice and consulting services, including assistance and representation in connection with tax audits and appeals, tax advice related to proposed acquisitions or sales, employee benefit plans and requests for rulings or technical advice from taxing authorities. |
All other fees primarily reflect accounting research software license costs. |
The boardReport of directors unanimously recommends a vote “FOR” the ratificationAudit Committee
ofManagement has primary responsibility for preparing the Company’s financial statements and establishing effective internal controls over financial reporting. PricewaterhouseCoopers LLP as Exelon’s Independent Auditor(PwC), the Company’s independent auditor for 2016.
the year ended December 31, 2018, is responsible for auditing those financial statements and expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on the effectiveness of the Company’s internal controls over financial reporting based on criteria established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.
The Audit Committee has reviewed and discussed with management and PwC the Company’s audited financial statements for the year ended December 31, 2018, including the critical accounting policies applied by the Company in the preparation of these financial statements and PwC’s evaluation of the Company’s internal control over financial reporting. The Audit Committee has also discussed with PwC the matters required to be discussed pursuant to PCAOB standards and had the opportunity to ask PwC questions relating to such matters. PwC has provided to the Audit Committee the written disclosures and PCAOB-required letter regarding its communications with the Audit Committee concerning independence, and the Audit Committee has discussed with PwC the firm’s independence.
In reliance on these reviews and discussions and other information considered by the Committee in its judgment, the Audit Committee recommended to the Board, and the Board approved, that the audited financial statements be included in Exelon Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC.
THE AUDIT COMMITTEE
Anthony K. Anderson,Chair | Ann C. Berzin | Laurie Brlas | Paul L. Joskow | Richard W. Mies |
28 Exelon 2019 Proxy Statement
Advisory Vote on Executive Compensation
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are providing shareholders with an annual advisory vote on the compensation paid to the company’s named executive officers, as disclosed in this proxy statement, in accordance with the compensation disclosure rules of the SEC. Accordingly, you may vote on the following resolution at the 2016 annual meeting.
RESOLVED, that the company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the company’s proxy statement for the 2016 Annual Meeting of Shareholders pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the 2015 Summary Compensation Table and the other related tables and disclosure.
The board of directors recommends a vote FOR this proposal because it believes:
RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2019 Annual Meeting of Shareholders pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table and the other related tables and disclosure. The Board of Directors recommends a vote FOR this proposal for the following reasons: ●Most compensation is ●Exelon had strong financial performance in 2018, achieving total shareholder return (TSR) of18.33%, adding to the positive TSR results of 2016 and |
2017, leading to a three-year TSR from 2016-2018 of80.80%. ● | The compensation framework ●We continued to engage with shareholders over the course of the year, building on prior dialogues to deepen our understanding of investor sentiments about our compensation program. The input received was positive and continued to support the program’s design and components. Many investors commented favorably on the demonstrated linkage between pay and performance and the alignment of our incentive compensation goals with the Company’s overall business strategies. | |
The Board recommends a vote “FOR” the approval of the compensation paid to the Company’s named executives, as disclosed in this proxy statement. |
Whilewww.exeloncorp.com 29
“Our Committee strives to design and implement an executive compensation framework that motivates and rewards Exelon executives to achieve superior performance for the benefit of our shareholders and other key stakeholders.” Yves de Balmann Chair, Compensation and Leadership Development Committee |
This Compensation Discussion and Analysis (CD&A) discusses Exelon’s 2018 executive compensation program. The program covers compensation for our named executive officers (NEOs) listed below:
Exelon’s Named Executive Officers
CHRISTOPHER CRANE | JOSEPH NIGRO | JONATHAN THAYER * | ANNE PRAMAGGIORE | WILLIAM VON HOENE, JR. | KENNETH CORNEW |
President and Chief Executive Officer | Senior EVP and Chief Financial Officer, as of May 8, 2018 | Senior EVP and Chief Transformation Officer | Senior EVP, CEO | Senior EVP and Chief Strategy Officer | Senior EVP and Chief Commercial Officer, President and CEO Exelon Generation |
* Chief Financial Officer through May 8, 2018
2018 Leadership Changes
In May 2018, Exelon announced several leadership changes to further strengthen and position the Company for future growth. As a result, this advisory proposal, commonly referredyear’s proxy includes six NEOs that include two new NEOs, and a new role for an existing NEO.
30 Exelon 2019 Proxy Statement
Compensation Discussion & Analysis
Business and Strategy Overview, Value Proposition and Performance Highlights
Exelon is not binding,composed of two primary businesses – regulated utilities and electric generation.
1 | 2 |
Regulated Utilities | Electric Generation |
We have regulated operations that consist of six utility subsidiaries, serving approximately 10 million electricity and natural gas customers, more than any other company in the industry.Our operational performance is generally top quartile or better across numerous metrics such as the frequency and duration of outages. We have significantly improved the operational performance of PHI since the 2016 acquisition consistent with our long-term strategy to increase investment in regulated assets for the benefit of our customers. | We also operate a competitive generation business that comprises one of the largest and cleanest electric generation businesses in the country and the largest competitive retail supply business serving wholesale, commercial, and industrial customers. We are the largest producer of emissions-free energy in the U.S. and are a best-in-class operator in terms of outage days and operating costs for our nuclear fleet. |
Exelon’s Value Proposition and Overview of 2018 Key Achievements on Objectives
The value proposition articulated below provides more granular insights into our long-term strategic goals and the board of directorspath to achieving these goals. Our continued focus on the following five key strategic initiatives is expected to drive strong operational and financial performance. The table below demonstrates the strong link between Exelon’s value proposition and the compensation and leadership development committee will review and consider the voting results when annually evaluatingcomponents or metrics used in our executive compensation program.
When casting your 2016 say on pay vote, we encourage you to consider the company’s 2015 performance, which included strong financial performance in the middle of Exelon’s upwardly adjusted earnings guidance range, with the utilities earning over $1 billion in net income and an aggregate return on equity of 9.5 percent leveraging strong results in reliability, customer service, and outstanding operational performance. The utilities achieved best or second best ever in 21 of the 26 metrics we track and Exelon Nuclear performed at world class levels for reliability in all seasons at a nearly 94 percent capacity factor. We were, however, disappointed with lagging total shareholder return, which followed gas prices down. The compensation and leadership development committee and board continue to believe that the changes to the compensation program we made in 2013, largely based on shareholder feedback and alignment with market practice, have strengthened the connection of pay with performance. The committee and the board appreciate your feedback and continue to look forward to hearing from shareholders about potential future program enhancements.
The board of directors unanimously recommends a vote “FOR” approval of the compensation paid to the company’s named executives, as disclosed in this proxy statement.STRONG FINANCIAL AND OPERATIONAL PERFORMANCE
Strategic Business Objective | Compensation Component or Metric | 2018 Results | |||
1. | Regulated utility growth with utility EPS rising 6-8% and rate base growth of 7.4% annually through 2021 | Adjusted (non-GAAP) Operating EPS* Performance measure for annual incentive Utility Net Income Performance share award measure | ●Operating EPS of $3.12 exceeded the |
Report of the Compensation and Leadership Development CommitteeCompleted eight distribution rate cases with regulatory authorities, reaching six constructive settlements
“Exelon’s executive compensation framework is designed to pay for performance and align the interests of executives, shareholders and other key stakeholders.”
The Compensation & Leadership Development Committee
The committee is composed solely of independent directors, and we are accountable for ensuring that the decisions we make about executive compensation are in the best long-term interests of shareholders. We accomplish this objective by having robust executive compensation principles. One of the tenets is having a strong compensation framework that drives pay for performance and aligns executive pay with shareholder interests. For Exelon’s CEO, 90 percent of his compensation is at risk in the form of annual and long-term incentives, with 78 percent of total pay tied directly to Exelon’s stock price performance. Therefore, as the stock rises or falls, the CEO’s compensation is aligned with shareholders’ interests.
The committee proactively seeks shareholder feedback as part of its year-round engagement program, which includes reaching out to our top shareholders to listen to feedback regarding our executive compensation program, disclosure practices and corporate governance. The committee values our shareholders’ insights and considers their feedback in addition to other factors such as emerging market practices, when formulating our executive compensation programs and making pay decisions. A full description of our shareholder outreach efforts and the changes we have made based on your feedback is detailed under “Shareholder Engagement” below.
The compensation and leadership development committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the committee recommended to the board that the Compensation Discussion and Analysis be included in the 2016 Proxy Statement. Dr. William C. Richardson, a long-time member of the committee, retired from the board of directors on December 31, 2015, and Linda Jojo was appointed to the committee as of February 1, 2016, after the 2015 compensation decisions had been made.
February 25, 2016
THE COMPENSATION & LEADERSHIPDEVELOPMENT COMMITTEE
John A. Canning, Jr., Chair
Yves C. de Balmann
Robert J. Lawless
Strong free cash generation and maintaining a strong balance sheet to support utility growth while also reducing debt by $3 billion over the next 4 years | Exelon Performance share award measure | ●Investment in advanced technology and infrastructure continued to drive improved customer satisfaction across our utilities, and allowed ComEd to complete its $920 million smart meter installation program three years ahead of its original schedule and more than $20 million under budget | |
3. | Invest in utilities where wecan earn an appropriate return | Utility Earned Return on Equity* Performance share award measure | |
4. | Superior operational performance to support achievement of financial objectives | Operational Metrics Outage duration, outage frequency, nuclear fleetwide capacity factor and dispatch match are performance measures for the | ●All Exelon Utilities generally achieved top quartile reliability performance in outage frequency and |
5. | Create sustainable value for shareholders by executing business strategy | Relative TSR Modifier for performance share award | ●Achieved significant judicial success in defending ZEC programs in New York and Illinois ●Announced additional annual cost savings of $200 million gross, and $150 million net, reflecting ongoing initiatives leveraging process efficiency and technology; full run-rate savings scheduled to be achieved in 2021 ●Together with previously announced cost savings, Exelon has identified total savings of over $900 million since 2015. |
Compensation Discussion & Analysis
Company Strategy
Exelon’s key objectives are to employ our competitive integrated business model to deliverstable growth,sustainable earnings and anattractive dividend.
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Exelon will continue to do what it does best: operate its generation, transmission and distribution assets at the highest levelsTable of excellence and reliability; find and deliver innovative and responsive solutions for customer priorities; invest for stable and reliable returns; and work to ensure a fair and competitive environment for our assets. The pace of change in our business is unprecedented. Exelon’s culture of innovation and excellence is designed to ensure that we keep this pace, and that we never take our eye off the essentials – keeping the lights on and the gas flowing.
Executive Compensation Goals are aligned with the Company’s Strategy: In designing the company’s executive compensation programs, the committee strives to align the goals and underlying metrics with the company’s strategy, while including compensation risk-mitigating design features to discourage our executives and employees from taking excessive risks for short-term benefits that may harm the company and our shareholders. We believe consistent execution of our strategy over multi-year periods will lead to long-term value creation for our shareholders.Contents
Base Salary increases are modest and averaged 2.5 percent in 2015 for our NEOs, which was lower than the 3.0 percent market data for executives.
For the company’s Annual Incentive Program (“AIP”), all named executive officers (“NEOs”), with the exception of the CEO of Exelon Utilities, are tied 100 percent to adjusted non-GAAP operating earnings per share (“EPS���), directly correlating to bottom-line financial results that drive shareholder value creation. For the Long-Term Incentive (“LTI”) Program, our NEOs receive both Performance Share Units (“PShares”) and Restricted Stock Units (“RSUs”). The PShares are contingent on achieving a threshold level of performance over a three-year period based on two goals — financial management and operational excellence — that are aligned with driving long-term shareholder value creation. A full scorecard for the PShare goals, underlying metrics, and 2013-2015 performance, including the total shareholder return (“TSR”) modifier is set forth below.
Compensation Discussion & Analysis
Key Take-Aways for 2015
1Executive Compensation Program Highlights STRONG FINANCIAL AND OPERATIONAL PERFORMANCE
What We Do | ||
✓Pay for performance – 90% of CEO pay and an average of 81% of NEO pay is at risk ✓Require Directors and executive officers to maintain significant stock ownership – 6X base salary for CEO and 3X for other NEOs ✓Mitigate undue risk in compensation programs (e.g., incentive awards are capped) and conduct an annual risk assessment of the compensation programs ✓Require double-trigger for change-in-control benefits – change-in-control plus termination ✓Retain an independent compensation consultant to advise the Compensation Committee ✓Evaluate management succession and leadership development efforts annually ✓Provide limited perquisites based on sound business rationale ✓Seek shareholder feedback on executive compensation programs, engaged with holders of approximately 40% of our shares in 2018 ✓Prohibit hedging transactions, short sales, derivative transactions or pledging of Company stock ✓Require executive officers to trade through 10b5-1 trading plans and obtain pre-approval before trading Exelon stock ✓Annually assess our programs against peer companies and best practices ✓Set appropriate levels of “stretch” in incentive targets, based on industry performance and/or Exelon’s business plan ✓Provide for discretionary clawbacks of incentive compensation paid or payable to current and former executives under certain circumstances ✓Conduct annual review by an independent third party of pay equity to maintain no systemic pay disparity | ✕No guaranteed minimum payout of AIP or LTIP programs ✕No employment agreements ✕No excise tax gross-ups for change-in-control agreements ✕No dividend-equivalents on PShares ✕No inclusion of the value of LTIP awards in pension or severance calculations ✕No additional credited service under supplemental pension plans since 2004 ✕No option re-pricing or buyouts |
2018 CEO Pay
Strong CEO Pay for Performance Closely Aligned to Total Shareholder Return (TSR)
●Chart depicts Exelon’s annual stock price for the last three years and CEO total compensation as it appears in the Summary Compensation Table. ●Over the last three years, CEO pay increased at an annualized rate of 0.8%, from $15.0 million to $15.6 million, while Exelon’s stock price increased from $27.77 to $45.10, resulting in an annualized rate of increase for TSR of 21.82%. |
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32 Exelon 2019 Proxy Statement
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2 STRONG PAY FOR PERFORMANCE ALIGNMENT ON 2013-2015 PSHARE PAYOUTTable of Contents
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3 CEO TARGET TOTAL DIRECT COMPENSATION (TDC) INCREASED SLIGHTLY FROM PRIOR YEAR
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4 KEY STRATEGIC INTIATIVES
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Compensation Discussion & Analysis
5Continued TSR Outperformance Compared to UTY in 2018 COMMITMENT TO SHAREHOLDER ENGAGEMENT
● ●For the three-year period beginning in 2016, Exelon outperformed the UTY index by 43.70 percentage points. |
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CEO
The Compensation Committee and Board approved the following compensation for the CEO:
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Strategic Business Results for 20152018 NEO Pay
Strong FinancialNEOs
The majority of target compensation paid to our NEOs is tied to the achievement of short- and Operational Performance with Lagging 2015 TSR Performance: Despite a challenging year for the sectorlong-term financial and a difficult yearoperational goals. A significant portion is paid in the markets, strong operating performance at both the utility and generation business enabled Exelon to deliver strong 2015 earnings, coming in at $2.49 per share in (non-GAAP) operating earnings. This ended up roughly in the middleform of our upward adjusted EPS rangeequity with all components except for salary being “at-risk.”
www.exeloncorp.com 33
Strong 2015 company performance demonstrated once again our ability to run the business well and manage through even the most challenging environments. Highlights for both the utility and generation business are shown below:
Exelon Utilities – Operational Excellence Drove Strong Financial Performance and Positive Regulatory Outcomes in 2015
Leading Operational Excellence
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Strong Financial Performance
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Positive Regulatory Outcomes
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Exelon Generation Delivered Strong Operational and Financial Performance in 2015
World Class Operational Performance
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Compensation Discussion & Analysis
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Industry Leading Load Serving Business
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Looking Forward to 2016 and Beyond:
Proper valuation of the reliable, carbon-free attributes of our nuclear generation assets was a key public policy issue in 2015 for the company, and will continue to be in 2016. Revenue uplifts from the PJM capacity performance auction results for 2016-2019 were highly beneficial for Exelon’s generation assets in PJM.
As discussed on our February 3, 2016 earnings call, our board approved a policy to raise our dividend by 2.5 percent each year for the next three years beginning with the June 2016 dividend. The dividend increase shows our commitment to provide an attractive total return proposition for our shareholders and reflects the shift in focus toward our regulated utility and long-term contract businesses. Our balance sheet and our cash flow profile support the shift in the dividend policy, allowing us to maintain a high credit quality, while investment grade rating remains a top priority. We also affirmed our 3 percent to 5 percent compound annual growth rate for 2016-2018 for Exelon and 7 percent to 9 percent for the utilities.
Exelon is also working on company-wide initiatives as it seeks to increase shareholder value such as:
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The continued investments in ComEd’s smart grid and grid modernization initiatives, and significant gas and electric infrastructure improvements across all three utilities, are designed to improve reliability, customer service and shareholder return, despite continued weak load growth. The investments also include commitments to innovative technology and customer-oriented systems. The utilities are transforming the way they interact with customers through innovative online and mobile-based applications, and with strategic partnerships to leverage the capabilities of the smart grid network.
In 2016, at Exelon Generation, we will continue to operate a world-class fleet of assets at the highest level of performance while continuing to execute our strategy of growing the contracted generation business with 350 megawatts of wind projects in development. At Constellation, we expect to achieve our targets of serving 210 terawatt hours of load across our wholesale and retail base, using our commercial platform as both a risk management vehicle and an earnings driver. Each of our businesses is well positioned to continue strong performance in 2016 operationally and financially.
Compensation Discussion & Analysis
Executive Compensation FrameworkProgram Philosophy and Central ThemesObjectives
The goal of our executive compensation program is to retain and reward leaders who create long-term value for our shareholders by delivering on objectives set forth inthat support the company’sCompany’s long-term strategic plan.plan, as shown below.
The design of our executive compensation program is based on aligning the incentives of our high-quality leaders, who effectively manage a company of Exelon’s size and complexity, with the interests of our shareholders. This goal affects the compensation elements we useis accomplished by using metrics and drives our compensation decisions. The primary compensation elementsgoals that are depicted in the table below, with all except for base salary being “pay-at-risk” anddirectly linked to changes in the stock priceCompany’s strategy and achievementperformance.
We believe that the consistent execution of short and long-term company financial and operational goals that build shareholder value.
Executive Compensation Principles
The following principles help guide and inform the committee in delivering highly effective executive compensation programs that drive performance, mitigate risk, and foster the attraction, motivation and retention of top leadership talent in order to enable the company to execute against its strategic business plan and ultimately deliverour strategy over multi-year periods drives long-term shareholder value.
value creation. Moreover, our program is structured to motivate measured, but sustainable and appropriate, risk-taking.
Objectives | ||||||
The |
Compensation
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We engage directly with shareholders and | ||||
Our NEOs’ pay levels are set by taking into consideration multiple factors including peer group market data, internal equity comparisons, experience, succession planning, performance and retention. |
Executives are required to meet and maintain significant stock ownership requirements. | Balance
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AIP Goal Rigor and Process Used to Set Goals
The 2018 EPS “Target” goal was set at $3.07, which was 47 cents above actual results for 2017, and 2 cents above the midpoint of our publicly disclosed 2018 earnings guidance range set at the beginning of the year. Operational “Target” metrics for 2018 were set at challenging levels that corresponded to top quartile performance compared to industry standards.
Building on the 2018 goal rigor, the Compensation Committee set an adjusted (non-GAAP) operating EPS* AIP target for 2019 at a level higher than the Company’s actual performance in 2018, which is generally aligned with the midpoint of our publicly disclosed 2019 financial guidance. For the 2019 operational goals, “Distinguished” targets were set at levels that outperform the historical achievement of Company metrics for three of the four operational metrics:
● | Best-ever for Dispatch Match | |
● | Best-ever for Nuclear Fleetwide Capacity Factor | |
● | Best-ever for outage frequency results (best-in-class) | |
● | First decile of industry standards for outage duration goals |
Exelon’s goal-setting process employs a multi-layer approach and analysis that incorporates a blend of objective and subjective business considerations and other analytical methods to ensure that the goals are sufficiently rigorous. Such considerations include:
● | Recent History -Goals generally reflect a logical progression of results from the recent past |
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● | Strategic Aspirations -Near- and |
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● | Sustainable Sharing -Earned awards reflect a balanced degree of shared benefits between shareholders and participants |
* | See Definitions of Non-GAAP measures in Appendix at page 69. |
34 Exelon 2019 Proxy Statement
Compensation Discussion & Analysis
Goal-setting process is competitive and well-defined | ●The Compensation Committee annually reviews components, targets and payouts to ensure that they are challenging, contain appropriate stretch, and are designed to mitigate excessive risk ●The Committee considers short- and long-term financial and operational results relative to our internal goals ●Goals for the AIP, including adjusted (non-GAAP) operating EPS, are set in January around the same time that Exelon provides full-year guidance for EPS and other key financial metrics | |
Target levels are challenging to achieve and drive long-term growth and success | ●EPS metric is aligned generally with external financial guidance ●Target goals are generally set near the mid-point of Exelon’s full-year EPS guidance ●Distinguished goals are set above the upper end of Exelon’s full-year EPS guidance ●Operational metrics are set at challenging levels (i.e., target typically corresponds to top quartile performance) compared to industry standards ●Return and cash flow metrics are set based on internal business plan |
Compensation Decisions - Roles of Board, Compensation Committee, CEO Pay at-a-Glanceand Independent Compensation Consultant
●CEO compensation decisions are made by the independent members of the Board, based on recommendation of the Compensation Committee. ●Other NEO compensation decisions are made by the Compensation Committee, based on several factors including input from the CEO and an independent compensation consultant retained to provide services described below. |
2015Setting Target Total Direct Compensation (TDC): In determining target TDC for the CEO, the independent directors considered his individual performance and assessed market competitiveness before it set Mr. Crane’s 2015 target TDC at $12.65 million (up 5.0 percent from the prior year) as shown in the table below.CEO…
Component | Percent Increase | | Dollar Increase | | Percent of Total Increase | | Approved 2015 level | | ||||
Base Salary | 2.5% | $30,000 | 5% | $1.23 million | ||||||||
AIP Target | 6.7% | $99,000 | 16% | $1.60 million | ||||||||
LTI | 5.0% | $476,000 | 79% | $9.82 million | ||||||||
Target TDC | 5.0% | $605,000 | N/A | $12.65 million |
Almost the entire amount (95 percent) of Mr. Crane’s 2015 TDC increase was in the form of AIP and LTI, with only 5 percentOne of the total amount in the form of a base salary increase.
Looking ahead to 2016 Target Total Direct Compensation (TDC):Mr. Crane’s 2016 TDC was set at $13.0 million, representing a 2.8 percent increase from 2015. Base salary increased 2.5 percent to $1.261 million, AIP remained flat at 130 percent of base salary, and LTI target opportunity increased to $10.1 million. These adjustments were made to ensure that Mr. Crane’s pay remain competitive relative to Exelon’s 20 company peer group.
2015 CEO Payouts:
Strong financial performance drives above-target 2015 AIP:For Mr. Crane, the independent directors on the board awarded a 2015 AIP payout of $2,072,777 based on operating EPS performance of $2.49 (129.63 percent of target).
2013-2015 PShare payout slightly above target:The independent directors also approved the 2013-2015 PShare award of 202,500 shares based on an overall performance of 105.91 percent (average of 2013, 2014 and 2015 PShare performance, including a 10 percent reduction as a result of the TSR modifier), valued at $5,499,900 based on the closing stock price of $27.16 on January 25, 2016.
Compensation Discussion & Analysis
Effective payout is only 92 percent of target value
Even though the overall performance factor was 105.91 percent of target, the effective payout was only about 92 percent of the grant date value, resulting in our CEO’s actual payout being almost $500,000 less than the target or intended value as shown in the table below:
Target Performance Shares at Grant Date (“Intended Value”)
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Grant Date | Grant Stock Price | Performance Multiplier Range | Target Shares | Intended Value | ||||
1/28/2013 | $31.18 | 50% to 150% | 191,200 | $5,961,616 | ||||
Board Approved Performance Shares (“Actual Value”)
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Award Date | Vesting Stock Price | Performance Multiplier | Awarded Shares | Actual Value | ||||
1/25/2016 | $27.16 | 105.91% | 202,500 | $5,499,898 | ||||
Dollar Difference of Actual vs. Intended Value | ($461,718) | |||||||
Actual Value as a Percent of Intended Value | 92% |
Shareholder Engagement
2015 Advisory Vote on Executive Compensation. Shareholders approved our advisory vote on executive compensation with 82 percent of the votes cast FOR the compensation of our NEOs, which was a 13 percentage point increase from the prior year. Based on our conversations with shareholders, the higher vote in favor of executive compensation was primarily a result of:
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We actively engage our shareholders throughout the year. Since 2006, we have maintained a shareholder engagement program in which we proactively contact our top shareholders and leading proxy advisory services firms and educate them about the corporate governance and executive compensation changes we have implemented, while also seeking feedback on executive compensation and corporate governance matters. Our engagement team comprises leaders from human resources, investor relations and the office of corporate governance. For 2015, the company offered the participation of the committee chair.
Robust 2015 Shareholder Outreach. In the spring and fall of 2015, we spoke with holders of about 46 percent of our outstanding common shares. These discussions were highly valuable, as we were able to summarize and answer questions about the 2015 proxy statement and key executive compensation and corporate governance matters, as well as review executive compensation changes that were implemented based on prior shareholder input. Overall, the feedback we received was positive and supported our programs.
Positive shareholder feedback for 2014 CEO pay (reported in 2015 proxy):
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Compensation Discussion & Analysis
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Our 2015 executive compensation program was largely unchanged from 2014 as the committee believes the program is aligned strongly with shareholder interests and market practice. The shareholder feedback we received, including the higher level of support on the say on pay vote in 2015, was positive. Even though the committee believes the program is meeting its objectives in rewarding financial, operational, and strategic success, it is always seeking ways to improve the executive compensation program and disclosure. During 2015, the company assessed trends in executive compensation practices and looked for ways to improve disclosures about our program. In addition, the committee and management reviewed correspondence submitted by individual and institutional shareholders, analyzed market practices at peer companies, and sought advice from the committee’s independent compensation consultant. Based on shareholder discussions and recommendations, the committee, during its annual evaluation of the company’s executive compensation programs made only slight modifications to our programs, and disclosures:
Section II: How We Design Our Executive Compensation Programs to Pay for Performance
Our approach to compensating our NEOs is to align the long-term interests of Exelon’s executives with those of our shareholders. Our compensation framework is based on providing market-competitive programs that attract and retain top talent necessary to effectively lead a company with the scale and technical complexity of Exelon throughout all phases of the business cycle. The framework promotes pay for performance by putting a majority of pay at risk and directly linking it to Exelon’s shareholder returns and to other performance factors that measure our progress against the financial management and operational excellence goals in our strategic and operating plans. This means when excellent performance is achieved, pay will be above target. Failure to achieve objectives will result in below-market pay.
In order to reaffirm the link between pay and performance, the committee annually reviews the executive compensation components, targets and payouts and approves compensation for all NEOs except the CEO, whose compensation is approved by the independent directors on the recommendation of the committee and its independent consultant (Semler
Compensation Discussion & Analysis
Brossy Consulting Group). The committee evaluates goals under the annual and long-term incentive programs to ensure that they are challenging, contain appropriate stretch, and are designed to mitigate excessive risk. Goals are selected and evaluated based on support for Exelon’s long-term business plan.
2015 NEO Pay Decisions
As stated in its charter, one of the committee’sCommittee’s most important responsibilities is to recommend the CEO’s target total direct compensation to the independent directors.Directors of the Board. The committeeCompensation Committee fulfills its oversight responsibilities and provides thoughtful recommendationsthis responsibility by analyzing peer group compensation and performance data with its independent compensation consultant and company performance data.consultant. The committeeCommittee also reviews the various elements of the CEO’s compensation in the context of the target total direct compensation (baseTDC which includes base salary, annual and long-term incentive target opportunities) opportunities.
…and then presents its recommendations following the compensation governance process set forth below.for Our NEOs
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The key executiveCompensation Committee also approves target TDC for our other NEOs. In doing so, the Compensation Committee considers input from the CEO and analyzes a variety of data to gauge market competitiveness, including peer group compensation activities that occur annually are shown below:
How Pay-for-Performance Works
Overview. Exelon has a long-standing commitment to link pay and performance by providing a majority of compensation that is tied to stock price or contingent on achieving short and long-term objectives.
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Compensation Discussion & Analysis
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Almost 78 percent of our CEO’s target total direct compensation is in the form of LTI, which is almost 7 percentage points higher than the average CEO in our peer group.
Compensation Discussion & Analysis
What We Do and Don’t Do
Exelon’s executive compensation philosophy focuses on pay-for-performance and reflects appropriate governance practices aligned with the needs of our business. Below is a summary of our executive compensation practices that are aligned with best practices, as well as a list of those practices we avoid because they do not align with shareholders’ long-term interests.
What We Do
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What We Don’t Do
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Compensation Discussion & Analysis
Assessing Executive Compensation Programs
Overview. An assessment of our executives’ compensation levels against our peer group is one of several considerations in the pay setting process. Peer group practices are analyzed each year for target total direct compensation and for other pay practices, such as perquisites and the mix of LTI vehicles. Because Exelon is one of the largest energy services companies, we compare executive compensation against a blended peer group with which we compete for talent. Each year the compensation and leadership development committee, workingdata with its independent consultant, reviews the composition of the peer group and determines whether any changes should be made. For 2015, the committee approved a change to the peer group to remove PepsiCo Inc., which was larger than the company’s criteria of 0.5X to 2.0X for both revenue and market capitalization. Additionally, Caterpillar and PPG Industries did not participate in the TowersWatson executive compensation survey. As a result, the committee approved replacing these three companies with Deere & Company, General Dynamics and Northrup Grumman. These companies all fit within our parameters for both revenue and market capitalization and those averages did not materially change as a result of these changes. The peer group has the following general characteristics:
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The peer group for 2015 is shown in the table below:
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Setting Target TDC for our NEOs. The committee initially sets target TDC at market median of peer group companies, butconsultant. TDC can vary by named executive officer based on competencies and skills, scope of responsibilities, the executive’s experience and performance, retention, succession planning and the organizational structure of the businesses (e.g., internal alignment and reporting relationships).
Role of the Compensation Consultant
The Compensation Committee retains the services of Meridian Compensation Partners, LLC (Meridian), an independent compensation consultant to support its duties and responsibilities. Meridian provides advice and counsel on executive and director compensation matters and provides information and advice regarding market trends, competitive compensation programs, and strategies including as described below.
✓Market data for each senior executive position, including evaluating Exelon’s compensation strategy and reviewing and confirming the peer group used to prepare the market data ✓An independent assessment of management recommendations for changes in the compensation structure | ✓Assisting management to ensure the Company’s executive compensation programs are designed and administered consistent with the Compensation Committee’s requirements | ✓Ad hoc support on executive compensation matters and related governance trends |
The Compensation Committee annually reviews the independence of Meridian, and approves its fees and other retention terms. In establishing NEO compensation levels, the committee does not formally consider the ratio2018, Meridian provided no other services for Exelon or its affiliates. Fees paid to Meridian were less than 1% of individual NEO compensation relative to other NEOs.its gross annual revenues.
www.exeloncorp.com 35
Compensation Discussion & Analysis
Peer Groups Used for Benchmarking Executive Compensation
We use a blended peer group for assessing our executive compensation program that consists of two sub-groups: energy services peers and general industry peers. We use a blended peer group because (1) there are not enough energy services peers with size, scale and complexity comparable to Exelon to create a robust energy services-only peer group, and (2) Exelon’s market for attracting talent includes general industry peers, with recent key executives hired from companies such as Johnson & Johnson and Proctor & Gamble. When selecting general industry peers, we look for capital asset-intensive companies with size, scale and complexity similar to Exelon, and we also consider the extent to which they may be subject to the effects of volatile commodity prices similar to Exelon’s sensitivity to commodity price volatility. Exelon evaluates its peer group on an annual basis in July and adjusts for changes with our energy and general industry peers when needed. For 2019, Exelon will take into account the bankruptcy filing of PG&E and the expected spin-off of DowDuPont.
Section III: What We Pay and Why We Pay itExelon’s revenues are at the 80thpercentile of the following blended peer group comprising 20 companies.
Our NEOs for 2015 are unchanged from 2014 as shown below:
Energy Services | EXELON VS. PEER GROUP | ||||||
Beginning in 2017, we included the following 11 energy services companies in our peer group even though seven of these companies had 2017 revenues that were less than half of Exelon’s revenues: | |||||||
American Electric Power | Dominion Energy, Inc. | Duke Energy Corporation | |||||
Edison International | Entergy Corporation | FirstEnergy | |||||
NextEra Energy, Inc. | PG&E Corporation | Public Service | |||||
Sempra Energy | The Southern | ||||||
General Industry | |||||||
There have been no changes since 2017 to the general industry peers in our peer group: | |||||||
| Deere & Company | DowDuPont | |||||
| Honeywell | International | * | Based on the four fiscal quarters prior to and | |||
| Northrop Grumman |
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Compensation Framework and 2015 Performance-based Pay Actions
Pay at Risk
Pay at risk in action. Consistent with our pay-for-performance culture and to ensure alignment with shareholder interests, the committee recommends CEO pay decisions to the independent directors based on the core compensation principle of putting the majority of compensation in the form of variable pay that is at risk.
Because there is a correlation between the size of an organization and its compensation levels, market data is statistically adjusted using a regression analysis. This commonly applied technique allows for a more precise estimate of the market value of Exelon given the size/scope of responsibility for Exelon’s executive roles. Each element of NEO compensation is then compared to these size-adjusted medians of the peer group.
2018 Say-on-Pay Vote Outcome and Shareholder Engagement
The Compensation Committee regularly reviews executive compensation, taking into consideration input received through Exelon’s regular and ongoing practice to engage with its investors. Feedback is typically solicited throughout the year in connection with the annual meeting of shareholders and the Compensation Committee’s review of the executive compensation program.
During 2018, Exelon contacted the holders of nearly 40% of our outstanding shares. Portfolio managers and governance professionals that accepted our offer to engage included a significant cross-section of our shareholder base, representing approximately one-third of Exelon’s outstanding shares. The Chair of Exelon’s Compensation Committee participated in many of the discussions held with shareholders in 2018, and feedback received was shared with the Compensation Committee, the Corporate Governance Committee, and the Board.
No substantive changes to our executive compensation program were requested through our engagement discussions. Feedback indicated that investors remain supportive of Exelon’s executive compensation program and design as demonstrated by our 2018 say-on-pay vote result of 93%.
36 Exelon 2019 Proxy Statement
Compensation Discussion & Analysis
Compensation Decisions and Rationale
2018 Compensation Program StructureIn keeping with Exelon’s executive compensation philosophy to motivate and reward leaders that create long-term value for our shareholders, the Compensation Committee designed Exelon’s 2018 compensation program, which is summarized below. Primary compensation elements include fixed and variable components:
Pay Element | Form | Performance | Purpose | |||||
Salary | Cash | Merit Based | ●Provides portion of income stability at competitive, market-based levels | |||||
Annual Incentive Plan | Cash | ●1 Year ●Adjusted (non-GAAP) Operating EPS*(70%)Operational Goals(30%) Outage Duration, Outage Frequency, Nuclear Fleetwide Capacity Factor, Dispatch Match ●TSR Cap if negative 1-year absolute TSR | ●Motivates executives to achieve key annual financial and operational objectives using adjusted (non-GAAP) operating EPS and operational goals that reflect commitment to become leading diversified energy provider ●Aligns with shareholder interests by capping payouts for any annual period with negative TSR results | |||||
Long-Term Incentive Plan | Performance Shares (67%of LTIP) | Cumulative Performance | 2018-2020 | ●Utility Earned ROE*(33.3%) ●Utility Net Income(33.3%) ●Exelon FFO/Debt*(33.4%) | ●Drives executive focus on long-term goals supporting utility growth, financial results, and capital stewardship to drive behavior and align with shareholder interests ●Includes relative comparison of TSR to market index and cap if absolute TSR is negative over the last 12 months of the performance cycle to further align with shareholder interests ●Shareholder friendly feature which provides a double-layer of shareholder protection over both a 1- and 3-year basis ●Provides executive with market competitive time-based restricted stock, diversifying the LTI portfolio | |||
2018-2020 | ●Relative TSR Modifier (3-year period) ●TSR Cap if negative 1-year absolute TSR | |||||||
Restricted Stock (33%of LTIP) | Vest One-Third Per Year Over 3 Years |
* | See Definitions of Non-GAAP measures in Appendix at page 69. |
www.exeloncorp.com 37
Base SalaryCompensation Discussion & Analysis
Overview.2018 Target Compensation for Named Executive Officers
The table below lists the target value of the compensation elements for each NEO as of December 31, 2018. An explanation of the promotion-related adjustments provided to Mr. Nigro and Ms. Pramaggiore is disclosed below this table.
Cash Compensation | Long-Term Incentives | Target Total Direct Compensation | ||||||||||||
Name | Base | AIP Target | Target Total Cash | RSUs 33% | PShares 67% | Target Total LTIP | ||||||||
Crane | $1,261,000 | 140% | $3,026,400 | $3,332,901 | $6,766,799 | $10,099,700 | $13,126,100 | |||||||
Nigro | 775,000 | 95% | 1,511,250 | 788,287 | 1,600,463 | 2,388,750 | 3,900,000 | |||||||
Thayer | 828,098 | 95% | 1,614,791 | 891,526 | 1,810,069 | 2,701,595 | 4,316,386 | |||||||
Pramaggiore | 775,000 | 95% | 1,511,250 | 788,287 | 1,600,463 | 2,388,750 | 3,900,000 | |||||||
Von Hoene, Jr. | 908,765 | 100% | 1,817,530 | 963,864 | 1,956,936 | 2,920,800 | 4,738,330 | |||||||
Cornew | 905,690 | 100% | 1,811,380 | 963,204 | 1,955,596 | 2,918,800 | 4,730,180 |
We payPromotion-Based Compensation Adjustments
Mr. Nigro and Ms. Pramaggiore each received adjustments to their compensation components including base salary and annual and long-term incentive target awards based on market data for their new positions.
● | Base salaries were adjusted to $775,000, representing an increase of 12% for Mr. Nigro and 18% for Ms. Pramaggiore. | |
● | Annual incentive targets were increased to 95% of base salary, from 85% for Mr. Nigro, and 70% for Ms. Pramaggiore. | |
● | Long-term incentive targets were increased to a value of $2,388,750, from $1,786,130 for Mr. Nigro, and $973,640 for Ms. Pramaggiore, with 33% of the total value awarded in the form of RSUs and 67% in the form of performance shares. | |
● | Incremental RSUs were granted to align to a target value of $788,287 for each of Mr. Nigro and Ms. Pramaggiore on May 8, 2018, and June 1, 2018, respectively. | |
● | The target value for the 2018-2020 cycle of the performance share awards was set at $1,600,463. |
Performance share cycles: Consistent with 2018 promotion-based award methodology, Mr. Nigro and Ms. Pramaggiore also received incremental awards to bring their target values to $1,600,463 for the two outstanding performance share cycles of 2016-2018 and 2017-2019.
Beginning in 2019, executives who are promoted during the first six months of the year will receive an adjustment to only that year’s current performance share award to reflect the increased scope and responsibilities for the new role.
The accounting impacts of the promotion-related awards are reflected in the Summary Compensation table on page 46, as well as the Grants of Plan-Based Awards table on page 49.
2018 Retention RSU award: Mr. Nigro also received a retention-related award granted in January 2018 with a grant date fair market value at $1,533,200.
Cash Compensation
The Compensation Committee sets base salaries to attract and retain talented executives and to provide a fixed level of cash compensation. Basefor each NEO, which salaries for our NEOs are set by the committee andmay be adjusted following an annual market assessment of peer group compensation. Base salaries mayWhen evaluating whether a NEO’s base salary should be adjusted, (1) as partthe Compensation Committee considers a number of factors, including the outcome of the annual merit review, or (2) based on a promotion or significant change in job scope. The committee considers the results of the annual market assessment in addition to the following factors when contemplating a merit review:of NEO compensation, job promotion, individual performance, scope of responsibility, leadership skills and values, current compensation, internal equity, and legacy matters.
2015In January 2018 as part of its annual merit review, the Compensation Committee approved a 2.5% increase in base salary, adjustments. The table below depicts 2015 base salary adjustmentsin line with prior years, for each NEO in his/her role as of that weredate, effective March 1, 2015 as part2018.
38 Exelon 2019 Proxy Statement
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Performance-based Annual Incentive Program
Overview. We grant performance-based annual incentive awards to compensate our NEOs for achieving the company’s annual performance goals. These awards represent a relatively small percentage of the executives’ target total direct compensation (e.g., 13 percent for our CEO to about 18 percent for all other NEOs on average), as a majority of NEO pay is in the form of LTI. Both the AIP and the LTI are considered at risk and subject to recoupment pursuant to Exelon’s recoupment policy in the case of a material negative adjustment of Exelon’s financial or operational results.
Compensation Discussion & Analysis
Annual Incentive Program
How 2018 Annual Incentive Program (AIP) Awards Are DeterminedPerformance Goals.The performance goalCompensation Committee used the following process to determine the annual incentives and bonuses2018 AIP awards for the named executive officers was adjusted non-GAAP operating EPS, which represents earnings directly related to ongoing operations of the business. Mr. O’Brien, the CEO of Exelon Utilities, has an AIP target based on a blend of EPS and the average operational and cost results for our three utilities (BGE, ComEd, and PECO). These goals were chosen because they reflect financial management and operational excellence goals that are associated with the creation of value for shareholders. Financial and operational goals are set at threshold (50 percent), target (100 percent) and distinguished (200 percent) levels based on objectives in the company’s strategic business plan. The 2015 adjusted non-GAAP operating EPS target approved by the committee contains stretch goals based on the company’s internal business plan. The committee set the operational goals based on industry performance benchmarks (where available).
each NEO:
Step 1 | Step 2 | Step 3 | Step | |||||||||||||||||||
Set AIP Target
| Determine Performance Factor |
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●If Exelon’s absolute TSR for | ● |
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20152018 AIP Performance. The committee approved a payout of 129.63 percent, based on adjusted non-GAAP operating EPS performance of $2.49 per share, with the exception of Mr. O’Brien whose payout was 133.38 percent, based on a blend of EPS and utility financial and operational metrics. All NEOs received an IPM of 100 percent.
The following table describesdetails the 2018 threshold, target, and distinguished or maximum performance goals, and the results achieved. The Compensation Committee selected the performance scales and results formetrics below as they align with the 2015 goals:long-term business strategy.
Goals | Threshold | Target | Distinguished | 2015 Results | Unadjusted Payout as a % of Target | |||||||||||||||
Adjusted (non-GAAP) Operating Earnings Per Share (EPS) | $ | 2.24 | $ | 2.41 | $ | 2.68 | $ | 2.49 | 129.63 | % | ||||||||||
Avg of BGE, ComEd and PECO Operational Results* |
| Performance scale is a composite of multiple measures |
| 137.60 | % | |||||||||||||||
Avg of BGE, ComEd and PECO Cost Results* | 128.70 | % |
Goals | Threshold | Target | Distinguished | Weighting | Weighted Payout as a % of Target | |||||
Financial | ||||||||||
Adjusted (non-GAAP) Operating Earnings Per Share (EPS) | 70.0% | 79.72% | ||||||||
Operational | ||||||||||
Outage Duration (CAIDI) Calculated as the total number of customer interruption minutes divided by the total number of customers served | 7.5% | 8.57% | ||||||||
Outage Frequency (SAIFI) Calculated as the total number of customer interruptions divided by the total number of customers served | 7.5% | 8.18% | ||||||||
Nuclear Fleetwide Capacity Factor* The weighted average of the capacity factor of all Exelon nuclear units, calculated as the sum of net generation in megawatt hours divided by the sum of the hourly annual mean net megawatt rating, multiplied by the number of hours in a period | 7.5% | 13.66% | ||||||||
Dispatch Match Measures the responsiveness of a fossil generating unit to the market | 7.5% | 10.13% | ||||||||
Formulaic Performance Calculation | 120.26% |
* |
www.exeloncorp.com 39
Compensation Discussion & Analysis
Note: Adjusted (non-GAAP) Operating EarningsAIP Performance Considerations.Payouts for 2018 AIP awards were calculated to be 120.26% of target, based on the following performance outcomes:
Adjusted (non-GAAP) operating earnings are provided as a supplement to results reported in accordance with GAAP. The adjustments generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains or losses from nuclear decommissioning trust fund adjustments. Management uses such adjusted (non-GAAP) operating earnings internally to evaluate the company’s performance and manage its operations and externally to report performance to investors. Accordingly, management also uses adjusted (non-GAAP) operating earnings as a goal in its annual incentive plan. A reconciliation of adjusted (non-GAAP) operating earnings per share to reported GAAP earnings for 2015 is presented below; amounts may not add due to rounding:
2015 Adjusted (non-GAAP) Operating Earnings (Loss) Per Share | $ | 2.49 | ||
Adjustments: | ||||
Mark-to-Market Impact of Economic Hedging Activities | 0.18 | |||
Tax Settlements | 0.06 | |||
CENG Non-Controlling Interest | 0.04 | |||
Mark-to-Market Impact of PHI Related Interest Rate Swaps | 0.02 | |||
Midwest Generation Recoveries | 0.01 | |||
ARO Update | 0.01 | |||
Reduction in State Income Tax Reserve | 0.01 | |||
Amortization of Commodity Contract Intangibles | — | |||
Unrealized Gain (Losses)-NDTF | (0.13 | ) | ||
Merger and Integration Costs | (0.07 | ) | ||
Reassessment of State Deferred Income Taxes | (0.05 | ) | ||
Long-lived Asset Impairments | (0.02 | ) | ||
PHI Merger Related Debt Exchange | (0.01 | ) | ||
Plant Retirements and Divestitures | — | |||
Bargain-Purchase Gain on Integrys Acquisition | — | |||
Gain on CENG Integration | — | |||
2015 GAAP Earnings (Loss) Per Share | $ | 2.54 |
● | Achieved outstanding operational performance on the four metrics, including best-in-class performance for Nuclear Fleetwide Capacity Factor and best-ever SAIFI performance |
● | Delivered solid financial performance on our adjusted (non-GAAP) operating EPS, at $3.12 |
● | The TSR cap was not invoked based on a positive 18.33% TSR for 2018 that significantly outperformed the UTY |
The following table shows howactual payout amounts awarded to Exelon’s NEOs:
NEO | AIP Target | Formulaic Performance Factor | Actual Award | |||
Crane | $1,765,400 | 120.26% | $2,123,070 | |||
Nigro | 736,250 | 120.26% | 885,414 | |||
Thayer | 786,693 | 120.26% | 946,077 | |||
Pramaggiore | 736,250 | 120.26% | 885,414 | |||
Von Hoene, Jr. | 908,765 | 120.26% | 1,092,880 | |||
Cornew | 905,690 | 120.26% | 1,089,182 |
Other Compensation
As discussed on page 30 under 2018 Leadership Changes, Mr. Thayer assumed the formularole of Chief Transformation Officer in May 2018 before he left the Company in January 2019 to pursue another opportunity. In this role, Mr. Thayer was appliedfocused on leading the critical work of optimizing Exelon’s costs, efficiencies and effectiveness in overall operations. These efforts resulted in a total cost savings of more than $900 million achieved since 2015, as reported by the Company in the third quarter of 2018. In November 2018, Exelon announced its commitment to drive another $200 million of gross annual cost savings by 2021. Mr. Thayer led the effort that identified these additional future cost savings in a manner that the Compensation Committee determined had exceeded the expectations and responsibilities of his position and that such accomplishments were not reflected in his AIP award for 2018. The Committee therefore awarded Mr. Thayer a $275,000 bonus in recognition of his leadership to transform Exelon’s businesses and the actual amounts awarded.results achieved. See Bonus column of the Summary Compensation Table on page 46.
NEO | Salary | Target AIP% | Performance Factor | Total Award for 2015 Performance | IPM% | Actual Award | ||||||||||||||||||||||||||||||||||||||
Crane | $ | 1,230,000 | x | 130 | % | x | 129.63 | % | = | $ | 2,072,777 | x | 100 | % | = | $ | 2,072,777 | |||||||||||||||||||||||||||
Thayer | $ | 750,000 | x | 95 | % | x | 129.63 | % | = | $ | 947,006 | x | 100 | % | = | $ | 947,006 | |||||||||||||||||||||||||||
Cornew | $ | 820,000 | x | 100 | % | x | 129.63 | % | = | $ | 1,090,185 | x | 100 | % | = | $ | 1,090,185 | |||||||||||||||||||||||||||
O’Brien | $ | 765,500 | x | 95 | % | x | 133.38 | % | = | $ | 994,688 | x | 100 | % | = | $ | 994,688 | |||||||||||||||||||||||||||
Von Hoene, Jr. | $ | 740,000 | x | 85 | % | x | 129.63 | % | = | $ | 835,753 | x | 100 | % | = | $ | 835,753 |
Compensation Discussion & Analysis
2015 LTI Awards
One of our central tenets of executive compensation is to manage for the long-term and we believe that execution against the company’s strategy over multi-year periods will position the company for future growth and lead to an increase in long-term shareholder value creation. The LTI program for our senior vice presidents and higher officers (including our NEOs) consists of RSUs and PShares.2018 Long-Term Incentive Program (LTIP)
The committee approves the annualCompensation Committee grants equity grantsincentive awards annually at its meeting in January. On January 26, 2015,29, 2018, the committeeCommittee approved the 2015 grants forawards of RSUs and PShares, which areperformance shares shown in detail in the Grants of Plan-Based Awards table.
The numbertable on page 49. As discussed on page 36 each element of shares subject tototal direct compensation, including the annual equity incentive awards, is determined for each award type wasNEO based on market data, and the 2015 target awards that were approved byexecutive’s competencies and skills, scope of responsibilities, experience and performance, retention, succession planning and the committee. The grant date fair valueorganizational structure of the awards based onbusinesses. When the January 26, 2015 closing stock pricetotal target equity incentive award is determined, the value is split between RSUs (33%) and performance shares (67%).
Restricted Stock Units (33% of $37.34 is shown in the Summary Compensation Table, and the amounts of equity awardstotal award).RSUs granted to each NEO are listed below as well as in the Grants of Plan-Based Awards table. Outstanding equity awards are shown in the Outstanding Equity Awards table.
Restricted Stock Units. RSUsNEOs vest ratably over three years. The committee believes that RSUs provide stability, foster retention and less volatility than other forms of LTI such as stock options, but are still linked to changes in shareholder value. Dividend equivalents with respect to RSUs are reinvested as additional RSUs and are subject to the same vesting conditions as the underlying RSUs.
Performance Share Units.Shares (67% of total award). BeginningA target number of PShares was granted in 2013,January 2018 to each NEO, the committee adopted overlappingearning of which is contingent on performance for the three-year PShare cycles rather than discreteperiod ending on December 31, 2020. The following equally-weighted performance cyclesmeasures underlying these awards include Utility Net Income, Utility Earned ROE, and Exelon FFO/Debt, which are the same performance metrics underlying the 2016-2018 and 2017-2019 performance cycles. The 2016-2018 performance cycle was the last cycle that reflected a transition to increase the focus on long-term shareholder value creation while aligninguse of one three-year performance cycle that began in 2016. In addition to the structure to market practice. The PShare program is based on two three-year goals consisting of financial management (weighted 60 percent) and operational excellence (weighted 40 percent), with ten underlying metrics as defined below. Final payout ismeasures shown below, any awards earned are then subject to a total shareholder return modifier (upthat factors in the relative performance of Exelon compared to +/- 25 percent) over three years relative to Exelon’s TSR peer group comprising competitive integrated companies that have at least 25 percent or more of their assets in unregulated businesses (Entergy, First Energy, NextEra Energy, and PSEG). PPL formerly was partthe performance of the TSR peer group but dropped after 2015 once they spun off partUTY index. See page 42 for the rationale behind the selection of their business to form Talon Energy. We compare ourthe performance against these companies due to their similar operating model and investment profile.goals used for PShares.
40 How the Performance Share Units Work. Each NEO’s target performance share award is applied against the following:Exelon 2019 Proxy Statement
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Compensation Discussion & Analysis
How Performance Share (PShare) Awards Are DeterminedThe Compensation Committee used the following process to determine PShare targets and awards:
Step | Step | Step | Step | Step | ||||||||
1 | 2 | 3 | 4 | 5 | ||||||||
Establish PShare Target | Determine Performance Multiplier Performance can range from 0% to 150% of target (target of 100%) | Determine TSR Modifier | Calculate Final Multiplier If Exelon’s absolute TSR for the final 12 months of the measurement period is negative, PShare payout will be capped at target | Apply Final Multiplier Award can range from 0% to 200% of target (target of 100%) after application of the TSR modifier |
Payout Determinations for the 2016-2018 PShare Cycle
PShare Weighting BasedThe Compensation Committee approved a payout of 169.82%, based on Financialthe weighted average performance of the one-year scorecard measuring 2016 performance and Operational Goalsthe two-year scorecard for 2017-2018 and the application of a positive TSR modifier of 43.70% based on 2016-2018 TSR performance.
Year | Scorecard Performance | Weighted Average Performance | TSR Modifier | Overall Award Payout | ||||
2016 | 125.00% | 118.18% | 43.70% | 169.82% | ||||
2017-2018 | 114.77% |
www.exeloncorp.com 41
Financial Metrics
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Operational Metrics
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Compensation Discussion & Analysis
2015The following table shows how the payout formula was calculated and actual PShare Performanceamounts awarded.
NEO | Target Shares | Performance Factor | Actual Award | |||||||
Crane | 249,146 | x | 169.82% | = | 423,100 | |||||
Nigro | 50,502 | x | 169.82% | = | 85,762 | |||||
Thayer | 66,631 | x | 169.82% | = | 113,153 | |||||
Pramaggiore | 37,578 | x | 169.82% | = | 63,815 | |||||
Von Hoene, Jr. | 68,564 | x | 169.82% | = | 116,435 | |||||
Cornew | 71,984 | x | 169.82% | = | 122,243 |
In 2015, we completedPursuant to the first yearterms of the long-term incentive program, all NEOs that have achieved 200% or more of their stock ownership targets (as described on page 43) receive PShare award payouts in cash. All NEOs except for Mr. Thayer achieved 200% of their stock ownership target. Other PShare participants who have not achieved 200% of their stock ownership targets receive PShare award payouts settled 50% in shares of Exelon common stock and 50% in cash.
Long-Term Incentive Program Goal-Setting Process
The Compensation Committee strives to set challenging financial performance targets that drive and motivate executives to achieve long-term success, shareholder value, and to help ensure key talent is retained. For the LTIP program, the Compensation Committee selects metrics that are directly tied to the Company’s financial strategies and are proven measures of long-term value creation. Financial targets are based on our internal business plans and external market factors.
Goal-Setting for 2019-2021 Performance Share Award Cycle
To ensure adequate rigor for the financial targets applicable to the 2019-2021 PShare performance period for our 2015-2017 award,cycle, we conducted statistical simulations to understand the second yearlevel of the PShare performance period for our 2014-2016 award, and the third year of the PShare performance perioddifficulty of our 2013-2015 award.payout range. We conducted a sensitivity analysis of reasonable value ranges for several internal and external variables that are significant drivers of performance, and we also examined historical levels of deviation of Company performance compared to plan.
PShare Goal Setting
The table below reflectsthree-performance metrics underlying the 20152019-2021 PShare Scorecard, whichawards include the following:
Utility Earned ROE (33.3%) | Utility Net Income (33.3%) | Exelon FFO/Debt (33.4%) | |||||||||||
Average utility ROE weighted by year-end rate base | Aggregate utility adjusted (non-GAAP) operating earnings, including Corporate | Funds from operations to total debt ratio |
The Utility Earned Return on Equity (ROE) and Utility Net Income use interpolation between threshold, target, and distinguished levels of performance whereas the Funds From Operations (FFO)/Debt metric uses a “stair-step” approach with no interpolation between datathe performance levels. The committee may electPerformance will be evaluated at the end of 2021 after the completion of the three-year performance period. This design aspect was implemented as part of the Company’s transition to modify the metricuse of three-year performance periods.
PShare targets annually on a forward-looking basis to address unintended consequences with the challenges of setting three-year goals. Once the annual scorecard is approved for the year, the goals are locked-down and may not be reset. However, for the upcoming year the performance levels around a metric such as ROE may be adjusted on a forward-looking basis for the year based on updated financial information and changing market conditions.
Goal Setting: All metrics are designed to be challenging to achieve and were chosen because they are key measures for driving long-term success for Exelon. Operational metrics are set at challenging levels (i.e., target typically corresponds to top quartile performance) compared to industry standards. Financial metrics (e.g., ROE and FFO/Debt) have targets that are set based on external commitments and/or probabilistic modeling. The performance scale range for the internal business plan. For 2015, sixUtility ROE and Utility Net Income metrics was based on the following probability levels of achievement: 95% for threshold and 5% for distinguished and the ten metrics were made more challenging, whichtarget is consistentaligned with projected performance. The target for the Exelon FFO/Debt metric is aligned with the 2014 Committee actions.expectations of credit rating agencies.
To safeguard the confidentiality of our long-term outlook on projected performance outcomes in light of changes in our industry and with our peer companies, as well as the overall utility and power generation markets, we do not disclose actual targets applied to the performance share unit cycles until the cycles have been completed. This maintains the propriety of our policy to only issue annual performance guidance externally.
42 Exelon 2019 Proxy Statement
For the PShare scorecard below, a lower number is more challenging for both outage duration and outage frequency, whereas a higher number is more challenging for all other metrics. The checkmark indicates the 2015 metric was set more challenging relative to 2014.Table of Contents
2015 Performance Share Scorecard | ||||||||||||||||||||||||||||||||
Goals/ Weighting | Metrics | Metric Weighting | Operating Company | Threshold | Target | Year-over- Year More | Target Calibrated to | Disting- uished | Final Score | Actual Award vs. Metric Weighting | ||||||||||||||||||||||
Financial | ROE | 30.0% | Exelon Corp | 7.25 | % | 7.75 | % | Budget | 8.50 | % | 8.23 | % | 37.5 | % | ||||||||||||||||||
FFO/Debt | 30.0% | ExGen HoldCo | 27.0 | % | 30.0 | % | Budget | 42.7 | % | 33.1 | % | 30.0 | % | |||||||||||||||||||
Operational Excellence | Outage Duration (Average) | 6.7% | BGE | 100.0 | 88.0 | ü | 1st Quartile | 85.0 | 91.0 | 1.68 | % | |||||||||||||||||||||
ComEd | 93.0 | 83.0 | ü | 1st Quartile | 82.0 | 82.0 | 3.35 | % | ||||||||||||||||||||||||
PECO | 93.0 | 87.0 | ü | 1st Quartile | 85.0 | 84.0 | 3.35 | % | ||||||||||||||||||||||||
Outage Frequency (Average) | 6.7% | BGE | 1.00 | 0.80 | ü | 1st Decile | 0.76 | 0.82 | 1.68 | % | ||||||||||||||||||||||
ComEd | 0.87 | 0.77 | ü | 1st Decile | 0.74 | 0.78 | 1.68 | % | ||||||||||||||||||||||||
PECO | 0.87 | 0.77 | ü | 1st Decile | 0.74 | 0.70 | 3.35 | % | ||||||||||||||||||||||||
Net Fleetwide Capacity Factor | 13.3% | Nuclear | 91.1 | % | 93.1 | % | 1st Quartile | 93.6 | % | 93.9 | % | 19.95 | % | |||||||||||||||||||
Dispatch Match | 13.3% | Power | 94.3 | % | 96.6 | % | Internal Measure | 97.8 | % | 98.6 | % | 19.95 | % | |||||||||||||||||||
| Committee Approved Performance |
| 122.48 | % |
Rationale for the four metrics that were set at a less challenging level in 2015 compared to 2014 is below:
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Compensation Discussion & Analysis
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TSR Modifier.The amount of the 2013-2015 PShare award was reduced by 10 percent based on Exelon’s TSR performance relative to the TSR average of its peer group from 2013-2015. The table below to the left depicts the stair-step approach that was used for determining the TSR modifier performance level. The table below to the right illustrates each peer group’s TSR from 2013-2015.
How the 2013-2015 PShare Performance was Determined. The PShare payout for the 2013-2015 cycle was approved by the committee at the January 25, 2016 meeting at 105.91 percent as shown in the table on line 1. This was based on the average annual PShare performance results over 2013, 2014, and 2015 factoring in the TSR modifier of negative 10 percent based on Exelon’s performance relative to the Competitive Integrated peer group from 2013-2015.
Compensation Discussion & Analysis
However, as shown in the table below under line 2, the payout for our CEO would have been $355,000 higher if the independent directors had not applied downward discretion to reduce the payout percent applicable to 2013 performance from 147.8 percent to 125 percent.
Settlement of PShares is 50 percent in shares with the balance in cash. However, executive vice presidents and higher officers who have achieved 200 percent or more of their stock ownership target as of September 30 of the year prior to payout have the option of settling the award (a) entirely in stock, (b) entirely in cash, or (c) half in stock and half in cash.
Compensation Discussion & Analysis
Supplemental information: 2014 and 2013 PShare Scorecards
Below are the 2014 and 2013 PShare Scorecards that were used to determine the 2013-2015 PShare performance. Versions of these 2014 and 2013 scorecards were disclosed in the Exelon 2015 and 2014 proxy statements, on pages 53 and 56, respectively. We have included them to assist the reader in better understanding our overall performance on the key metrics below.
2014 Performance Share Scorecard | ||||||||||||||||||||||||||||||
Goals/ Weighting | Metrics | Metric Weighting | Operating Company | Threshold | Target | Target Calibrated to | Disting- uished | Final Score | Actual Award vs. Metric Weighting | |||||||||||||||||||||
Financial | ROE | 30.0 | % | Exelon Corp | 7.0 | % | 8.0 | % | Budget | 9.0 | % | 8.22 | % | 30.00 | % | |||||||||||||||
FFO/Debt | 30.0 | % | ExGen HoldCo | 39.0 | % | 40.6 | % | Budget | 43.1 | % | 41.0 | % | 30.00 | % | ||||||||||||||||
Operational Excellence | Outage Duration (Average) | 6.7 | % | BGE | 113.0 | 95.0 | 2nd Quartile | 91.5 | 92.0 | 2.79 | % | |||||||||||||||||||
ComEd | 94.0 | 85.0 | 1st Quartile | 84.0 | 84.0 | 3.35 | % | |||||||||||||||||||||||
PECO | 94.0 | 88.0 | 1st Quartile | 85.5 | 90.0 | 1.68 | % | |||||||||||||||||||||||
Outage | 6.7 | % | BGE | 1.12 | 0.97 | 2nd Quartile | 0.91 | 0.77 | 3.35 | % | ||||||||||||||||||||
ComEd | 0.90 | 0.78 | 1st Decile | 0.76 | 0.81 | 1.68 | % | |||||||||||||||||||||||
PECO | 0.90 | 0.78 | 1st Decile | 0.76 | 0.77 | 2.79 | % | |||||||||||||||||||||||
Net Fleetwide Capacity Factor | 13.3 | % | Nuclear | 91.3 | % | 93.3 | % | 1st Quartile | 93.8 | % | 94.2 | % | 19.95 | % | ||||||||||||||||
Dispatch Match | 13.3 | % | Power | 95.1 | % | 97.1 | % | Internal Measure | 97.9 | % | 96.5 | % | 9.98 | % | ||||||||||||||||
| Committee Approved Performance |
| 105.56 | % | ||||||||||||||||||||||||||
2013 Performance Share Scorecard | ||||||||||||||||||||||||||||||
Goals/ Weighting | Metrics | Metric Weighting | Operating Company | Threshold | Target | Target Calibrated to | Disting- uished | Final Score | Actual Award vs. Metric Weighting | |||||||||||||||||||||
Financial | ROE | 30.0 | % | Exelon Corp | 8.0 | % | 9.0 | % | Budget | 9.5 | % | 9.70 | % | 45.00 | % | |||||||||||||||
FFO/Debt | 30.0 | % | ExGen HoldCo | 25.0 | % | 27.0 | % | Budget | 30.0 | % | 37.0 | % | 45.00 | % | ||||||||||||||||
Operational Excellence | Outage Duration (Average) | 6.7 | % | BGE | 126.0 | 120.0 | 3rd Quartile | 116.5 | 96.0 | 3.35 | % | |||||||||||||||||||
ComEd | 94.0 | 86.0 | 1st Quartile | 85.0 | 81.0 | 3.35 | % | |||||||||||||||||||||||
PECO | 94.0 | 88.0 | 1st Quartile | 87.0 | 94.0 | 1.12 | % | |||||||||||||||||||||||
Outage | 6.7 | % | BGE | 1.25 | 1.10 | 2nd Quartile | 1.04 | 0.87 | 3.35 | % | ||||||||||||||||||||
ComEd | 1.02 | 0.89 | 1st Quartile | 0.87 | 0.76 | 3.35 | % | |||||||||||||||||||||||
PECO | 0.90 | 0.81 | 1st Quartile | 0.76 | 0.68 | 3.35 | % | |||||||||||||||||||||||
Net Fleetwide Capacity Factor | 13.3 | % | Nuclear | 91.1 | % | 93.1 | % | Best-in-Class | 93.6 | % | 94.1 | % | 19.95 | % | ||||||||||||||||
Dispatch Match | 13.3 | % | Power | 93.4 | % | 96.6 | % | Internal Measure | 97.4 | % | 99.1 | % | 19.95 | % | ||||||||||||||||
| Formulaic Payout | | 147.8 | % | ||||||||||||||||||||||||||
| Final Committee Discretion |
| 125 | % |
Compensation Discussion & Analysis
Section IV: Governance Features of Our Executive Compensation Programs
CEO Annual Performance Assessment
On an annual basis, the independent directors of the Exelon board conduct a thorough review of CEO performance. In 2015, the review considered the extent of Mr. Crane’s achievement in executing against Exelon’s strategy to deliver stable growth, sustainable earnings and an attractive dividend. The board considered strong financial (beat plan for EPS by 8 cents) and exceptional operational performance (best-in-class or first decile performance against industry standards on several metrics). Mr. Crane prepared a detailed self-assessment reporting to the board on his performance during the year with respect to each of the performance requirements. The Exelon board considered the financial highlights of the year and a strategy scorecard that assessed performance against the company’s vision and goals. This review was considered in making decisions regarding Mr. Crane’s compensation.
Stock Ownership and Trading Requirements
To strengthen the alignment of executives’executive interests with those of shareholders, officersVPs and above of the companyCompany are required to own certain amountsmultiples of base salary of Exelon common stock. Executives must meet these guidelines within five years afterstock by the later of five years following (1) an adjustment made to the implementation of the new guidelines their employment(last made in 2012) or (2) his or her hire date or promotion to a new position. As of the annual measurement date of September 30, 2015,2018, all NEOs except for Mr. Thayer had exceeded 200 percent200% of their stock ownership guidelines, as shown in the table below:
following chart.
Crane | Nigro | Thayer | Pramaggiore | ||
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The following types of ownership count towards meeting the stock ownership guidelines: restricted shares and restricted stock units, shares held in the Exelon Deferral Plan, dividend reinvestment plan, 401(k) Employee Savings Plan, and common shares beneficially owned directly or indirectly. For additional informationdetails about Exelon’sNEO stock ownership, guidelines, please see Stock Ownership Requirements for Directors and Officers and the Beneficial Ownership Table.Table on page 62.
Exelon has adopted a policy requiringrequires executive vice presidents and higher officersabove who wish to sell Exelon common stock to do so only through Rule 10b5-1the adoption of a stock trading plans, and permitting other officers to enter into such plans.plan meeting the requirements of SEC Rule 10b5-1(c). This requirement is designed to enable officers to diversify a portion of their holdings in excess of the applicable stock ownership requirements in an orderly manner as part of their retirement and tax planning activities.personal financial plans. The use of Rule 10b5-1 stock trading plans serves to reduce the riskrisks that investorssuch transactions will view routine portfolio diversification stock sales by executive officersbe viewed negatively or as a signal of negative expectationscommentary with respect to the future value of Exelon’s stock. In addition, the use of Rule 10b5-1 stock trading plans reducesare believed to reduce the potential for accusations of trading on the basis of material, non-public information, which could damage the reputation of the company.Company. Exelon’s stock trading policyInsider Trading Policy does not permit short sales, derivative transactions involving Exelon stock, hedging or pledging.
Recoupment (Clawback) Policy
Consistent with the pay-for-performanceThe Board of Directors revised its recoupment policy in May 2007,2018 to broaden the board of directors adopted a recoupment policy as part of Exelon’s Corporate Governance Principles. The board of directors will seek recoupment ofdiscretionary ability to clawback incentive compensation paid to an executive officer ifwhen deemed appropriate. Under the board determines, in itspolicy, the Board has sole discretion to recoup incentive compensation if it determines that:
the incentive compensation was based on the achievement of financial or other results that were subsequently restated or corrected; | |
● | the |
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the need for restatement or correction; | ||
Compensation Discussion & Analysis
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recoupment is not precluded by applicable law or employment |
The Board or Compensation Committee may also seek to recoup incentive compensation paid or payable to current or former incentive plan participants if, in its sole discretion, the Board or Compensation Committee determine that:
the current or former incentive plan participant breached a restrictive covenant or engaged or participated in misconduct or intentional or reckless acts or omissions or serious neglect of responsibilities that caused or contributed to a significant financial loss or serious reputational harm to Exelon or its subsidiaries regardless of whether a financial statement restatement or correction of incentive plan results was required; and | |
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www.exeloncorp.com 43
Compensation Discussion & Analysis
In addition, the terms of the annual incentive plan provide that the Compensation Committee and management may curtail awards if there is a “significant event,” which is defined as a single, high-profile event caused by a failure of Exelon that is determined to have been directly or indirectly caused by a human error or poor management attention. Significant events may include a single high-profile outage or another event that may result in negative customer and media impact or a significant adverse governmental or regulatory action.
The Compensation Committee may also apply negative discretion to unvested equity incentive awards if a significant event or other occurrence is determined to have a similar impact on the Company. Similarly, the terms of the long-term incentive plan provide that the Compensation Committee may amend or adjust the performance measures or other terms and conditions of outstanding awards in the event of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles.
Risk Management Assessment of Compensation Policies and Practices as They Relate to Risk Management
The Compensation Committee reviews Exelon’s compensation and leadership development committee has considered Exelon’s policies and practices of compensating its employees, including non-executive officers, as they relate to the Company’s risk management practices and risk-taking incentivesincentives. In 2018, the Compensation Committee partnered with Exelon’s Enterprise Risk Management group to apply the enterprise risk management policy and framework to the compensation risk assessment process to assess and validate that the controls in place continued to mitigate incentive compensation risks.
Following this assessment, the Committee believes that suchthe risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on Exelon. In this regard, the committeeCompensation Committee considered the following factors:
compensation program features, which balance the degree of risk taking.
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● | Long-term incentives include multiple vehicles and performance metrics and three-year overlapping performance periods that are | |
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Although the foregoing factors address financial risks, the committee also considered that Exelon’s policies and practices include measures to make sure that the cost reduction and other goals designed to address financial performance do not present significant operational risk issues. These measures include the following:
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Tax Consequences
UnderOn December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was signed into law and included significant changes to expand the scope of the executive compensation rules in Section 162(m) of the Internal Revenue Code executivethat limit deductible compensation in excess ofto $1 million paidfor covered employees. Pursuant to a CEO or other person among the three other highest compensated officers (excludingTax Act, the CFO) is generally not deductible for purposestypes of corporate federal income taxes. However, qualifiedcompensation subject to the $1 million limitation has been expanded beyond salary, restricted stock and RSUs to include performance-based compensation such as AIP and PShare awards. The Tax Act also expanded the definition of covered employee to include the CFO and sustains the classification as a covered employee in perpetuity even after death through severance and post-death payments. Finally, the application of the $1 million limitation has been expanded to include covered employees at Exelon’s corporate registrants with publicly traded debt in addition to those with publicly traded equity as required prior to the Tax Act. Under the new law, Exelon has eight registrants that now fall within the meaningscope of Section 162(m). The IRS and applicableTreasury have issued a preliminary notice to assist with interpreting the technical aspects of the new law and expect to issue regulations remains deductible. The compensation and leadership development committee intendsin 2019 to provide further guidance.
44 Exelon 2019 Proxy Statement
Compensation Discussion & Analysis
Report of the Compensation and Leadership Development Committee
continue reliance on performance-basedThe Compensation and Leadership Development Committee is accountable for ensuring that the decisions made about executive compensation programs,are in the best long-term interests of our shareholders consistent with soundour compensation philosophy. To achieve the objectives of our program, rigorous but balanced metrics directly linked to the Company’s business and strategic goals as informed by feedback received from shareholders help us to continuously improve and strengthen our executive compensation policy. programs. Investor input received on our executive compensation program in 2018 was positive and resulted in no significant changes to our program.
The committee’s policyCompensation and Leadership Development Committee has been to seek to cause executive incentive compensation to qualify as “performance-based” in order to preserve its deductibility for federal income tax purposesreviewed and discussed with management the Compensation Discussion and Analysis contained on pages 30-44 of this proxy statement. Based on such review and discussion, the Committee recommended to the extent possible, without sacrificing flexibilityBoard that the Compensation Discussion and Analysis be included in designing appropriate compensation programs.the 2019 Proxy Statement.
Because it is not “qualified performance-based compensation” within the meaning of Section 162(m), base salary is not eligible for a federal income tax deduction to the extent that it exceeds $1 million. Accordingly, Exelon is unable to deduct that portion of Mr. Crane’s base salary in excess of $1 million. Annual incentive awards and performance share units payable to NEOs are intended to be qualified performance-based compensation under Section 162(m), and to be deductible for federal income tax purposes. Restricted stock and restricted stock units are not deductible by the company for federal income tax purposes under the provisions of Section 162(m) to the extent an NEO’s compensation that is not “qualified performance-based compensation” is in excess of $1 million.
In order to qualify payments under the AIP and performance share program as performance-based for Section 162(m) of the Internal Revenue Code, the committee uses a “plan-within-plan” two-step approach to determine the amount of the bonus payment. The first step is to fund the overall bonus pool. The pool is funded if the company meets the pre-established performance metrics. The second step is accomplished when the committee exercises “negative discretion” by making adjustments to the formula award funded by the overall pool. Negative discretion is used to reduce the amount funded by the pool to an amount equal to the target bonus (for AIP) or target equity (for the performance share program) adjusted for final company performance and individual performance.
Under Section 4999 of the Internal Revenue Code, there is an excise tax if change-in-control or severance benefits are greater than 2.99 times the five-year average amount of income reported on an individual’s W-2. In April 2009 the committee adopted a policy that no future employment or severance agreements that provide for benefits for NEOs on account of termination will include an excise tax gross-up. However, certain NEOs have change in control severance agreements that pre-date April 2009 and provide excise tax gross-ups, and avoid gross-ups by reducing payments to under the threshold if the amount otherwise payable to an executive is not more than 110 percent of the threshold.
THE COMPENSATION AND LEADERSHIP
DEVELOPMENT COMMITTEE
Yves C. de Balmann,Chair | Robert J. Lawless | Linda P. Jojo | Stephen D. Steinour |
www.exeloncorp.com 45
Executive Compensation Data
ExecutiveSummary Compensation Table
The tables below summarize the total compensation paid or earned by each of the Named Executive Officers (NEOs) of Exelon for the year ended December 31, 2015, presented in accordance with SEC requirements. Basic information about the elements of compensation as disclosed in the tables is shown below:
Salary:
Year | Salary ($) | Bonus ($) (Note 1) | Stock Awards ($) (Note 2) | Non-Equity Incentive Plan Compensation ($) (Note 3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (Note 4) | All Other Compensation ($) (Note 5) | Total ($) | |
Christopher M. Crane | ||||||||
President and Chief Executive Officer, Exelon | ||||||||
2018 | $1,261,000 | — | $10,099,725 | $2,123,070 | $1,734,587 | $424,696 | $15,643,078 | |
2017 | 1,261,000 | — | 10,099,755 | 1,585,531 | 1,524,765 | 386,808 | 14,857,859 | |
2016 | 1,255,515 | — | 10,099,718 | 1,639,300 | 1,836,211 | 400,958 | 15,231,702 | |
Joseph Nigro | ||||||||
Senior Executive Vice President and Chief Financial Officer, Exelon | ||||||||
2018 | 767,496 | — | 4,589,122 | 885,414 | 188,680 | 99,509 | 6,530,221 | |
Jonathan W. Thayer | ||||||||
Senior Executive Vice President and Chief Financial Officer and Chief Transformation Officer, Exelon | ||||||||
2018 | 824,839 | 275,000 | 2,701,652 | 946,077 | 172,860 | 3,699,854 | 8,620,282 | |
2017 | 804,339 | — | 2,701,654 | 742,331 | 144,688 | 119,146 | 4,512,158 | |
2016 | 784,802 | — | 2,701,035 | 1,071,368 | 225,160 | 60,504 | 4,842,869 | |
Anne Pramaggiore | ||||||||
Senior Executive Vice President and Chief Executive Officer, Exelon Utilities | ||||||||
2018 | 720,225 | — | 3,892,882 | 885,414 | 194,694 | 220,915 | 5,914,130 | |
William A. Von Hoene Jr. | ||||||||
Senior Executive Vice President and Chief Strategy Officer, Exelon | ||||||||
2018 | 904,673 | — | 2,920,823 | 1,092,880 | 242,061 | 534,420 | 5,694,857 | |
2017 | 882,696 | — | 2,920,829 | 857,520 | 202,125 | 374,057 | 5,237,227 | |
2016 | 831,350 | — | 3,700,342 | 1,237,642 | 216,271 | 198,770 | 6,184,375 | |
Kenneth W. Cornew | ||||||||
Senior Executive Vice President and Chief Commercial Officer, Exelon; President and Chief Executive Officer, Exelon Generation | ||||||||
2018 | 935,596 | — | 2,918,830 | 1,089,182 | 281,793 | 89,336 | 5,314,737 | |
2017 | 878,865 | — | 2,918,832 | 854,618 | 235,324 | 87,667 | 4,975,306 | |
2016 | 857,477 | — | 2,918,043 | 1,233,350 | 231,669 | 93,848 | 5,334,387 |
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resulting cost-saving initiatives. | ||
Executive Compensation Data
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Transition Awards:
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Restricted Stock Units:
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Stock Options:
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Executive Compensation Data
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Non-equity incentive plan compensation:
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Executive Compensation Data
Summary Compensation Table
Year (a) | Salary ($) (b) | Bonus ($) Note 1 (c) | Stock Awards ($) Note 2 (d) | Option Awards ($) Note 3 (e) | Non-Equity Incentive Plan Compensation ($) Note 4 (f) | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings ($) Note 5 (g) | All Other Compen- sation ($) Note 6 (h) | Total ($) (i) | ||||||||||||||||||||||||||
| Christopher M. Crane President and Chief Executive Officer, Exelon |
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2015 | $ | 1,224,808 | $ | — | $ | 9,821,055 | $ | — | $ | 2,072,777 | $ | 2,462,551 | $ | 380,054 | $ | 15,961,245 | ||||||||||||||||||
2014 | 1,200,000 | 155,355 | 9,345,480 | — | 1,553,550 | 2,431,986 | 304,459 | 14,990,830 | ||||||||||||||||||||||||||
2013 | 1,191,539 | — | 12,606,074 | — | 1,565,250 | 1,584,841 | 243,994 | 17,191,698 | ||||||||||||||||||||||||||
| Jonathan W. Thayer Senior Executive Vice President and Chief Financial Officer, Exelon |
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2015 | 794,556 | — | 2,700,466 | — | 947,006 | 229,066 | 90,194 | 4,761,288 | ||||||||||||||||||||||||||
2014 | 717,597 | 73,795 | 2,974,199 | — | 737,946 | 166,783 | 85,008 | 4,755,328 | ||||||||||||||||||||||||||
2013 | 670,193 | — | 4,000,394 | — | 633,913 | 162,252 | 254,815 | 5,721,567 | ||||||||||||||||||||||||||
| Kenneth W. Cornew Senior Executive Vice President and Chief Commercial Officer, Exelon; President and Chief Executive Officer, Exelon Generation |
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2015 | 836,558 | — | 2,918,046 | — | 1,090,185 | 191,460 | 93,485 | 5,129,734 | ||||||||||||||||||||||||||
2014 | 815,769 | 84,929 | 2,822,820 | — | 849,285 | 194,029 | 55,193 | 4,822,025 | ||||||||||||||||||||||||||
2013 | 760,392 | — | 4,715,518 | — | 834,782 | 219,293 | 37,349 | 6,567,334 | ||||||||||||||||||||||||||
| Denis P. O’Brien Senior Executive Vice President, Exelon; Chief Executive Officer, Exelon Utilities |
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2015 | 780,874 | — | 2,469,294 | — | 994,688 | 239,970 | 86,431 | 4,571,257 | ||||||||||||||||||||||||||
2014 | 761,534 | 84,964 | 2,382,900 | — | 849,639 | 299,132 | 54,936 | 4,433,105 | ||||||||||||||||||||||||||
2013 | 742,233 | — | 3,233,366 | — | 811,205 | 411,426 | 43,984 | 5,242,214 | ||||||||||||||||||||||||||
| William A. Von Hoene Jr. Senior Executive Vice President and Chief Strategy Officer, Exelon |
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2015 | 755,296 | — | 2,296,821 | — | 835,753 | 163,284 | 111,890 | 4,163,044 | ||||||||||||||||||||||||||
2014 | 736,710 | 65,146 | 2,067,060 | — | 651,463 | 161,623 | 97,304 | 3,779,306 | ||||||||||||||||||||||||||
2013 | 717,446 | — | 3,371,564 | — | 639,495 | 179,014 | 74,359 | 4,981,878 |
Notes to the Summary Compensation Table
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The amounts shown in this column include the aggregate grant date fair value of restricted stock unit and performance share |
46 Exelon 2019 Proxy Statement
Performance Share Unit Value | ||||||||
At Target | At Maximum | |||||||
Crane | $ | 6,580,092 | $ | 13,160,184 | ||||
Thayer | 1,809,310 | 3,618,619 | ||||||
Cornew | 1,955,085 | 3,910,170 | ||||||
O’Brien | 1,654,423 | 3,308,847 | ||||||
Von Hoene Jr. | 1,538,856 | 3,077,712 |
Executive Compensation Data
Exelon’s 2017 Annual Report on Form 10-K. The performance share awards are subject to performance conditions. For the 2018-2020 performance share award, the grant date fair value and the value assuming the highest level of performance, including the maximum total shareholder return multiplier, is as follows:
Performance Share Unit Value | ||||||
At Target | At Maximum | |||||
Crane | $ | 6,766,817 | $ | 13,533,634 | ||
Nigro | 1,600,513 | 3,201,026 | ||||
Thayer | 1,810,096 | 3,620,192 | ||||
Pramaggiore | 1,600,516 | 3,201,032 | ||||
Von Hoene Jr. | 1,956,938 | 3,913,876 | ||||
Cornew | 1,955,597 | 3,911,194 |
(3) |
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The amounts shown in this column for |
The amounts shown in this column represent the change in the accumulated pension benefit for the NEOs from December 31, |
All Other Compensation: The |
All Other CompensationALL OTHER COMPENSATION
Name | Perquisites ($) (Note 1) | Reimbursement for Income Taxes ($) (Note 2) | Company Contributions to Savings Plans ($) (Note 3) | Company Paid Term Life Insurance Premiums ($) (Note 4) | Other ($) (Note 5) | Total ($) | ||||||
Crane | $178,608 | $134,661 | $75,660 | $35,767 | — | $424,696 | ||||||
Nigro | 44,289 | 6,395 | 44,492 | 4,333 | — | 99,509 | ||||||
Thayer | 445,247 | 7,348 | 14,116 | 3,561 | 3,229,582 | 3,699,854 | ||||||
Pramaggiore | 133,824 | 45,368 | 36,731 | 4,992 | — | 220,915 | ||||||
Von Hoene Jr. | 342,371 | 132,246 | 53,843 | 5,960 | — | 534,420 | ||||||
Cornew | 31,337 | — | 54,247 | 3,752 | — | 89,336 |
Name (a) | Perquisites ($) Note 1 (b) | Reimburse- ment for Income Taxes ($) Note 2 (c) | Payments or Accruals For Termination or Change in Control (CIC) ($) Note 3 (d) | Company Contributions to Savings Plans ($) Note 4 (e) | Company Paid Term Life Insurance Premiums ($) Note 5 (f) | Dividends or Earnings Not Included in Grants ($) (g) | Total ($) (h) | |||||||||||||||||||||
Crane | $ | 195,210 | $ | 80,227 | $ | — | $ | 73,488 | $ | 31,128 | $ | — | $ | 380,054 | ||||||||||||||
Thayer | 36,131 | 36,546 | — | 13,956 | 3,561 | — | 90,194 | |||||||||||||||||||||
Cornew | 39,540 | — | — | 50,193 | 3,752 | — | 93,485 | |||||||||||||||||||||
O’Brien | 26,840 | — | — | 46,852 | 12,738 | — | 86,431 | |||||||||||||||||||||
Von Hoene Jr. | 31,978 | 28,634 | — | 45,318 | 5,960 | — | 111,890 |
Notes to All Other Compensation Table
(1) |
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●Amounts reported for the personal use of corporate aircraft are based on the aggregate incremental cost to Exelon and are calculated using the hourly incremental cost for flight services, including federal excise taxes, fuel charges, and domestic segment fees. Exelon’s Board-approved policy on corporate aircraft usage includes spousal/domestic partner and other family member usage when appropriate. Associated costs for meals and other related amenities for spouse/domestic partners are covered when attendance at Company or industry-related events is customary. Exelon also provides fleet services of Company cars and driver services for NEOs and other officers enabling the performance of duties among the Company’s various offices and facilities. Certain NEOs are also entitled to |
www.exeloncorp.com 47
Executive Compensation Data
●Benefits are provided to Ms. Pramaggiore and Messrs. Von Hoene and Thayer, each of whom is subject to state public service commission requirements to maintain principal workplaces in the ●Limited personal financial planning benefits are provided with usage values imputed as additional taxable income. Executive officers may request Company matching gifts to qualified charitable organizations in amounts up to $10,000, and up to $15,000 for Messrs. Cornew and Thayer under the Constellation legacy policy. Executive officers may use Company-provided vendors for comprehensive physical examinations and related medical testing. |
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Exelon provides basic term life insurance, accidental death and disability insurance, and long-term disability insurance to all employees, including NEOs. The values shown in this column include the premiums paid during | |
(5) | For Mr. Thayer, the aggregate amount includes severance payments of $3,229,582 distributed pursuant to the terms of the Senior Management Severance Plan, representing two times the sum of Mr. Thayer’s then current base salary and target annual incentive for the year of termination. |
48 Exelon 2019 Proxy Statement
Executive Compensation Data
Perquisites
The following table indicates the various perquisites for which Exelon incurred incremental costs in 2015 for each NEO. A checkmark (ü) indicates perquisite usage during 2015 by the NEO listed at the top of the column.
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Executive Compensation Data
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Note 1) | Estimated Possible Payouts Under Equity Incentive Plan Awards (Note 2) | All Other Stock Awards: Number of Shares or Units (#) (Note 3) (i) | All Other Options Awards: Number of Securities Under- lying Options (#) (j) | Exercise or Base Price of Option Awards ($) (k) | Grant Date Fair Value of Stock and Option Awards ($) (Note 4) (l) | |||||||||||||||||||||||||||||||||||
Name (a) | Grant Date (b) | Thres- hold ($) (c) | Plan ($) (d) | Maxi- mum ($) (e) | Thres- hold (#) (f) | Target (#) (g) | Maxi- mum (#) (h) | |||||||||||||||||||||||||||||||||
Crane | 1/26/2015 | $ | 799,500 | $ | 1,599,000 | $ | 3,198,000 | |||||||||||||||||||||||||||||||||
1/26/2015 | 33,041 | 176,221 | 352,442 | $ | 6,580,092 | |||||||||||||||||||||||||||||||||||
1/26/2015 | 86,796 | 3,240,963 | ||||||||||||||||||||||||||||||||||||||
Thayer | 1/26/2015 | 365,274 | 730,548 | 1,461,096 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 9,085 | 48,455 | 96,910 | 1,809,310 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 23,866 | 891,156 | ||||||||||||||||||||||||||||||||||||||
Cornew | 1/26/2015 | 420,500 | 841,000 | 1,682,000 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 9,817 | 52,359 | 104,718 | 1,955,085 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 25,789 | 962,961 | ||||||||||||||||||||||||||||||||||||||
O’Brien | 1/26/2015 | 372,874 | 745,748 | 1,491,496 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 8,308 | 44,307 | 88,614 | 1,654,423 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 21,823 | 814,871 | ||||||||||||||||||||||||||||||||||||||
Von Hoene Jr. | 1/26/2015 | 322,362 | 644,724 | 1,289,448 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 7,727 | 41,212 | 82,424 | 1,538,856 | ||||||||||||||||||||||||||||||||||||
1/26/2015 | 20,299 | 757,965 |
Notes to Grants of Plan-Based Awards Table
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Note 1) | Estimated Possible Payouts Under Equity Incentive Plan Awards (Note 2) | All Other Stock Awards: Number of Shares or Units (#) (Note 3) | Grant Date | |||||||||||||||||
Threshold ($) | Plan ($) | Maximum | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||
Crane | 1/29/2018 | $ | 66,203 | $ | 1,765,400 | $ | 3,530,800 | |||||||||||||||
1/29/2018 | 29,429 | 176,541 | 353,082 | $ | 6,766,817 | |||||||||||||||||
1/29/2018 | 86,953 | 3,332,908 | ||||||||||||||||||||
Nigro | 1/29/2018 | 5,205 | 31,222 | 62,444 | 1,196,739 | |||||||||||||||||
1/29/2018 | 15,378 | 589,439 | ||||||||||||||||||||
1/29/2018 | 40,000 | 1,533,200 | ||||||||||||||||||||
5/8/2018 | 27,609 | 736,250 | 1,472,500 | |||||||||||||||||||
5/8/2018 | 4,382 | 26,285 | 52,570 | 1,070,851 | ||||||||||||||||||
5/8/2018 | 4,822 | 198,893 | ||||||||||||||||||||
Thayer | 1/29/2018 | 29,501 | 786,693 | 1,573,385 | ||||||||||||||||||
1/29/2018 | 7,872 | 47,224 | 94,448 | 1,810,096 | ||||||||||||||||||
1/29/2018 | 23,260 | 891,556 | ||||||||||||||||||||
Pramaggiore | 1/29/2018 | 2,837 | 17,020 | 34,040 | 652,377 | |||||||||||||||||
1/29/2018 | 8,383 | 321,320 | ||||||||||||||||||||
6/1/2018 | 27,609 | 736,250 | 1,472,500 | |||||||||||||||||||
6/1/2018 | 9,973 | 59,824 | 119,648 | 2,452,186 | ||||||||||||||||||
6/1/2018 | 11,393 | 466,999 | ||||||||||||||||||||
Von Hoene Jr. | 1/29/2018 | 34,079 | 908,765 | 1,817,530 | ||||||||||||||||||
1/29/2018 | 8,511 | 51,055 | 102,110 | 1,956,938 | ||||||||||||||||||
1/29/2018 | 25,147 | 963,885 | ||||||||||||||||||||
Cornew | 1/29/2018 | 33,963 | 905,690 | 1,811,380 | ||||||||||||||||||
1/29/2018 | 8,505 | 51,020 | 102,040 | 1,955,597 | ||||||||||||||||||
1/29/2018 | 25,130 | 963,233 |
(1) | All NEOs have annual incentive plan target opportunities based on a fixed percentage of their base salary. Under the terms of the AIP, threshold performance earns 50% of the respective target, while performance at plan earns 100% of the respective target and the maximum payout is capped at 200% of target. The possible payout at threshold for AIP was calculated at 3.75% of target, which is 50% performance on the lowest weighted AIP performance metric. For additional information about the terms of these programs, see Compensation Discussion and |
(2) | NEOs have a long-term performance share |
(3) | This column shows restricted stock unit awards made during the year. The vesting dates of the awards are provided in footnote 2 to the Outstanding Equity |
(4) | This column shows the grant date fair value, calculated in accordance with FASB ASC Topic 718, of the performance share |
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Executive Compensation Data
Outstanding Equity Awards at Year End
Option Awards (Note 1) | Stock Awards | |||||||||||||||
Name | Number of Securities Underlying Unexercised Options That Are Exercisable (#) | Number of Securities Underlying Unexercised Options That Are Not Exercisable (#) | Option Exercise or Base Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Yet Vested (#) (Note 2) | Market Value of Shares or Units of Stock That Have Not Yet Vested Based on 12/31 Closing Price $45.10 ($) (Note 2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#) (Note 3) | Equity Incentive Plan Awards: Market or Payout Value or Unearned Shares, Units or Other Rights That Have Not Yet Vested ($) (Note 3) | ||||||||
Crane | 285,000 | — | $39.21 | 2-Apr-2022 | 626,154 | $28,239,545 | 739,316 | $33,343,152 | ||||||||
94,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||
53,000 | — | 46.09 | 24-Jan-2020 | |||||||||||||
49,000 | — | 56.51 | 26-Jan-2019 | |||||||||||||
Nigro | 13,000 | — | 39.81 | 12-Mar-2022 | 166,671 | 7,516,847 | 170,394 | 7,684,769 | ||||||||
13,400 | — | 43.40 | 24-Jan-2021 | |||||||||||||
3,800 | — | 46.09 | 24-Jan-2020 | |||||||||||||
4,300 | — | 56.51 | 26-Jan-2019 | |||||||||||||
Thayer | — | — | — | — | 167,471 | 7,552,942 | 197,764 | 8,919,156 | ||||||||
Pramaggiore | 37,000 | — | 39.81 | 12-Mar-2022 | 104,960 | 4,733,679 | 163,798 | 7,387,290 | ||||||||
Von Hoene Jr. | 88,000 | — | 39.81 | 12-Mar-2022 | 173,972 | 7,846,128 | 213,808 | 9,642,741 | ||||||||
67,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||
33,000 | — | 46.09 | 24-Jan-2020 | |||||||||||||
25,200 | — | 56.51 | 26-Jan-2019 | |||||||||||||
Cornew | 70,000 | — | 39.81 | 12-Mar-2022 | 180,924 | 8,159,672 | 213,662 | 9,636,156 | ||||||||
26,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||
13,300 | — | 46.09 | 24-Jan-2020 | |||||||||||||
14,900 | — | 56.51 | 26-Jan-2019 |
Option Awards (See Note 1) | Stock Awards | |||||||||||||||||||||||||||||||
Name (a) | Number of Securities Underlying Unexercised Options That Are Exercisable (#) (b) | Number of Securities Underlying Unexercised Options That Are Not Exercisable (#) (c) | Option Exercise or Base Price ($) (d) | Option Expiration Date (e) | Number of Shares or Units of Stock That Have Not Yet Vested (#) (Note 2) (f) | Market Value of Shares or Units of Stock That Have Not Yet Vested Based on 12/31 Closing Price $27.77 ($) (Note 2) (g) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#) (Note 3) (h) | Equity Incentive Plan Awards: Market or Payout Value or Unearned Shares, Units or Other Rights That Have Not Yet Vested ($) (Note 3) (i) | ||||||||||||||||||||||||
Crane | 213,750 | 71,250 | $ | 39.21 | 2-Apr-2022 | 406,381 | $ | 11,285,200 | 797,842 | $ | 22,156,072 | |||||||||||||||||||||
94,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||||||||||||||||||
53,000 | — | 46.09 | 24-Jan-2020 | |||||||||||||||||||||||||||||
49,000 | — | 56.51 | 26-Jan-2019 | |||||||||||||||||||||||||||||
28,000 | — | 73.29 | 27-Jan-2018 | |||||||||||||||||||||||||||||
35,000 | — | 59.96 | 21-Jan-2017 | |||||||||||||||||||||||||||||
22,500 | — | 58.55 | 22-Jan-2016 | |||||||||||||||||||||||||||||
Thayer | 72,750 | 24,250 | 39.81 | 12-Mar-2022 | 141,659 | 3,933,870 | 221,310 | 6,145,779 | ||||||||||||||||||||||||
175,946 | — | 39.24 | 24-Feb-2022 | |||||||||||||||||||||||||||||
125,429 | — | 32.46 | 25-Feb-2021 | |||||||||||||||||||||||||||||
67,304 | — | 37.71 | 26-Feb-2020 | |||||||||||||||||||||||||||||
167,669 | — | 21.25 | 27-Feb-2019 | |||||||||||||||||||||||||||||
8,676 | — | 101.05 | 21-Feb-2018 | |||||||||||||||||||||||||||||
8,342 | — | 81.56 | 22-Feb-2017 | |||||||||||||||||||||||||||||
Cornew | 52,500 | 17,500 | 39.81 | 12-Mar-2022 | 152,454 | 4,233,648 | 238,118 | 6,612,537 | ||||||||||||||||||||||||
26,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||||||||||||||||||
13,300 | — | 46.09 | 24-Jan-2020 | |||||||||||||||||||||||||||||
14,900 | — | 56.51 | 26-Jan-2019 | |||||||||||||||||||||||||||||
11,000 | — | 73.29 | 27-Jan-2018 | |||||||||||||||||||||||||||||
8,500 | — | 59.96 | 21-Jan-2017 | |||||||||||||||||||||||||||||
6,375 | — | 58.55 | 22-Jan-2016 | |||||||||||||||||||||||||||||
O’Brien | 76,500 | 25,500 | 39.81 | 12-Mar-2022 | 103,766 | 2,881,582 | 201,814 | 5,604,375 | ||||||||||||||||||||||||
49,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||||||||||||||||||
27,000 | — | 46.09 | 24-Jan-2020 | |||||||||||||||||||||||||||||
30,700 | — | 56.51 | 26-Jan-2019 | |||||||||||||||||||||||||||||
22,000 | — | 73.29 | 27-Jan-2018 | |||||||||||||||||||||||||||||
19,000 | — | 59.96 | 21-Jan-2017 | |||||||||||||||||||||||||||||
20,000 | — | 58.55 | 22-Jan-2016 | |||||||||||||||||||||||||||||
Von Hoene Jr. | 66,000 | 22,000 | 39.81 | 12-Mar-2022 | 111,398 | 3,093,522 | 180,424 | 5,010,374 | ||||||||||||||||||||||||
67,000 | — | 43.40 | 24-Jan-2021 | |||||||||||||||||||||||||||||
33,000 | — | 46.09 | 24-Jan-2020 | |||||||||||||||||||||||||||||
25,200 | — | 56.51 | 26-Jan-2019 | |||||||||||||||||||||||||||||
19,000 | — | 73.29 | 27-Jan-2018 | |||||||||||||||||||||||||||||
19,000 | — | 59.96 | 21-Jan-2017 | |||||||||||||||||||||||||||||
17,000 | — | 58.55 | 22-Jan-2016 |
Executive Compensation Data
Notes to Outstanding Equity Table
(1) | Non-qualified stock options |
(2) | The amount shown includes unvested restricted stock unit (RSU) awards and the performance share (PShare) award earned for the performance period beginning January 1, |
(3) | The amount shown includes the target |
50 Exelon 2019 Proxy Statement
Executive Compensation Data
Option Exercises and Stock Vested
Option Awards | Stock Awards (Note 1) | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Crane | — | $ | — | 305,129 | $11,695,590 | |||
Nigro | — | — | 55,079 | 2,111,168 | ||||
Thayer | 465,679 | 3,188,614 | 113,327 | 4,359,714 | ||||
Pramaggiore | — | — | 30,031 | 1,151,087 | ||||
Von Hoene Jr. | — | — | 107,690 | 4,243,774 | ||||
Cornew | — | — | 120,036 | 4,616,898 |
Option Awards | Stock Awards (Note 1) | |||||||||||||||
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | Number of Shares Acquired on Vesting (#) (d) | Value Realized on Vesting ($) (e) | ||||||||||||
Crane | — | $ | — | 207,754 | $ | 7,757,538 | ||||||||||
Thayer | — | — | 64,669 | 2,397,514 | ||||||||||||
Cornew | — | — | 69,947 | 2,555,734 | ||||||||||||
O’Brien | — | — | 57,597 | 2,150,686 | ||||||||||||
Von Hoene Jr. | — | — | 49,972 | 1,865,956 |
Notes to Option Exercises and Stock Vested Table
(1) | Share amounts are composed of the following tranches of prior awards that vested on January |
Exelon sponsors the Exelon Corporation Retirement Program, a traditional defined benefit pension plan that covers certain management and unionized employees. The Program includes the Service Annuity System (SAS), a traditional pension plan covering certain employees who commenced employment prior to January 1, 2001, and a cash balance pension plan (CBPP) covering management and certain collective bargaining unit employees. The Exelon Corporation Retirement Program includes the Service Annuity System (“SAS”), which is the legacy ComEd pension plan. Effectiveunionized employees hired after January 1, 2001, Exelon also established two cash balance defined benefit pension plans in order to both reduce future retirement benefit costs and provide an option that is portable as the company anticipated a work force that was more mobile than the traditional utility workforce. The cash balance defined benefit pension plans cover management employees and certain collective bargaining unit employees hired on or after such date, as well as certain other management employees hired prior to such date who elected to participate in a cash balance plan. Legacy Constellation employees participate inparticipate.
Exelon also sponsors the Pension Plan of Constellation Energy Group, Inc. (“(Constellation Pension Plan), which covers certain legacy Constellation Pension Plan”). The Constellation Pension Planemployees. It includes a traditional pension formula referred to as the Enhanced Traditional Plan (“ETP”) and a Pension Equity Plan (“PEP”). Employeesfor employees hired before January 1, 2000, and a pension equity formula (PEP) for employees hired thereafter or who elected to participate in that formula.
In furtherance of Exelon’s efforts to align to the ETP. Employeesmarket and control pension costs and liabilities, the CBPP was closed to non-represented, non-craft employees hired on or after
Executive Compensation Data
January February 1, 2000 and2018, at Exelon Generation (including Constellation) or BSC. In lieu of pension benefits, these employees hired before that date who electedwill receive an additional non-discretionary contribution to do so participate in the PEP.Exelon Savings Plan. Each of these plans is intended to be tax-qualified under Section 401(a) of the Internal Revenue Code. An employee can participate in only one of the qualified pensionthese plans.
For NEOs participating in the SAS, the annuity benefit payable at normal retirement age is equal to the sum of 1.25% of the participant’s earnings as of December 25, 1994, reduced by a portion of the participant’s Social Security benefit as of that date, plus 1.6% of the participant’s highest average annual pay, multiplied by the participant’s years of credited service (up to a maximum of 40 years). Pension-eligible compensation for the SAS’s Final Average Pay Formula includes base pay and annual incentive awards. Benefits under the SAS are vested after five years of service.
The “normal retirement age” under the SAS is 65. The plan also offers an early retirement benefit prior to age 65, which is payable if a participant retires after attainment of age 50 and completion of 10 years of service. The annual pension payable under the plan is determined as of the early retirement date, reduced by 2% for each year of payment before age 60 to age 58, then 3% for each year before age 58 to age 50. In addition, under the SAS, the early retirement benefit is supplemented prior to age 65 by a temporary payment equal to 80% of the participant’s estimated monthly Social Security benefit. The supplemental benefit is partially offset by a reduction in the regular annuity benefit.
Under the cash balance pension, plan, a notional account is established for each participant, and the account balance grows as a result of annual benefit credits and annual investment credits. (Employees who participated in the SAS prior to January 1, 2001 and elected to participate in the cash balance plan also have a frozen transferred benefit from the former plan and received a “transition” credit based on their age, service and compensation at the time of transfer.) Beginning January 1, 2008, the annual benefit credit under the plan is 7% of base pay and annual incentive award and beginning January 1, 2013 for employees hired on or after such date, the annual benefit credit is equal to a percentage of base pay and annual incentive award which varies between 3% and 8%, based upon age. For the portion of the account balance accrued beginning January 1, 2008,Beginning in 2017, the annual investment credit is the third segment spot rate of interest on long-term investment grade corporate bonds. The segment rate will be determined as of November of the year for which the cash
www.exeloncorp.com 51
Executive Compensation Data
balance account receives the investment credit. For the portion of theCash balance participants with pre-2008 balances receive an additional benefit accrued beforecredit ranging from 0.5% to 3.5% based on their pre-2008 service. Also, beginning in 2017, account balances for employees hired prior to January 1, 2008, pending Internal Revenue Service guidance, the annual2013 will be subject to a minimum investment credit is the greater of 4%, or the average of the annual rate of return of the S&P 500 Stock Index and the 30-year Treasury bond rate (the interest rate is determined in November of each year). For employees hired on or after January 1, 2013, the annual investment credit is the second segment spot rate of interest on long-term corporate bonds, determined as of November of the year for which the cash balance account receives the investment credit, subject to a minimum annual investment credit rate of 3.8% and a maximum annual investment credit rate of 7%. Benefits are vested after three years of service and are payable in an annuity or a lump sum at any time following termination of employment. Apart from the benefit credits and the vesting requirement, and as described above, years of service are not relevant to a determination of accrued benefits under the cash balance pension plans.
For NEOs who participate in the PEP, a lump sum benefit amount is computed based on covered earnings multiplied by a total credit percentage. Covered earnings are equal to the average of the highest three of the last five twelve-month periods’ base pay plus short-term incentive.annual incentive awards. The total service credit percentage is equal to the sum of the credit percentages based on the following formula: 5% per year of service through age 39, 10% per year of service from age 40 to age 49, and 15% per year of service after age 49. No benefits are available under the PEP until a participant has at least three years of vesting service. Benefits payable under the PEP are paid as an annuity unless a participant elects a lump sum within 60 days after separation.
The Internal Revenue Code limits to $265,000$275,000 the individual 20152018 annual compensation that may be taken into account under the tax-qualified retirement plan. As permitted by Employee Retirement Income Security Act, Exelon sponsors three supplemental executive retirement plans (or “SERPs”)SERPs) that allow the payment to a select group of management or highly-compensated individuals out of its general assets of any benefits calculated under provisions of the applicable qualified pension plan which may be above these limits. The SERPs offer a lump sum as an optional form of payment, which includes
Executive Compensation Data
the value of the marital annuity, death benefits and other early retirement subsidies at a designated interest rate. The interest rate applicable for distributions to participants in the SAS in 20152018 is 2.83%2.77%. For participants in the cash balance pension plan and the PEP, the lump sum is the value of the non-qualified account balance. The values of the lump sum amounts do not include the value of any pension benefits covered under the qualified pension plans, and the methods and assumptions used to determine the non-qualified lump sum amount are different from the assumptions used to generate the present values shown in the tables of benefits to be received upon retirement, termination due to death or disability, involuntary separation not related to a change in control, or upon a qualifying termination following a change in control which appear later in this proxy statement.
Under the terms of the SERPs, participants are provided the amount of benefits they would have received under the SAS, cash balance plan, ETP or PEP, as applicable, but for the application of the Internal Revenue Code limits. In addition, certain executives previously received grants of additional credited service under a SERP. In particular, in 1998, Mr. Crane received an additional 10 years of credited service through September 28, 2008, the date of his tenth anniversary, as part of his employment offer that provided one additional year of service credit for each year of employment to a maximum of 10 additional years.
As of January 1, 2004, Exelon does not grant additional years of credited service to executives under the SERP for any period in which services are not actually performed, except that up to two years of service credits may be provided upon a qualifying termination of employment under severance or change in control agreements first entered into after such date, and performance-based grants or grants which make up for lost pension benefits from another employer may be (but have not been) provided. Service credits previously available under employment, change in control or severance agreements or arrangements (or any successor arrangements) are not affected by this policy.
The amount of the change in the pension value for each of the named executive officersNEOs is the amount included in the Summary Compensation Table above in the column headed “Change in Pension Value & Nonqualified Deferred Compensation Earnings.”above. The present value of each NEO’s accumulated pension benefit is shown in the following tables. The present value for cash balance and PEP participants is the account balance. The assumptions used in estimating the present values for SAS participants include the following: pension benefits are assumed to begin at each participant’s earliest unreduced retirement age; the SERP lump sum amounts are determined using the rate of 5% for SAS participants at the assumed retirement age; the lump sum amounts are discounted from the assumed retirement date at the applicable discount rates of 3.94%3.62% as of December 31, 20142017 and 4.29%4.31% as of December 31, 2015;2018; and the applicable mortality tables. The applicable mortality table is the RP 2000-based table projected generationally using Exelon’s best estimate of long-term mortality improvements. The December 31, 20152018 mortality table is consistent with the mortality used in the Exelon December 31, 20152018 pension disclosure.
52 Exelon 2019 Proxy Statement
Name (a) | Plan Name (b) | Number of Years Credited Service (#) (c) | Present Value of Accumulated Benefit ($) (d) | Payments During Last Fiscal Year ($) (e) | ||||||||||
Crane (1) | SAS | 17.26 | $ | 955,457 | $ | — | ||||||||
SERP | 27.26 | 13,753,084 | — | |||||||||||
Thayer | PEP | 13.00 | 234,000 | — | ||||||||||
SERP | 13.00 | 1,297,615 | — | |||||||||||
Cornew | Cash Balance | 21.59 | 594,698 | — | ||||||||||
SERP | 21.59 | 838,808 | — | |||||||||||
O’Brien | Cash Balance | 33.51 | 1,315,232 | — | ||||||||||
SERP | 33.51 | 1,612,192 | — | |||||||||||
Von Hoene Jr. | Cash Balance | 13.93 | 341,219 | — | ||||||||||
SERP | 13.93 | 925,850 | — |
Executive Compensation Data
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||
Crane | SAS | 20.26 | $1,334,886 | $— | ||||||
SMRP | (2) | 30.26 | 18,469,218 | — | ||||||
Nigro | CBPP | 22.42 | 387,062 | — | ||||||
SMRP | 22.42 | 841,621 | — | |||||||
Thayer | PEP | 16.00 | 324,000 | — | ||||||
CEG BRP | 16.00 | 1,750,324 | — | |||||||
Pramaggiore | CBPP | 20.93 | 725,336 | — | ||||||
SMRP | 20.93 | 831,458 | — | |||||||
Von Hoene Jr. | CBPP | 16.93 | 460,675 | — | ||||||
SMRP | 16.93 | 1,466,851 | — | |||||||
Cornew | CBPP | 24.59 | 766,702 | — | ||||||
SMRP | 24.59 | 1,415,590 | — |
(1) | Plan names include: Service Annuity System (SAS); Supplemental Management Retirement Plan (SMRP); Cash Balance Pension Plan (CBPP); Pension Equity Plan (PEP); and the CEG Benefits Restoration Plan (CEG BRP). |
(2) | Based on discount rates prescribed by the SEC proxy disclosure guidelines, Mr. Crane’s non-qualified SERP present value is |
Deferred Compensation Programs
Exelon offers deferred compensation plans to permit the deferral of certain cash compensation to facilitate tax and retirement planning and satisfaction of stock ownership requirements for executives and key managers. Exelon maintains non-qualified deferred compensation plans that are open to certain highly-compensated employees, including the NEOs.
The Exelon Deferred Compensation Plan is aand the Constellation Deferred Compensation Plan are non-qualified planplans that permitspermit their respective legacy Exelon executives and key managers to defer receipt of base compensation and the companyCompany to credit related matching contributions that would have been contributed to the Exelon Corporation Employee Savings Plan (the company’sCompany’s tax-qualified 401(k) plan) but for the applicable limits under the Internal Revenue Code (the “Code”). The Constellation Deferred Compensation Plan is a non-qualified plan that permits legacy Constellation executives to defer receipt of base compensation and the company to credit related matching contributions that would have been contributed to the Exelon Corporation Employee Savings Plan.Code. The Deferred Compensation Plans permit participants to defer taxation of a portion of their income. The Exelon Deferred Compensation Plan benefitsincome and benefit the companyCompany by deferring the payment of a portion of its compensation expense, thus preserving cash.
The Exelon Employee Savings Plan is intended to be tax-qualified under Sections 401(a) and 401(k) of the Code. The Constellation Energy Group Employee Savings Plan was merged into Exelon’s Employee Savings Plan as of July 1, 2014. Exelon maintains the Employee Savings Plan to attract and retain qualified employees, including the NEOs, and to encourage employees to save some percentage of their cash compensation for their eventual retirement. The Employee Savings Plan permits employees to do so and allows the companyCompany to make matching contributions in a relatively tax-efficient manner. The companyCompany maintains the excess matching feature of the Deferred Compensation Plans to enable key management employees to save for their eventual retirement to the extent they otherwise would have were it not for the limits established by the IRS.
The Stock Deferral Plan is a non-qualified plan that permitted legacy Exelon executives to defer performance share unitsshares prior to 2007.
Executive Compensation Data
The following table shows the amounts that NEOs have accumulated under both the Deferred Compensation Plans and the Stock Deferral Plan. The Exelon Deferred Compensation and Stock Deferral Plans were closed to new deferrals of base pay (otherother than excess Employee Savings Plan deferrals), annual incentive payments or performance shares awardsdeferrals in 2007, and participants were granted a one-time election to receive a distribution of their accumulated balance in each plan during 2007. Existing balances will continue to accrue dividends or other earnings until payout upon termination. Balances in the Deferred Compensation PlanPlans will be settled in cash upon the termination event selected by the officer and will be distributed either in a lump sum, or in annual installments. Share balances in the Stock Deferral Plan continue to earn the same dividends that aredividend equivalents to those available to all shareholders, which are reinvested as additional notional shares in the plan. Balances in the plan are distributed in shares of Exelon stock in a lump sum or installments upon termination of employment.
The Deferredwww.exeloncorp.com 53
Executive Compensation Plans continue in effect for thoseData
Once officers who participate in the Employee Savings Plan and who reach their statutory contribution limit during the year. After this limit is reached,year, their elected payroll contributions and companyCompany matching contribution will be credited to their accounts in the Deferred Compensation Plans. The investment options under the Deferred Compensation Plans consist of a basket of investment fund benchmarks substantially the same as those funds available through the Employee Savings Plan. Deferred amounts represent unfunded, unsecured obligations of the company.Company.
Name (a) | Executive Contributions in 2015 ($) (Note 1) (b) | Registrant Contributions in 2015 ($) (Note 2) (c) | Aggregate Earnings in 2015 ($) (Note 3) (d) | Aggregate Withdrawals/ Distributions ($) (e) | Aggregate Balance at 12/31/15 ($) (Note 4) (f) | |||||||||||||||
Crane | $ | 104,481 | $ | 57,334 | $ | (50,223 | ) | $ | — | $ | 1,020,731 | |||||||||
Thayer | — | — | — | — | — | |||||||||||||||
Cornew | 28,578 | 31,515 | (10,825 | ) | — | 249,197 | ||||||||||||||
O’Brien(5) | 36,661 | 28,431 | (121,737 | ) | — | 2,294,662 | ||||||||||||||
Von Hoene Jr. | 34,871 | 27,372 | (23,189 | ) | — | 334,881 |
Name | Executive Contributions in 2018 ($) (Note 1) | Registrant Contributions in 2018 ($) (Note 2) | Aggregate Earnings in 2018 ($) (Note 3) | Aggregate Withdrawals/ Distributions ($) (Note 4) | Aggregate Balance at 12/31/18 ($) (Note 4) | ||||||
Crane | $106,700 | $32,010 | $(62,364 | ) | $— | $1,757,802 | |||||
Nigro | 23,846 | 14,308 | (6,608 | ) | — | 64,803 | |||||
Thayer | — | — | — | — | — | ||||||
Von Hoene Jr. | 44,040 | 18,874 | (22,013 | ) | — | 649,134 | |||||
Cornew | 33,092 | 19,856 | (38,195 | ) | — | 494,227 | |||||
Pramaggiore | 29,844 | 22,495 | (760 | ) | — | 81,025 |
(1) | The full amount shown for executive contributions is included in the base salary figures for each NEO shown above in the Summary Compensation Table. |
(2) | The full amount shown under registrant contributions is included in the |
(3) | The amount shown under aggregate earnings reflects the NEO’s gain or loss based upon the individual allocation of his notional account balance into the basket of mutual fund benchmarks. These gains or losses do not represent current income to the NEO and have not been included in any of the compensation tables shown above. |
(4) | For all NEOs the aggregate balance shown |
|
Executive Compensation Data
Potential Payments upon Termination or Change in Control
Change in control employment agreements and severance plan covering named executive officersNEOs
Background
The Compensation Committee reviews Exelon’s change in control and severance benefits policies were initially adopted in January 2001to ensure that they are reasonable and harmonized the policies of Exelon’s predecessor companies.consistent with competitive practice. In adoptingreviewing the policies, the compensation committee consideredCompensation Committee considers the advice of a consultant who advised that the levels were consistent with competitive practice and reasonable.its compensation consultant. The Exelon benefits currently include multiples of change in control benefits ranging from two times base salary and annual bonus for corporate and subsidiary vice presidents to 2.99 times base salary and annual bonus for the CEO executive vice presidents, presidents of certain business units and select senior vice presidents.other NEOs. In 2003, the compensation committee reviewed the terms of the Senior Management Severance Plan and revised it to reduce the situations when an executive could terminate and claim severance benefits for “good reason,” clarified the definition of “cause,” and reduced non-change in control benefits for executives with less than two years of service. In December 2004, the compensation committee’s consultant presented a report on competitive practice on executive severance. The competitive practices described in the report were generally comparable to the benefits provided under Exelon’s severance policies. In discussing the compensation consultant’s December 2007 annual report to the committee on compensation trends, the consultant commented that Exelon’s change in control and severance policies were conservative, citing the use of double triggers, and that they remained competitive. In April 2009, the compensation committee adopted a policy that Exelon would not includeCompensation Committee eliminated excise tax gross-up payment provisions in any senior executive employment, change in control, or severance plans, programs or agreements that arefirst entered into, adopted or materially amended on or after April 2, 2009 (other than renewals of existing arrangements that are not materially amended or arrangements assumed pursuant to a corporate transaction). In 2016, any NEOs covered by change in control agreements, which previously included excise tax gross-up provisions, agreed to waive those payments and agreements were later amended to remove such gross-up payments. Therefore, no NEO is currently entitled to an excise tax gross-up payment upon any termination of employment from Exelon.
Named executive officersNEOs have entered into individual change in control employment agreements, or are covered by the change in control provisions of the Senior Management Severance Plan, which generally protect such executives’ position and compensation levels for two years after a change in control of Exelon. The individual agreements are initially effective for a period of two years, and provide for a one-year extension each year thereafter until cancellation or termination of employment. The plan does not have
54 Exelon 2019 Proxy Statement
Executive Compensation Data
Quantification of Payments upon a specific term.Change in Control
During the 24-month period following a change in control, or, with respect to an executive with an individual agreement, during the 18-month period following another significanta “significant corporate transaction affecting thetransaction”, meaning one that affects an executive’s business unit in which Exelon shareholders retain between 60% and 662/3% % control, (a significant acquisition), if a named executive officerNEO resigns for good reason or if thean executive’s employment is terminated by Exelon other than for cause or disability, the executive is entitled to the following:
the executive’s annual incentive and |
severance payments equal to 2.99 |
a benefit equal to the amount payable under the SERP determined as if (1) the SERP benefit were fully vested, (2) the executive had 2.99 additional years of age and years of service (2.0 years for executives who first entered into such agreements after 2003 or do not have such agreements) and (3) the severance pay constituted covered compensation for purposes of the SERP; |
a benefit equal to the actuarial equivalent present value of any non-vested accrued benefit under Exelon’s qualified defined benefit retirement plan; |
Executive Compensation Data
all previously-awarded stock options, |
life, disability, accident, health and other welfare benefit coverage continues during the severance pay period on the same terms and conditions applicable to active employees, followed by retiree health coverage if the executive has attained at least age 50 and completed at least 10 years of service (or any lesser eligibility requirement then in effect for regular employees); and |
outplacement and financial planning services for at least 12 months. |
The changeChange in control benefits are also provided if thean executive is terminated other than for cause or disability, or terminates for good reason (1) after a tender offer or proxy contest commences, or after Exelon enters into an agreement which, if consummated, would cause a change in control, and within one year after such termination a change in control does occur, or (2) within two years after a sale or spin-off of the executive’s business unit in contemplation of a change in control that actually occurs within 60 days after such sale or spin-off (a disaggregation) if the executive has an individual agreement..
A change in control under the individual change in control employment agreements and the Senior Management Severance Plan generally occurs:
when any person acquires 20% of Exelon’s voting securities; |
when the incumbent members of the Exelon |
upon consummation of a reorganization, merger or consolidation, or sale or other disposition of at least 50% of Exelon’s operating assets (excluding a transaction where Exelon shareholders retain at least 60% of the voting power); or |
upon shareholder approval of a plan of complete liquidation or dissolution. |
The term good reason“Good reason” under the individual change in control employment agreements generally includes any of the following occurring within two years after a change in control or disaggregation or within 18 months after a significant acquisition:
corporate transaction:
a material reduction in salary, incentive compensation opportunity or aggregate benefits, unless such reduction is part of a policy, program or arrangement applicable to peer executives; |
failure of a successor to assume the agreement; |
a material breach of the agreement by Exelon; or |
any of the following, but only after a change in control or disaggregation: (1) a material adverse reduction in the executive’s position, duties or responsibilities (other than a change in the position or level of officer to whom the executive reports or a change that is part of a policy, program or arrangement applicable to peer executives) or (2) a required relocation by more than 50 miles. |
The term causewww.exeloncorp.com 55
Executive Compensation Data
“Cause” under the change in control employment agreements generally includes any of the following:
refusal to perform or habitual neglect in the performance of duties or responsibilities or of specific directives of the officer to whom the executive reports which are not materially inconsistent with the scope and nature of the executive’s duties and responsibilities; |
willful or reckless commission of acts or omissions which have resulted in or are likely to result in a material loss or material damage to the reputation of Exelon or any of its affiliates, or that compromise the safety of any employee; |
commission of a felony or any crime involving dishonesty or moral turpitude; |
Executive Compensation Data
material violation of the code of business conduct, |
any breach of the executive’s restrictive covenants. |
Executives who entered into suchIf the amount payable to a NEO under a change in control employment agreements prioragreement, inclusive of other parachute payments, would cause an excise tax to April 2, 2009 (and which have not been materially amended after such date) will be eligible to receive an additional payment to cover excise taxes imposed under Section 4999 of the Internal Revenue Code, on excess parachutethe payments to such executive shall be reduced to the maximum amount below which no such tax is imposed or, under similar state or local law, but only if the payment without such reduction would leave the executive with a greater amount after payment of payments and benefits subject to thesesuch excise taxes, exceeds 110% of the safe harbor amount that would not subject the employee to these excise taxes. If the amount does not exceed 110% of the safe harbor amount, then payments and benefits subject to these taxes wouldno such reduction shall be reduced or eliminated to equal the safe harbor amount.applied.
If a named executive officerNEO resigns for good reason or is terminated by Exelon other than for cause or disability, in each case under circumstances not involving a change in control or similar provision described above, the named executive officerNEO may be eligible for the following non-change in control benefits under the Exelon Corporation Senior Management Severance Plan:
previously awarded Pshare awards and regular-cycle RSUs and restricted shares vest, and prorated payment of the executive’s annual incentive and performance share |
for a |
a benefit equal to the amount payable under the SERP determined as if the severance payments were paid as ordinary base salary and annual incentive; |
during the severance period, continuation of health, basic life and other welfare benefits the executive was receiving immediately prior to the severance period on the same terms and conditions applicable to active employees, followed by retiree health coverage if the executive has attained at least age 50 and completed at least 10 years of service (or any lesser eligibility requirement then in effect for non-executive employees); and |
outplacement and financial planning services for twelve months. |
Payments under individual agreements entered into after April 2, 2009 or the Senior Management Severance Plan are subject to reduction by Exelon to the extent necessary to avoid imposition of excise taxes imposed by Section 4999 of the Internal Revenue Code on excess parachute payments or under similar state or local law.
The term good reason“Good reason” under the Senior Management Severance Plan means either of the following:
a material reduction of the executive’s salary (or, with respect to a change in control, incentive compensation opportunity or aggregate benefits) unless such reduction is part of a policy, program or arrangement applicable to peer executives of Exelon or of the business unit that employs the executive; or |
a material adverse reduction in the executive’s position or duties (other than a change in the position or level of officer to whom the executive reports) that is not applicable to peer executives of Exelon or of the executive’s business unit, but excluding under the non-change in control provisions of the plan any change (1) resulting from a reorganization or realignment of all or a significant portion of the business, operations or senior management of Exelon or of the executive’s business unit or (2) that generally places the executive in substantially the same level of responsibility. |
With respect to a change in control, the term good reason under the plan also includes a required relocation of more than 50 miles.
The term cause“Cause” under the Senior Management Severance Plan generally has the same meaning as the definition of such term under the individual change in control employment agreements.
Executive Compensation Data
Benefits under the change in control employment agreements and the Senior Management Severance Plan are subject to termination upon an executive’s violation of his or her restrictive covenants, and incentive payments under the agreements and the plan may be subject to the recoupment policy adopted by the boardBoard of directors.Directors.
56 Exelon 2019 Proxy Statement
Executive Compensation Data
Estimated Value of Benefits to be Received Upon Retirement
The following table shows the estimated value of payments and other benefits to be conferred upon the NEOs assuming they retired as of December 31, 2015.2018. These payments and benefits are in addition to the present value of the accumulated benefits from each NEO’s qualified and non-qualified pension plans shown in the tables within the Pension Benefit section and the aggregate balance due to each NEO that is shown in the tables within the Nonqualified Deferred Compensation section.
Name | Cash Payment ($) (Note 1) | Value of Unvested Equity Awards ($) (Note 2) | Total Value of All Payments and Benefits ($) (Note 3) | ||||||
Crane | $ | 2,123,000 | $ | 36,966,000 | $ | 39,089,000 | |||
Nigro | 885,000 | — | 885,000 | ||||||
Thayer | — | — | — | ||||||
Pramaggiore | 885,000 | 6,784,000 | 7,669,000 | ||||||
Von Hoene Jr. | 1,093,000 | 10,482,000 | 11,575,000 | ||||||
Cornew | 1,089,000 | — | 1,089,000 |
Name (a) | Cash Payment ($) (Note 1) (b) | Value of Unvested Equity Awards ($) (Note 2) (c) | Total Value of All Payments and Benefits ($) (Note 3) (d) | |||||||||
Crane | $ | 2,073,000 | $ | 21,674,000 | $ | 23,747,000 | ||||||
Thayer | — | — | — | |||||||||
Cornew | 1,090,000 | — | 1,090,000 | |||||||||
O’Brien | 995,000 | 5,507,000 | 6,502,000 | |||||||||
Von Hoene Jr. | 836,000 | 4,888,000 | 5,724,000 |
Notes to Benefits to be Received Upon Retirement Table
(1) | Under the terms of the |
(2) |
Includes the value of the |
the accelerated portion of the executives’ |
(3) | The estimate of total payments and benefits is based on a December 31, |
Executive Compensation Data
Estimated Value of Benefits to be Received Upon Termination due to Death or Disability
The following table shows the estimated value of payments and other benefits to be conferred upon the NEOseach NEO assuming their employment is terminated due to death or disability as of December 31, 2015.2018. These payments and benefits are in addition to the present value of the accumulated benefits from the NEO’s qualified and non-qualified pension plans shown in the tablestable within the Pension Benefit section and the aggregate balance due to each NEO that is shown in tablesthe table within the Nonqualified Deferred Compensation section.
Name | Cash Payment ($) (Note 1) | Value of Unvested Equity Awards ($) (Note 2) | Total Value of All Payments and Benefits ($) (Note 3) | ||||||
Crane | $ | 2,123,000 | $ | 36,966,000 | $ | 39,089,000 | |||
Nigro | 885,000 | 9,751,000 | 10,636,000 | ||||||
Thayer | 946,000 | 9,772,000 | 10,718,000 | ||||||
Pramaggiore | 885,000 | 7,235,000 | 8,120,000 | ||||||
Cornew | 1,089,000 | 10,683,000 | 11,772,000 | ||||||
Von Hoene Jr. | 1,093,000 | 10,482,000 | 11,575,000 |
Name (a) | Cash Payment ($) (Note 1) (b) | Value of Unvested Equity Awards ($) (Note 2) (c) | Total Value of All Payments and Benefits ($) (Note 3) (d) | |||||||||
Crane | $ | 2,073,000 | $ | 21,674,000 | $ | 23,747,000 | ||||||
Thayer | 947,000 | 6,820,000 | 7,767,000 | |||||||||
Cornew | 1,090,000 | 7,332,000 | 8,422,000 | |||||||||
O’Brien | 995,000 | 5,507,000 | 6,502,000 | |||||||||
Von Hoene Jr. | 836,000 | 5,443,000 | 6,279,000 |
Notes to Benefits to be Received Upon Termination due to Death or Disability Table
(1) | Under the terms of the |
(2) |
Includes the value of the |
the accelerated portion of the executives’ |
(3) | The estimate of total payments and benefits is based on a December 31, |
www.exeloncorp.com 57
Executive Compensation Data
Estimated Value of Benefits to be Received Upon Involuntary Separation Not Related to a Change in Control
The following table shows the estimated value of payments and other benefits to be conferred upon the NEOseach NEO assuming they were terminated as of December 31, 20152018 under the terms of the Amended and Restated Senior Management Severance Plan. These payments and benefits are in addition to the present value of the accumulated benefits from the NEO’s qualified and non-qualified pension plans shown in the tablestable within the Pension Benefit section and the aggregate balance due to each NEO that is shown in the tablestable within the Nonqualified Deferred Compensation section.
Name | Cash Payment ($) (Note 1) | Retirement Benefit Enhancement ($) (Note 2) | Value of Unvested Equity Awards ($) (Note 3) | Health and Welfare Benefit Continuation ($) (Note 4) | Perquisites and Other Benefits ($) (Note 5) | Total Value of All Payments and Benefits ($) (Note 6) | ||||||||||||
Crane | $ | 8,176,000 | $ | 1,638,000 | $ | 36,966,000 | $ | 105,000 | $ | 40,000 | $ | 46,925,000 | ||||||
Nigro | 3,908,000 | 257,000 | 8,363,000 | 33,000 | 40,000 | 12,601,000 | ||||||||||||
Thayer | 4,176,000 | 363,000 | 9,772,000 | 34,000 | 40,000 | 14,385,000 | ||||||||||||
Pramaggiore | 3,908,000 | 242,000 | 7,087,000 | 41,000 | 40,000 | 11,318,000 | ||||||||||||
Cornew | 4,712,000 | 344,000 | 10,683,000 | 41,000 | 40,000 | 15,820,000 | ||||||||||||
Von Hoene | 4,728,000 | 291,000 | 10,482,000 | 37,000 | 40,000 | 15,578,000 |
Name (a) | Cash Payment ($) (Note 1) (b) | Retirement Benefit Enhance- Ment ($) (Note 2) (c) | Value of Unvested Equity Awards ($) (Note 3) (d) | Health and Welfare Benefit Continuation ($) (Note 4) (e) | Perquisites And Other Benefits ($) (Note 5) (f) | Total Value of All Payments and Benefits ($) (Note 6) (g) | ||||||||||||||||||
Crane | $ | 7,731,000 | $ | 3,615,000 | $ | 21,674,000 | $ | 94,000 | $ | 40,000 | $ | 33,154,000 | ||||||||||||
Thayer | 3,946,000 | 147,000 | 6,474,000 | 27,000 | 40,000 | 10,634,000 | ||||||||||||||||||
Cornew | 4,454,000 | 235,000 | 6,986,000 | 38,000 | 40,000 | 11,753,000 | ||||||||||||||||||
O’Brien | 4,056,000 | 214,000 | 5,507,000 | 56,000 | 40,000 | 9,873,000 | ||||||||||||||||||
Von Hoene Jr. | 3,642,000 | 207,000 | 5,132,000 | 43,000 | 40,000 | 9,064,000 |
Notes to Benefits to be Received Upon Involuntary Separation Not Related to a CIC Table
(1) | Represents the estimated severance benefit equal to 2 times the sum of the executive’s (i) current base salary and (ii) the target annual incentive for the year of termination. In addition, under Section 4.2 of the Senior Management Severance Plan, a pro-rated annual incentive award is payable upon involuntary separation or qualifying voluntary separation based on the days worked during the year of termination |
(2) | Represents the estimated retirement benefit enhancement that consists of a one-time lump sum payment based on the actuarial present value of a benefit under the non-qualified pension plan assuming that the severance pay period was taken into account for purposes of vesting, and the severance pay constituted covered compensation for purposes of the non-qualified pension plan. |
(3) |
Includes the value of the |
the accelerated portion of the executives’ |
(4) | Estimated costs of healthcare, life insurance, and long-term disability coverage which continue during the severance period. |
(5) | Estimated costs of outplacement and financial planning services for up to 12 months for all NEOs. |
(6) | The estimate of total payments and benefits is based on a December 31, |
Executive Compensation Data
Estimated Value of Benefits to be Received Upon a Qualifying Termination following a Change in Control
The following table shows the estimated value of payments and other benefits to be conferred upon the NEOseach NEO assuming they were terminatedtermination upon a qualifying change in control as of December 31, 2015.2018. The companyCompany has entered into Change in Control agreements with Messrs. Crane, Cornew, O’Brien, and Von Hoene.each NEO. These payments and benefits are in addition to the present value of accumulated benefits from the NEO’s qualified and non-qualified pension plans shown in the tablestable within the Pension Benefit section and the aggregate balance due to each NEO that is shown in tablesthe table within the Nonqualified Deferred Compensation section.
Name | Cash Payment ($) (Note 1) | Retirement Benefit Enhancement ($) (Note 2) | Value of Unvested Equity Awards ($) (Note 3) | Health and Welfare Benefit Continuation ($) (Note 4) | Perquisites and Other Benefits ($) (Note 5) | Potential Scaleback ($) (Note 6) | Total Value of All Payments and Benefits ($) (Note 7) | |||||||||||||||
Crane | $ | 10,814,000 | $ | 2,465,000 | $ | 36,966,000 | $ | 158,000 | $ | 40,000 | $ | Not required | $ | 50,443,000 | ||||||||
Nigro | 5,255,000 | 384,000 | 9,751,000 | 49,000 | 40,000 | (2,633,000 | ) | 12,846,000 | ||||||||||||||
Thayer | 5,974,000 | 421,000 | 9,772,000 | 51,000 | 40,000 | (362,000 | ) | 15,896,000 | ||||||||||||||
Pramaggiore | 5,255,000 | 361,000 | 7,235,000 | 62,000 | 40,000 | Not required | 12,953,000 | |||||||||||||||
Cornew | 6,736,000 | 554,000 | 10,683,000 | 61,000 | 40,000 | (2,699,000 | ) | 15,375,000 | ||||||||||||||
Von Hoene Jr. | 6,758,000 | 468,000 | 10,482,000 | 55,000 | 40,000 | Not required | 17,803,000 |
Name (a) | Cash Payment ($) (Note 1) (b) | Retirement Benefit Enhance- ment ($) (Note 2) (c) | Value of Unvested Equity Awards ($) (Note 3) (d) | Health and Welfare Benefit Continuation ($) (Note 4) (e) | Perquisites and Other Benefits ($) (Note 5) (f) | Modified Gross-up Payment ($) (Note 6) (g) | Scaleback ($) (Note 6) (h) | Total Value of All Payments and Benefits ($) (Note 7) (i) | ||||||||||||||||||||||||
Crane | $ | 10,172,000 | $ | 5,138,000 | $ | 21,674,000 | $ | 142,000 | $ | 40,000 | Not required | $ | (1,204,000 | ) | $ | 35,962,000 | ||||||||||||||||
Thayer | 5,215,000 | 147,000 | 6,820,000 | 41,000 | 40,000 | Not required | (1,677,000 | ) | 10,586,000 | |||||||||||||||||||||||
Cornew | 6,000,000 | 361,000 | 7,332,000 | 57,000 | 40,000 | $ | 5,816,000 | Not required | 19,606,000 | |||||||||||||||||||||||
O’Brien | 5,738,000 | 233,000 | 5,507,000 | 84,000 | 40,000 | Not required | Not required | 11,602,000 | ||||||||||||||||||||||||
Von Hoene Jr. | 4,940,000 | 310,000 | 5,443,000 | 65,000 | 40,000 | Not required | Not required | 10,798,000 |
Notes to Benefits to be Received Upon a Qualifying Termination following a CIC Table
(1) | Represents the estimated cash severance benefit equal to 2.99 times the sum of the executive’s (i) current base salary and (ii) Severance Incentive. |
Under Section 4.1(a)(ii) of the CIC |
58 Exelon 2019 Proxy Statement
Executive Compensation Data
(2) | Represents the estimated retirement benefit enhancement that consists of a one-time lump sum payment based on the actuarial present value of a benefit under the non-qualified pension plan assuming that the severance pay period was taken into account for purposes of vesting, and the severance pay constituted covered compensation for purposes of the non-qualified pension plan. |
(3) |
Includes the value of the executives’ unvested |
(4) | Estimated costs of healthcare, life insurance and long-term disability coverage which continue during the severance period. |
(5) | Estimated costs of outplacement and financial planning services for up to 12 months for all NEOs. |
(6) | In 2009, the |
(7) | The estimate of total payments and benefits is based on a December 31, |
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules, we are providing the following information about the relationship of annual total compensation, calculated pursuant to SEC rules, of our median employee and our CEO, Christopher M. Crane. For 2018, the ratio of annual total compensation of our CEO and the median of the annual total compensation of all employees was 126:1, demonstrating Exelon’s commitment to balance equitable compensation stewardship with competitively based compensation that drives and rewards performance. The total annual compensation for Mr. Crane and the median employee is $15,600,000 and $124,000, respectively.
The rules governing the CEO Pay Ratio allow for utilization of the same individual for a 3-year period, provided that employee is actively employed at the company. As such, Exelon used the same individual identified in 2017 that was included in the compilation of our CEO pay ratio as reported in the 2018 proxy. The methodology utilized to identify that person is described below.
On December 31, 2018, our employee population consisted of approximately 34,972 individuals (excluding the CEO), which includes two employees based in the United Kingdom and eight employees based in Canada. We have chosen to exclude these ten employees as permitted under SEC rules from our determination of the “median employee,” given the small number of our non-US based employees. The consistently applied compensation measure we used to identify the median employee was W-2 Box 1 wages for employees as of December 31, 2018. After identifying the median employee, the annual total compensation for the median employee was calculated using the same methodology used in compiling the Summary Compensation Table found on page 46 in this proxy statement for our NEOs. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. We believe the methodology, assumptions, and estimates used in determining the ratio are reasonable given our specific employee population.
Because SEC rules provide flexibility in determining the methodology, assumptions, and estimates used to determine pay ratios and the fact that workforce composition issues differ significantly between companies, comparability of pay ratios amongst companies may be limited.
www.exeloncorp.com 59
The proponent represents Burn More Coal, a special interest group supportive of the | ||
|
VoteShareholders request that, beginning in 2019, Exelon publish an annual report of actually incurred company costs and associated actual/significant benefits accruing to shareholders, public health and the environment from the company’s environment-related activities that are voluntary and exceed federal/state regulatory requirements. The report should be prepared at reasonable cost and omit proprietary information.
Supporting Statement:
Exelon’s purpose is to generate profits from generating affordable and reliable electricity for ratepayers while obeying applicable laws and regulations.
Electricity from existing coal plants costs less than any new source of power generation per the U.S. Department of Energy’s National Coal Council 2018 report, “Power Reset” (www.BurnMoreCoal.com/wp-content/uploads/2018/10/NCC-Power-Reset-2018.pdf).
Yet Exelon has divested from coal and, according to its web site, is investing in a “cleaner energy future,” apparently in hopes of altering global climate change. No law or regulation requires that Exelon take this action.
This resolution is intended to help shareholders, going forward, monitor whether Exelon’s voluntary activities and expenditures touted as protecting the public health and environment are actually producing meaningful benefits to shareholders, public health and the environment.
Corporate managements sometimes engage in “greenwashing” — i.e., spending shareholder money on Managementschemes ostensibly environment-related, but really undertaken merely for the purpose of improving the public image of management.
Such insincere “green” posturing and associated touting of alleged, but actually imaginary benefits to public health and the environment may harm shareholders by distracting management, wasting corporate assets, ripping off ratepayers and deceiving shareholders and the public.
For example, Exelon boasts on its web site that it plans to reduce carbon dioxide (CO2) emissions by 15 million tons per year by 2020. To attain this goal, Exelon states it divested from coal and invested in nuclear, wind, solar and hydro-generating capacity. Shareholders should have an honest accounting of this action’s cost and the action’s actual and current (vs. hypothetical or imagined) benefits. After all, Exelon’s reduction in CO2 emissions is not an obvious benefit to anyone or anything.
Global CO2 emissions are higher now than ever and increasing. Coal will remain the dominant fuel globally for electricity through at least 2040, according to the International Energy Agency. China is reportedly now adding coal plant capacity equal to the entire US coal fleet. There are reportedly 1,600 coal plants under construction around the world. So what are the actual benefits to ratepayers, shareholders and the environment of achieving Exelon’s goal? By how much, in what way, and when will any of Exelon’s activities actually reduce or alter climate change?
60 Exelon 2019 Proxy Statement
Stockholder Proposal
The information requested by this proposal is not already contained in any Exelon report.
Exelon should report to Amend Exelon’s Bylawsshareholders what are the specific actual benefits produced by its voluntary, highly touted and costly environmental activities. Are the touted benefits real and worthwhile? Or are they just greenwashing? Shareholders want to Provide Proxy Access
know.
PROPOSAL 4: MANAGEMENT’S PROPOSAL REGARDING PROXY ACCESSBoard of Directors’ Statement in Opposition to Proposal from Burn More Coal
The Exelon Board considered the proposal and concluded that “proxy access”—the abilitypreparation of shareholdersan annual report on the “costs and actual benefits related to include shareholder-nominated candidatesthe Company’s environmental activities” as described in the proposal would have no value to Exelon’s shareholders.In the first instance, Exelon divested its coal generation over the last two decades because running the divested plants was not in our economic or strategic interest. Our value proposition has long reflected this reality. Second, the proposal asks Exelon to undertake the technically impossible task of measuring and reporting on the impact of a single company’s proxy materialsactions to address global climate change. Further, the proposal’s supporting statement suggests that Exelon’s strategy to embrace technology and innovation to create value for our customers, communities, and shareholders by providing safe, clean, reliable, and affordable power and energy services is not based on economic and scientific fact. We disagree.
Worldwide scientific consensus is overwhelming that global climate change is real and that increasing concentrations of greenhouse gases (GHG) from human activities are the cause.Environmental sustainability has been a core value and business driver for Exelon since our company’s beginning, and global climate change is a key sustainability issue for our business, our stakeholders and society at large. As the largest producer of clean and reliable energy in the United States, accounting for one-ninth of all clean energy produced, we have a responsibility to manage our environmental impacts. Given the potential impacts of climate change on the electric sector, Exelon must consider not only how to respond to the need to reduce GHG emissions, but also how our business may be affected by the physical impacts of climate change.
Climate change implications for the electric sector range from changes in demand for energy and grid disruptions to supply shortages and market disturbances from new policy or legislation.The adoption of the Paris Agreement in December 2015 by the United Nations Intergovernmental Panel on Climate Change strengthened momentum to hold the increase in global average annual meetingstemperature to less than 2°Celsius above pre-industrial levels by 2050. Based on best available scientific estimates, this increase represents the maximum acceptable change in global average temperatures that can occur if the world is to have a chance of shareholders—would enhance shareholder abilitylimiting potentially catastrophic climatic effects on the earth’s environment.
Nations and companies have been evaluating potential strategies to participatereduce GHG emissions in director elections while potentially enhancing board accountabilitysupport of meeting the 2° Celsius limit recommended by the Paris Agreement and responsiveness. However,other organizations such as the board believes,Task Force on Climate-related Disclosures. Experts have developed recommendations for specific sector contributions to this reduction, based on current emissions trajectories and potential for reductions.
In this vein, Exelon previously set and achieved two corporate-wide GHG emission reduction goals over the past decade.Through these two programs — Climate Leaders and Exelon 2020 — we reduced more than 9 million metric tons of GHG emissions from 2001 to 2008, improved our building energy efficiency level by 25 percent by 2012, and avoided another 1.5 billion metric tons of GHG emissions through our customer energy efficiency programs and nuclear generation during that same time. In 2018, we announced a numberthird corporate GHG emission reduction goal that is focused on reducing GHG emissions related to our internal operations by another 15 percent by 2022, compared to a 2015 baseline. Our new goal is focused on GHG emissions associated with our buildings, fleet vehicles, processes and equipment that emit GHGs.
Through our focus on operational excellence, we work to maximize the performance of our shareholders alsolow-carbon generation fleet to meet customer demands.We strive to enhance our customer energy efficiency programs and modernize our infrastructure to reduce both emissions associated with power generation and line losses and to ensure that our infrastructure remains resilient in the face of changing weather conditions. And we are continuously engaged in exploring new and emerging technologies to further drive emissions reductions in these areas, in addition to advocating for regulatory and market policies that support the clean evolution of the electric supply.
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The following table shows the ownership of Exelon common stock as of February 20, 2019 by each Director, each NEO in the Summary Compensation Table, and for all Directors and executive officers as a group.
Name of Beneficial Owner | Beneficial Ownership of Exelon Common Stock (Note 1) | Common Shares Underlying Vested Stock Options and Options that Vest Within 60 Days | Total Share Interest (Note 2) | |||
Anthony K. Anderson | 22,080 | — | 22,080 | |||
Ann C. Berzin | 80,015 | — | 80,015 | |||
Laurie Brlas | 771 | — | 771 | |||
Yves C. de Balmann | 67,145 | — | 67,145 | |||
Nicholas DeBenedictis | 55,792 | — | 55,792 | |||
Linda P. Jojo | 12,602 | — | 12,602 | |||
Paul L. Joskow | 47,526 | — | 47,526 | |||
Robert J. Lawless | 97,489 | — | 97,489 | |||
Richard W. Mies | 35,475 | — | 35,475 | |||
John W. Rogers, Jr. | 91,958 | — | 91,958 | |||
Mayo A. Shattuck III | 301,605 | — | 301,605 | |||
Stephen D. Steinour | 88,614 | — | 88,614 | |||
John F. Young | 1,518 | — | 1,581 | |||
Christopher M. Crane | 617,743 | 432,000 | 1,049,743 | |||
Joseph Nigro | 172,354 | 30,200 | 202,554 | |||
Jonathan W. Thayer | 88,814 | — | 88,814 | |||
Kenneth W. Cornew | 133,736 | 109,300 | 243,036 | |||
William A. Von Hoene, Jr. | 219,653 | 188,000 | 407,653 | |||
Anne Pramaggiore | 130,929 | 37,000 | 167,929 | |||
Total | 2,585,947 | 893,100 | 3,479,047 | |||
Directors & Executive Officers as a group (26 people) (Note 3) |
(1) | Includes any shares as to which the individual has sole or shared voting or investment power, Directors’ deferred stock units, officers’ RSUs and deferred shares held in the Stock Deferral Plan, and Directors’ and officers’ phantom shares held in a non-qualified deferred compensation plan which will be settled in cash on a 1 for 1 basis upon retirement or termination. |
(2) | Total share interest of Directors and executive officers, both individually and as a group, represents less than 1% of the outstanding shares of Exelon common stock. |
(3) | Total includes shares held by all Directors and NEOs as well as those executive officers listed in Item 1, Executive Officers of the Registrants in Exelon’s 2018 Annual Report on Form 10-K filed on February 8, 2019, who are not NEOs for purposes of compensation disclosure. |
62 Exelon 2019 Proxy Statement
Ownership of Exelon Stock
Other Significant Owners of Exelon Stock
Shown in the table below are those owners who wishare known to promote special interests that are not aligned withExelon to hold more than 5% of the interests of other shareholders. The board also believes that proxy access should be structured to minimize disruption of board functions and effectiveness.
In 2014, a shareholder submitted a proxy access proposal and requested that it be included in Exelon’s proxy statement for the annual meeting in 2015. The board of directors evaluated the shareholder proposal and considered the composition of Exelon’s shareholders, Exelon’s governance practices, and other factors. Exelon also sought input on the subject of proxy access from shareholders holding over 39 percent of Exelon’s outstanding common stock. Shareholders’ opinions about proxy access are mixed: some shareholders support proxy access consistentThis information is based on the most recent Schedule 13Gs filed with the SEC rule adopted in 2010 (which was subsequently struck down by a federal court); some shareholders support proxy access but have concerns about the potential for shareholder abuse of proxy accessThe Vanguard Group on February 11, 2019, BlackRock, Inc. on February 4, 2019 and disruption of board functions; and other shareholders are opposed to proxy access in any form.
Accordingly, at the annual meeting in 2015, the board gave shareholders the opportunity to consider alternative proxy access proposals. The proxy statement for the annual meeting in 2015 presented for a shareholder vote both a management proposal and the shareholder proposal for proxy access. These alternative proposals included different standards regarding the appropriate qualifications for shareholders to use proxy access, the number of directors who may be nominated, and other important matters. At the 2015 annual meeting, shareholders approved the management proposal with over 52% of shares voting in favor of that proposal. In contrast, the shareholder proposal received support from only approximately 43% of the shares represented at the meeting. The proposal favored by a majority of shareholders at the 2015 annual meeting would allow any shareholder or group of up to 20 shareholders holding both investment and voting rights with respect to at least 5 percent of Exelon’s outstanding common stock continuously for at least 3 years to nominate up to 20 percent of the Exelon directors to be elected (2 directorsState Street Corporation on Exelon’s current board of 13 directors) at the annual meeting of shareholders.February 11, 2019.
Both the board’s proposal and the shareholder proposal were advisory in nature. Subsequent to the 2015 annual meeting, Exelon sought further input from shareholders regarding proxy access and the board of directors considered developing trends for proxy access. Based on this additional information, Exelon determined that most shareholders would support a proxy access proposal that includes most elements of the management proposal presented at the 2015 annual meeting but with a 3 percent ownership requirement.
The proposal for proxy access recommended by the board of directors for approval by shareholders at the 2016 annual meeting is printed in its entirety in Appendix A attached to this proxy statement. In summary, the proposal recommended by the board, if approved by shareholders, would allow any shareholder or group of up to 20 shareholders holding both investment and voting rights with respect to at least 3 percent of Exelon’s outstanding common stock continuously for at least 3 years to nominate up to 20 percent of the Exelon directors to be elected (2 directors on Exelon’s current board of 13 directors) at the annual meeting of shareholders.
Name and address of beneficial owner | Amount and nature of beneficial ownership | Percent of class | ||
The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | 79,749,630 | 8.25% | ||
BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10055 | 75,231,069 | 7.80% | ||
State Street Corporation(4) State Street Financial Center One Lincoln Street Boston, MA 02111 | 58,992,473 | 6.10% |
(1) | The Vanguard Group disclosed in its Schedule 13G/A that it has sole power to vote or direct the vote of 1,115,344 shares, shared voting power over 242,029 shares, sole power to dispose or direct the disposition of 78,400,432 shares, and shared dispositive power over 1,349,198 shares. |
(2) | BlackRock, Inc. disclosed in its Schedule 13G/A that it has sole power to vote or to direct the vote of 64,557,088 shares and sole power to dispose or direct the disposition of 75,231,069 shares. |
(3) | State Street Corporation disclosed in its Schedule 13G that it has shared voting power over 45,298,089 shares and shared dispositive power over 58,992,473 shares. |
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of reports filed for fiscal year 2018 and written affirmations received from Directors and officers. Exelon believes that its Directors and officers made all required Section 16 filings on a timely basis during 2018.
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Vote on Management Proposal to Amend Exelon’s Bylaws to Provide Proxy Access
Exelon’s board of directors unanimously recommends a vote “FOR” this proposal. A summary of the principal features of the proposal and the basis of the board’s recommendation follows:
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Several shareholders with whom Exelon discussed the subject since the 2015 annual meeting expressed continued support for a minimum ownership requirement of 5 percent, although others expressed a preference for a 3 percent ownership standard. The Exelon board believes that the prevailing view among shareholders has developed since the 2015 annual meeting to support a 3 percent ownership requirement.
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Exelon already has a process for shareholders to make recommendations to the corporate governance committee for nominees for election to the board. The corporate governance committee has an important role in considering the effectiveness of the board and in identifying nominees who possess a combination of skills, professional experience and diversity of background necessary to oversee Exelon’s complex business. The corporate governance committee also considers whether a candidate would contribute to an effective and well-rounded and diverse board that operates openly and collaboratively and represents the best interests of all shareholders, and not just those with a special interest. The corporate governance committee’s process for considering nominees for director and the matters it considers are described above at page 1 under the heading “Director Qualifications and Nomination.” Although Exelon recognizes the value of proxy access, the board also recognizes that nominees proposed through proxy access are not subject to any evaluation or screening by the board’s corporate governance committee. Proxy access could therefore result in loss of important skills, experience and cognitive diversity on the board of directors.
The board believes that the board’s proposal allowing nominations of directors representing up to 20 percent of the board strikes the right balance between affording proxy access to long-term shareholders while not being overly disruptive to board functions and effectiveness that might adversely affect Exelon’s financial and operational performance.
The proposed amendment to the bylaws includes a requirement that shareholders may nominate no less than two candidates for the board of directors through proxy access. This will protect shareholders’ opportunities under proxy access in the event that the Exelon board is reduced in size to less than ten directors.
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The board believes that proxy access should be structured to require a sustained commitment to Exelon in terms of the shareholder’s ownership holding period, consistent with Exelon’s focus on managing the business for the long term. The board’s proxy access proposal will preclude the use of Exelon stock sold short in meeting the ownership requirements for proxy access. Exelon’s proposal establishes standards for treatment of borrowed shares in the share ownership requirements. In general, a shareholder who has loaned shares will be treated as the owner if the shareholder has the power to recall such loaned shares on not more than five business days’ notice, or if the shareholder has delegated voting power through an arrangement that is revocable at any time.
Vote on Management Proposal to Amend Exelon’s Bylaws to Provide Proxy Access
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Exelon believes that this is a reasonable limitation that will reduce administrative costs for Exelon and help reduce the risk of abuse of proxy access rights. Exelon has approximately 85 shareholders who collectively hold over 65 percent of Exelon’s common stock. These shareholders could easily act alone or form a group of 20 or fewer shareholders to establish the requisite 3 percent ownership requirement. Other holders of Exelon’s common stock who have legitimate concerns about the composition of the board could easily join with any one or more of the other holders of Exelon stock to form a group of 20 or fewer shareholders with the requisite 3 percent ownership. In the absence of a reasonable limitation on the number of shareholders in a group, Exelon could be required to make burdensome inquiries into the nature and duration of the share ownership of a large number of individuals participating in a nomination in order to verify their qualifications to make the nomination.
Shares held by two or more related investment funds will be treated as a single shareholder if the funds are (1) under common management and investment control, or (2) under common management and funded by a single employer, or (3) a “group of investment companies” as such term is defined in section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended.
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The board’s proposal includes a requirement that information regarding director independence be provided with respect to each nominee so it can be made available to shareholders when they cast their votes in the election of directors. Absent this requirement, shareholders will have information about the independence of Exelon’s nominees under the relevant independence standards but may not receive complete information about shareholder nominees. The board of directors will have the power to exclude shareholder nominees who do not meet established independence requirements.
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The board’s proposal provides that a shareholder participating in a nomination of directors through procedures other than proxy access will not be allowed to participate in a nomination at the same meeting through proxy access. Proxy access is intended to allow shareholders to nominate directors without the expense of a proxy solicitation. A shareholder who uses proxy access and engages in a proxy solicitation at the same time incurs the expense that proxy access is intended to avoid and diminishes the opportunities of other shareholders to make use of proxy access.
The nominating shareholder and members of a nominating group will not be permitted to join in another group that is making a nomination of other nominees through proxy access. This restriction is needed to prevent the use of the same shares to meet the minimum shareholding requirements for multiple nominations through proxy access.
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Vote on Management Proposal to Amend Exelon’s Bylaws to Provide Proxy Access
The summary presented above is qualified by reference to the complete text of the proposal set forth in Appendix A. Shareholders are encouraged to review and rely upon the complete text of the proposed amendment to the Exelon bylaws.Shareholder Proposals
The board of directors unanimously recommends a vote “FOR”
the management proposal regarding proxy access.
Communication with the Board of Directors
PROCESS FOR SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Shareholders and other interested persons can communicate with any director or the independent directors as a group by writing to them, c/o Bruce G. Wilson, Senior Vice President, Deputy General Counsel and Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. The board has instructed the Corporate Secretary to review communications initially and transmit a summary to the directors and to exclude from transmittal any communications that are commercial advertisements, other forms of solicitation, general shareholder service matters or individual service or billing complaints. Under the board policy, the Corporate Secretary will forward to the directors any communication raising substantial issues. All communications are available to the directors upon request. Shareholders may also report an ethics concern with the Exelon Ethics Hotline by calling 1-800-23-Ethic (1-800-233-8442). You may also report an ethics concern via the Internet at EthicsOffice@ExelonCorp.com.
SHAREHOLDER PROPOSALS
If you wantwish to submit a proposal for possible inclusion in next year’s proxy statement, you must submit it in writing to the Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. Exelon must receive your proposal onno earlier than October 22, 2019 or beforelater than November 16, 2016.21, 2019. Exelon will consider only proposals meeting the requirements of the applicable rules of the Securities and Exchange Commission. Under our Bylaws,bylaws, the proposal must also disclose fully all ownership interests the proponent has in Exelon and contain a representation as to whether the shareholder has any intention of delivering a proxy statement to the other shareholders of Exelon.
We strongly encourage any shareholder interested in submitting a proposal to contact our Corporate Secretary in advance of this deadline to discuss the proposal, and shareholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement. Our corporate governance committeeCorporate Governance Committee reviews all shareholder proposals and makes recommendations to the boardBoard for action on such proposals.
Additionally, under our Bylaws,bylaws, for a shareholder to bring any matter before the 20172020 annual meeting that is not included in the 20162020 proxy statement, the shareholder’s written notice must be received by the Corporate Secretary not lessno earlier than 120 days prior to the first anniversary of the mailing date of this proxy statement, which will beOctober 22, 2019 or later than November 16, 2016.21, 2019.
DIRECTOR NOMINATIONSDirector Nominations
A shareholder who wishes to recommend a candidate (including a self-nomination) to be considered by the Exelon corporate governance committeeCorporate Governance Committee for nomination as a directorDirector must submit the recommendation in writing to the Chair of the Corporate Governance Committee, c/o Bruce G. Wilson,Thomas S. O’Neill, Senior Vice President, Deputy General Counsel and Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. The corporate governance committeeCorporate Governance Committee will consider all recommended candidates and self-nominees when making its recommendation to the full boardBoard of directorsDirectors to nominate a slate of directorsDirectors for election.
Nominations for |
Nominations for |
CommunicationA shareholder may also use one of two alternative provisions of Exelon’s bylaws to nominate a candidate for election as a Director. Under one provision of the bylaws currently in effect, a shareholder must comply with the following: (1) notice of the proposed nomination must be received by Exelon no earlier than October 22, 2019 or later than November 21, 2019; (2) the notice must include information required under the bylaws, including: (a) information about the nominating shareholder, (b) information about the candidate that would be required to be included in a proxy statement under the rules of the SEC, (c) a representation as to whether the shareholder intends to deliver a proxy statement to the other shareholders of Exelon, and (d) the signed consent of the candidate to serve as a Director of Exelon, if elected. Under this procedure, any shareholder can nominate any number of candidates for director for election at the annual meeting, but the shareholder’s nominees will not be included in Exelon’s proxy statement or form of proxy for the meeting.
A shareholder who meets criteria in the Exelon bylaws may also nominate a limited number of candidates for election as Directors through provisions commonly referred to as “proxy access.” Subject to the requirements set forth in the bylaws, any shareholder or group of up to 20 shareholders holding both investment and voting rights with respect to at least 3% of Exelon’s outstanding common stock continuously for at least 3 years may nominate up to 20% of the Exelon Directors to be elected (two Directors on Exelon’s current Board of Directors13 Directors). The nominating shareholder(s) must comply with the following, among other detailed requirements specified in the bylaws: (1) notice of the proposed nomination and other required information must be received by
64 Exelon 2019 Proxy Statement
Exelon no earlier than October 22, 2019 or later than November 21, 2019; (2) the notice must include information required under the Bylaws, including: (a) information about the nominating shareholder(s), (b) information about the candidate(s) including information that would be required to be included in a proxy statement under the rules of the SEC, and (c) the signed consent of each candidate to serve as a Director of Exelon, if elected. Under this procedure, the shareholder’s nominees will be included in the Exelon proxy statement and the form of proxy for the meeting.
AVAILABILITY OF CORPORATE DOCUMENTSA shareholder who wishes to submit a nomination is encouraged to seek the advice of legal counsel regarding the requirements of the SEC and Exelon’s bylaws. Exelon will not consider any proposal or nomination that does not comply with the requirements of the SEC and Exelon’s bylaws.
Exelon’s bylaws are amended from time to time. Please review the bylaws posted on our website to determine if any changes to the nomination process or requirements have been made.
Availability of Corporate Documents
The Exelon Corporate Governance Principles, the Exelon Code of Business Conduct, the Exelon Amended and Restated Bylaws, and the charters for the audit, corporate governance, compensationAudit, Corporate Governance, Compensation and leadership developmentLeadership Development and other committeesCommittees of the boardBoard of directorsDirectors are available on the Exelon website atwww.exeloncorp.com, on the corporate governanceGovernance page under the Investors tab. Copies may be printed from the Exelon website and copies are available without charge to any shareholder who requests them by writing to Bruce G. Wilson,Thomas S. O’Neill, Senior Vice President, Deputy General Counsel and Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398. In addition, our Articles of Incorporation, Compensation Consultant Independence Policy, Political Contributions Guidelines, biographical information concerning each director,Director, and all of our filings submitted to the SEC are available on our website. Access to this information is free of charge to any user with internet access. Information contained on our website is not part of this proxy statement.
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Frequently Asked Questions
Can I access the Notice of Annual Meeting and Proxy Statement and the 20152018 Financial Report on the Internet?
As permitted by SEC rules, we are making this proxy statement and our annual report available to shareholders electronically via the internet at www.proxyvote.com.www.proxyvote.com. On March 16, 2016,20, 2019, we began mailing to our shareholders a notice containing instructions on how to access this proxy statement and our annual report and how to vote online. If you received that notice, you will not receive a printed copy of the proxy materials unless you request it by following the instructions for requesting such materials contained on the notice.
In addition, shareholders may request to receive proxy materials in printed form or electronically by email on an ongoing basis. Exelon encourages shareholders to take advantage of the availability of the proxy materials on the internet in order to save Exelon the cost of producing and mailing documents to you, reduce the amount of mail you receive and help preserve resources.
Shareholders of Record:record: If you vote on the internet atwww.proxyvote.com, simply follow the prompts for enrolling in the electronic delivery service.
Beneficial Owners:owners: You also may be able to receive copies of these documents electronically. Please check the information provided in the proxy materials sent to you by your bank, broker or other holder of record regarding the availability of this service.
Do I need a ticket to attend the annual meeting?Annual Meeting?
You will need an admission ticket or proof of ownership to enter the annual meeting.
If you are a shareholder of record, the bottom half of your proxy card will serve as your admission ticket.
If your shares are held in the name of a bank, broker, or other holder of record and you plan to attend the meeting, you must present proof of your ownership of Exelon stock as you enter the meeting, such as a bank or brokerage account statement. If you would rather have an admission ticket, you can obtain one in advance by mailing a written request, along with proof of your ownership of Exelon stock, to:
Annual Meeting Admission Tickets c/o Bruce G. Wilson,Thomas S. O’Neill, Senior Vice President, Deputy General Counsel and Corporate Secretary, Exelon Corporation, 10 South Dearborn Street, P.O. Box 805398 Chicago, Illinois 60680-5398.
Shareholders also must present a form of personal photo identification in order to be admitted into the meeting.
No cameras, audio or video recording equipment, similar electronic devices, large bags, briefcases or packages will be permitted into the meeting or adjacent areas. Cell phones and similar wireless communication devices will be permitted in the meeting only if turned off. All items brought into the meeting will be subject to search.
Who is entitled to vote at the annual meeting?Annual Meeting?
Holders of Exelon common stock as of 5:00 p.m. New York Time on March 4, 20162019 are entitled to receive notice of the annual meeting and to vote their shares at the meeting. As of that date, there were 921,694,742964,986,919 shares of common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the meeting.
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
If your shares are registered directly in your name with Exelon’s transfer agent, EQ (formerly Wells Fargo Shareowner Services,Services), you are the “shareholder of record” of those shares. This Notice of Annual Meeting and Proxy Statement and accompanying documents have been provided directly to you by Exelon.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of those shares. This Notice of Annual Meeting and Proxy Statement and the accompanying documents have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote your shares by using the voting instruction card or by following their instructions for voting by telephone or on the Internet.internet.
66 Exelon 2019 Proxy Statement
Frequently Asked Questions
How do I vote?
Your vote is important. We encourage you to vote promptly. Internet and telephone voting are available through 11:59 p.m. Eastern Time on April 25, 2016.29, 2019. You may vote in the following ways:
By | By Mail | At the Annual Meeting | ||||
If you have internet access, you may vote by internet. You will need the control number included on your Notice Regarding the Availability of Proxy Materials, proxy card or voting instruction form |
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May I revoke a proxy?
Yes. You may revoke a proxy at any time before the proxy is exercised by filing with the Corporate Secretary a notice of revocation, or by submitting a later-dated proxy by mail, telephone or electronically through the Internet. You may also revoke your proxy by attending the annual meeting and voting in person.
What is householding and how does it affect me?
Exelon has adopted a procedure approved by the SEC called “householding.” Under this procedure, shareholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of this Notice of Annual Meeting and Proxy Statement and the 20152017 Annual Report, unless we are notified that one or more of these shareholders wishes to continue receiving individual copies. This procedure will reduce our printing costs and postage fees. Shareholders who receive proxy materials in paper form will continue to receive separate proxy cards/voting instruction forms to vote their shares. Shareholders who receive the Notice of Internet Availability of Proxy Materials will receive instructions on submitting their proxy cards/voting instruction form via the internet.
Frequently Asked QuestionsIf you would like to change your householding election, request that a single copy of the proxy materials be sent to your address, or request a separate copy of the proxy materials, please contact our distribution agent, Broadridge Financial Solutions, by calling (800) 542-1061 or by writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717. We will promptly deliver the proxy materials to you upon receipt of your request. If you hold your shares in street name, please contact your bank, broker, or other record holder to request information about householding.
If you receive more than one proxy card/voting instruction form, your shares probably are registered in more than one account or you may hold shares both as a registered shareholder and through the Exelon 401(k) Savings Plan. You should vote each proxy card/voting instruction form you receive.
What are the voting requirements to elect the directorsDirectors and to approve each of the proposals discussed in the Proxy Statement?
The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the annual meeting, in person or represented by proxy, is necessary to constitute a quorum.
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Frequently Asked Questions
Election of Directors: Majority Vote Policy
Under our Bylaws, directorsbylaws, Directors must be elected by a majority of votes cast in uncontested elections. This means that the number of votes cast “for” a directorDirector nominee must exceed the number of votes cast “against” the nominee. An abstention will have no effect on the outcome of the vote because an abstention does not count as a vote cast. In contested elections, the vote standard would be a plurality of votes cast, in which case a withhold vote would have no effect on the vote’s outcome. In either case, broker non-votes will have no effect on the outcome of the vote because they are not considered votes cast.
Our Bylawsbylaws provide that, in an uncontested election, each directorDirector nominee must submit to the boardBoard before the annual meeting a letter of resignation that becomes effective only if the directorDirector fails to receive a majority of the votes cast at the annual meeting. The resignation of a directorDirector nominee who is not an incumbent directorDirector is automatically accepted by the board.Board. The resignation of an incumbent directorDirector is tendered to the independent directorsDirectors of the boardBoard for a determination of whether or not to accept the resignation. The board’sBoard’s decision and the basis for the decision would be disclosed within 90 days following the certification of the final vote results.
Ratification of PricewaterhouseCoopers as Independent Auditor
The appointment of PricewaterhouseCoopers LLP (PwC) as Exelon Corporation’s independent auditor requires an affirmative vote of a majority of shares of common stock represented at the annual meeting and entitled to vote thereon in order to be adopted. An abstention will have the effect of a vote “against” the ratification of the independent auditor. If shareholders do not ratify the appointment of PwC, the Audit Committee will reconsider the appointment.
Executive Compensation
TheUnder our bylaws, whenever any corporate action is to be taken by vote of the shareholders, it shall be authorized upon receiving an affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon, and abstentions will have the effect of a vote “against” the action. However, the vote on executive compensation is advisory and is not binding on the company,Company, the boardBoard of directors,Directors, or the compensationCompensation and leadership development committeeLeadership Development Committee in any way, as provided by law. Our boardBoard and the compensationCompensation and leadership development committeeLeadership Development Committee will review the results of the vote and input from shareholders and will take itthem into account in making a determination concerning executive compensation consistent with our record of shareowner engagement.
ManagementShareholder Proposal Regarding Proxy Accessfrom Burn More Coal
The adoption of the managementshareholder proposal regarding proxy access requires an affirmative vote ofby a majority of the shares represented at the annual meeting and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal.
Shareholder Proposal Regarding the Form of Director Qualification Disclosure
The adoption of the shareholder proposal requires an affirmative vote of a majority of shares represented at the annual meeting and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal.
How frequently will I have an opportunity to vote on executive compensation?
Every year. The Exelon board of directors has decided to hold the advisory vote on executive compensation annually until the next required vote on the frequency of shareholder votes on the compensation of executives.
Could other matters be decided at the annual meeting?Annual Meeting?
AtAs of the date this proxy statement went to press, we did not knowknew of anyno matters to be raised at the annual meeting other than those referred to in this proxy statement.
Who will count the votes?
Representatives of Broadridge Financial Communications and Exelon’s Office of Corporate Governance will tabulate the votes and act as inspectors of the election.
Where can I find the voting results?
We will report the voting results in a Form 8-K to be filed with the SEC within four business days following the end of our annual meeting.
Who will pay for the cost of this proxy solicitation?
Exelon will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors,Directors, officers or employees in person or by telephone, electronic transmission and facsimile transmission. We have hired Alliance Advisors, LLCMorrow Sodali to distribute and solicit proxies. We will pay Alliance Advisors, LLCMorrow Sodali a fee of $15,000$20,000 plus reasonable expenses for these services.
68 Exelon 2019 Proxy Statement
Definitions of Non-GAAP Measures
Exelon reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP) and supplements its reporting with certain non-GAAP financial measures, including adjusted (non-GAAP) operating earnings per share, earned ROE, and FFO/Debt to enhance investors’ understanding of Exelon’s performance. Our method of calculating adjusted (non-GAAP) operating earnings and operating ROE may not be comparable to other companies’ presentations.
Adjusted (non-GAAP) operating earningsper share exclude certain costs, expenses, gains and losses and other specified items, including mark-to-market adjustments from economic hedging activities, unrealized gains and losses from nuclear decommissioning trust fund investments, certain costs associated with plant retirements and divestitures, costs related to a cost management program, and other items as set forth in the table below reconciling adjusted (non-GAAP) operating earnings from GAAP earnings, which is the most directly comparable GAAP measure. Management uses adjusted (non-GAAP) operating earnings as one of the primary indicators to evaluate performance, allocate resources, set incentive compensation targets and plan and forecast future periods. We believe the measure enhances an investor’s overall understanding of period over period financial results and provides an indication of Exelon’s baseline operating performance by excluding items that are considered by management to not be directly related to the ongoing operations of the business.
The table below reconciles reported GAAP Earnings per share to adjusted (non-GAAP) operating earnings per share for 2018 (amounts may not add due to rounding).
2018 GAAP Earnings (Loss) Per Share | $ | 2.07 | ||
Adjustments: | ||||
Mark-to-market impact of economic hedging activities | 0.26 | |||
Unrealized gains related to NDT fund investments | 0.35 | |||
Gain on Contract Settlement | (0.06 | ) | ||
Asset Retirement Obligation | 0.02 | |||
Long-lived asset impairments | 0.04 | |||
Plant retirements and divestitures | 0.53 | |||
Reassessment of deferred income taxes | (0.02 | ) | ||
Cost management program | 0.05 | |||
Noncontrolling interests | (0.12 | ) | ||
Adjusted (non-GAAP) Operating Earnings (Loss) Per Share | $ | 3.12 |
Earned ROEis calculated using adjusted (non-GAAP) operating earnings, reflecting all lines of business for the utility businesses (electric distribution, gas distribution, transmission), divided by average shareholder’s equity over the year. Management uses operating ROE as a measurement of the actual performance of the company’s utility business.
FFO/Debtis a coverage ratio that compares funds from operations to total debt and is a key ratio analyzed by the credit rating agencies in determining Exelon’s credit rating. An investment grade rating is critical as it increases the ability to participate in commercial business opportunities, lowers collateral requirements, creates reliable and cost-efficient access to capital markets and increases business and financial flexibility. The ratio is calculated following S&P’s current methodology. The most directly comparable GAAP measure to FFO is GAAP Cash Flow from Operations and the most directly comparable GAAP measure to Debt is Long-Term Debt plus Short-Term Borrowings. Management uses FFO/Debt to evaluate financial risk by measuring the company’s ability to service debt using cash from operations. We believe the measure enhances an investor’s overall understanding of the creditworthiness of Exelon’s operating companies.
Due to the forward-looking nature of some forecasted non-GAAP measures, information to reconcile the forecasted adjusted (non-GAAP) measures to the most directly comparable GAAP measure may not be currently available; therefore, management is unable to reconcile these measures.
www.exeloncorp.com 69
Appendix
2016 PShare Scorecard
The table below reflects the 2016 PShare Scorecard, which uses a “stair-step” approach with no interpolation between data performance levels. Performance was evaluated at the end of 2016. The 2016 scorecard applies to the first year of the 2016-2018 PShare program.
2016 PShare Scorecard | ||||||||||||
Metrics | Metric Weighting | Threshold | Target | Distinguished | Final Score | Actual Award vs. Metric Weighting | ||||||
Exelon ROE | 50.0% | 6.60% | 7.05% | 7.50% | 8.08% | 75.0% | ||||||
ExGen FFO/Debt | 50.0% | 27.0% | 30.0% | 38.01% | 33.7% | 50.0% | ||||||
Committee-Approved | 125.00% | |||||||||||
Performance |
2017- 2018 PShare Scorecard
The table below reflects the 2017- 2018 PShare Scorecard, which uses a “stair-step” approach with no interpolation between data performance levels for FFO/Debt. Utility Return on Equity and Utility Net Income use interpolation. Performance was evaluated at the end of 2018. The 2018 scorecard applies to the final two years of the 2016-2018 PShare program.
2017-2018 PShare Scorecard | ||||||||||||||||
Metrics | Metric Weighting | Threshold 50% | Target | Distinguished | Final Score | Actual Award vs. Metric Weighting | ||||||||||
Utility ROE | 33.3% | $1,362 | $1,571 | $1,785 | $1,683 | 42.01% | ||||||||||
Utility Net Income | 33.3% | 8.3% | 9.3% | 10.4% | 9.7% | 39.35% | ||||||||||
Metric | Metric Weighting | Threshold 50% | 75% | Target 100% | 125% | Distinguished 150% | Final Score | Actual Award vs. Metric Weighting | ||||||||
Exelon FFO/Debt | 33.4% | >=16.0% | >=17.0% | >=18.0% | >=22.0% | >=24.0% | 20.6% | 33.41% | ||||||||
Committee Approved | 114.77% | |||||||||||||||
Performance |
70 Exelon 2019 Proxy Statement
Appendix
Exelon Corporation
Categorical Standards of Independence
In accordance with The Exelon Corporation Independence Standards for Directors, the Board has determined that the following categories of relationships do not affect an Exelon director’s independence unless determined to affect a director’s independence by reason of the independence standards set forth in Exelon’s Corporate Governance Principles. The categorical standards are intended to assist the directors with independence determinations in connection with relationships not specifically covered by the independence standards set forth in the Corporate Governance Principles. The Board may determine that other relationships do not affect independence.
Immaterial position and ownership interest:The relationship arises solely from (1) such director’s (or an immediate family member’s) position as a director, trustee, advisory board member, or similar position with another company or organization; (2) such director’s (or an immediate family member’s) direct or indirect ownership of a 10% or less equity interest in another company or organization; or (3) a combination of the relationships described in clauses (1) and (2).
Immaterial business relationships:A director’s (or an immediate family member’s) relationship with another company that participates in a transaction with the Company or its consolidated subsidiaries where: the rates or charges involved are determined by competitive bid or are competitive with current prices generally available to the public for similar goods and services; the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; the transaction involves services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar services, or commercial banking services provided on arm’s length terms and in the ordinary course of business; the provider of goods or services in a transaction is determined by the purchaser to be the only practical source to obtain the goods or services; or the interest arises solely from direct or indirect ownership of debt or equity securities of the Company or its subsidiaries where all holders of the same class of securities have the same rights and receive the same benefits on a pro rata basis.
Immaterial transactions:A director’s (or an immediate family member’s) relationship with another company that has made payments to, or received payments from, the Company for property or services in an amount which, in the last fiscal year, does not exceed the greater of $1 million or 2% of such other company’s consolidated gross revenues for such year.
Immaterial indebtedness:A director’s relationship as an executive officer, or where any member of his or her immediate family is an executive officer, of any other company which is indebted to the Company, or to which the Company is indebted, in each case excluding normal trade debt, and the total principal amount of such indebtedness is less than the greater of $1 million or 2% of the total consolidated assets of such other company.
Immaterial investment:A director’s (or an immediate family member’s) relationship with another company (1) in which Exelon or any of its consolidated subsidiaries (including any benefit plan or arrangement sponsored by Exelon or its consolidated subsidiaries), or any nuclear decommissioning trust or other segregated investment fund maintained by Exelon or its subsidiaries makes investments or places funds for investment management or (2) which underwrites or invests in securities issued by Exelon or any of its consolidated subsidiaries, all in the ordinary course of such other company’s business on terms and under circumstances similar to those available to or from entities unaffiliated with such director.
Immaterial non-profit relationships:A director’s relationship as a current employee or where any member of his or her immediate family serves as executive officer of a charitable or educational organization which receives contributions from the Company or any of its consolidated subsidiaries in its most recent fiscal year of less than the greater of $1 million or 2% of that organization’s consolidated gross revenues in that year. In any other circumstances, a director’s relationship with a charity or educational organization to which the Company or any of its consolidated subsidiaries makes contributions where the aggregate contributions made by the Company or any of its consolidated subsidiaries to that organization in its most recent fiscal year were less than the greater of $1 million or 5% of that organization’s consolidated gross receipts for that year.
www.exeloncorp.com 71
AIP |
PROPOSED AMENDMENT TO EXELON’S BYLAWS TO IMPLEMENT PROXY ACCESS
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Annual Incentive Plan | ||
Appendix A
Electric Company, |
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Customer Average Interruption Duration Index | ||
ComEd | Commonwealth Edison Company,an Exelon |
Appendix A
EPS | Earnings Per Share | |
FERC | Federal Energy Regulatory Commission | |
FFO | Funds From Operations | |
GHG | Greenhouse Gases | |
LTIP | Long-Term Incentive Plan | |
NYSE | New York Stock Exchange | |
PCAOB | Public Company Accounting Oversight Board | |
PECO | PECO Energy Company,an |
PHI | ||
PShares | Performance Shares | |
PwC | PricewaterhouseCoopers LLP | |
ROE | Return on |
RSUs |
RTOs | ||
SAIFI | System Average Interruption Frequency Index | |
SEC | Securities and Exchange Commission | |
TDC | Total Direct Compensation | |
TSR | Total Shareholder Return | |
UTY | PHLX Utility Sector Index | |
ZEC | Zero Emission Credits |
www.exeloncorp.com 73
2018 Exelon Awards and Recognition
Community Engagement Exelon employees volunteered more than240,000 hoursand donated nearly $9M Kids in Need of Corporate Excellence One of Joined the | Diversity and Black Enterprise’s50 Best Companies for Diversity2007-2009, 2011-2012, 2014-2015, 2018 DiversityInc Top 50 Companies 2018for diversity and Workplace Military TimesBest for Vets 2013-2018 Human Rights CampaignBest Places to Vault’s list of Environmental |
Appendix A
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VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 29, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the environmental impacts and costs incurred by mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 29, 2019. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Appendix A
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Appendix A
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
| KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
EXELON CORPORATION | ||||||||||||||
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1. | Election of Directors | For | Against | Abstain | ||||||
Nominees: | ||||||||||
1a. | Anthony K. Anderson | ☐ | ☐ | ☐ | ||||||
| 1b. | Ann C. Berzin | ☐ | ☐ | ☐ | |||||
1c. | Laurie Brlas | ☐ | ☐ | ☐ | ||||||
1d. | Christopher M. Crane | ☐ | ☐ | ☐ | ||||||
1e. | Yves C. de Balmann | ☐ | ☐ | ☐ | ||||||
1f. | Nicholas DeBenedictis | ☐ | ☐ | ☐ | ||||||
1g. | Linda P. Jojo | ☐ | ☐ | ☐ | ||||||
1h. | Paul L. Joskow | ☐ | ☐ | ☐ | ||||||
1i. | Robert J. Lawless | ☐ | ☐ | ☐ | ||||||
1j. | Richard W. Mies | ☐ | ☐ | ☐ | ||||||
1k. | Mayo A. Shattuck III | ☐ | ☐ | ☐ | ||||||
1l. | Stephen D. Steinour | ☐ | ☐ | ☐ | ||||||
1m. | John F. Young | ☐ | ☐ | ☐ |
The Board of Directors recommends you vote FOR proposals 2 and 3 and AGAINST proposal 4. | For | Against | Abstain | |||||||||||||||||||
2. | Ratification of PricewaterhouseCoopers LLP as Exelon’s Independent Auditor for 2019. | ☐ | ☐ | ☐ | ||||||||||||||||||
| Advisory approval of executive compensation. | ☐ | ☐ | ☐ | ||||||||||||||||||
4. | A shareholder proposal from Burn More Coal. | ☐ | ☐ | ☐ | ||||||||||||||||||
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For address changes and/or comments, please check this box and write them on the back where indicated. |
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Please indicate if you plan to attend this meeting. | ☐ | ☐ | ||||||||||
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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ADMISSION TICKET
To attend the annual meeting please detach and bring this ticket along with a valid photo ID and present them at the Shareholder Registration Table upon arrival. This ticket is not transferable.
No cameras, audio or video recording equipment, similar electronic devices, large bags, backpacks, briefcases or packages will be permitted in the meeting room or adjacent areas. Cell phones and similar wireless communication devices will be permitted in the meeting only if turned off. All items brought into the meeting will be subject to search.
NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING
Exelon’sExelon's Notice and Proxy Statement and Annual Report are available online atwww.proxyvote.com. The electronic documents have been prepared to offer easy viewing and are completely searchable. The website will allow you to view the materials as you vote the shares. We believe that you will find this method of viewing Exelon's information and voting the shares more convenient.
We encourage you to vote at www.proxyvote.com
and then register for the electronic delivery of Exelon's proxy materials for 2020 and beyond.
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IF YOU WISH TO ATTEND THE ANNUAL MEETING, DETACH AND BRING THIS ADMISSION TICKET ALONG WITH A PHOTO ID
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E02681-P75443-Z67404
E60466-P19604-Z74427 |
EXELON CORPORATION
2019 COMMON STOCK PROXY
This proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Shareholders to be held
on Tuesday, April 30, 2019 at 9:00 A.M. Eastern Time at
The Hotel du Pont
42 West 11th Street
Wilmington, Delaware
THOMAS S. O'NEILL and CARTER C. CULVER, or either of them with power of substitution, are hereby appointed to vote as specified all shares of common stock which the shareholder(s) named on the proxy card is/are entitled to vote at the annual meeting described above or at any adjournment thereof, and in their sole discretion to vote upon all other matters that may be properly brought before the annual meeting. If the proxy card is signed and dated, but no votes are indicated, it will be voted as recommended by the Board of Directors.
The Northern Trust Company as trustee for the Exelon Employee Savings Plan, for which Northwest Plan Services, Inc. is the Plan record keeper, is hereby authorized to execute a proxy with the identical instructions for any shares of common stock held in the Plan for the benefit of any shareholder(s) named on this card. For all shares for which no valid instruction is timely received, the trustee of the Plan is instructed to vote the shares in the same proportion as the shares that were affirmatively voted by shareholders participating in the Plan.
Address Changes/Comments: | |||||||||
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