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In 2022 we continued to focus on our short- and long-term strategies, with particular emphasis on a recovery plan coming outChairman of the last rate case. This included investing time Board, President
To our Shareholders: On behalf of our Board of Directors, management, and employees, I invite you to participate in our 2024 Annual Meeting of Shareholders. The meeting will be held at 1:30 p.m. (EDT), Wednesday, May 22, 2024. Details regarding how to attend the meeting and the business to be conducted are in the accompanying Notice of Annual Meeting and Proxy Statement. | ||
Jeffrey B. Guldner
Chairmandetails of the Board, President
and Chief Executive Officer
On behalfsome of our Board of Directors, management and employees,accomplishments, but a few that I invite youwould like to participate in specifically mention here are:
Our year began with an intentional review of the lessons we learned from the outcome of our 2019 rate case. One of the items that we focused on was the need to improve our customer experience. We believe our success in that area is reflected byoutstanding operational performance, including the fact that Palo Verde Generating Station attained its 32nd consecutive year as the nation’s largest power producer, all of it carbon-free;
Last, we committed to creating long-term value for our shareholders. Thefinancials, including minimizing shareholder impact from the 2019 rate case decision led to one of the largest financial challenges we have faced as a Company in recent history. Nonetheless, we committed to minimize shareholder impact by deferring any equity issuances,issuance, managing costs and capital allocation, and preservingsustaining dividend growth; and growing
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Purpose: As Arizona stewards, we do what is right for the people and prosperity of our state.
Vision: Create a sustainable energy future for Arizona.
Mission: Serve our customers with clean, reliable, and affordable energy.
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Our 10-Year Strategic Plan outlines how we will deliver on the APS Promise. You can read more about the Plan on page 3364 of this Proxy Statement. In 2022,2023, we focusedcontinued our focus on categorizing our strategy and business planning ambitions into two different time horizons:
Today-forward, where we focus on near-term execution to maximize the potential of our current business with metrics that focus on today and now. In our today-forward planning, we look at numerous factors, including our corporate and business unit plans, our tiered metrics, the Company’s position on key issues and topics, and our strategic initiatives.
Future-back, where we look at how we change the business over the next decade in order to execute on our Vision and Mission. In our future-back planning, we focus on our long-term strategies and risks, we engage in future state scenario planning, and we scan the external environment for opportunities and risks related to our business model.
This strategic thinking has helped us establish an efficient strategy and planning process, created an integrated planning system, and has provided for effective and informed decision-making. The result of this process is a
Last year I told you that I saw 2022 as fullmidst of opportunities. I see an even better future for 2023. Arizona’s economya transformation. Our state’s population continues to grow, rapidly, which translates into steady customer growth. Arizona also continuesespecially in Maricopa County, and Phoenix is booming as a vibrant commercial hub in the Southwest region, attracting an influx of new residents and businesses, with large industrial customers and data centers continuing to diversify — we see an increaseexpress interest in advanced manufacturing, technologythe Valley. At the same time, our customers’ needs and startups, whichpreferences are evolving, including increased demand for innovative demand-side programs and options to purchase clean energy directly. We continue to review, refine, and implement our strategic plan to meet the opportunities and challenges presented by the growth in turn means resiliency and continued growth.
The COVID-19 pandemic is largely behind us, and we can re-engage in person with each other, our customers, our regulators,state and our communities. I appreciatecustomers’ choices, expectations, and valuesatisfaction. We believe this face-to-face time. This year, it has been rewardingstrategic approach and focus will drive shareholder value.
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knowledge, experience and skills bring crucial insights to developing near- and long-term goals and, ultimately, overseeing our progress in building a more sustainable energy future and creating customer and shareholder value. I want to thank the Board of Directors for their outstanding support in 2022.
One of our Directors, Dr. Dale Klein,As we noted last year, Kathy Munro will retirebe retiring from the Board as ofat the 2023 Annual Meeting. We thank Dale for his many years of service. His deep knowledge of the nuclear industry and valued counsel on important issues facing our Company will be missed.
We are excited about the addition of Kristine Svinicki to the Board. As a former Chairman of the Nuclear Regulatory Commission, Kristine will bring deep knowledge and great insight to us as we operate Palo Verde Nucelar Generating Station, the largest nuclear power plant in the United States. I look forward to working with Kristine.
Finally, in February of 2023, the Board elected Paula Sims as the new Lead Director, starting in May of 2023. The transition of the position from Kathy Munro to Paula Sims is part of our plan to provide an orderly transition in light of Kathy’s scheduled departure from the Board in 2024. I want to personally thank Kathyher for the excellect jobguidance, knowledge, and expertise that she has done in the role of Lead Director. She has provided wisdom and counselbrought to the Board and to the managementleadership team andover the years. We are a stronger Company thanks to our shareholders. Kathy will continue to serve on the Board and her committees until her retirement.
We continue to execute on our Clean Energy Commitment to provide 100% clean, carbon-free energy to customers by 2050, and we continue to evaluate ways to achieve that commitment through the promotion of supportive policies, economic advancement in our communities, innovative technologies in our industry, and collaboration with our stakeholders. You can read more about our progress on page 13 of this Proxy Statement.
service as a director.
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Our independent Board membersAs Independent Directors, we are active, engagedcommitted to sound governance principles, and contributing members. Our discussions are detailed and focused on oversight of Pinnacle West’s and APS’s business strategies and the implementation of these strategies. The Board’s oversight and guidance seeks to make sure that Pinnacle West operates responsibly and efficiently and achieves long-term sustainableensuring long term value for our fellow shareholders.”
Kathryn L. Munro
Lead Director
ThisThe energy industry is rapidly changing, largely in part due to the development of new technologies, as well as an emphasis on clean energy by customers, investors, and other stakeholders. The energy landscape in Arizona is experiencing unprecedented load growth and increases in demand for energy. At our Board meetings and during our Strategic Retreat, we engaged with the management team in robust discussions about overall strategy, business priorities, long-term risks, and growth opportunities. The Today-Forward and Future-Back strategic framework allows the Board to actively monitor the changing landscape, while focusing on shareholder returns, customer experience and satisfaction, system reliability, resiliency, and affordability.
It has been a privilege to serve as your Lead Director and I thank you for your support. I have had the opportunity to work with very talented management teams and board members over the years and it truly has been an honor to serverisks identified in this role. In my last year onProxy Statement and other risks identified by the Board, I will continue to be an active memberCompany as its top risks. We understand that a critical role of the Board and my committees, but withis risk oversight; be assured it is a focus on the future members of the Board. I made a commitment to the shareholders to help to build a strong and effective Board, and I believe I have done that and will continue that focus.
We have a great Company and one we should be proud of.
It is the Board’s honor to serve as the stewards of Pinnacle West. The Board’s oversight and guidance focuses on operational responsibility and efficiency and the achievement of long-term sustainable value for our fellow shareholders. We fulfill our oversight responsibilities through our five standing committees and as a full Board. Each committee provides ongoing oversight for the most significant issues and risks designated to it, reports to the Board on its oversight activities, and elevates review of key matters to the Board as appropriate.
The independent Directors, together with Jeff, are deeply committed to sound corporate governance, oversight of environmental and social issues, the performance of our nuclear and non-nuclear operations, human capital management, customer service, and effective risk management policies and practices. These, among others, were topics of thoughtful considerationpriority for the Board in 2022.
Our independent Board members are active, engaged and contributing members. Our discussions are detailedone that we actively address.
We acknowledge and appreciate the progress thatstakeholders. This strategy was a thoughtful undertaking by the management team, fully supported by the Board. Management’s engagement strategy has maderesulted in its businessa number of favorable decisions for APS in the last year and you can read more about these outcomes in Jeff's letter in the Annual Report. We will maintain our focus on this engagement strategy planning. At our September Retreat,and support management's efforts to improve outcomes with the Arizona Corporation Commission so that we exploredcan invest in significant detail the today-forwardinfrastructure needed to support Arizona's growth while delivering reliable and future-back strategy. The Board receives periodic updates on the implementation of the management
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team’s strategic plan
The Composition
It is with mixed emotions that I say good-bye to our trusted advisor and friend, Dale Klein. Throughout his service, Dale has brought thought-provoking and insightful analyses to the issues that have come before the Board. His expertise in the nuclear industry has been extremely valuable to the Board. His counsel has been wise, and he has been a phenomenal asset to the Board of Directors and the Company. We are sorry to see Dale leave the Board, but have valued his significant contributions over the years.
We are excited to have Kristine Svinicki join the Board. As a former ChairmanChair of the Nuclear Regulatory Commission, retired from the Board. We retained the nuclear expertise with the addition of Kristine brings expertise in allSvinicki, also a former Chair of the Nuclear Regulatory Commission. This is indicative of our approach to Board membership, showing that we are looking at, and planning for, the current and future areas of nucelar energy, regulation, operationexpertise that will be needed to best serve the Company and safety. I look forward to working with Kristineits shareholders.
The Board continues to focus on addingbusiness value of having diverse candidates. We require our outside director search firm to make diversity a focal point of all our
searches. The Corporate Governance and Public Responsibility Committee is responsible for identifying and recommending to the Board individuals qualified to become Directors. The Board believes that its membership should be composed of a combination of knowledge, skills, and experienceperspectives in the following areas, among others: finance and accounting; business operations and strategy; leadership experienceboardroom. We are deliberate in large organizations; energy and utility industry; public policy and regulatory compliance; and risk oversight and risk management. The Board also believes that diversity, utilizing a broad meaning that includes race, gender, background, ethnicity, accomplishments, and other traits, is an important consideration in selecting candidates. Outensuring we have the right mix of our eleven nominees, four are women and two are racially or ethnically diverse. Our Directors’ diverseperspectives, skills, and expertise are shown into address the chartCompany’s current and future needs.
The Board also continued its focus on sustainability. Of particular interest to our shareholders is the Board’s oversightLead Director and Chairman of climate change related issues. As such, we amended the Corporate Governance and Public Responsibility Committee’s CharterCommittee. We made a few other important changes to specifically add oversightour Board leadership structure in 2023. Bill Spence took over the role of climate change related issues. At the Committee’s meeting in October, the Committee engaged with management in a detailed discussion about various sustainability matters, including the Company’s water needs and the mega-drought.
On behalfChairman of the Nuclear and Operating Committee, and Jim Trevathan is now Chairman of the Finance Committee. Both individuals bring experience, expertise, and new perspectives to their committees.
customers, employees, and shareholders alike.
Kathryn L. Munro
Lead Director
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| Glynis A. Bryan | Gonzalo A. de la Melena, Jr. | Richard P. Fox | ||||||
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| Kathryn L. Munro | Bruce J. Nordstrom | Paula J. Sims | ||||||
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| William H. Spence | Kristine L. Svinicki | James E. Trevathan, Jr. | ||||||
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Your vote is important. Whether you plan to participate in the Annual Meeting or not, please promptly vote by telephone, Voting Instruction Form. By order of the Board of Directors,
 DianeWood Corporate Secretary April 4, 2024 The Proxy Statement and form of proxy are first being made available to shareholders on or about April | |||||||||||||
May 22, 2024 1:30 p.m. Eastern Daylight Time | |||||||||||
EXECUTIVE OFFICES ADDRESS: PINNACLE WEST CAPITAL CORPORATION Post Office Box 53999 Phoenix, Arizona 85072-3999 | |||||||||||
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Wednesday, May at 1:30 p.m. Eastern | |||||||||||
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All shareholders of record at the close of business on March | |||||||||||
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 | INTERNET www.proxyvote.com | ||||||||||
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| Proposal | Board Recommendation | Page Reference | |||
1. Election of Directors The Board of Directors and the Corporate Governance and Public Responsibility Committee believe that the eleven nominees possess the skills and experience necessary to serve on the Board and have concluded that each nominee is qualified to serve as Director. |
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2. Advisory Vote on Executive Compensation The Company has designed its executive compensation program to align executives’ interests with those of our shareholders, make executives accountable for business and individual performance by putting pay at risk, and attract, retain and reward the executive talent required to achieve our corporate objectives and to increase long-term shareholder value. We believe that our compensation policies and practices promote a pay at risk philosophy and, as such, are aligned with the interests of our shareholders. |
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3. Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation The Company believes that an annual advisory vote on the compensation of our Named Executive Officers, as defined on page 60 of this Proxy Statement, is in the best interests of our shareholders. |
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4. Approval of the First Amendment to the Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan (the “2021 Plan”) We are asking the Company’s shareholders to approve an amendment (the “First Amendment”) to the 2021 Plan to: (i) increase the maximum number of shares of the Company’s common stock authorized for issuance over the term of the 2021 Plan, (ii) change the time-based vesting of restricted stock and restricted stock units subject to the five percent limitation from three years to one year; and (iii) extend the term of the 2021 Plan to June 1, 2033, unless terminated earlier by the Board. We are not making any other changes to the 2021 Plan. |
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5. Ratification of the Appointment of Deloitte & Touché LLP (“D&T”) as the Independent Accountant for the Company The Audit Committee has discussed the qualifications and performance of D&T and believes that the continued retention of D&T to serve as the Company’s independent accountant is in the best interest of the Company and its shareholders. |
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6. A Shareholder Proposal A shareholder proposal requesting the adoption of a policy separating the chairman and CEO roles and requiring an independent Board Chairman whenever possible, if properly presented at the 2023 Annual Meeting of Shareholders. |
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1.Election of Directors The Board of Directors and the Corporate Governance and Public Responsibility Committee believe that the nine nominees possess the skills and experience necessary to serve on the Board and have concluded that each nominee is qualified to serve as Director. | FOR | |||||||
2.Advisory Vote on Executive Compensation The Company has designed its executive compensation program to align executives’ interests with those of our shareholders, make executives accountable for business and individual performance by putting pay at risk, and attract, retain, and reward the executive talent required to achieve our corporate objectives and to increase long-term shareholder value. We believe that our compensation policies and practices promote a pay-at-risk philosophy and, as such, are aligned with the interests of our shareholders. | FOR | |||||||
3.Ratification of the Appointment of Deloitte & Touche LLP (“D&T”) as the Independent Registered Public Accounting Firm for the Company The Audit Committee has discussed the qualifications and performance of D&T and believes that the continued retention of D&T to serve as the Company’s independent registered public accounting firm is in the best interest of the Company and its shareholders. | FOR | |||||||
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 | The APS Promise |  | Our Strategy | ||||||||||||||||||||||||||
OurPurpose As Arizona stewards, we do what is right for the people and prosperity of our state. OurVision Create a sustainable energy future for Arizona. OurMission Serve our customers with clean, reliable, and affordable energy. | How we will execute our | ||||||||||||||||||||||||||||
Long-termissuesandpriorityareas of focus • focus on customer experience and community stewardship; • support an evolving workforce; • decarbonize and manage generation resources; • achieve a constructive regulatory environment; and • ensure long-term financial health. | |||||||||||||||||||||||||||||
 | Our Principles | ||||||||||||||||||||||||||||
The culture and behaviors that will enable us to fulfill our Design for Tomorrow
See the Way Forward Innovate with Courage Value Learning EmpowerEachOther Embrace Diverse Perspectives Challenge Respectfully Unite as One Team SucceedTogether Create Clarity Anchor in Safety Deliver for the Community | |||||||||||||||||||||||||||||
StrategiesandGoals Actions and targets that guide resources and efforts to address our long-term issues: BusinessPlan — defines how each business unit executes our strategy. PerformanceAmbitions — defines the TieredMetrics— provides a clear look at what the Company is trying to accomplish by measuring what matters. PerformanceManagement— recognizes and rewards the individual contributions to priority work. | |||||||||||||||||||||||||||||
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Creating long-term value for our shareholders is dependent upon having the right strategy to drive our operational performance. We recognize the links between strong customer satisfaction, a constructive regulatory environment, and financial health and stability. To support future value creation for our shareholders, we are committed to enhancing our customer focus and improving our regulatory relationships. In addition, our strong customer growth and clean energy investments contribute to our potential to continue to build shareholder value. | |||||
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Customers are at the core of what we do every day at APS and we are committed to providing options that make it easier for them to do business with us. Recognizing that creating customer value is inextricably linked to increasing shareholder value, our focus remains on our customers and our goal of achieving an industry-leading customer experience. | |||||
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Our more than | |||||
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APS demonstrates commitment to its role as a leader in environmental and sustainability stewardship by establishing sound environmental policies, managing environmental risks, implementing environmental management systems and driving the adoption of sustainable | |||||
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In addition to powering Arizona, we empower communities across Arizona through programs and partnerships dedicated to improving the lives of Arizonans. We not only invest in the communities where we do | |||||
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* Value of $100 invested as of December 31, 2017, with dividends reinvested.
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PNW increased its dividend for the 12th itsdividendforthe11thconsecutiveyear.
As a direct outcome of favorable weather and higher than expected sales growth,the constructive outcome of the general rate case appeal, PNW ended 20222023 with earnings above budgeted expectations.
Our supply chain organizationeffectively providedmitigated rising costs through securing long-term pricing with strategic suppliers.
Helpedmaintainregionalgridstabilityandlowercustomerfuelcostsby assisting neighboring utilities through off-system sales.
Demonstratedresilienceandreliability by successfully responding to a summer storm season that brought destructive winds and rain, inflicting record damage on our system, requiring the replacement of over 800 poles due to weather.
Non-nuclear generation units performedexceptionallywell during the crucial summer run, with a summertime equivalent availability factor of 95%93.4% and start up reliability of 99.7%.
Added 351 MWs of clean energy to the APS continued successfulowned generation fleet operationwith 150 MWs of Palo Verde Generating Station (“PVGS”), operating at record capacitysolar and 201 MWs of 100.2%.
Compared to 2021, APS made quartile gains in every single driver of residentialOur JDP Residential rankings for overall customer satisfaction firmly lifting the Company intohave improved annually, finishing 2023 ranked in the second quartile nationally. Consequently, overallamong large investor-owned utilities. In fact, residential customers ranked APS second in the peer set for both “Perfect Power” (no brief or lengthy outages) and “Phone Customer Care”. Business customer satisfaction is now well above industry benchmarks when compared to the Company’s large investor-owned peers. APS’s strongest performing drivers forfinished the year were customer care (phone and digital), power quality and reliability, corporate citizenship, and billing and payment.
Additionally, JDP’s business 2022 full-year results place the Companyranked in the first-quartilesecond quartile of utilities nationally for business customers.
As a result, our employees’ commitment and focus has led to APS being among the most improved utilities in the nation for both residential and business customer satisfaction.
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In 2021, we initiated an organization-wide customer experience strategy council designed to further drive a •
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implementing numerous aps.com enhancements, including improving • enhancing customer touchpoints throughout the outage journey and continuing to improve the functionality of our online outage •continuing to communicate with customers
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 | Limited Income Offerings | ||||
We have assistance programs and direct customers to state and local assistance programs that provide discounts to qualified limited-income customers, as well as other non-income based assistance programs for customers struggling to These programs include: • CrisisBillAssistance. Qualified customers experiencing an unplanned major expense or an unexpected reduction in income can receive up to • Energy Support. •Customer Support Fund. Call Center advisors were able to provide $100 in utility bill assistance for customers struggling to pay their bill and experiencing a hardship. In total, this fund helped approximately 16,000 customers in 2023. • ProjectShare. This program encourages our customers and employees to make tax-deductible contributions through their monthly electric bills and employee paychecks, • SafetyNetandGuestRole. These programs allow customers to designate a friend or relative to receive a copy of their monthly APS bill and to serve as a reminder when payment is due and/or be notified if the account becomes past due. Also, individuals designated as “Guest Roles” can access account information with options to make payments and compare service plans. •Payment Arrangements. APS is committed to working with customers who continue to make good faith efforts to get current on their bills through partial or full payments, revised payment arrangements, and/or customer assistance. To help customers continue to pay down their outstanding balances and avoid disconnection, APS modified 339,000 payment arrangements in 2023. •State and Local Assistance. There were several additional assistance programs through Arizona in 2023 for qualified customers, including the Low-Income Housing Energy Assistance Program that works with Community Action Programs and other local providers to lower energy costs for customers struggling to pay their energy bills, as well as Emergency Rental Assistance Program, Housing Assistance Fund, and more. In 2023, 41,700 customers received $28.2 million in bill assistance from these sources. | |||||
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 | Focused on Our People | ||||
Our Company seeks to attract, retain, and create a productive work environment for all employees. We believe the strength, talent, and commitment of our employees are significant contributors to our Company’s success. TalentStrategy • Internship programs: • Apprentice programs: 130 • Incomingengineerprograms: • Enhanced recruitment marketing: Improved marketing collateral and increased job advertising (externally and internally) to attract top talent and create greater awareness of career opportunities available to employees •Strong commitment to our communities:
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Retention • Robustemployeeengagement, including • Average employeetenureof • Total turnover for 2023 was 8.2% • Annual employee experience and focused quarterly pulse surveys • Actions taken in response to the surveys focus on improvements in targeted areas. Examples include | |||||
Development and Succession Planning •Graduated 152 employees
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Supported our modern learning culture by continuing to offer on-demand learningto our leaders and program participants who collectively completed over
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At APS, we believe that belonging matters. When we feel seen, heard, and valued, we can more effectively unite behind our APS Promise. You can find more information on the APS Promise on the inside back cover of this Proxy Statement. We create this sense of belonging through our commitment to inclusion. Inclusion at APS involves taking deliberate action to embrace the unique perspectives of each employee. True inclusion brings greater appreciation for our diversity. This allows us to equitably leverage our powerful workforce so we can succeed together to bring our APS Promise to life. | |||||||||||||
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Employee diversity:(1) |  | • We are a • bringing inclusive leadership education to • developing and launching • conducting cultural competence assessments with our inclusion council • holding listening sessions with employees to learn about what matters most to them. | |||||||||||
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 | The African American Network for Diversity and Inclusion’s mission is to create a collaborative and | |||||||
  | The Lesbian, Gay, Bisexual & Transgender Alliance’s mission is to empower inclusion through community, support, and education. | |||||||
  | The Veteran Engagement, Transition & Retention Network’s mission is to develop opportunities benefiting our honored Arizona veterans. We strive to promote their service to our country, leadership skills, and the achievements of veterans in the organization. | |||||||
  | Women in Search of Excellence’s mission is to build a community at APS to further develop women as they achieve their personal and professional excellence. | |||||||
  | Palo Verde Young Generation in Nuclear’s mission is to unite young professionals for the purpose of strengthening its community by focusing on the success of nuclear technology. | |||||||
  | Palo Verde Women in Nuclear’s mission is to promote an environment in which all employees are able to succeed while working to encourage public awareness about nuclear energy. | |||||||
  | The Native American Network Organization’s mission is to attract and develop Native American talent by providing professional development opportunities, assisting in recruiting and retention, and encouraging community development. | |||||||
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  | The Hispanic Organization for Leadership and Advancement promotes a culture of inclusiveness and community stewardship across APS, as well as develops high-performing leaders in pursuit of operational excellence and continuous self-improvement. | |||||||
  | Links’ mission is to connect experienced employees with opportunities for development, networking, and engagement. | |||||||
 | AsPIRE is dedicated to promoting awareness and understanding of the Asian American and Pacific Islander (“AAPI”) community and culture; advocating for diversity and inclusion in the workplace; and providing support and resources for AAPI employees to thrive and succeed in their careers. | |||||||
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 | Recognition | ||||||
• Energy Star Partner of the Year for Energy Efficiency Program Delivery. Over the past year, APS continued to promote energy efficiency with offerings across multiple program areas, while managing demand and reducing lifetime carbon dioxide emissions by 2.3 billion pounds. • Pinnacle West maintained its “AA” rating from MSCI (as of February 14, 2023). • On the list of Top 100 Green Utilities from Energy Intelligence for the fourth year in a row. | |||||||
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APS is in the midst of one of the greatest periods of change in our Company’s 130-plus year history. • 2,400 MW of renewable capacity today • Plan to add at least 2,500 MW of additional clean energy technologies, including solar and storage, by 2025 |
|  | Our 10 grid-scale solar plants are powered by more than 1 million solar panels | ||||
 | Reducing Water Consumption | ||||||
Operating in the water-constrained Southwest desert, APS is challenged to maximize our use of water resources: • 34% reduction(1) in groundwater use in 2022 • 71% of water consumed by APS power plants in 2022 came from treated effluent water | |||||||
| Projected Conservation of Non-Renewable Water Supplies: | ||||||
2025 |
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| 2035 |
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| 50% |
| 79% |
| 80% |
| 95% |
groundwater | use of treated | groundwater reduction(1) | use of treated | ||||
Based on 2014 usage baseline.
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•Pinnacle West maintained its “AA” rating from MSCI (as of February 10, 2024). •On the list of Top 100 Green Utilities from Energy Intelligence for the fifth year in a row. | ||||||||||||||||||||||||||
 | Energy Innovation | |||||||||||||||||||||||||
APS is in the midst of one of the greatest periods of change in our Company’s nearly 140 year history. •Over 1,400 MW of utility scale renewable capacity today •Plan to add more than 2,500 MW of additional clean energy technologies, including solar and storage, by 2027 | Our 11 grid-scale solar plants are powered by more than 1.6 million solar panels | |||||||||||||||||||||||||
| 2024 Proxy Statement | | ||||
•a 2030 target
•
Our clean energy plan will be guided by sound science and focused on achieving environmental and economic gains — all while maintaining affordable, reliable service for our • Collaboration with customers, regulators and other stakeholders is key to our plan’s ultimate success. We look forward to working alongside those who believe in this vision to move forward together to keep Arizona clean, beautiful and
| Clean Energy Pathway   | ||||||||||||||||
 | Policy Decisions |   | Electrification | ||||||||||||||
Support policy decisions that leverage market-based technology and innovation to attract investment in Arizona | Electrification will drive a cleaner environment and more energy-efficient operations throughout the economy | ||||||||||||||||
 | Existing Power Sources |   | Modernization of the Electric Grid | ||||||||||||||
| Near-term use of natural gas until technological advances are available to maintain reliable service | Continue to advance infrastructure that is responsive and resilient while providing customers more choice and control | ||||||||||||||||
 | Evolving Market-Based Solutions |   | Energy Storage Solutions | ||||||||||||||
Participation in the Energy Imbalance Market (“EIM”) provides access to clean energy resources while saving customers money | Storage creates opportunities to take advantage of midday solar generation and better respond to peak demand | ||||||||||||||||
14 | |
| 2024 Proxy Statement | ||||||
| Path Forward | Steady progress on our commitment: | ||||
• In 2023,
•In 2024, the Company expects to add 215 MW of utility-scale solar energy, 216 MW of wind energy, and more than 450 MW of energy storage. •By 2027, APS will seek to add more than 6,000 MW of solar and wind power, coupled with battery storage, which would provide the greatest long-term value and affordability to customers. •You can learn more about our Clean Energy Commitment at | |||||
 | Coal Communities Transition | ||||
The transition away from coal-fired power plants toward a clean energy future will pose unique economic challenges for the communities around these plants. We worked collaboratively with community leaders and stakeholders to propose a comprehensive CoalCommunitiesTransitionPlan. The proposed framework provides substantial financial and economic development support to build new economic opportunities and addresses a transition strategy for plant employees. We are committed to continuing our long-running partnership with the Navajo Nation in other areas as well, including expanding electrification and developing | |||||
 | Community Engagement | ||||
At APS, we initiate and maintain relationships with stakeholders to understand our communities’ needs and identify opportunities to build healthy and sustainable communities. Our External Affairs team collaborates with representatives from a wide range of community and government entities, In | |||||
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2024 Proxy Statement | | ||||
 | Philanthropy and Volunteerism | ||||
We are actively involved in the communities we serve. We partner with nonprofit organizations and community groups across the state to build a stronger, healthier Arizona. Our efforts include financial support, board service, and volunteer assistance. We donated more than services, and community development. Giving back to our communities is an integral part of the APS culture, and our employees donate their time and talents to a wide range of charitable organizations and civic initiatives. In Our employees sit on the boards of nearly 300 Arizona community Other accomplishments for 2023 include: employeespledged • for the • through our partnership with Earn to Learn, 238newscholarships were awarded to • in partnership with key nonprofit partners, we expanded our heat relief strategy aimed at expanding assistance to vulnerable individuals during Arizona’s hot summer • through strategic APS grants, in partnership with St. Vincent de Paul, •we distributed nearly $55,000 through the Utilities Grant Programto • we | |||||
16 | |
| 2024 Proxy Statement | ||||||
BoardIndependence • IndependentLeadDirector role with clearly defined and robust responsibilities •
 | Robust management successionplanning Focused Board oversight of strategyandrisk Thorough CEO performance oversight process AnnualBoard,committee,andindividualDirectorevaluations and discussions with the Lead Director Director skills and experience necessary to provide oversightofourstrategyandoperations RobustBoardrefreshment, with Director retirement policy | A group of 15% of our shareholders can call a special meeting (“Shareholder Special Meeting Rights”) Annualelections of all Directors with cumulative voting Nopoisonpillplan or similar anti-takeover provision in place Nosupermajorityprovisions in our Articles of Incorporation or Bylaws Proxyaccessrights allow up to 20 shareholders owning 3% of our outstanding stock for at least 3 years to nominate up to 25% of the Board
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Shareholderfeedback informs compensation program design
Substantial proportion of target compensation is at risk (84% (85% for the CEO for 2023 and 75%73% for other NEOs)
Performancesharesaretiedtorelativeperformance,ensuringlongterm long-term financialhealthandfurtheringourCleanEnergyCommitment
Noexcisetaxgross-upprovisions in new or materially amended Change of Control Agreements with our NEOs
Anti-hedgingpolicy for all Directors, officers, and all employees, and anti-pledging policy for all Directors and officers
Stockownershipguidelines for all NEOs and Directors
Clawbackpolicy for our current and former executive officers that is compliant with the rules of the New York Stock Exchange (“NYSE”), covering short- and long-term incentive awards
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2024 Proxy Statement | | ||||
12 | 11 | 4 | 2 | 8.3(1)YEARS | ||
Directors | Independent | Women | Diverse | Average tenure of independent Directors | ||
6 | 3 | 3 | ||||
0-5 years | 6-10 years | Over 10 years | ||||
Name |
| Occupation | Age(2) | Director Since | Independent | Committees | |||
 | Glynis A. Bryan | Chief Financial Officer, | 64 | 2020 |  |  |  |  |  |
 | Gonzalo A. de la Melena, Jr. | Founder and Chief Executive Officer, | 54 | 2022 | | | |
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 | Richard P. Fox | Independent Consultant and | 75 | 2014 | |  | |  |
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 | Jeffrey B. Guldner | Chairman of the Board, | 57 | 2019 |
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 | Dale E. Klein, Ph.D. | Professor, Walker Department of Mechanical Engineering, Cockrell School of Engineering, The University of Texas at Austin | 75 | 2010 | | | |
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 | Kathryn L. Munro | Lead Director | 74 | 2000 | |  | |  |
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 | Bruce J. Nordstrom | Of Counsel and CPA, | 73 | 2000 | |  | | | |
 | Paula J. Sims | Consultant | 61 | 2016 | | | |  |
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 | William H. Spence | Former Chairman and Chief Executive Officer, PPL Corporation | 66 | 2021 | | | | |
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 | Kristine L. Svinicki | Former Nuclear Regulatory Commission (“NRC”) Chairman | 56 | 2023 | | | |
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 | James E. Trevathan, Jr. | Former Executive Vice President and | 69 | 2018 | | | | |
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 | David P. Wagener | Managing Partner, Wagener Capital Management | 68 | 2014 | | |  | |
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Committees | |||||||||
| 10 | 9 | 4 | 2 | 9.1 YEARS(1) | ||||||||||||||||||||||
| Directors | Independent | Women | Diverse Ethnicity | Average Tenure of Independent Directors | ||||||||||||||||||||||
| 5 | 1 | 3 | ||||||||||||||||||||||||
| 0-5 years | 6-10 years | Over 10 years | ||||||||||||||||||||||||
| Name | Occupation | Age(2) | Director Since | Independent | Committees | ||||||||||||||||||||||||
 | Glynis A. Bryan | Chief Financial Officer, Insight Enterprises, Inc. | 65 | 2020 |  |  |  |  |  | ||||||||||||||||||||
 | Gonzalo A. de la Melena, Jr. | Founder and Chief Executive Officer, Emerging Airport Adventures, LLC | 55 | 2022 | | |  | | |||||||||||||||||||||
 | Richard P. Fox | Independent Consultant and former Managing Partner, Ernst & Young | 76 | 2014 | | |  |  | |||||||||||||||||||||
 | Jeffrey B. Guldner | Chairman of the Board, President and Chief Executive Officer of PNW and Chairman of the Board and Chief Executive Officer of APS | 58 | 2019 | |||||||||||||||||||||||||
 | Kathryn L. Munro | Principal, BridgeWest, LLC | 75 | 2000 | | | | | |||||||||||||||||||||
 | Bruce J. Nordstrom | Of Counsel and CPA, Nordstrom & Associates, P.C. | 74 | 2000 | |  | | | | ||||||||||||||||||||
 | Paula J. Sims | Lead Director Retired Professor of Practice, University of North Carolina Kenan-Flager Business School, and Former Senior Vice President of Corporate Development and Improvement, Duke/Progress Merger | 62 | 2016 | |  | | | |||||||||||||||||||||
 | William H. Spence | Former Chairman and Chief Executive Officer, PPL Corporation | 67 | 2021 | | | |  | |||||||||||||||||||||
 | Kristine L. Svinicki | Former Nuclear Regulatory Commission (“NRC”) Chairman | 57 | 2023 | | | | ||||||||||||||||||||||
 | James E. Trevathan, Jr. | Former Executive Vice President and Chief Operating Officer, Waste Management, Inc. | 70 | 2018 | | |  | | |||||||||||||||||||||
| Committees | |||||||||||||||||||||||||||||
| Audit | |
| | Corporate Governance and Public Responsibility | | Finance | | Human Resources | | Nuclear and Operating | |
| | Financial Expert |   | Chair | ||||||||||||||||||||||||||||
Tenure as of May 18, 2023
Directors’ ages are as of February 22, 2023
18 | |
| 2024 Proxy Statement | ||||||
  |   |   |   |   |   |   |   |   |  |  |   | |||||||||||||||||||||||||||||
DIVERSITY | ||||||||||||||||||||||||||||||||||||||||
Gender or Ethnicity |   |  | | | |  | | |||||||||||||||||||||||||||||||||
FINANCE AND ACCOUNTING | ||||||||||||||||||||||||||||||||||||||||
Audit Expertise | | | | |||||||||||||||||||||||||||||||||||||
Finance/Capital Allocation | | | | | | | | | | |||||||||||||||||||||||||||||||
Financial Literacy and Accounting | | | | | | | | | | | | |||||||||||||||||||||||||||||
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BUSINESS OPERATIONS AND STRATEGY | ||||||||||||||||||||||||||||||||||||||||
Business Strategy |  | | | | | | | |||||||||||||||||||||||||||||||||
Complex Operations Experience | | | | | | | | | | |||||||||||||||||||||||||||||||
Corporate Governance | | | | | | | | | ||||||||||||||||||||||||||||||||
Customer Perspectives | | | | | | | | |||||||||||||||||||||||||||||||||
Extensive Knowledge of Company’s Business Environment | | | | | | | ||||||||||||||||||||||||||||||||||
| Cybersecurity/Data Privacy | | | | | ||||||||||||||||||||||||||||||||||||
| Sustainability | | | | | ||||||||||||||||||||||||||||||||||||
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LEADERSHIP EXPERIENCE IN A LARGE ORGANIZATION | ||||||||||||||||||||||||||||||||||||||||
| CEO/Senior Leadership | | | | | | | | | | |||||||||||||||||||||||||||||||
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Public Board Service | | | | | | | | |||||||||||||||||||||||||||||||||
Human Capital Management | | | | | | | | | | | ||||||||||||||||||||||||||||||
THE COMPANY’S INDUSTRY | ||||||||||||||||||||||||||||||||||||||||
Nuclear Experience | | | | | | | | |||||||||||||||||||||||||||||||||
Utility Industry Experience | | | | | | | | | ||||||||||||||||||||||||||||||||
PUBLIC POLICY AND REGULATORY COMPLIANCE | ||||||||||||||||||||||||||||||||||||||||
Government/Public Policy/Regulatory | | | | | | | | | | | ||||||||||||||||||||||||||||||
RISK OVERSIGHT AND RISK MANAGEMENT | ||||||||||||||||||||||||||||||||||||||||
Risk Oversight and Risk Management | | | | | | | | | ||||||||||||||||||||||||||||||||
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2024 Proxy Statement | | ||||
| Pay Element | Measurement Period | Performance Link | Description | |||||||||||
  | Cash | Salary is based on experience, performance, and responsibilities and is benchmarked to a peer group and market survey data to align with competitive levels. | ||||||||||||
  | Cash | 1year |
| Universal measure of business financial performance; encourages achievement of bottom-line earnings growth goals. | ||||||||||
| Pre-established operational business unit performance goals that include safety, customer experience, and operational quality and efficiency metrics. | |||||||||||||
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| 3years |
| Links pay to key measures generating shareholder value relative to others in the industry. | ||||||||||
| Links pay to key measures generating shareholder value and financial targets. | |||||||||||||
| Links pay to our Clean Energy Commitment. | |||||||||||||
| Vest ratably over 4years | StockPrice | Encourages retention; value dependent upon share price appreciation and four-year vesting to encourage retention. | |||||||||||
  | We provide benefits, including pension and deferred compensation programs, change of control agreements, and limited perquisites that are designed to attract and retain our executive talent. | |||||||||||||
20 | | | 2024 Proxy Statement | ||||||
CEO AND OTHER NEOs’ TOTAL COMPENSATION
| CEO AND OTHER NEOs’ TOTAL COMPENSATION | ||||||||||||||||||||||||||||||||
15.1% Base Salary |
17.4% Target Annual Incentive | 67.5% Long-Term Incentive | ||||||||||||||||||||||||||||||
| CEO | ||||||||||||||||||||||||||||||||
85%At-Risk Performance-Based Pay | ||||||||||||||||||||||||||||||||
26.9% Base Salary | 20.5% Target Annual Incentive | 52.6% Long-Term Incentive | ||||||||||||||||||||||||||||||
Other NEOS | ||||||||||||||||||||||||||||||||
73%At-Risk Performance-Based Pay | ||||||||||||||||||||||||||||||||
| 2024 Proxy Statement | | ||||
22 | | | 2024 Proxy Statement | ||||||
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Operations in our industry require the development of policies and procedures that allow for the oversight of and effectively manage risk.
| 2024 Proxy Statement | 23 | ||||
| HighStandards | We look for individuals who set high standards and expectations for themselves and others and who demonstrate a commitment to accomplishing those standards and expectations. | |||||
| InformedJudgment | Directors should be thoughtful in their deliberations. We look for individuals who demonstrate intelligence, wisdom, and thoughtfulness in | |||||
| IntegrityandAccountability | Directors should act with integrity. We look for individuals who have integrity and strength of character in their personal and professional dealings. Our Directors should be prepared to be, and are, held accountable for their decisions. | |||||
| TimeandEffort | Directors need time to properly discharge their responsibilities as Directors, including reviewing written materials provided in advance of Board or committee meetings and attending and participating in those meetings. We look for individuals who are willing and able to commit this time to the Board. We also look for Directors who are willing to make themselves accessible to management upon request. | |||||
| OtherCommitments | We look for individuals who will monitor their other commitments to ensure that these other commitments do not impact their service to our Company. Our Directors may not serve on more than three other boards of public companies in addition to the Pinnacle West Board without the prior approval of the Corporate Governance and Public Responsibility Committee. Our Directors also may not serve as a member of the Audit Committee if he or she serves on the audit committees of more than three public companies (including the Company) unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve on the Company’s Audit Committee. | |||||
24 | |
| 2024 Proxy Statement | ||||||
| BoardSize | The Corporate Governance and Public Responsibility Committee regularly assesses the appropriate size of the Board, including whether any vacancies on the Board are expected due to retirement or otherwise. | |||||
| BoardKnowledge,Skills,Expertise,andDiversity | The Corporate Governance and Public Responsibility Committee considers whether the Board reflects the appropriate balance of knowledge, skills, expertise, and diversity required for the Board as a whole. If the Corporate Governance and Public Responsibility Committee determines there are any gaps in the Board’s overall composition, it will focus its candidate search and recruiting efforts to address those gaps. In conducting a search, diversity is a | |||||
| SourcingCandidates | Candidates may be considered at any point during the year and | |||||
Other than Ms. Svinicki, all
| 2024 Proxy Statement | 25 | ||||
two.
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access must be received by our Corporate Secretary at the address set forth above not earlier than the close of business on November 7, 2023,5, 2024, nor later than the close of business on December 7, 2023.5, 2024. The number of qualifying shareholder-nominated candidates the Company will include in its proxy materials under proxy access will be reduced on a one-for-one basis in the event the Company receives a Shareholder Nomination, but at least one qualifying shareholder-nominated proxy access nominee will be included in the proxy materials.
26 | | | 2024 Proxy Statement | ||||||
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May 2024 • Kathryn L. Munro scheduledretirement | |||||
OurBoardhasbeenrefreshed
Since the adoption of our Director Retirement Policy, six independent Directors have been added and five members of the Board will have retired as of May 17, 2023.
Our average independent Director tenure decreased from 12.3 years as of May 2016 to 8.3 years as of May 2023.
Our Board has been refreshed Since the adoption of our Director Retirement Policy, six independent Directors have been added and six Directors will have retired as of May 22, 2024. Our average independent Director tenure will have decreased from 12.3 years in May 2016 to 9.1 years as of March 14, 2024. | ||
|
2024 Proxy Statement | | ||||
| 1 | evaluation of Board (“Board Evaluation”) and committee performance, a three-year basis to identify year-over-year trends | Topics covered include, among others: • Board composition and effectiveness • Competency and accountability • Deliberations and administration • Committee effectiveness • Specific skills, experience, and expertise recommended by Directors to be added or enhanced | ||||||
| 2 |
| Topics covered include, among others:
•Independence • Knowledge and expertise • Judgment and skills • Participation and contribution to collective decision-making | ||||||
| 3 |
| Topics covered include, among others: • The Board, its functions, and membership • Board and committee structure • Processes for effective communication and feedback • Director’s plan with respect to continuing Board service • Any other topic the individual Director wishes to discuss | ||||||
| 4 | EvaluationResults | The results of the evaluations and calls are presented to the Corporate Governance and Public Responsibility Committee and the full Board each February | ||||||
| 5 | FeedbackIncorporated | Based on the evaluation results, changes in practices or procedures are considered and implemented as needed | ||||||
28 | | | 2024 Proxy Statement | ||||||
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We employ a plurality voting standard with a Director resignation policy because we believe a majority voting policy is inconsistent with cumulative voting, which is mandated by the Arizona Constitution.
| We employ a plurality voting standard with our Director Resignation Policy because we believe a majority voting standard is inconsistent with cumulative voting, which is mandated by the Arizona Constitution. | ||
| 2024 Proxy Statement | 29 | ||||
Kathryn L. Munro
With respect to Ms. Munro, as a former chief executiveutility industry with significant Board and Chair and Lead Director experience, sheboard experience. She also has the competence and capability to fulfill the duties of Lead Director. As Lead Director, Ms. MunroSims guides the Board during these transformative times. Ms. MunroSims is independent and vigorously carries out the duties of the Lead Director. Ms. MunroShe also makes sure the Directors are focused, are encouraged to offer different points of view, and maintain their independence from management.
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serves as a liaison between the Chairman and the independent Directors;
approves the schedule of Board meetings to ensure that there is sufficient time for discussion of all agenda items, reviewreviews and approveapproves agendas for the Board meetings;
reviews and approves information sent to the Boards in connection with Board and Board committee meetings;
presides at all meetings at which the Chairman is not present, including executive sessions of the independent Directors (which are regularly scheduled as part of each Board meeting) and calls meetings of the independent Directors when necessary and appropriate;
oversees the Board and Board committee evaluation process;
is available for appropriate consultation and direct communication with the Company’s shareholders and other interested parties;
is authorized to retain outside advisors and consultants who report directly to the Board on board-wide issues; and
performs such other duties as the Board may from time-to-time delegate.
30 | | | 2024 Proxy Statement | ||||||
For further information about our Lead Director, duties, and whether the Board believes an independent Board Chair would be in the best interests of our shareholders, please see our Statement of Opposition to the Shareholder Proposal starting on page 131 of this Proxy Statement.
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| 2024 Proxy Statement | 31 | ||||
| AUDIT COMMITTEE | |||||
“In a challenging and ever-changing environment, the Audit Committee members are committed to their obligation of effective oversight of the Company’s audit and financial management.” —Bruce Nordstrom
2023 Meetings:6 Committeemembers: Bruce J. Nordstrom, Chair Glynis A. Bryan Gonzalo A. de la Melena, Jr.
Richard P. Fox Kristine L. Svinicki Keymember
 | Responsibilities: • Oversees the integrity of the Company’s financial statements and internal controls; • Appoints the independent accountants and is responsible for their qualifications, independence, performance (including resolution of disagreements between the independent accountants and management regarding financial reporting), and compensation; • Monitors the Company’s compliance with legal and regulatory requirements; •Recommends to the Board that the Company’s audited financial statements be included in the Company’s annual report on Form 10-K; •Sets policies for the Company’s hiring of employees or former employees of the independent auditor; •Reviews and concurs in the appointment, replacement or dismissal of the Director of Audit Services; •Review and approves the internal audit plan and scope of internal audits; •Reviews the annual audited financial statements or quarterly financial statements, as applicable, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; • Discusses with management and the independent accountants significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements; • Reviews the Company’s draft earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; • Discusses guidelines and policies to govern the process by which risk assessment and risk management is undertaken across the Company and discusses the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures; and • Reviews management’s monitoring of the Company’s compliance with the Company’s Code of Ethical Conduct. The Board has determined that each member of the Audit Committee meets the NYSE experience requirements and that Mr. Nordstrom, the Chair of the Audit Committee, and Ms. Bryan are “audit committee financial experts” under applicable SEC rules. None of the members of our Audit Committee currently serve on more than three public company audit committees. | ||||
32 | |
| 2024 Proxy Statement | ||||||
| CORPORATE GOVERNANCE AND PUBLIC RESPONSIBILITY COMMITTEE | |||||
“The Committee continues to —
2023 Meetings: 5 Committeemembers: Paula J. Sims, Chair Richard P. Fox Kathryn L. Munro
Bruce J. Nordstrom
William H. Spence James E. Trevathan, Jr. Keymember
 | Responsibilities: • Reviews and assesses the Corporate Governance Guidelines; • Develops and recommends to the Board criteria for selecting new directors; • Identifies and evaluates individuals qualified to become members of the Board, consistent with the criteria for selecting new directors; • Recommends director nominees to the Board; • Recommends to the Board who should serve on each of the Board’s committees; • Reviews significant • Directly oversees climate change related issues and the Company’s strategies in response to those issues; • Reviews the Company’s public and social responsibility policies, strategy, and practices, and periodically reviews them with the Board; • Reviews the results of the Annual Meeting shareholder votes; • Reviews and makes recommendations to the Board regarding the selection of the CEO and succession planning for the CEO and senior management roles; • Reviews the Company’s Code of Ethical Conduct for compliance with applicable law; • Recommends a process for responding to communications to the Board by shareholders and other interested parties; • Reviews the independence of members of the Board and approves or ratifies certain types of • Reviews and makes recommendations to the Board regarding shareholder proposals presented for inclusion in the Company’s proxy materials; • Reviews and makes recommendations regarding proxy material disclosures related to the Company’s corporate governance policies and practices; • Periodically reviews principal risks relating to the Company’s corporate governance policies and practices or other matters addressed by the Corporate Governance and Public Responsibility Committee; • Oversees the Board and committee evaluations on at least an annual basis; and • Reviews and assesses the Company’s Political Participation Policy and then reviews the Company’s policies and practices with respect to governmental affairs strategy and political activities in accordance with that policy. The Corporate Governance and Public Responsibility Committee periodically reviews and recommends to the Board amendments to the Corporate Governance Guidelines and the Political Participation Policy. The Corporate Governance Guidelines and the Political Participation Policy are available on the Company’s website (www.pinnaclewest.com). | ||||
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2024 Proxy Statement | | ||||
| FINANCE COMMITTEE | |||||
“The Finance Committee is focused on the short- and long-term —
2023 Meetings:4 Committeemembers:
James E. Trevathan, Jr. , Chair Glynis A. Bryan Kathryn L. Munro Bruce J. Nordstrom William H. Spence Keymember
 | Responsibilities: • Reviews the historical and projected financial performance of the Company and its subsidiaries; • Reviews the Company’s financial condition, including sources of liquidity, cash flows, and levels of indebtedness; • Reviews and recommends approval of corporate short-term investment and borrowing policies; • Reviews the Company’s financing plan and recommends to the Board approval • Reviews the Company’s use of guarantees and other forms of credit support; • Reviews and monitors the Company’s dividend policies and proposed dividend actions; • Establishes and selects the members of the Company’s Investment Management Committee to oversee the investment programs of the Company’s trusts and benefit plans; • Reviews and discusses with management the Company’s process for • Reviews and recommends approval of the Company’s annual capital budget; • Reviews the Company’s annual operations and maintenance • Reviews the Company’s insurance programs; and • Periodically reviews principal risks relating to the Company’s policies and practices concerning budgeting, financing, credit exposures, or other matters addressed by the Finance Committee. | ||||
34 | |
| 2024 Proxy Statement | ||||||
| HUMAN RESOURCES COMMITTEE | |||||
“The Committee focused on our workforce, specifically addressing issues such as workforce recruitment, development and retention, pay equity, benefits, diversity and inclusion, and, —Rick Fox
2023 Meetings:6 Committeemembers: Richard P. Fox, Chair Gonzalo A. de la Melena, Jr. Kathryn L. Munro
Paula J.
Sims James E. Trevathan, Jr. Keymember
 | Responsibilities: • Reviews management’s programs for the attraction, retention, succession, motivation, and development of the Company’s human resources needed to achieve corporate objectives; • Establishes the Company’s executive compensation philosophy; • Reviews and assesses the Company’s strategies and policies related to human capital management, including those with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development, and retention; • Recommends to the Board individuals for election as officers; • Annually reviews the goals and performance of the officers of the Company and APS; • Approves corporate goals and objectives relevant to the compensation of the CEO, assesses the CEO’s performance in light of these goals and objectives, and sets the CEO’s compensation based on this assessment; • Makes recommendations to the Board with respect to non-CEO executive compensation and Director compensation; • Administers the Company’s long-term incentive plans; • Reviews and discusses with management the Compensation Discussion and Analysis (“CD&A”) on executive compensation set forth in our proxy statements; • Reviews the number, type, and design of the Company’s pension, health, welfare, and benefit plans; • Periodically reviews principal risks relating to the Company’s compensation and human resources policies and practices or other matters addressed by the Human Resources Committee; and • Periodically reviews the Company’s compensation policies and practices applicable to executive and non-executive employees to identify and assess potential material risks arising from the policies and practices. Under the Human Resources Committee’s charter, the Human Resources Committee may delegate authority to subcommittees, but did not do so in | ||||
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2024 Proxy Statement | | ||||
| NUCLEAR AND OPERATING COMMITTEE | |||||
“The Committee —
2023 Meetings:4 Committeemembers:
William H. Spence, Chair Glynis A. Bryan Gonzalo A. de la Melena, Jr.
Paula J. Sims Kristine L. Svinicki Keymember
 | Responsibilities: • Receives regular reports from management and monitors the overall performance of PVGS; • Reviews the results of major PVGS inspections and evaluations by external oversight groups, such as the Institute of Nuclear Power Operations • Monitors overall performance of the principal non-nuclear business functions of the Company and APS, including fossil energy generation, energy transmission and delivery, customer service, fuel supply and transportation, safety, legal and regulatory compliance, key performance indicator results and trends, and any significant incidents or events; • Reviews regular reports from management concerning the Company’s environmental, health, and safety (“EH&S”) policies and practices, and monitors the Company’s compliance with such policies and applicable laws and regulations, and reviews and discusses with management how the Company can continue to improve its safety practices; • Reviews APS’s planning for resource adequacy (including generation • Periodically reviews principal risks related to the Company’s nuclear, fossil generation, transmission and distribution, and EH&S operations, or other matters addressed by this Committee; • Receives reports on the Company’s sustainability initiatives and strategy; • Provides oversight of security policies, programs, and controls for protection of cyber and physical assets; and • Receives regular reports from the Off-Site Safety Review Committee — a committee of non-employee individuals with senior management experience in the nuclear industry and the Palo Verde Director of Nuclear Assurance that provides independent assessments of the safe and reliable operations of PVGS. | ||||
36 | |
| 2024 Proxy Statement | ||||||
| Focus on customer experience and community stewardship | ||
| Critical to our success is our ability to deliver value to our customers and build quality relationships with our stakeholders. We have an opportunity to improve the customer experience and strengthen our community stewardship by increasing our customer focus, investing in the community in new ways, and building on our | ||
| Support an evolving workforce | ||
| As our industry experiences social and economic change, employees continue to be the key differentiators of our success. We must plan and prepare to employ the workforce of the future in order to achieve long-term success. The creation of the APS Promise and a focus on cultural principles will allow us to drive innovation and create a sense of belonging for our employees. | ||
| |||
| Decarbonize and manage generation resources | ||
| National sentiment toward environmental and climate issues increasingly challenges our use of fossil resources and accelerates the transition to renewable and clean energy sources. APS must thoughtfully navigate these transitions to optimize our existing generation fleet, integrate customer-sited resources, and strategically invest in the clean energy fleet needed to meet our Clean Energy Commitment. | ||
| Achieve a constructive regulatory environment | ||
| As a regulated utility, our business outcomes are shaped by regulatory outcomes at the federal, state, and local level. This requires us to work from a strong foundation of trust and accountability, and to focus our engagements with the customer top of mind. We must continue to build from a long history of productive relationships and engagement to achieve our long-term objectives. | ||
| 2024 Proxy Statement | 37 | ||||
| Ensure long-term financial health | ||
| We must keep rates affordable while meeting investor growth expectations and reliability goals. Investments that encourage an economically vital Arizona support our financial health and provide opportunities for new and diversified revenue streams, which will prove essential to our long-term success. | ||
APS has been integrating ESG practices into its core work
To demonstrateitself. For example, the heightened attentionNuclear and Operating Committee annually receives and reviews a report on ESG,the Company’s sustainability initiatives and strategy. In 2023, the Nuclear and Operating Committee reviewed a number of sustainability topics, including the continued reliable operation of our generation fleet during one of the hottest Arizona summers on record. The Human Resources Committee periodically reviews and assesses the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development, and retention. Pursuant to its Charter, the Corporate Governance and Public Responsibility Committee has the responsibility to reviewreviews significant ESGenvironmental and social trends that may impact the Company, ensureand in 2023, engaged in a discussion regarding the oversightlink between sustainability, core business strategy, and shareholder value. Another key focus of relevant ESG issues by the Board and its committees, and make recommendations to the Board, as appropriate. In early 2023, the Corporate Governance and Public Responsibility Committee charter was amended to include oversight of climate change related issues and the Company’s strategies in response to those issues. Another key focus of the Board is the adoption and maintenance of good governance practices, which is a primary responsibilityreflected by our adoption of the Corporate GovernanceDirectors Retirement Policy, Shareholder Special Meeting Rights, and Public Responsibility Committee.
Proxy Access, among other policies and practices. The full Board also dedicates a significant amount of time to ESG matters. As an electric utility, environmental matters areaddresses numerous sustainability issues at the forefront ofBoard level, including our discussionsprogress on operations, strategyour Clean Energy Commitment, emergent clean energy technologies, reliability, and risk. The Nuclear and Operating Committee has primary responsibility over operational environmental practices. Our social impact, within the Company,customer affordability.
|
|
In support of our Clean Energy Commitment and the growing role of ESG infocus on sustainability within our organization, we formedincreased our focus on sustainability efforts by dedicating a new Sustainability department that is dedicated toDepartment at Pinnacle West responsible for integrating environmental, social and governance bestresponsible business practices into the everyday work of APS. Its fundamental purpose is to drive our performance and enhance our reputation as a responsible corporate citizen.the Company. The department reports to the Vice President of Sustainability, who reports directly to our Senior Vice President of Public Policy.
In addition,
The Company also established a framework for the Social Issues Committee. The goal of the framework is to provide a process for considering emergent social issues, and for determining whether or how best to engage on these important issues.
38 | | | 2024 Proxy Statement | ||||||
Ethical Conduct
|
|
Executive.
Top risks discussed by the Board and its committees in 2022 included:
Legal Compliance & Liability
Top risks discussed by the Board and its committees in 2023 included: •Economic Development Load Growth •Arizona Utility Regulation •Customer Affordability •Physical Security •Employee and Public Safety •Loss of Generation Reliability •Lack of Resource Adequacy and Regional Reliability •Catastrophic Wildfire •Cybersecurity •Loss of a Mission Critical Application or Service •Ability to Attract/Retain Top Talent and Maintain Company Culture •Nuclear Strategy and Execution •Supply Chain Constraints The Board believes it is important to look at the list fresh each year as part of a diligent risk review. | ||
Arizona Utility Regulation
Employee Safety, Public Safety and Environmental Welfare
Lack of Resource Adequacy & Regional Reliability
Catastrophic Fire Event
Cybersecurity, Physical Security & Data Privacy
Loss of Critical Applications
Loss of Customer Trust
Ability to Attract and Retain Top Talent
Nuclear Strategy & Execution
Supply Chain Constraints
Shareholder/Environmental, Social and Governance Activism
The Board believes it is important to look at the list fresh each year as part of a diligent risk review.
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2024 Proxy Statement | | ||||
BOARD OF DIRECTORS The Board focuses on fostering a culture of risk awareness and risk-adjusted decision-making and ensuring that an appropriate “tone at the top” is established. The Board annually discusses and updates a listing of areas of risk and a suggested allocation of responsibilities for such risks among the Board and the Board committees and then reviews those risks throughout the year. | ||||||||
COMMITTEES The charter for each of the Board’s committees requires each committee to periodically review risks in its respective area. Each committee: •receives periodic presentations or reports from management about its assigned risk areas; •receives information about the effectiveness of the risk identification and mitigation measures being employed; and •discusses its risk reviews with the Board. The Audit Committee periodically reviews the Company’s risk assessment processes, guidelines, policies, and programs, as well as the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures. | ||||||||
 | ||||||||
ENTERPRISE RISK MANAGEMENT GROUP - EXECUTIVE RISK COMMITTEE •The Enterprise Risk Management group reports to the Company’s Vice President, Controller and Chief Accounting Officer. The internal group is responsible for implementing a consistent risk management framework and the Risk Oversight and Governance process to raise and report material company risks to the Executive Risk Committee (“ERC”) and the Board of Directors. •The ERC is comprised primarily of senior-level officers of the Company and is chaired by the Company’s Senior Vice President and Chief Financial Officer. The ERC is responsible for ensuring that the Board receives timely information concerning the Company’s material risks and risk management processes and the effectiveness of the Enterprise Risk Management program. | ||||||||
40 | | | 2024 Proxy Statement | ||||||
Two
The Companygrow, and Maricopa County is increasingly challengedbooming as a vibrant commercial hub in the Southwest region, attracting an influx of new residents and businesses, with large industrial customers and data centers continuing to attract and compete for top talentexpress interest in the Valley. These changes are driving a market where its competitors are no longer other utilities, but all other industries and markets on a national scale. Arizona business growth, including key segments of engineering and technology, coupled with soaring real estate pricessignificant increase in Arizona, also exacerbate an already challenging talent market. A deep adoption of remote work throughout the country has created hyper-talent mobility of critical knowledge workers. Employees have an expectation of a culture of remote work, career growth and flexibility. These expectations create a risk of losing talented and vital knowledge workers, who may seek employment elsewhere with more upward mobility, or more flexible work options.
Main components of the mitigation strategy include:
leadership development programs;
Total Rewards Modernization and Workplace of the Future Initiative;
ongoing engagement surveys; and
promotion of Company purpose and culture through the APS Promise and Principles
Responsibility for oversight ofelectric loads. In reviewing this risk, was allocatedthe Board has looked at numerous mitigation strategies, including the following:
The Companyset realistic expectations
dual sourcing of suppliers;
Vendor Management Organization;
utilization of non-conventional sources and suppliers; and
developing emergency engineering approvals to procure alternate materials.
Responsibility for oversight ofour top priorities. In reviewing this risk, was allocated to the Nuclear and Operating Committee.
|
|
Committee and the Board have looked at numerous mitigation strategies, including the following:
Our Board places a high priority on senior management development and succession planning. While the Corporate Governance and Public Responsibility Committee has principal responsibility for overseeing CEO and other senior management succession planning, the Human Resources Committee and full Board are actively involved in reviewing our senior management succession plans, which are designed to provide for smooth and thoughtful leadership transitions. Our deliberate and thoughtful succession plans continue to be implemented with the following changes: Theodore N. Geislerchanges in 2023: Shannon Standaert was promoted to the position ofVice President, of APS; Andrew D. CooperHuman Resources; Cary Harbor was promoted to the position of Senior Vice President, and Chief Financial Officer of Pinnacle West and APS; and Paul J. MountainSite Operations; Brian Cole was promoted to the position of Vice President, FinanceResource Management; and Treasurer of Pinnacle West and APS. We also made several changes at PVGS, including: appointed Adam C. HeflinMichael Kohrt was promoted to the position of Executive Vice President, and Chief Nuclear Officer of PVGS of APS; appointed Cary Harbor to the position of Vice President, Nuclear Regulatory and Oversight of PVGS of APS; appointed Alfred “Rex” Meeden to the position of Vice President, Nuclear Engineering of PVGS of APS; and appointed John Hernandez to the position of Vice President, Site Services of PVGS of APS. We also promoted Jose Esparza to the position of Senior Vice President, Public Policy of APS.
Generation.
Given our need for specialized experience, we maintain strong management succession planning practices and are focused on developing and retaining talent within our Company. Our Board’s focus on attracting, developing and retaining highly skilled and experienced executives is a core consideration in structuring our executive compensation program.
| Given our need for specialized experience, we maintain strong management succession planning practices and are focused on developing and retaining talent within our Company. Our Board’s focus on attracting, developing, and retaining highly skilled and experienced executives is a core consideration in structuring our executive compensation program. | ||
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2024 Proxy Statement | | ||||
| Shareholder Outreach | Board Access | ||||||||||||||||
 | In | Our Board is focused on shareholder feedback. Our Lead Director and other members of the Board, depending on the topic to be discussed, have participated in shareholder discussions, providing shareholders with direct access to the Board. | |||||||||||||||
 | |||||||||||||||||
| Matters Discussed in our Fall | |||||||||||||||||
• Our strategy • Our performance • Our Clean Energy Commitment | • Board refreshment •
•
| • Customer experience • Diversity, equity, and inclusion | |||||||||||||||
| We Listen to our Shareholders | |||||||||||||||||
| We want to ensure we have the opportunity to engage directly with our | |||||||||||||||||
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| Board Responsiveness | |||||||||||||||||
| In response to feedback
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SPRING | SUMMER | FALL | WINTER | |||||||||||||||||||
| We publish annual communications to our shareholders: Annual Report, Proxy Statement, and Corporate Responsibility Report. We | We review the results of the Annual Meeting and potential improvements to our governance policies and practices. | We reach out to our shareholders in order to discuss the Annual Meeting outcome and to understand their priorities for the year. We communicate shareholder feedback to the Board and use it to enhance our governance practices, our disclosures, and our sustainability and compensation programs. | The cycle concludes with the Board considering our shareholders’ feedback and determining whether to implement items in response. | |||||||||||||||||||
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2024 Proxy Statement | | ||||
 | The Board of Directors unanimously recommends a vote FOR the election of each of the nominated Directors. | |||||||
44 | |
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| | | |  |  |   |   |  |  |   | ||||||||||||||||||||||||||
DIVERSITY | ||||||||||||||||||||||||||||||||||||
Gender or Ethnicity | | | | | | | ||||||||||||||||||||||||||||||
FINANCE & ACCOUNTING | ||||||||||||||||||||||||||||||||||||
Audit Expertise | | | | |||||||||||||||||||||||||||||||||
Finance/Capital Allocation | | | | | | | | | ||||||||||||||||||||||||||||
Financial Literacy and Accounting | | | | | | | | | | | ||||||||||||||||||||||||||
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BUSINESS OPERATIONS AND STRATEGY | ||||||||||||||||||||||||||||||||||||
Business Strategy | | | | | | | ||||||||||||||||||||||||||||||
Complex Operations Experience | | | | | | | | | ||||||||||||||||||||||||||||
Corporate Governance | | | | | | | | |||||||||||||||||||||||||||||
Customer Perspectives | | | | | | | | |||||||||||||||||||||||||||||
Extensive Knowledge of Company’s Business Environment | | | | | | |||||||||||||||||||||||||||||||
| Cybersecurity/Data Privacy | | | | | ||||||||||||||||||||||||||||||||
| Sustainability | | | | |||||||||||||||||||||||||||||||||
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LEADERSHIP EXPERIENCE IN A LARGE ORGANIZATION | ||||||||||||||||||||||||||||||||||||
| CEO/Senior Leadership | | | | | | | | | ||||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
Public Board Service | | | | | | | ||||||||||||||||||||||||||||||
Human Capital Management | | | | | | | | | | |||||||||||||||||||||||||||
THE COMPANY’S INDUSTRY | ||||||||||||||||||||||||||||||||||||
Nuclear Experience | | | | | | | | |||||||||||||||||||||||||||||
Utility Industry Experience | | | | | | | | | ||||||||||||||||||||||||||||
PUBLIC POLICY AND REGULATORY COMPLIANCE | ||||||||||||||||||||||||||||||||||||
Government/Public Policy/Regulatory | | | | | | | | | | |||||||||||||||||||||||||||
RISK OVERSIGHT AND RISK MANAGEMENT | ||||||||||||||||||||||||||||||||||||
Risk Oversight and Risk Management | | | | | | | | |||||||||||||||||||||||||||||
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2024 Proxy Statement | | ||||
| GLYNIS A. BRYAN | ||||||||
 Age Director since: 2020 ü
Committees: •Audit •Finance
•
Nuclear and Operating | Background | |||||||
• Since 2007: CFO, Insight Enterprises, Inc. (computer hardware, software, and technology solutions) • Ms. Bryan •Ms. Bryan is also a director of Wesco | ||||||||
Qualifications As a CFO for more than | Nominee Skills and Experience As a long-tenured CFO and member of a public board of a large, multinational corporation, Ms. Bryan brings the following key attributes to the Company: • Audit Expertise • Finance/Capital Allocation • Financial Literacy/Accounting • Business Strategy • Complex Operations Experience •Extensive Knowledge of Company’s Business Environment • CEO/Senior Leadership • Public Board Service •
Risk Oversight and Risk Management | |||||||
46 | | | 2024 Proxy Statement | ||||||
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| GONZALO A. DE LA MELENA, JR. | ||||||||
 Age Directorsince: 2022 ü
Committees: •Audit •Human Resources
• Nuclear and Operating | Background | |||||||
• Since 2012: Founder and CEO, Emerging Airport Ventures, LLC (airport concessions company) • Mr. de la Melena served as the CEO of the Arizona Hispanic Chamber of Commerce from 2010 to 2020 • Mr. de la Melena currently serves on the Board of Directors of Gainey Business Bank, | ||||||||
Qualifications As the | Nominee Skills and Experience As the • Finance/Capital Allocation • Financial Literacy and Accounting •
Business Strategy • Customer Perspectives •
•Sustainability • CEO/Senior Leadership • Human Capital Management •
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| 2024 Proxy Statement | 47 | ||||
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| RICHARD P. FOX | ||||||||
 Age Directorsince: 2014 ü
Committees: •Audit • Corporate Governance and Public Responsibility •
Human Resources (Chair) | Background | |||||||
• Since 2001: Consultant and independent board member for companies in various industries • Mr. Fox previously held executive, operational, and financial positions at CyberSafe Corporation (“CyberSafe”), Wall Data, •
Within the past five years, Mr. Fox has served as a director of Univar Solutions, Inc. (“Univar”) | ||||||||
Qualifications As a former Managing Partner of Ernst & Young, former CFO of Wall Data, and President and COO of CyberSafe, Mr. Fox has a deep understanding of auditing, financial, and accounting matters. Mr. Fox has also served on the boards of several companies throughout his career, including | Nominee Skills and Experience As a former Managing Partner of Ernst & Young, one of the “Big Four” auditing firms with multinational operations, Mr. Fox brings the following key attributes to the Company: •Audit Expertise • Finance/Capital Allocation • Financial Literacy and Accounting •
Corporate Governance • Customer Perspectives •
•CEO/Senior Leadership • Public Board Service • Human Capital Management
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48 | | | 2024 Proxy Statement | ||||||
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| JEFFREY B. GULDNER | ||||||||
 Age Directorsince: 2019 ü
| Background | |||||||
• Since May 2022: Chairman of the Board, President and CEO of the Company and Chairman of the Board and CEO of APS • From August 2021 to May 2022: Chairman of the Board, President and CEO of the Company and APS • From November 2019 to August 2021: Chairman of the Board, President and CEO of the Company and Chairman of the Board and CEO of APS • From December 2018 to January 2020: President of APS • From May 2017 to November 2019: Executive Vice President, Public Policy of the Company • From May 2017 to December 2018: Executive Vice President, Public Policy of APS • From May 2017 to August 2018: General Counsel of the Company and APS • From 2014 to May 2017: Senior Vice President, Public Policy of APS | ||||||||
Qualifications Mr. Guldner joined the Company in 2004 and has held a number of leadership and executive positions responsible for several different areas of importance to the health and success of the Company, including public policy, legal, rates and regulation, government affairs, and customer service. Prior to joining APS, Mr. Guldner was a partner in the Phoenix office of Snell & Wilmer LLP, where he practiced public utility, telecommunications, and energy law. Before practicing law, Mr. Guldner served as a surface warfare officer in the United States Navy and was an assistant professor of naval history at the University of Washington. | Nominee Skills and Experience Mr. Guldner has comprehensive experience within the Company in many different areas of importance to the overall health of the Company, including the development of strategy with respect to rates and regulation, as well as our clean energy vision. Mr. Guldner brings the following key attributes to the Company: • Business Strategy • Customer Perspective • Extensive Knowledge of Company’s Business Environment • Sustainability • CEO/Senior Leadership • Human Capital Management •Nuclear Experience • Utility Industry Experience • Government/Public Policy/Regulatory
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| 2024 Proxy Statement | 49 | ||||
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| BRUCE J. NORDSTROM | ||||||||
 Age74 Directorsince: 2000 ü
Committees: •Audit (Chair) • Corporate Governance and Public Responsibility • Finance
| Background | |||||||
•
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Since January 2021: Of Counsel to and certified public accountant, Nordstrom & Associates, P.C., in Flagstaff, Arizona • June 2019 to December 2020: Vice President of and certified public accountant, Nordstrom & Associates, P.C. • From 1988 to June 2019: President of and certified public accountant, Nordstrom & Associates, P.C. | |||||
Qualifications As the former president of and current Of Counsel to an accounting firm, Mr. Nordstrom | Nominee Skills and Experience As the former President of Nordstrom & Associates, P.C. and a former practicing CPA, Mr. Nordstrom brings the following key attributes to the Company: • Audit Expertise •Finance/Capital Allocation • Financial Literacy/Accounting •
Business Strategy • Corporate Governance • Customer Perspectives • Extensive Knowledge of Company’s Business Environment • Human Capital Management • Risk Oversight and Risk Management | ||||
50 | | | 2024 Proxy Statement | ||||||
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| PAULA J. SIMS | ||||||||
 Age Directorsince: 2016 ü
Lead Director Committees: •
Corporate Governance and Public Responsibility (Chair)•Human Resources • Nuclear and Operating | Background | |||||||
• Since December • From May 2012 to December 2022: Professor of Practice and Executive Coach, University of North Carolina Kenan-Flagler Business School • From January 2011 to June 2012: Senior Vice President of Corporate Development and Improvement and Chief Integration Officer for Duke/Progress Merger • From July 2010 to June 2012: Senior Vice President of Corporate Development and Improvement, Progress Energy, Inc. • From July 2007 to July 2010: Senior Vice President Power Operations, Progress Energy, Inc. | ||||||||
Qualifications Ms. Sims worked directly in the utility industry for more than 13 years. She brings extensive leadership experience to the Company in business and finance strategy, electric utility operations, nuclear strategy, and operating in a regulated environment. In her prior roles at Progress Energy, Ms. Sims was responsible for complex business operations and strategy, including new generation, supply chain, and information technology and cybersecurity, as well as overall process and efficiency improvements. Prior to that, she held leadership positions within GE’s Aviation business for 12 years. Her experience gives her extensive insight into the operational, financial, regulatory, and risk-related matters that are of ever-increasing significance to the Company. | Nominee Skills and Experience Ms. Sims brings hands-on experience in electric utility operations, including generation, renewable energy, energy efficiency, fuels and energy trading, and customer service, as well as an understanding of the role of management and executive oversight, and brings the following key attributes to the Company: • Financial Literacy and Accounting • Complex Operations Experience • Corporate Governance •
• CEO/Senior Leadership • Nuclear Experience • Utility Industry Experience •
Risk Oversight and Risk Management •Cybersecurity/Data Privacy | |||||||
| 2024 Proxy Statement | 51 | ||||
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| WILLIAM H. SPENCE | ||||||||
 Age Directorsince: 2021 ü
Committees: •Corporate Governance and Public Responsibility •Finance
•
Nuclear and Operating (Chair) | Background | |||||||
• Since March 2021: Former Chairman of the Board, PPL Corporation • From June 2020 to March 2021: Chairman of the Board, PPL Corporation • From March 2012 to June 2020: Chairman of the Board, President and Chief Executive Officer, PPL Corporation • Mr. Spence is also a director of | ||||||||
Qualifications As the former Chief Executive Officer of an investor-owned electric utility company, Mr. Spence brings a broad range of operating experience in the energy industry. He has extensive experience in strategy development and risk management and has a comprehensive understanding of the issues facing an electric utility, including regulatory strategy and customer service. Mr. Spence also co-chaired an Edison Electric Institute task force that developed an industry strategy for cybersecurity threats. He also brings significant public board experience both from his role as Chairman of PPL Corporation and from his service as a director of | Nominee Skills and Experience As a former CEO of an electric utility, Mr. Spence brings the following
•Finance/Capital Allocation • Complex Operations Experience •
•
CEO/Senior Leadership • Public Board Experience • Nuclear Experience • Utility Industry Experience • Government/Public Policy/Regulatory •Cybersecurity/Data Privacy | |||||||
52 | | | 2024 Proxy Statement | ||||||
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| KRISTINE L. SVINICKI | ||||||||
 Age Directorsince: 2023 ü
Committees: •Audit •
Nuclear and Operating | Background | |||||||
• Since February 2021: Adjunct Professor, Nuclear Engineering and Radiological Sciences, University of Michigan • From March 2008 to January 2021: Chairman, U.S. Nuclear Regulatory Commission (January 2017-January 2021) and previously Commissioner (March 2008-January 2017) • From January 2001-March 2008: Professional Staff Member, U.S. Senate • From December 1990 to February 2001: Project Manager and Nuclear Engineer, U.S. Department of Energy • Ms. Svinicki is also a director of Southern Company and TerraPower | ||||||||
Qualifications The NRC oversees nuclear power plant operations in the United States. As the former Chairman of the NRC, Ms. Svinicki brings expertise in all aspects of nuclear energy regulation, operation, technology, cybersecurity and safety. Her broad national and international experience in all aspects of the nuclear utility industry, nuclear energy, government, and regulation brings value to the Board, particularly from the perspective of our operations at | Nominee Skills and Experience As a former U.S. • Finance/Capital Allocation • Financial Literacy and Accounting •
CEO/Senior Leadership • Public Board Service • Human Capital • Nuclear Experience • Utility Industry Experience • Government/Public Policy/Regulatory •Cybersecurity/Data Privacy | |||||||
| 2024 Proxy Statement | 53 | ||||
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| JAMES E. TREVATHAN, JR. | ||||||||
 Age Directorsince: 2018 ü
Committees: •Corporate Governance and Public Responsibility •Finance (Chair)
• Human Resources
| Background | |||||||
• From July 2012 to December 2018: Executive Vice President and COO, Waste Management, Inc. (“Waste Management”) (waste disposal and recycling solutions) • From June 2011 to July 2012: Executive Vice President of Growth, Innovation and Field Support, Waste Management • From July 2007 to June 2011: Senior Vice President — Southern Group, Waste Management | ||||||||
Qualifications Mr. Trevathan brings to the Board | Nominee Skills and Experience From his more than 35 years of operational and executive experience at Waste Management, Mr. Trevathan brings the following key attributes to the Company: • Financial Literacy and Accounting •
Complex Operations Experience •Corporate Governance • Customer Perspectives • Sustainability • CEO/Senior Leadership • Human Capital Management • Government/Public Policy/Regulatory • Risk Oversight and Risk Management | |||||||
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Dale E. Klein, Ph.D.Re-election
54 | |
| 2024 Proxy Statement | ||||||
| 9 OF OUR 10 current Directors are | |||||||
11 OF OUR 12 Directors are
independent
In accordance with the NYSE rules and the Director Independence Standards, the Board undertakes an annual review to determine which of its Directors are independent. The review generally takes place in the first quarter of each year; however, Directors are required to notify the Company of any changes that occur throughout the year that may impact their independence. Based on the Board’s review, the Board has determined that all the Company’s Directors and Director nominees are independent, except Mr. Guldner due to his employment with the Company. Dr. Cortese wasKlein and Mr. Wagener were independent while he was a memberthey were members of the Board.
Ms. Bryan is an executive officer of Insight Enterprises, Inc. (“Insight”), which provides computer hardwareIT services, specifically IT project management services, infrastructure and software productsoperations, and information technology services to APS.administrative services. The amounts paid to Insight represent less than 0.85%0.02% of the Company’s and Insight’s total annual revenues; and
Mr. FoxMs. Bryan serves as a director of Wesco, from which APS purchases electrical supplies and services. The amounts paid to Wesco represent less than 0.22% of the Company’s and Wesco’s total annual revenues; and
|
2024 Proxy Statement |55 | ||||
Name |
| Fees Earned or Paid in Cash ($) |
| Stock Awards ($)(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) |
| All Other Compensation ($) |
| Total ($) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) | All Other Compensation ($) | Total ($) | ||||||||||||
Glynis A. Bryan |
| 110,000 |
| 139,986 |
| 1,178 |
| 0 |
| 251,164 | |||||||||||||||||
Denis A. Cortese, M.D.(4) |
| 41,994 |
| 0 |
| 0 |
| 0 |
| 41,994 | |||||||||||||||||
Richard P. Fox |
| 130,000 |
| 139,986 |
| 21,251 |
| 0 |
| 291,237 | |||||||||||||||||
Jeffrey B. Guldner(3) |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 | |||||||||||||||||
Gonzalo A. de la Melena, Jr. (5) |
| 93,305 |
| 178,108 |
| 0 |
| 0 |
| 271,413 | |||||||||||||||||
Dale E. Klein, Ph.D. |
| 110,000 |
| 139,986 |
| 0 |
| 0 |
| 249,986 | |||||||||||||||||
| Gonzalo A. de la Melena, Jr. | |||||||||||||||||||||||||||
Dale E. Klein, Ph.D.(4) | |||||||||||||||||||||||||||
Kathryn L. Munro |
| 160,000 |
| 139,986 |
| 18,155 |
| 0 |
| 318,141 | |||||||||||||||||
Bruce J. Nordstrom |
| 130,000 |
| 139,986 |
| 63,837 |
| 0 |
| 333,823 | |||||||||||||||||
Paula J. Sims |
| 130,000 |
| 139,986 |
| 3,157 |
| 0 |
| 273,143 | |||||||||||||||||
William H. Spence |
| 110,000 |
| 139,986 |
| 0 |
| 0 |
| 249,986 | |||||||||||||||||
Kristine L. Svinicki(5) | |||||||||||||||||||||||||||
James E. Trevathan, Jr. |
| 110,000 |
| 139,986 |
| 9,555 |
| 0 |
| 259,541 | |||||||||||||||||
David P. Wagener |
| 130,000 |
| 139,986 |
| 0 |
| 0 |
| 269,986 | (1) In accordance with FASB ASC Topic 718, this amount reflects the aggregate grant date fair value of the stock awards. On May 18, 2022, all of the Directors at that time received a grant of either common stock or stock units (“SUs”) based on an election previously delivered to the Company. All Directors who received the grant on May 18, 2022 received common stock except for Messrs. Spence, and Trevathan, Dr. Klein, and Mses. Bryan and Munro, who each received SUs. Under the terms of the SUs, Ms. Bryan and Dr. Klein will receive 100% of the SUs in stock; Mr. Spence and Mr. Trevathan will receive 100% of the SUs in cash; and Ms. Munro will receive 50% of the SUs in cash and 50% of the SUs in common stock, in all cases on the last business day of the month following the month in which they separate from service on the Board, with the exception of Dr. Klein who will receive payment on May 1, 2024. The number of shares of common stock or SUs granted was 1,878, and the grant date fair value of each share of common stock or SU was $74.54, which was the closing stock price on May 18, 2022. In addition, on March 1, 2022, Mr. de la Melena received a pro-rata grant of common stock based on his service on the Board from February 2022 to May 2022 in the amount of 546 shares, and the shares have a grant date fair value of $38,122. As of December 31, 2022, the following Directors had the following outstanding restricted stock units (“RSU”) or SU awards: Ms. Bryan — 5,168; Mr. Fox — 8,927; Dr. Klein — 21,274; Ms. Munro — 19,229; Ms. Sims — 2,817; Mr. Spence — 1,878; and Mr. Trevathan — 6,431. (2) The Company does not have a pension plan for Directors. The amount in this column consists solely of the above-market portion of annual interest accrued under a deferred compensation plan pursuant to which Directors may defer all or a portion of their Board fees. See the discussion of the rates of interest applicable to the deferred compensation program under “Discussion of Nonqualified Deferred Compensation.” (3) Mr. Guldner is a NEO and his compensation is set forth in the Summary Compensation Table. Only non-management Directors are compensated for Board service. (4) Dr. Cortese retired from the Board of Directors on May 18, 2022. (5) Mr. de la Melena joined the Board of Directors on February 23, 2022. | ||||||||||||||||
56 | | | 2024 Proxy Statement | ||||||
| Compensation Component | Amount
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Annual Retainer |
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Audit Committee, Corporate Governance and Public Responsibility Committee, Human Resources Committee, Finance Committee, and Nuclear and Operating Committee Chairs Annual Retainers | 20,000 | ||||
Lead Director Annual Retainer | 30,000 | ||||
Annual Equity Grant | Shares with a value of approximately
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treated as reinvested.
| 2024 Proxy Statement | 57 | ||||
In December 2019,
58 | |
| 2024 Proxy Statement | ||||||
| The Board of Directors unanimously recommends a vote FOR the approval, on an advisory basis, of the | |||||||
The Board of Directors
unanimously recommends a
voteFOR the approval, on an
advisory basis, of the Company’s
executive compensation
In deciding how to vote on this say-on-pay proposal, the Board points out the following factors, many of which are more fully discussed in the CD&A:
Ourour Human Resources Committee has designed the compensation packages for our NEOs to depend significantly on putting pay at risk by tying pay to the achievement of goals that the Human Resources Committee believes drive long-term shareholder value;
Ourour pay practices are designed to encourage management to not take unacceptable risks;
Wewe engage in periodic structural reviews of our compensation programs and policies; and
Wewe believe that the Company’s executive compensation program is well suited to promote the Company’s objectives in both the short- and long-term.
| 2024 Proxy Statement | 59 | ||||
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Statement and incorporated by reference into the Company’s Annual report on Form 10-K for the year ended December 31, 2023.
60 | |
| 2024 Proxy Statement | ||||||
| TABLE OF CONTENTS | ||||||||||||||
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| JEFFREY B. GULDNER | |||||
| Chairman of the Board, President and Chief Executive Officer of PNW and Chairman of the Board and Chief Executive Officer of APS | ||||
Jeff leads Pinnacle West and APS. Since joining APS in 2004, Jeff has held several leadership positions responsible for areas including legal, rates and regulation, government affairs, and customer service. He serves on the Board of Directors for Nuclear Energy Institute, Edison Electric Institute, Electric Power Research Institute, and the Smart Electric Power Alliance. In addition to industry leadership, Jeff is dedicated to community involvement and actively serves on the Board of Directors for Greater Phoenix Leadership | |||||
| ANDREW D. COOPER | |||||
 | Senior Vice President and Chief Financial Officer of PNW and APS Andrew is responsible for the organization’s accounting, corporate treasury, financial planning and budgeting, internal audit, investor relations, pension and trust investments, and tax services. Andrew previously served as the Company’s and APS’s Vice President and Treasurer. He serves on the Board of Directors for Valle del Sol and is a trustee of the Phoenix Art Museum. | ||||
| 2024 Proxy Statement | 61 | ||||
| THEODORE N. GEISLER | |||||
 | President of APS | ||||
Ted is responsible for the Company’s core utility functions, specifically non-nuclear operations, public policy, technology, customer experience, and strategy. He began his career at APS in 2001 in generation and has served in a variety of roles throughout the Company, including Senior Vice President and Chief Financial Officer. A Phoenix native, Ted is engaged in the community, currently serving on the boards of Chicanos Por La Causa, Greater Phoenix Economic Council, and the Arizona Chamber of Commerce, and volunteering with Hunkapi Programs, which provides equine therapy to children. | |||||
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Mr. Geisler served as Senior Vice President and Chief Financial Officer of PNW and APS until May 2022.
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ADAM C. HEFLIN | |||||
 | Executive Vice President and Chief Nuclear Officer of APS | ||||
Adam is responsible for all nuclear-related activities associated with the nation’s largest power producer, PVGS, which He has served on the boards of the Nuclear Energy Institute and the Institute for Nuclear Power Operations. | |||||
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ROBERT E. SMITH | |||||
 | Executive Vice President, General Counsel and Chief Development Officer of PNW and APS | ||||
Bob is responsible for overseeing all facets of the Company’s legal affairs, corporate secretary function, and the Company’s growth plans and strategies. He | |||||
62 | | | 2024 Proxy Statement | ||||||
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Ms. Lacal retired on September 30, 2022.
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51% of
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PVGS provides nearly 68% of Arizona’s carbon-free energy | ||
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2024 Proxy Statement | | ||||
| APS PROMISE | 10-YEAR STRATEGIC PLAN | |||||||
• Do what is right for the people and prosperity of our state • Create a sustainable energy future in Arizona • Serve our customers with clean, reliable and affordable energy | • Focus on customer experience and stewardship • Support an evolving workforce • Decarbonize and manage generation resources • Achieve a constructive regulatory environment • Ensure long-term financial health | |||||||
The Company believes that the negative TSRs were attributable in part to the fact that utilities were the worst performing sector in 2023, largely due to negative sentiment associated with rising interest rates and inflationary pressures.
Due
64 | | | 2024 Proxy Statement | ||||||
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Although our total shareholder value underperformed during this time, we achieved the following accomplishments in 2022,2023, among others:
PNW increased its dividend for the 11th consecutive year.
As a direct outcome of favorable weather and higher than expected sales growth, PNW ended 2022 with earningsabovebudgetedexpectations.
•PNWincreased its dividend for the 12th consecutive year. •As a direct outcome of favorable weather and the constructive outcome of the general rate case appeal, PNW ended 2023 withearnings above budgeted expectations. •Provided reliable, affordable and clean energy to serve our customers during a record-breaking summer thatexceeded previous all-time peak loads 18 times, setting a new all-time peak customer demand of 8,162 MWon July 15, 2023. •Our supply chain organizationmitigated rising coststhrough securing long-term pricing with strategic suppliers. •Maintained grid reliability and minimized customer costsby utilizing existing real-time markets and continuing to evaluate additional market steps, including day ahead market participation and a regional resource adequacy construct. •Demonstrated resilience and reliabilityby ending the year with top quartile performance for limiting system outages frequency and duration, despite Phoenix experiencing the hottest July on record of any U.S. city. •Non-nuclear generation unitsperformed exceptionally wellduring the crucial summer run, with a summertime equivalent availability factor of 93.4% and start up reliability of 99.7%. •Added351 MW of clean energy to the APS owned generation fleetwith 150 MW of solar and 201 MW of batteries placed in service in 2023. | ||
Our supply chain organization effectivelyprovideddifficulttoobtainmaterialsfor our field crews, working to minimize service disruptions.
Helpedmaintainregionalgridstabilityandlowercustomerfuelcostsby assisting neighboring utilities through off-system sales.
Demonstratedresilienceandreliability by successfully responding to a summer storm season that brought destructive winds and rain, inflicting record damage on our system, requiring the replacement of over 800 poles due to weather.
Non-nuclear generation units performedexceptionallywell during the crucial summer run, with a summertime equivalent availability factor of 95%.
APS continued successfuloperation of PVGS, operating at record capacity of 100.2%.
Our executive compensation philosophy incorporates the following core principles and objectives:
We structure our annual cash and long-term equity incentive compensation to put payatrisk and reward business performance.
We structure our program to provide compensation at levels necessary to attract, engage and retain an experienced management team.
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The Company believes that a significant portion of each NEO’s total compensation opportunity should reflect both upside potential and downside risk. We place a strong emphasis on performance-based, shareholder-aligned incentive compensation.
CEO AND OTHER NEOs’ TOTAL COMPENSATION
We are committed to actively engaging with our shareholders and making changes to our compensation program to ensure that it represents our strong commitment to our pay-for-performance philosophy. Over the past several years, we have undertaken the following:
Enhanced annual cash incentive plan with enterprise shared metrics focused on our strategic priorities and cultural transformation
Ensured performance-based plan goals are set with appropriate levels of rigor
Increased percentage of at-risk compensation
Aligned the 2022 Performance Share Award metrics to shareholder value and our Clean Energy Commitment by eliminating various relative operational metrics and adding EPS performance and clean megawatts installed metrics
Beginning with the 2022 equity grants, to align with best practice, we:
Modified the RSU awards to only be issued in stock
Removed full vesting upon reaching retirement eligibility; upon retirement, performance share awards payouts will be prorated based on actual time employed during the performance period and RSU recipients will only receive the next subsequent vesting
Provided accelerated vesting upon death and disability
Discontinued provision which provided for certain vesting rights for individuals who met the defintion of a late career recipient
Dividend equivalents changed to paid in cash and treated as reinvested; eliminated interest paid on dividends
Aligned the 2021 Performance Share Award relative operational metrics to our long-term strategic initiatives by:
Adding JDP residential customer satisfaction
Removing relative coal capacity factor
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The table below illustrates the total direct compensation (in millions) for each of our NEOs in 2022:
| Jeffrey B. Guldner  | Theodore N. Geisler  | Andrew D. Cooper  | Adam C. Heflin  | Maria L. Lacal  | Jacob Tetlow  | Robert E. Smith  |
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Base Salary | $ | 1.1 |
| $ | 0.6 |
| $ | 0.4 |
| $ | 0.4 |
| $ | 0.5 |
| $ | 0.5 |
| $ | 0.6 |
|
Annual Cash Incentive | $ | 1.7 |
| $ | 0.8 |
| $ | 0.5 |
| $ | 0.5 |
| $ | 0.6 |
| $ | 0.5 |
| $ | 0.7 |
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Long-Term Incentive | $ | 4.6 |
| $ | 1.4 |
| $ | 0.9 |
| $ | 2.3 |
| $ | 1.4 |
| $ | 0.6 |
| $ | 0.9 |
|
Total Direct Compensation | $ | 7.4 |
| $ | 2.8 |
| $ | 1.8 |
| $ | 3.2 |
| $ | 2.5 |
| $ | 1.6 |
| $ | 2.2 |
|
At Risk |
| 85% |
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| 79% |
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| 78% |
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| 88% |
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| 80% |
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| 69% |
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| 73% |
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For 2022, the Company’s core executive compensation program for our NEOs consisted of the following key components:
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For fiscal year 2022, the Human Resources Committee (for purposes of the CD&A, the “Committee”), or the Board acting on the Committee’s recommendation, approved the compensation described below for our NEOs:
For fiscal year 2022, the Committee did not increase Mr. Guldner’s salary recognizing that his base salary was well positioned versus the market median for his role. The Board, acting on the Committee’s recommendation, increased Messrs. Geisler’s, Cooper’s, Tetlow’s, and Smith’s and Ms. Lacal’s base salary by 27.8%, 6.3%, 2.1%, 1.6% and 3.3%, respectively. Mr. Geisler and Mr. Cooper received additional base salary increases of 13.0% and 47.1%, respectively in May of 2022 in recognition of their promotions.
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The Board oversees the Company’s business strategy. The Company maintains a rigorous performance goal-setting process wherein targets are set during our annual business planning process based on strategies and goals that address our long-term issues.
The Committee annually reviews the earnings goal and business unit metrics to ensure alignment with the financial plan and business strategy, with target performance set at levels that are intended to be challenging without incentivizing inappropriate risk taking.
The Company’s goal setting process is guided by our long-term objectives and strategic priorities, using a blend of business considerations, industry benchmark data, and opportunities to improve performance to ensure the appropriate level of rigor.
The 2022 annual incentive earnings and business unit components were set with these practices and philosophy as further described on pages 76-80 of this Proxy Statement.
Our long-term equity incentive compensation is intended to align the interests of executives and our shareholders and increase long-term shareholder value, while also offering an award opportunity that helps attract and retain qualified, experienced executives. The 2022 long-term annual incentive grants awarded to our NEOs were granted consistent with our executive compensation practices and philosophy as described on page 80 of this Proxy Statement.
Our executive compensation program is overseen by the Committee and has received strong shareholder support over the past years. In 2022, our say-on-pay vote received a “for” vote of 95% and as a result, the Committee did not make any changes to the compensation program in direct response to the 2022 vote. However, through ongoing shareholder engagement and regular assessment of our compensation governance practices, we seek to continue to improve our compensation governance:
Shareholderfeedbackinformscompensationprogramdesign
Short-term and long-term goalsconnecttothelong-termobjectives,ourfinancialplanandstrategicgoals
Substantial proportion of target compensation isatrisk (84% for the CEO and 75% for other NEOs)
In 2022, we added EPS performance and clean megawatt installed metrics to our Performance Shares Award to align to our shareholders and Clean Energy Commitment, and removed operational metrics
ShareholdervaluealignmentthroughperformancesharerelativeTSRperformance—nopayoutreceived forperformance period beginning January 1, 2020 and ending December 31, 2022
2021 Performance Share Awards removed coal capacity factor and added relative JDP customer satisfaction rating
Noexcisetaxgross-upprovisions in new or materially amended Change of Control Agreements (defined below) with our NEOs
Anti-hedgingpolicyforallDirectors,officersandemployeesandanti-pledgingpolicyforallDirectorsandofficers
Stockownershipguidelines for all NEOs, other officers and non-employee Directors (all NEOs, other officers and non-employee Directors are in compliance with guidelines)
Clawbackpolicy for our current or former executive officers covering short- and long-term incentive awards
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Our compensation program is designed to be transparent with a clear emphasis on putting pay at risk and retaining key executives. Our executive compensation philosophy incorporates the following core principles and objectives:
AlignmentwithShareholderInterests. We structure our annual short-term cash and long-term equity incentive compensation to put pay at risk and reward business performance. Payouts under these plans are tied predominantly to the Company’s total return to shareholders, earnings, and the achievement of measurable and sustainable business and individual goals, so that executives’ interests are tied to the success of the Company and are aligned with those of our shareholders.
KeyManagementRetention. We structure our program to provide compensation at levels necessary to attract, engage and retain an experienced management team who have the skill sets and industry experience to succeed in our complex operating and regulatory environment, including operating PVGS, and who can provide consistently strong operating and financial results.
Our executive compensation philosophy incorporates the following core principles and objectives: | 2024 Proxy Statement | 65 | ||||
| The Company believes that a significant portion of each NEO’s total compensation opportunity should reflect both upside potential and downside risk. We place a strong emphasis on performance-based, shareholder-aligned incentive compensation. | ||||||||||||||||||||||||||
| CEO AND OTHER NEOs’ TARGET TOTAL COMPENSATION | ||||||||||||||||||||||||||
15.1% Base Salary | 17.4% Target Annual Incentive | 67.5% Long-Term Incentive | ||||||||||||||||||||||||
| CEO | ||||||||||||||||||||||||||
85% At-Risk Performance-Based Pay | ||||||||||||||||||||||||||
26.9% Base Salary | 20.5% Target Annual Incentive | 52.6% Long-Term Incentive | ||||||||||||||||||||||||
Average of Other NEOS | ||||||||||||||||||||||||||
73% At-Risk Performance-Based Pay | ||||||||||||||||||||||||||
66 | | | 2024 Proxy Statement | ||||||
Jeffrey B. Guldner  | Andrew D. Cooper  | Theodore N. Geisler  | Adam C. Heflin  | Robert E. Smith  | ||||||||||||||||||||||||||||||||||
| Base Salary | $ | 1.1 | $ | 0.6 | $ | 0.7 | $ | 0.7 | $ | 0.6 | ||||||||||||||||||||||||||||
| Annual Cash Incentive | $ | 1.9 | $ | 0.6 | $ | 0.8 | $ | 0.8 | $ | 0.8 | ||||||||||||||||||||||||||||
| Long-Term Incentive | $ | 5.0 | $ | 1.3 | $ | 1.5 | $ | 1.3 | $ | 1.1 | ||||||||||||||||||||||||||||
| Total Direct Compensation | $ | 8.0 | $ | 2.5 | $ | 3.0 | $ | 2.8 | $ | 2.5 | ||||||||||||||||||||||||||||
| At Risk | 86 | % | 76 | % | 77 | % | 75 | % | 76 | % | ||||||||||||||||||||||||||||
| 2024 Proxy Statement | 67 | ||||
| Pay Element | Measurement Period | Performance Link | Description | |||||||||||
| Cash | Salary is based on experience, performance, and responsibilities and is benchmarked to a peer group and market survey data to align with competitive levels. | ||||||||||||
| Cash | 1 year | Earnings CEO(1): 50.0% Other NEOs: 50.0% | Universal measure of business financial performance; encourages achievement of bottom-line earnings growth goals. | ||||||||||
Business Unit Performance(2) 50.0% | Pre-established operational business unit performance goals that include safety, customer experience and operational quality and efficiency metrics. | |||||||||||||
| Performance Shares 70%(3) | 3 years | Relative TSR 40% | Links pay to key measures generating shareholder value relative to others in the industry. | ||||||||||
EPS Performance 40% | Links pay to key measure generating shareholder value and financial targets. | |||||||||||||
Clean Megawatts Installed 20% | Links pay to Clean Energy Commitment. | |||||||||||||
Restricted Stock Units 30%(3) | Vest ratably over 4 years | Stock Price | Encourages retention; value dependent upon share price appreciation and four-year vesting to encourage retention. | |||||||||||
| We provide benefits, including pension and deferred compensation programs, change of control agreements, and limited perquisites that are designed to attract and retain our executive talent. | |||||||||||||
68 | | | 2024 Proxy Statement | ||||||
| 2024 Proxy Statement | 69 | ||||
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warranted. The Consultant does not provide any other services to the Company ornor its affiliates. The Committee has assessed the independence of the Consultant and has concluded that the Consultant is independent as determined under the NYSE rules.
70 | | | 2024 Proxy Statement | ||||||
PEER GROUP (33%)(1) | GENERAL INDUSTRY DATA (33%)(1) | INDUSTRY-SPECIFIC DATA (33%)(1) | ||||||||||||
| 2021/2022 compensation information as disclosed in | + | Based on | + | From the Willis Towers Watson Energy Services Industry Survey (reflecting an interpolation between companies in the $3B-$6B revenue bracket and companies with revenues greater than $6B) | ||||||||||
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Vice President and Chief Nuclear Officer of PVGS, APS were supported by the Consultant’s analysis of these roles as occupied by their predecessors.
| Name | Target Annual Cash (Salary + Target Annual | Long-Term Incentives | Target Total Direct Compensation | ||||||||
Mr.Guldner | 50thpercentile | 25thpercentile | Between the 25th | ||||||||
Mr. | < 25thpercentile | < 25thpercentile | < 25thpercentile | ||||||||
Mr. | 50thpercentile | 25th - 50th percentile | 50thpercentile | ||||||||
| 50thpercentile |
| 50th percentile | ||||||||
| Mr. Smith | 75th percentile | 25th - 50thpercentile | |||||||||
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| 2024 Proxy Statement | 71 | ||||
Pinnacle West’s operating subsidiary, APS, operates PVGS, the largest nuclear power plant in the U.S., which has a $1 billion annual budget, employs slightly under one-third of APS employees, and is subject to comprehensive and complex nuclear and environmental regulation;
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• |
The management scope of the PVGS operations requires the Company to seek talent from larger utilities, including those with significant nuclear operations and similar regulatory and business challenges; and
APS has full operational control and legal responsibility for PVGS and Four Corners Generating Station and Cholla Power Plant.Corners. This is an important factor because APS does not have 100% ownership of these stations and, therefore, our full operational responsibility is not accounted for in standard measures of Pinnacle West’s or APS’s size.
Scope of management complexity
Nuclear operations
Top industry talent (related to management complexity)
Regulated vs. non-regulated operations
Complexities of a challenging regulatory environment
CEO/senior management leadership
72 | | | 2024 Proxy Statement | ||||||
| Alliant Energy Corporation (LNT)
| Evergy, Inc. (EVRG)
| PNM Resources, Inc. (PNM)
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| 2024 Proxy Statement | 73 | ||||
Name(1) | 2021 Base Salary ($) | 2022 Base Salary ($) |
Mr. Guldner | 1,100,000 | 1,100,000 |
Mr. Geisler(2) | 450,000 | 575,000 |
Mr. Cooper(3) | 320,000 | 340,000 |
Ms. Lacal | 600,000 | 620,000 |
Mr. Smith | 610,000 | 620,000 |
Mr. Tetlow | 475,000 | 485,000 |
Mr. Heflin was hired on June 6, 2022 as Executive Vice President and Chief Nuclear Officer of PVGS of APS with a $700,000 base salary.
| Name | 2022 Base Salary ($) | 2023 Base Salary ($) | ||||||
| Mr. Guldner | 1,100,000 | 1,125,000 | ||||||
| Mr. Cooper | 500,000 | 600,000 | ||||||
| Mr. Geisler | 650,000 | 670,000 | ||||||
| Mr. Heflin | 700,000 | 715,000 | ||||||
| Mr. Smith | 620,000 | 630,000 | ||||||
Mr. Geisler’s salary increased to $650,000 effective May 16, 2022 in recognition of his promotion to President of APS.
Mr. Cooper’s salary increased to $500,000 effective May 16, 2022 in recognition of his promotion to Senior Vice President and Chief Financial Officer of PNW and APS.
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CEO.Mr. Guldner participatesparticipated in the APS Incentive Plan, but the award opportunities are based 50% on the achievement of 20222023 Pinnacle West earnings levels and 50% on the achievement of enterprise shared metrics that are aligned with achieving our strategic goals and APS business unit performance goals established for business units of APS in the functional areas of customer experience and communications, transmission and distribution, generation (non-nuclear), corporate resources, and PVGS.
Other NEOs. Messrs. NEOs. Messrs.Cooper, Geisler Cooper, Tetlow and Smith participated in the APS Incentive Plan and Ms. Lacal and Mr. Heflin participated in the APS 20222023 Annual Incentive Award Plan for Palo Verde Employees (the “Palo Verde Incentive Plan”).
2023 CEO Annual Cash Incentive (1) | = | PNW Earnings Performance 50% | + | Business Unit Performance 50% | ||||||||||
APS Incentive Plan:Earnings threshold must be met for any payout of annual incentive award | ||||||||||||||
2023 Other NEOs Annual Cash Incentive (1) | = | APS Earnings Performance 50% | + | Business Unit Performance 50% | ||||||||||
APS Incentive Plan: Earnings threshold must be met for any payout of annual incentive award Palo Verde Incentive Plan: Earnings threshold and target business unit performance must be met for payout of APS earnings component; if earnings threshold is not met, there can still be a payout under the business unit performance component | ||||||||||||||
74 | | | 2024 Proxy Statement | ||||||
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NEO |
| Threshold (% of Salary) |
| Target (% of Salary) |
| Maximum (% of Salary) |
| 2022 Actual (% of Salary) |
| 2022 Actual ($) |
Mr. Guldner |
| 28.75 |
| 115 |
| 230 |
| 155.5 |
| 1,710,723 |
Mr. Geisler(1) |
| 21.25 |
| 85 |
| 170 |
| 133.7 |
| 831,872 |
Mr. Cooper(1) |
| 17.50 |
| 70 |
| 140 |
| 119.5 |
| 526,750 |
Mr. Heflin |
| 18.75 |
| 75 |
| 150 |
| 131.5 |
| 527,008 |
Ms. Lacal |
| 18.75 |
| 75 |
| 150 |
| 131.5 |
| 609,722 |
Mr. Smith |
| 18.75 |
| 75 |
| 150 |
| 112.9 |
| 699,825 |
Mr. Tetlow |
| 18.75 |
| 75 |
| 150 |
| 111.4 |
| 540,242 |
(1) On May 16, 2022, Mr. Geisler’s annual incentive target as a percent of salary was increased from 70% to 85% and Mr. Cooper’s was increased from 40% to 70% as a result of their promotions to President of APS and Senior Vice President and Chief Financial Officer, respectively.
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| NEO | Threshold (% of Salary) | Target (% of Salary) | Maximum (% of Salary) | 2023 Actual (% of Salary) | 2023 Actual ($) | ||||||||||||
| Mr. Guldner | 28.75 | 115 | 230 | 167.1 | 1,880,049 | ||||||||||||
| Mr. Cooper | 17.50 | 70 | 140 | 98.8 | 592,830 | ||||||||||||
| Mr. Geisler | 21.25 | 85 | 170 | 121.7 | 815,287 | ||||||||||||
| Mr. Heflin | 18.75 | 75 | 150 | 106.0 | 757,721 | ||||||||||||
Mr. Smith (1) | 18.75 | 75 | 150 | 127.0 | 800,321 | ||||||||||||
NEO |
| 50% Business Unit Performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 50% Business Unit Performance | 50% Business Unit Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NEO | 50% Earnings(1) (%) | Corporate Resources (%) | Customer Experience (%) | Generation (non-nuclear) (%) | Transmission/ Distribution (%) | Palo Verde (%) | 2022 Total (%) | NEO | 50% Earnings(1) (%) | Corporate Resources (%) | Customer Experience & Communications (%) | Generation (non-nuclear) (%) | Transmission/ Distribution (%) | Palo Verde (%) | 2023 Total (%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
160 |
| 103 | (2) | 111 |
| 125 |
| 63 |
| 151 |
| 110 |
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Weighting | (50 | ) | (10 | ) | (10 | ) | (10 | ) | (10 | ) | (10 | ) | (50 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mr. Cooper | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mr. Geisler | 200 |
| 108 | (3) | 111 |
| 125 |
| 63 |
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| 101 |
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Weighting | (50 | ) | (12.5 | ) | (12.5 | ) | (12.5 | ) | (12.5 | ) |
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Mr. Cooper | 200 |
| 101 | (4) |
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Weighting | (50 | ) | (50 | ) |
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Mr. Heflin | 200 |
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Weighting | (50 | ) |
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Ms. Lacal | 200 |
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| 151 |
| 151 |
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Weighting | (50 | ) |
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Mr. Smith | 200 |
| 101 | (5) |
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Weighting | (50 | ) | (50 | ) |
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Mr. Tetlow | 200 |
| 108 | (6) |
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| 125 |
| 63 |
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| 97 |
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Weighting | (50 | ) | (15 | ) |
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| (17.5 | ) | (17.5 | ) |
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| (50 | ) | (1) Reflects PNW earnings for Mr. Guldner and APS earnings for all others. (2) Reflects the average of all Corporate Resources business units. (3) Reflects the average of all Corporate Resources business units weighted at 15% plus the Resource Management and Information Technology business units weighted at 5% each. (4) Reflects the Finance/Accounting business unit. (5) Reflects the Legal Corporate Resources business unit. (6) Reflects the average of all Corporate Resources business units weighted at 25% plus the Resource Management business unit weighted at 5%. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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2024 Proxy Statement |75 | ||||
The earnings component targets consider that, as a regulated utility, we are generally unable to adjust our base retail rates outside of a rate case. As such, in years in which we do not expect a retail rate adjustment, changes in our revenues over the previous year would depend largely on factors beyond our control, such as customer growth, weather and customer usage patterns. The Committee sets earnings goals each year in support of the Company’s financial plan and growth objectives, while taking into consideration economic conditions and items that may have impacted the prior year’s actual results, such as:
weather-related revenue
state and federal regulatory or policy changes
The earnings component targets consider that, as a regulated utility, we are generally unable to adjust our base retail rates outside of a rate case. As such, in years in which we do not expect a retail rate adjustment, changes in our revenues over the previous year would depend largely on factors beyond our control, such as customer growth, weather, and customer usage patterns. The Committee sets earnings goals each year in support of the Company’s financial plan and growth objectives, while taking into consideration economic conditions and items that may have impacted the prior year’s actual results, such as: •weather-related revenue •state and federal regulatory or policy changes •impact(s) of one-time or non-recurring items The Committee reviews earnings adjustments throughout the year by considering: •whether the item was included in the financial plan •whether the item was an unanticipated event that occurred during the period (outside of management’s control) •whether the item was unusual or non-recurring, including, without limitation, ACC related impacts on earnings | ||
impact(s) of one-time or non-recurring items
The Committee reviews earnings adjustments throughout the year by considering:
whether the item was included in the financial plan
whether the item was an unanticipated event that occurred during the period (outside of management’s control)
whether the item was unusual or non-recurring, including, without limitation, ACC related impacts on earnings
Consistent with this methodology, for 2022,2023, the Committee set threshold, target, and maximum Pinnacle West and APS earnings goals at a decrease relative to 2021 actual incentive earnings in consideration of the following:
inclusion of a projection of revenue and earnings impacts related to the decrease in rates as a result of our 2019 rate case decision
a continued focus on effective cost controls and customer affordability
annual increasemodest increases to customer usage and sales forecasts
The Committee and the Board review and discuss the metrics and target recommendations to ensure appropriate rigor and alignment to business strategy and the financial plan. The Company reviews enterprise shared and business unit specific metrics as part of the strategic business planning process to ensure alignment with the APS Promise and our strategic priorities. The goal-setting process considers objective measures to set achievement levels based on: •industry benchmarks with the objective of delivering top quartile performance •previous performance and opportunities to improve performance •internal trends and external considerations •goals to stretch and motivate performance improvement | ||
76 | |
| 2024 Proxy Statement | ||||||
retail customer growth, primarily small commercial and industrial sales
higher revenues due toas a result of a constructive appellate court decision that reversed a disallowance of recovery for required investments in pollution control equipment at our Four Corners;
| 2024 Proxy Statement | 77 | ||||
| Performance (in millions) | ||||||||||||||||||||||||||||||||
| Metric | Threshold | Target | Maximum | |||||||||||||||||||||||||||||
| $501.6 | ||||||||||||||||||||||||||||||||
| 2023 Results | ||||||||||||||||||||||||||||||||
| PNW Incentive Earnings | ||||||||||||||||||||||||||||||||
| $415 | $467 | $519 | ||||||||||||||||||||||||||||||
| Performance (in millions) | |||||||||||||||||||||||||||||
| Metric | Threshold | Target | Maximum | ||||||||||||||||||||||||||
| $555.6 | |||||||||||||||||||||||||||||
| 2023 Results | |||||||||||||||||||||||||||||
| APS Incentive Earnings | |||||||||||||||||||||||||||||
| $472 | $524 | $576 | |||||||||||||||||||||||||||
78 | |
| 2024 Proxy Statement | ||||||
The Committee and the Board review and discuss the metrics and target recommendations to ensure appropriate rigor and alignment to business strategy and the financial plan.
The Company reviews enterprise shared and business unit specific metrics as part of the strategic business planning process to ensure alignment with the APS Promise, long-term goals and strategic priorities.
The goal-setting process considers objective measures to set achievement levels based on:
industry benchmarks with the objective of delivering top quartile performance
previous performance and opportunities to improve performance
internal trends and external considerations
goals to stretch and motivate performance improvement
Enterprise shared and specific business unit metrics are tied to the mission pillars of the APS Promise: Culture; Reliable; Customer Centric; Clean; and Affordable.
For 2022, we continued to align our shared enterprise-wide and business unit metrics with our principles and execution of strategic priorities. The 2022 Incentive Plans business unit performance for the NEOs (excluding Ms. Lacal and Mr. Heflin) was measured 60% on five shared enterprise metrics and the remaining 40% on specific metrics aligned with the business unit(s) the officer supports.
Mr. Guldner was evaluated against the shared enterprise metrics and an average of the five business specific areas
Mr. Heflin and Ms. Lacal were measured on PVGS business area metrics
| Business Unit Performance | |||||
Corporate Resources (%) | Customer Experience (%) | Generation (non-nuclear) (%) | Transmission/ Distribution (%) | Palo Verde (%) | Average (%) | |
2022 Results(1) | 103 | 111 | 125 | 63 | 151 | 110 |
2021 Results(2) | 83 | 90 | 102 | 51 | 154 | 96 |
(1) Results do not include adjustments. (2) Results include adjustments for prudent business decisions discussed on page XX of the Company’s 2022 Proxy Statement. | ||||||
| Business Unit Performance | ||||||||||||||||||||
| Corporate Resources (%) | Customer Experience (%) | Generation (non-nuclear) (%) | Transmission/ Distribution (%) | Palo Verde (%) | Average (%) | |||||||||||||||
| 2023 Results | 121 | 122 | 123 | 137 | 122 | 125 | ||||||||||||||
| 2022 Results | 103 | 111 | 125 | 63 | 151 | 110 | ||||||||||||||
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Business Unit Measures and Weighting | Measure | Target | Actual Results | % of Target Performance Achieved |
Shared Enterprise Metrics (60%) (excluding PVGS) |
|
| 45 | |
Culture (15%) | Total Company Serious Injury and Fatality(1) (“SIF”) (15%) | N/A | 3 | 100 |
Customer Centric (15%) | J.D. Power Business Study Overall Customer Satisfaction (4%) | Top half of 3rd Quartile | 1st Quartile | 200 |
J.D. Power Electric Utility Residential Study Overall Customer Satisfaction Index (11%) | Top half of 3rd Quartile | 2nd Quartile | 200 | |
Affordable (30%) | PNW O&M (15%) | Budget | $59.6M Over | 0 |
PNW Capital (15%) | Budget +/- $5M | $12.5M Over | 0 | |
Corporate Resources (Information Technology) |
|
| 107 | |
Shared Enterprise Metrics (60%) |
|
| 45 | |
Reliable (40%) | Average of All Operations Groups(2) Results (30%) | 100% | 140% | 140 |
Mission and Business Critical Systems Service Level Performance (10%) | 90.00% | 99.40% | 200 | |
Corporate Resources (Resource Management) |
|
| 113 | |
Shared Enterprise Metrics (60%) |
|
| 45 | |
Reliable (40%) | Average of All Operations Groups(2) Results (20%) | 100% | 140% | 140 |
EIM Flex Ramping Value (20%) | 96.50% | 98.89% | 200 | |
Corporate Resources (excluding Information Technology and Resource Management) |
|
| 101 | |
Shared Enterprise Metrics (60%) |
|
| 45 | |
Reliable (40%) | Average of All Operations Groups(2) Results (40%) | 100% | 140% | 140 |
Customer Experience |
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| 111 | |
Shared Enterprise Metrics (60%) |
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| 45 | |
Customer Centric (40%) | Customer Care Service Level (20%) | 75.00% | 77.47% | 131 |
Digital Engagement (20%) | 100.0% | 114.0% | 200 | |
Generation (non-nuclear) |
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| 125 | |
Shared Enterprise Metrics (60%) |
|
| 45 | |
Reliable (20%) | G&O Start-Up Reliability (20%) | 99.1% | 99.7% | 200 |
Customer Centric (20%) | Fleet Summertime Equivalent Availability Factor (20%) | 92.8% | 95.0% | 200 |
Transmission & Distribution |
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| 63 | |
Shared Enterprise Metrics (60%) |
|
| 45 | |
Reliable (40%) | System Average Interruption Frequency Index (“SAIFI”) — All Weather (20%) | 0.84 | 0.89 | 0 |
System Average Interruption Duration Index (“SAIDI”) (20%) | 82.49 | 84.05 | 88 | |
PVGS(3) |
|
| 151 | |
Culture (20%) | INPO Operational Focus Index (Nov) (10%) | 2nd Quartile | 1st Quartile | 200 |
PV SIF(4) — Employees and Contractors (10%) | N/A | 1 | 150 | |
Customer Centric (30%) | Site Capacity Factor (12.5%) | 93.00% | 92.59% | 59 |
Summer Reliability Capacity Factor (17.5%) | 99.00% | 100.18% | 200 | |
| Business Unit Measures and Weighting | Measure | Target | Actual Results | % of Target Performance Achieved | ||||||||||
| Shared Enterprise Metrics (60%) (excluding PVGS) | 57 | |||||||||||||
| Employee Safety (15%) | Total Company Serious Injury and Fatality(1) (“SIF”) (15%) | N/A | 8 | 50 | ||||||||||
| Customer Experience (15%) | J.D. Power Business Study Overall Customer Satisfaction (4%) | Middle third of 2nd Quartile | Top third of 2nd Quartile | 200 | ||||||||||
| J.D. Power Utility Residential Study Overall Customer Satisfaction (11%) | Middle third of 2nd Quartile | Middle third of 2nd Quartile | 100 | |||||||||||
| Customer Affordability (30%) | PNW O&M (15%) | N/A | $37.1M Over | 0 | ||||||||||
| PNW Capital (15%) | Target +/- $5M | $1.8M Over | 200 | |||||||||||
| Corporate Resources (Information Technology) | 125 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Reliability (40%) | Average of Operations Groups(2) Results (30%) | 100 | % | 162 | % | 162 | ||||||||
| Mission and Business Critical Systems Service Level Performance (10%) | 90.00 | % | 100.00 | % | 200 | |||||||||
|
2024 Proxy Statement |79 | ||||
| Business Unit Measures and Weighting | Measure | Target | Actual Results | % of Target Performance Achieved | ||||||||||
| Corporate Resources (Resource Management) | 116 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Reliability (40%) | Average of Operations Groups(2) Results (20%) | 100 | % | 162 | % | 162 | ||||||||
| EIM Flex Ramping Value (20%) | 97.25 | % | 97.58 | % | 133 | |||||||||
| Corporate Resources (excluding Information Technology and Resource Management) | 121 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Reliability (40%) | Average of Operations Groups(2) Results (40%) | 100 | % | 162 | % | 162 | ||||||||
| Customer Experience and Communications | 122 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Customer Experience (40%) | Customer Care Service Level (20%) | 75 | % | 77 | % | 125 | ||||||||
| Digital Engagement (20%) | 4 | % | 18 | % | 200 | |||||||||
| Generation (non-nuclear) | 123 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Reliability (20%) | G&O Start-Up Reliability (20%) | 99.2 | % | 99.7 | % | 200 | ||||||||
| Customer Experience (20%) | Fleet Summertime Equivalent Availability Factor (20%) | 92.8 | % | 93.4 | % | 130 | ||||||||
| Transmission and Distribution | 137 | |||||||||||||
| Shared Enterprise Metrics (60%) | 57 | |||||||||||||
| Reliability (40%) | System Average Interruption Frequency Index (“SAIFI”) — All Interruptions (20%) | 1.05 | 0.88 | 200 | ||||||||||
| System Average Interruption Duration Index (“SAIDI”) — All Interruptions (20%) | 147.34 | 98.58 | 200 | |||||||||||
PVGS(3) | 122 | |||||||||||||
| Employee Safety (15%) | PV SIF(4) — Employees and Contractors (10%) | N/A | 0 | 200 | ||||||||||
| PI&R Performance Index (out of 7), measured quarterly (5%) | 6 Green/White No Red | 7 Green/White; | 200 | |||||||||||
| Customer Experience (25%) | Site Capacity Factor (10%) | 92.00 | % | 91.42 | % | 71 | ||||||||
| Summer Reliability Capacity Factor (15%) | 99.00 | % | 98.95 | % | 95 | |||||||||
| Nuclear Operations (10%) | INPO Operational Focus Index (Nov) (10%) | 2nd Quartile | 2nd Quartile | 100 | ||||||||||
| Reliability (30%) | Scrams (Avoidable) (5%) | 0 | 2 | — | ||||||||||
| Spring Outage Performance (7.5%) | 4 of 5 | 5 of 5 | 200 | |||||||||||
| Fall Outage Performance (7.5%) | 4 of 5 | 5 of 5 | 200 | |||||||||||
| INPO Equipment Performance Indicator Index (Nov) (10%) | Top of 2nd Quartile | 2nd Quartile | 50 | |||||||||||
| Customer Affordability (20%) | Capital Budget (Jun) (5%) | $2M < Budget | $1.1M Under | 190 | ||||||||||
| O&M Budget (15%) | $2M < Budget | $0.1M Under | 105 | |||||||||||
80 | | | 2024 Proxy Statement | ||||||
Business Unit Measures and Weighting | Measure | Target | Actual Results | % of Target Performance Achieved |
Reliable (30%) | Scrams (Avoidable) (10%) | 0 | 0 | 200 |
Spring Outage Performance (5%) | 29 days | 35 days | 0 | |
Fall Outage Performance (5%) | 29 days | 33 days | 0 | |
INPO Maintenance Index (Jun & Nov) (10%) | 2nd Quartile | 1st Quartile | 200 | |
Affordable (20%) | Capital Budget (Jun) (5%) | $2M < Budget | $0.7M Under | 200 |
O&M Budget (15%) | $2M < Budget | $3.1M Under | 155 | |
(1) Measured quarterly; pays at maximum for each quarter with no recordable incidents; no payout in the event of an APS employee work-related fatality. (2) Average includes: Transmission/Distribution, Customer Experience, Generation (non-nuclear) and PVGS. (3) PVGS business unit performance goals must achieve at least 100% payout overall before payment of the APS performance component can occur. (4) Measured quarterly; pays at maximum for each quarter with no recordable incidents; no payout in the event of a PVGS work-related fatality. | ||||
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(1)For our 2023 annual long-term equity awards, Messrs. Guldner, Geisler, Heflin, and Smith were granted 70% performance shares and 30% RSUs; Mr. Cooper was granted 60% performance shares and 40% RSUs.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
To determine the amount of performance share and RSU awards for the annual grants made in February 2022, the promotional grant for Mr. Cooper in May 2022 and the new hire grants for Mr. Heflin in June 2022,2023, the Committee first established a target compensation value for each officer that it wanted to deliver through long-term equity award opportunities. The Committee considered various factors, including the retention value of the total compensation package, the long-term equity component in light of the competitive environment, and individual performance. The Committee also considered target value, taking into consideration the Company’s achievement of earnings targets, and overall performance. Once the target value was established, the Committee determined the number of shares subject to the awards by reference to the then-current market value of the Company’s common stock, and then allocated the 20222023 awards 70% to performance shares and 30% to RSUs for the CEO, APS PesidentPresident, and Executive Vice Presidents, 60% to performance shares and 40% to RSUs for all Senior Vice Presidents, and 50% to performance shares and 50% to RSUs for all other officers.
Name | Performance Shares – 70%(#) | RSUs – 30%(#) | Grant Date Value($)(1) | Name | Performance Shares – 70%(#) | RSUs – 30%(#) | Grant Date Value($)(1) | |||||||
Mr. Guldner | 44,044 | 18,876 | $4,335,188 | |||||||||||
Mr. Geisler(2) | 11,324 | 7,548 | $1,300,281 | |||||||||||
Mr. Cooper(2) | 6,724 | 5,028 | $850,670 | |||||||||||
Mr. Heflin | 10,756 | 17,420 | $2,200,546 | |||||||||||
| Mr. Geisler | ||||||||||||||
| Mr. Heflin | ||||||||||||||
| Mr. Smith | ||||||||||||||
|
2024 Proxy Statement | | ||||
Name | Performance Shares – 70%(#) | RSUs – 30%(#) | Grant Date Value($)(1) |
Ms. Lacal | 13,208 | 5,664 | $1,300,281 |
Mr. Smith | 8,384 | 3,596 | $825,422 |
Mr. Tetlow | 6,096 | 2,616 | $600,256 |
(1) For purposes of this table, Grant Date Value is equal to the total number of shares multiplied by the Company’s closing stock price on the date of grant ($68.90). For Mr. Cooper’s May promotional grant, the closing stock price on the date of grant was ($73.73). For Mr. Heflin’s June new hire grant, the closing stock price on the date of grant was ($78.10). (2) Messrs. Geisler’s and Cooper’s February 2022 annual awards were 60% performance shares and 40% RSUs and 50% performance shares and 50% RSUs, respectively. Mr. Cooper’s May promotional award was 60% performance shares and 40% RSUs. | |||
| Metrics | Weighting | Rationale | ||||||
| 40% | Links pay to key measures generating shareholder value relative to others in the industry | ||||||
| 40% | Links pay to key measures generating shareholder value and financial target | ||||||
clean | 20% | Links pay to Clean Energy Commitment | ||||||
We anticipate that the common stock payout, if any, for each element described below will be made in February 2026.
| Relative TSR
| Performance
| Total Maximum Award Opportunity | ||||||
| 200% of the Base Grant | 200%ofBaseGrant | ||||||
55th Percentile(1) | 100% of the Base Grant | |||||||
| 25% of the Base Grant | |||||||
| Less than 25th Percentile | None | |||||||
82 | | | 2024 Proxy Statement | ||||||
| ||||||||
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|
| Average EPS
| Performance
| Total Maximum Award Opportunity | ||||||
110.0% | 200% of the Base Grant | 200%ofBaseGrant | ||||||
100.0% | 100% of the Base Grant | |||||||
95.0% | 25% of the Base Grant | |||||||
Less than 95.0% | None | |||||||
| Actual Clean MW Installed
| Performance Share Payout | Total Maximum Award Opportunity | ||||||
105.0% | 200% of the Base Grant | 200%ofBaseGrant | ||||||
90.0% | 100% of the Base Grant | |||||||
75.0% | 25% of the Base Grant | |||||||
Less than 75.0% | None | |||||||
| 2024 Proxy Statement | 83 | ||||
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84 | | | 2024 Proxy Statement | ||||||
|
2024 Proxy Statement | | ||||
| Officer | Multiple of Base Salary(1) | ||||
Chief Executive Officer | 5 times Base Salary | ||||
APS President and all Executive and Senior Vice Presidents | 2 times Base Salary | ||||
All other Vice Presidents and Officers | 1 times Base Salary | ||||
| |||||
86 | |
| 2024 Proxy Statement | ||||||
Pursuant to Section 162(m) of the Code, for federal income tax purposes, publicly traded corporations generally are not permitted to deduct annual compensation in excess of $1 million paid to any of certain top executives. The Committee and the Board may weigh the tax consequences of the total compensation program when setting the total compensation package for an officer. However, the Committee and the Board do not routinely apply the tax-deductibility rules to limit what they determine otherwise to be necessary and appropriate compensation awards or as a justification for awarding compensation below $1 million.
As a result of changes made by the 2017 Tax Cuts and Jobs Act, certain “performance-based” compensation, which was excludible from the scope of Section 162(m) under prior law, must now be included in determining the $1 million limitation unless it qualifies under a transition rule applicable to certain compensation arrangements in place as of November 2, 2017. In December 2020, the Internal Revenue Service released final regulations which provide additional guidance related to this transition rule. The Company continues to believe that performance-based awards granted to our executive officers, and in place as of November 2, 2017, are deductible under this transition rule. Further, the Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.
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MARIA L. LACAL
Executive Vice President and Advisor
to the CEO, APS
ROBERT E. SMITH
JACOB TETLOW
Executive Vice President, Operations, APS
|
2024 Proxy Statement |87 | ||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) |
Jeffrey B. Guldner, Chairman of the Board, President and Chief Executive Officer of PNW and Chairman of the Board and Chief Executive of APS | 2022 | 1,100,000 | 0 | 4,577,787 | 1,710,723 | 931,174 | 38,633 | 8,358,317 |
2021 | 1,100,000 | 0 | 4,079,762 | 1,790,074 | 1,099,555 | 30,766 | 8,100,157 | |
2020 | 1,100,000 | 0 | 3,316,740 | 1,551,946 | 856,971 | 23,798 | 6,849,455 | |
Theodore N. Geisler, (5) President, APS | 2022 | 622,260 | 0 | 1,376,974 | 831,872 | 128,704 | 31,217 | 2,991,027 |
2021 | 450,000 | 0 | 1,051,582 | 447,757 | 93,957 | 28,489 | 2,071,785 | |
2020 | 380,109 | 0 | 512,791 | 318,840 | 78,194 | 23,388 | 1,313,322 | |
Andrew D. Cooper, (5) Senior Vice President and Chief Financial Officer, PNW and APS | 2022 | 440,821 | 0 | 895,565 | 526,750 | 64,803 | 43,113 | 1,971,052 |
Adam C. Heflin, (6) Executive Vice President and Chief Nuclear Officer of Palo Verde Generating Station, APS | 2022 | 400,822 | 500,000 | 2,283,316 | 527,008 | 71,793 | 5,577 | 3,788,516 |
Maria L. Lacal, (7) Executive Vice President and Advisor to the CEO, APS | 2022 | 463,726 | 0 | 1,373,029 | 609,722 | (245,000) | 281,417 | 2,482,894 |
2021 | 600,000 | 0 | 839,352 | 796,545 | 483,567 | 34,821 | 2,754,285 | |
2020 | 570,710 | 0 | 714,708 | 563,394 | 479,883 | 23,210 | 2,351,905 | |
Robert E. Smith, Executive Vice President, General Counsel and Chief Development Officer of PNW and APS | 2022 | 620,000 | 0 | 871,606 | 699,825 | 213,331 | 31,381 | 2,436,143 |
2021 | 610,000 | 0 | 762,436 | 646,333 | 229,176 | 26,800 | 2,274,745 | |
2020 | 610,000 | 0 | 717,454 | 528,812 | 194,742 | 115,813 | 2,166,821 | |
Jacob Tetlow, Executive Vice President, Operations, APS | 2022 | 485,000 | 0 | 633,827 | 540,242 | (99,050) | 27,308 | 1,587,327 |
(1) The amounts in this column reflect the aggregate grant date fair value of performance shares and RSUs computed in accordance with FASB ASC Topic 718. The TSR performance share value reported is based on the probable outcome of the performance conditions as of the grant date using a Monte Carlo simulation model: February grants for Messrs. Guldner, Tetlow and Smith, and Ms. Lacal ($82.67); and February grants for Messrs. Geisler and Cooper ($85.83); Mr. Cooper’s May grant ($90.35); and Mr. Heflin’s June grant ($97.34). The EPS and clean megawatts installed performance share value is based on the closing price on the date of grant: February grants ($68.90); Mr. Cooper’s May grant ($73.73); and Mr. Helfin’s June grant ($78.10). The amounts in the column are allocated between the various equity grants as follows: | ||||||||
| Name | RSUs ($) | Performance Shares ($) |
| Mr. Guldner | 1,300,556 | 3,277,231 |
| Mr. Geisler | 520,057 | 856,917 |
| Mr. Cooper | 362,812 | 532,753 |
| Mr. Heflin | 1,360,502 | 922,814 |
| Ms. Lacal | 390,250 | 982,779 |
|
|
| Name | RSUs ($) | Performance Shares ($) |
| Mr. Smith | 247,764 | 623,842 |
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||
Jeffrey B. Guldner, Chairman of the Board, President and Chief Executive Officer of PNW and Chairman of the Board and Chief Executive of APS | 2023 | 1,125,000 | 0 | 5,028,405 | 1,880,049 | 1,253,907 | 34,831 | 9,322,192 | ||||||||||||||||||
| 2022 | 1,100,000 | 0 | 4,577,787 | 1,710,723 | 931,174 | 38,633 | 8,358,317 | |||||||||||||||||||
| 2021 | 1,100,000 | 0 | 4,079,762 | 1,790,074 | 1,099,555 | 30,766 | 8,100,157 | |||||||||||||||||||
Andrew D. Cooper, Senior Vice President and Chief Financial Officer, PNW and APS | 2023 | 600,000 | 0 | 1,269,171 | 592,830 | 163,357 | 28,935 | 2,654,293 | ||||||||||||||||||
| 2022 | 440,821 | 0 | 895,565 | 526,750 | 64,803 | 43,113 | 1,971,052 | |||||||||||||||||||
Theodore N. Geisler, President, APS | 2023 | 670,000 | 0 | 1,467,032 | 815,287 | 270,264 | 32,505 | 3,255,088 | ||||||||||||||||||
| 2022 | 622,260 | 0 | 1,376,974 | 831,872 | 128,704 | 31,217 | 2,991,027 | |||||||||||||||||||
| 2021 | 450,000 | 0 | 1,051,582 | 447,757 | 93,957 | 28,489 | 2,071,785 | |||||||||||||||||||
Adam C. Heflin, Executive Vice President and Chief Nuclear Officer of PVGS, APS | 2023 | 715,000 | 0 | 1,338,517 | 757,721 | 240,596 | 24,473 | 3,076,307 | ||||||||||||||||||
| 2022 | 400,822 | 500,000 | 2,283,316 | 527,008 | 71,793 | 5,577 | 3,788,516 | |||||||||||||||||||
Robert E. Smith, Executive Vice President, General Counsel and Chief Development Officer of PNW and APS | 2023 | 630,000 | 0 | 1,055,255 | 800,321 | 270,751 | 34,390 | 2,790,717 | ||||||||||||||||||
| 2022 | 620,000 | 0 | 871,606 | 699,825 | 213,331 | 31,381 | 2,436,143 | |||||||||||||||||||
| 2021 | 610,000 | 0 | 762,436 | 646,333 | 229,176 | 26,800 | 2,274,745 | |||||||||||||||||||
| Mr. Tetlow | 180,242 | 453,585 |
The aggregate grant date fair value of the performance shares granted in 2022 assuming the highest level of performance is achieved is as follows: Mr. Guldner — $6,554,462; Mr. Geisler — $1,713,833; Mr. Cooper — $1,065,505; Mr. Heflin — $1,845,627; Ms. Lacal — $1,965,556; Mr. Smith — $1,247,684; and Mr. Tetlow — $907,171. Per the terms of the 2022 Performance Shares, when Ms. Lacal retired, a pro-rata portion of each of her 2022 Performance Shares equal to 9,905 total performance shares were forfeited. (2) These amounts represent the payments described under “Executive Compensation Components — Annual Cash Incentives” in the CD&A. (3) The amounts in this column for 2022 consist of: (i) the estimated aggregate change in the actuarial present value from December 31, 2021 to December 31, 2022 of each of the NEO’s accumulated benefits payable under all defined benefit and actuarial pension plans (including supplemental plans and employment agreements) as follows: Mr. Guldner — $890,667; Mr. Geisler — $120,208; Mr. Cooper — $64,803; Mr. Heflin — $71,676; Ms. Lacal — $(290,254); Mr. Smith — $194,686; and Mr. Tetlow — $(119,789); and (ii) the above-market portion of interest accrued under the deferred compensation plan as follows: Mr. Guldner — $40,507; Mr. Geisler — $8,496; Mr. Heflin — $117; Ms. Lacal — $45,254; Mr. Smith — $18,645; and Mr. Tetlow — $20,739. The actuarial present value provided in this footnote is driven by certain assumptions, including the discount rate and the mortality assumption. (4) The amounts in this column include the following amounts for each of the NEOs for 2022: | |||
| Name | RSUs ($) | Performance Shares ($) | ||||||
| Mr. Guldner | 1,465,600 | 3,562,805 | ||||||
| Mr. Cooper | 490,214 | 778,957 | ||||||
| Mr. Geisler | 427,640 | 1,039,392 | ||||||
| Mr. Heflin | 390,273 | 948,244 | ||||||
| Mr. Smith | 307,533 | 747,722 | ||||||
88 | | | 2024 Proxy Statement | ||||||
| Mr. Guldner: | ||||||
• Company’s contribution under the 401(k) plan |
| |||||
• Perquisites and personal benefits consisting of a car allowance, executive physical, and financial planning |
| |||||
| Mr. Cooper: | ||||||
• Company’s contribution under the 401(k) plan |
| |||||
• Perquisites and personal benefits consisting of a car allowance, executive physical, and financial planning |
| |||||
| Mr. Geisler: | ||||||
• Company’s contribution under the 401(k) plan |
| |||||
• Perquisites and personal benefits consisting of a car allowance, executive physical, and financial planning |
| |||||
| Mr. Heflin: | ||||||
•Company’s contribution under the 401(k) plan | 14,473 | |||||
• Perquisite consisting of a car allowance |
| |||||
| Mr. Smith: | ||||||
• Company’s contribution under the 401(k) plan |
| |||||
•
|
| |||||
|
| |||||
| ||||||
|
| |||||
|
| |||||
| ||||||
|
| |||||
Perquisites and personal benefits consisting of a car allowance, executive physical, and financial planning |
| |||||
| 2024 Proxy Statement | 89 | ||||
|
|
Name | Grant Date(1) | Committee Action Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) |
| Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards(3) ($) | Name | Grant Date(1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards(3) ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey B. Guldner |
|
| 6,325 | 1,265,000 | 2,530,000 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 8,809 | 17,618 | 35,236 |
| 1,456,480 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS TSR) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 8,809 | 17,618 | 35,236 |
| 1,213,880 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS EPS) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 4,404 | 8,808 | 17,616 |
| 606,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS Clean) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(5) |
|
| 18,876 | 1,300,556 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(RSU) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS Clean) | (PS Clean) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (RSU) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew D. Cooper | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/212023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS EPS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS Clean) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (RSU) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Theodore N. Geisler |
|
| 2,763 | 552,500 | 1,105,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 2,265 | 4,530 | 9,060 |
| 388,810 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS TSR) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 2,265 | 4,530 | 9,060 |
| 312,117 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS EPS) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 1,132 | 2,264 | 4,528 |
| 155,990 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS Clean) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(5) |
|
| 7,548 | 520,057 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(RSU) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew D. Cooper |
|
| 1,750 | 350,000 | 700,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 327 | 654 | 1,308 |
| 56,133 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS TSR) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 327 | 654 | 1,308 |
| 45,061 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS EPS) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(4) |
|
| 164 | 328 | 656 |
| 22,599 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS Clean) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/2022(5) |
|
| 1,636 | 112,720 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(RSU) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
05/16/2022(4,6) | 04/20/2022(6) |
| 1,017 | 2,035 | 4,070 |
| 183,862 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS TSR) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
05/16/2022(4,6) | 04/20/2022(6) |
| 1,017 | 2,035 | 4,070 |
| 150,041 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS EPS) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
05/16/2022(4,6) | 04/20/2022(6) |
| 509 | 1,018 | 2,036 |
| 75,057 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(PS Clean) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
05/16/2022(5,6) | 04/20/2022(6) |
| 3,392 | 250,092 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(RSU) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/212023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS EPS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS Clean) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (RSU) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adam C. Heflin | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/212023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS EPS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS Clean) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (RSU) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Robert E. Smith | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/212023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS EPS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (PS Clean) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/21/2023(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (RSU) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
90 | |
| 2024 Proxy Statement | ||||||
Name | Grant Date(1) | Committee Action Date |
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) |
| Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards(3) ($) | ||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||
Adam C. Heflin |
|
|
| 1,503 | 300,615 | 601,230 |
|
|
|
|
|
|
06/06/2022(4,7) |
|
|
|
|
|
| 2,151 | 4,302 | 8,604 |
| 418,757 | |
(PS TSR) |
|
|
|
|
|
|
|
|
|
|
| |
06/06/2022(4,7) |
|
|
|
|
|
| 2,151 | 4,302 | 8,604 |
| 335,986 | |
(PS EPS) |
|
|
|
|
|
|
|
|
|
|
| |
06/06/2022(4,7) |
|
|
|
|
|
| 1,076 | 2,152 | 4,304 |
| 168,071 | |
(PS Clean) |
|
|
|
|
|
|
|
|
|
|
| |
06/06/2022(5,7) |
|
|
|
|
|
|
|
|
| 4,612 | 360,197 | |
(RSU) |
|
|
|
|
|
|
|
|
|
|
| |
06/06/2022(5,7) |
|
|
|
|
|
|
|
|
| 12,808 | 1,000,305 | |
(RSU) |
|
|
|
|
|
|
|
|
|
|
| |
Maria L. Lacal |
|
|
| 1,739 | 347,797 | 695,594 |
|
|
|
|
|
|
02/22/2022(4) |
|
|
|
|
|
| 2,641 | 5,283 | 10,566 |
| 436,746 | |
(PS TSR) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 2,641 | 5,283 | 10,566 |
| 363,999 | |
(PS EPS) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 1,321 | 2,642 | 5,284 |
| 182,034 | |
(PS Clean) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(5) |
|
|
|
|
|
|
|
|
| 5,664 | 390,250 | |
(RSU) |
|
|
|
|
|
|
|
|
|
|
| |
Robert E. Smith |
|
|
| 2,325 | 465,000 | 930,000 |
|
|
|
|
|
|
02/22/2022(4) |
|
|
|
|
|
| 1,677 | 3,354 | 6,708 |
| 277,275 | |
(PS TSR) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 1,677 | 3,354 | 6,708 |
| 231,091 | |
(PS EPS) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 838 | 1,676 | 3,352 |
| 115,476 | |
(PS Clean) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(5) |
|
|
|
|
|
|
|
|
| 3,596 | 247,764 | |
(RSU) |
|
|
|
|
|
|
|
|
|
|
| |
Jacob Tetlow |
|
|
| 1,819 | 363,750 | 727,500 |
|
|
|
|
|
|
02/22/2022(4) |
|
|
|
|
|
| 1,219 | 2,438 | 4,876 |
| 201,549 | |
(PS TSR) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 1,219 | 2,438 | 4,876 |
| 167,978 | |
(PS EPS) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(4) |
|
|
|
|
|
| 610 | 1,220 | 2,440 |
| 84,058 | |
(PS Clean) |
|
|
|
|
|
|
|
|
|
|
| |
02/22/2022(5) |
|
|
|
|
|
|
|
|
| 2,616 | 180,242 | |
(RSU) |
|
|
|
|
|
|
|
|
|
|
| |
(1) In this column, the abbreviation “PS” means performance share awards and “RSU” means restricted stock unit awards. (2) As required by SEC rules, the “Estimated Possible Payouts” represent the “threshold,” “target,” and “maximum” payouts the NEOs were eligible to receive under the 2022 Incentive Plans. The actual awards paid to the NEOs under the 2022 Incentive Plans are disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. With respect to Messrs. Guldner, Geisler, Cooper, Smith and Tetlow, the minimum amount each officer would have been eligible to receive was calculated based on earnings achieving 1% and no achievement of the business unit performance metrics. The minimum amount Mr. Heflin and Ms. Lacal would have been eligible to receive was calculated based on the business unit performance metrics achieving 1% and no achievement of the APS earnings goals under the Palo Verde Incentive Plan. | ||||||||||||
|
|
(5)This amount represents the 2023 RSU awards described under “Executive Compensation Components — Long-Term Incentives — RSUs” in the CD&A. In accordance with FASB ASC Topic 718, we valued the RSUs using the number of RSUs awarded multiplied by the closing stock price on the date of the grant ($74.14). There were no forfeitures in 2023.
|
The Company awarded Mr. Cooper a promotional long-term incentive award consisting of 60% Performance Share awards and 40% RSUs valued at $625,000 granted upon his May 16, 2022 promotion date and based upon the closing stock price on such date.
The Company and Mr. Heflin executed an offer letter dated May 19, 2022. Pursuant to the offer letter, Mr. Heflin was awarded a $500,000 hiring incentive in lieu of executive relocation benefits, a long-term incentive award consisting of 70% Performance Share awards and 30% RSUs valued at $1,200,000 granted upon hire date and based upon the closing stock price on such date, and an additional one time RSU grant valued at $1,000,000, also granted upon hire date and based upon the closing stock price on such date. The offer letter also provided for participation in the Supplemental Executive Retirement Plan, the Deferred Compensation Plan and Change-in-Control Agreement similar to those provided to other officers.
|
2024 Proxy Statement | | ||||
Name | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||
| Stock Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||||||||||||
18,876 | (2) | 1,435,331 | 35,236 | (6) | 2,679,345 | |||||||||||||||||||||||||||||||||||||||||
Jeffrey B. Guldner | (RSUs) |
|
| (PS at maximum) |
|
| Jeffrey B. Guldner | (RSUs) | (PS at maximum) | |||||||||||||||||||||||||||||||||||||
|
|
| 35,236 | (7) | 2,679,345 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| (PS at maximum) | ||||||||||||||||||||||||||||||||||||||||
|
|
| 4,404 | (8) | 334,880 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| (PS at threshold) | ||||||||||||||||||||||||||||||||||||||||
12,450 | (3) | 946,698 | 38,731 | (9) | 2,945,105 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| (RSUs) | (PS at maximum) | |||||||||||||||||||||||||||||||||||||||
4,790 | (4) | 364,232 | 25,219 | (10) | 1,917,653 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| (PS at maximum) | ||||||||||||||||||||||||||||||||||||||||
1,490 | (5) | 113,300 |
|
|
| |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
7,548 | (2) | 573,950 | 9,060 | (6) | 688,922 | |||||||||||||||||||||||||||||||||||||||||
Theodore N. Geisler | (RSUs) |
|
| (PS at maximum) |
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
| 9,060 | (7) | 688,922 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 1,132 | (8) | 86,077 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
4,269 | (3) | 324,615 | 8,536 | (9) | 649,078 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
1,110 | (4) | 84,404 | 3,327 | (10) | 252,985 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
228 | (5) | 17,337 |
|
|
| |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
1,636 | (2) | 124,401 | 1,308 | (6) | 99,460 | |||||||||||||||||||||||||||||||||||||||||
Andrew D. Cooper(11) | (RSUs) |
|
| (PS at maximum) |
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
| 1,308 | (7) | 99,460 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 164 | (8) | 12,471 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
3,392 | (2) | 257,928 | 4,070 | (6) | 309,483 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 4,070 | (7) | 309,483 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 509 | (8) | 38,704 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at treshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
1,027 | (3) | 78,093 | 1,423 | (9) | 108,205 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
508 | (4) | 38,628 | 1,608 | (10) | 122,273 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
| Jeffrey B. Guldner | ||||||||||||||||||||||||||||||||||||||||||||||
| Andrew D. Cooper | ||||||||||||||||||||||||||||||||||||||||||||||
| Andrew D. Cooper | (RSUs) | (PS at maximum) | ||||||||||||||||||||||||||||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||||||||||||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | (PS at maximum) | |||||||||||||||||||||||||||||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||||||||||||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||||||||||||||||||||||||||||
| (PS at target) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
92 | |
| 2024 Proxy Statement | ||||||
| Stock Awards | ||||||||||||||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||
| Theodore N. Geisler | 5,768 | (2) | 414,373 | 10,764 | (6) | 773,286 | ||||||||||||||
| (RSUs) | (PS at maximum) | |||||||||||||||||||
| 10,764 | (7) | 773,286 | ||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||
| 1,346 | (8) | 96,697 | ||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||
| 5,661 | (3) | 406,686 | 9,060 | (9) | 650,870 | |||||||||||||||
| (RSUs) | (PS at maximum) | |||||||||||||||||||
| 9,060 | (10) | 650,870 | ||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||
| 1,132 | (11) | 81,323 | ||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||
| 3,000 | (4) | 215,520 | 8,998 | (12) | 646,416 | |||||||||||||||
| (RSUs) | (PS at target) | |||||||||||||||||||
| 587 | (5) | 42,170 | ||||||||||||||||||
| (RSUs) | ||||||||||||||||||||
| Adam C. Heflin | 5,264 | (2) | 378,166 | 9,820 | (6) | 705,469 | ||||||||||||||
| (RSUs) | (PS at maximum) | |||||||||||||||||||
| 9,820 | (7) | 705,469 | ||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||
| 1,228 | (8) | 88,220 | ||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||
| 3,459 | (3) | 248,495 | 8,604 | (9) | 618,111 | |||||||||||||||
| (RSUs) | (PS at maximum) | |||||||||||||||||||
| 8,604 | (10) | 618,111 | ||||||||||||||||||
| (PS at maximum) | ||||||||||||||||||||
| 1,076 | (11) | 77,300 | ||||||||||||||||||
| (PS at threshold) | ||||||||||||||||||||
| 9,606 | (14) | 690,095 | ||||||||||||||||||
| (RSUs) | ||||||||||||||||||||
| 2024 Proxy Statement |93 | ||||
| Stock Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||
Name | Stock Awards | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||||||||||||||||||
Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||||||||||||||||||
Adam C. Heflin(12) | 4,612 | (2) | 350,696 | 8,604 | (6) | 654,248 | ||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 8,604 | (7) | 654,248 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 1,076 | (8) | 81,819 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
12,808 | (2) | 973,920 |
|
|
| |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Maria L. Lacal |
|
|
| 2,642 | (6) | 200,898 | ||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 2,642 | (7) | 200,898 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 331 | (8) | 25,169 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 8,637 | (9) | 656,758 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 5,629 | (10) | 428,030 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
Robert E. Smith | 3,596 | (2) | 273,440 | 6,708 | (6) | 510,076 | ||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 6,708 | (7) | 510,076 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 838 | (8) | 63,722 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
2,978 | (3) | 226,447 | 6,189 | (9) | 470,612 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
1,464 | (4) | 111,323 | 4,656 | (10) | 354,042 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
844 | (5) | 64,178 |
|
|
| |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Jacob Tetlow(13) | 2,616 | (2) | 198,921 | 4,876 | (6) | 370,771 | ||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 4,876 | (7) | 370,771 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at maximum) |
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| 610 | (8) | 46,384 | |||||||||||||||||||||||||||||||||||||||||
|
|
| (PS at threshold) |
|
| |||||||||||||||||||||||||||||||||||||||||
1,709 | (3) | 129,952 | 3,415 | (9) | 259,676 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
546 | (3) | 41,518 | 1,754 | (9) | 133,375 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
666 | (4) | 50,643 | 1,995 | (10) | 151,700 | |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
| (PS at target) |
|
| |||||||||||||||||||||||||||||||||||||||||
228 | (5) | 17,337 |
|
|
| |||||||||||||||||||||||||||||||||||||||||
(RSUs) |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
| Robert E. Smith | ||||||||||||||||||||||||||||||||||||||||||||||
| 754 | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
| (RSUs) | ||||||||||||||||||||||||||||||||||||||||||||||
94 | | | 2024 Proxy Statement | ||||||
| 2024 Proxy Statement | | ||||
|
|
|
Name | Stock Awards | |
Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | |
Jeffrey B. Guldner | 19,972 | 1,323,853 |
Theodore N. Geisler | 3,345 | 226,019 |
Andrew D. Cooper | 587 | 40,455 |
Adam C. Heflin | 0 | 0 |
Maria L. Lacal | 13,564 | 885,310 |
Robert E. Smith | 5,970 | 394,674 |
Jacob Tetlow | 2,479 | 166,334 |
(1) The amount in this column consists of: (i) RSUs that were granted to NEOs in February 2021 that vested and were released in part on February 18, 2022 as follows: Mr. Guldner — 3,838; Mr. Geisler — 1,316; Mr. Cooper — 329; Ms. Lacal — 790; Mr. Smith —954; and Mr. Tetlow — 703; dividend rights (and interest thereon) payable in stock earned on RSUs granted in February 2021 and released in part on February 18, 2022, as follows: Mr. Guldner — 190; Mr. Geisler — 65; Mr. Cooper — 8; Ms. Lacal — 20; Mr. Smith — 24; and Mr. Tetlow — 29; (ii) RSUs that were granted to NEOs in February 2020 (except Mr. Cooper), and Mr. Cooper in June 2020, that vested and were released in part on February 18, 2022, as follows: Mr. Guldner — 2,395; Mr. Geisler — 492; Mr. Cooper — 240; Ms. Lacal — 516; Mr. Smith — 688; and Mr. Tetlow — 295; dividend rights (and interest thereon) payable in stock earned on RSUs granted in February 2020 and released in part on February 18, 2022 as follows: Mr. Geisler — 49; Mr. Cooper — 10; Ms. Lacal — 52; Mr. Smith — 34; and Mr. Tetlow — 29; (iii) RSUs that were granted to NEOs in February 2019 that vested and were released in part on February 18, 2022 as follows: Mr. Guldner — 1,490; Mr. Geisler — 194; Ms. Lacal — 331; Mr. Smith — 718; and Mr. Tetlow — 194; dividend rights (and interest thereon) payable in stock earned on RSUs granted in February 2019 and released in part on February 18, 2022 as follows: Mr. Geisler — 29; Ms. Lacal — 49; Mr. Smith — 107; and Mr. Tetlow— 29; (iv) RSUs that were granted to NEOs in February 2018, that vested and were released in part on February 18, 2022, as follows: Mr. Guldner — 681; Mr. Geisler — 227; Ms. Lacal — 389; and Mr. Tetlow — 227; dividend rights (and interest thereon) payable in stock earned on RSUs granted in 2018 and released in part on February 18, 2022, as follows: Mr. Geisler — 45; Ms. Lacal — 77; and Mr. Tetlow — 45; (v) 5,664 RSUs granted to Ms. Lacal in February 2022; 2,370 RSUs granted to Ms. Lacal in February 2021; 1,032 granted to Ms. Lacal in February 2020; 331 RSUs granted to Ms. Lacal in February 2019; dividend rights (and interest thereon) payable in stock earned on those RSU consisting of 96 on the 2021 RSUs, 70 on the 2020 RSUs, and 63 on the 2019 RSUs, in all cases that vested (but were not released) on September 30, 2022; (vi) additional RSUs resulting from notional dividends on the one-time award of supplemental grants of RSUs that were granted in February 2011 for performance prior to 2011 and further described below (the “Supplemental RSUs”), that vested, but were not released, on the following dates in 2022: | ||
| Name | March 1 | June 1 | September 1 | December 1 |
| Jeffrey B. Guldner | 65 | 60 | 63 | 63 |
| Maria L. Lacal | 44 | 40 | 41 | - |
(The Supplemental RSUs vested 50% on February 15, 2013, 25% on February 14, 2014, and 25% on February 13, 2015. The Supplemental RSUs are not released to the recipient until the recipient’s retirement, death, disability or separation of employment from the Company); and (vii) performance shares that were granted to the NEOs in February 2019, which were based on a performance period of January 1, 2019 to December 31, 2021, and which were released in 2022 when the Company had the information needed to determine whether, and to what extent, the applicable performance criteria were met, as follows: performance shares related to TSR did not meet performance criteria so there was no pay out of shares for this portion of the award; and performance shares related to the five operational performance metrics were released on October 19, 2022 as follows: Mr. Guldner — 9,326; Mr. Geisler — 778; Ms. Lacal — 1,332; Mr. Smith — 2,887; and Mr. Tetlow — 778; and dividend rights (and interest thereon) payable in stock on the performance shares released on October 19, 2022 as follows: Mr. Guldner — 1,801; Mr. Geisler — 150; Ms. Lacal — 257; Mr. Smith — 558; and Mr. Tetlow — 150. (2) The values realized for the RSUs, Supplemental RSUs and the performance shares are calculated by multiplying the number of shares of stock or units released or vested by the market value of the common stock on the release or vesting date, which: (i) for the RSUs released on February 18, 2022 was $68.92; (ii) for the Supplemental RSUs vested on March 1, 2022 was $69.82; (iii) for the Supplemental RSUs vested on June 1, 2022 was $77.43; (iv) for the Supplemental RSUs vested on September 1, 2022 was $75.94; (v) for the Supplemental RSUs vested on December 1, 2022 was $77.80; (vi) for the performance shares released on October 19, 2022 was $64.05; and for (vii) RSUs vested on September 30, 2022 was $64.51. | |||||
| Name | Stock Awards | |||||||
Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | |||||||
| Jeffrey B. Guldner | 30,960 | 2,344,412 | ||||||
| Andrew D. Cooper | 2,997 | 226,307 | ||||||
| Theodore N. Geisler | 6,479 | 489,120 | ||||||
| Adam C. Heflin | 4,355 | 327,060 | ||||||
| Robert E. Smith | 6,792 | 513,647 | ||||||
| Name | March 1 | June 1 | September 1 | December 1 | ||||||||||
| Jeffrey B. Guldner | 68 | 65 | 67 | 68 | ||||||||||
96 | |
| 2024 Proxy Statement | ||||||
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits ($)(1) | Payments During Last Fiscal Year ($) | Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits ($)(1) | Payments During Last Fiscal Year ($) | |||||||||
Jeffrey B. Guldner(2) | Retirement Plan | 18 | 417,263 | 0 | ||||||||||||||
Supplemental Plan | 18 | 4,830,406 | 0 | |||||||||||||||
Theodore N. Geisler(3) | Retirement Plan | 13 | 177,253 | 0 | ||||||||||||||
Supplemental Plan | 13 | 237,612 | 0 | |||||||||||||||
Andrew D. Cooper(4) | Retirement Plan | 3 | 39,420 | 0 | ||||||||||||||
Supplemental Plan | 3 | 82,951 | 0 | |||||||||||||||
Andrew D. Cooper(3) | ||||||||||||||||||
Theodore N. Geisler(4) | ||||||||||||||||||
Adam C. Heflin(5) | Retirement Plan | 1 | 18,238 | 0 | ||||||||||||||
Supplemental Plan | 1 | 53,438 | 0 | |||||||||||||||
Maria L. Lacal(6) | Retirement Plan | 16 | 0 | 387,130(7) | ||||||||||||||
Supplemental Plan | 16 | 2,125,833 | 0 | |||||||||||||||
Robert E. Smith(8) | Retirement Plan | 5 | 87,108 | 0 | ||||||||||||||
Supplemental Plan | 5 | 645,551 | 0 | |||||||||||||||
Jacob Tetlow(9) | Retirement Plan | 21 | 634,032 | 0 | ||||||||||||||
Supplemental Plan | 21 | 538,751 | 0 | (1) See Note 7 of the Notes to Consolidated Financial Statements in the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for additional information about the assumptions used by the Company in calculating pension obligations. (2) The amounts shown are the present values of Mr. Guldner’s accumulated benefits for the Retirement Plan to be paid as an annuity and lump sum and for the Supplemental Plan to be paid as a five-year certain payment (payable in 60 monthly installments). (3) The amounts shown are the present values of Mr. Geisler’s accumulated benefits for the Retirement Plan to be paid as an annuity and lump sum and for the Supplemental Plan to be paid as an annuity. (4) The amounts shown are the present values of Mr. Cooper’s accumulated benefits for the Retirement Plan to be paid as an annuity and lump sum and for the Supplemental Plan to be paid as an annuity. (5) The amounts shown are the present values of Mr. Heflin’s accumulated benefits for the Retirement Plan to be paid as an annuity and lump sum and for the Supplemental Plan to be paid as a five-year certain payment (payable in 60 monthly installments). (6) The amounts shown are the present values of Ms. Lacal’s accumulated benefits to be paid as an annuity for the Supplemental Plan. (7) Ms. Lacal received a lump sum payment of $387,130 for the Retirement Plan on December 1, 2022. (8) The amounts shown are the present values of Mr. Smith’s accumulated benefits for the Retirement Plan to be paid as an annuity and lump sum and for the Supplemental Plan to be paid as a five-year certain payment (payable in 60 monthly installments). (9) The amounts shown are the present values of Mr. Tetlow’s accumulated benefits for the Retirement Plan to be paid as an annuity and for the Supplemental Plan to be paid as a five-year certain payment (payable in 60 monthly installments), both at age 62.5, which is the earliest Mr. Tetlow could retire with no reduction in benefits. | ||||||||||||||
Robert E. Smith(6) | ||||||||||||||||||
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2024 Proxy Statement |97 | ||||
| Description |
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| Effective April 1, 2003, the Company changed the benefit accrual formula for both the Retirement Plan and the Supplemental Plan to a retirement account balance formula (the “Account Balance Formula”). Active participants were able to elect to either (1) continue to earn benefits calculated under a Traditional Formula, or (2) earn benefits calculated (a) under the Traditional Formula for service through March 31, 2003, and (b) under the Account Balance Formula for service after that date. Messrs. Guldner’s, Cooper’s, Geisler’s, | Under the Account Balance Formula, a notional account is established for each eligible participant and benefits are generally payable at termination of employment. The Company credits monthly amounts (based on the participant’s current monthly compensation) to a participant’s account. | ||||
| Age Plus Whole Years of Service at End of Plan Year | Percent of Monthly Compensation Contribution Rate (%) | ||||
Less than 40 | 4 | ||||
40-49 | 5 | ||||
50-59 | 6 | ||||
60-69 | 7 | ||||
70-79 | 9 | ||||
80 and over | 11 | ||||
98 | | | 2024 Proxy Statement | ||||||
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| Age at End of Plan Year | Percent of Monthly Compensation Contribution Rate (%) | ||||
Less than 35 | 12 | ||||
35-39 | 14 | ||||
40-44 | 16 | ||||
45-49 | 20 | ||||
50-54 | 24 | ||||
55 and over | 28 | ||||
| Age at End of Plan Year | Percent of Monthly Compensation Contribution Rate (%) | ||||
Less than 35 | 8 | ||||
35-39 | 9 | ||||
40-44 | 10 | ||||
45-49 | 12 | ||||
50-54 | 15 | ||||
55 and over | 18 | ||||
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2024 Proxy Statement | | ||||
Name |
| Executive Contributions in Last Fiscal Year ($)(1) |
| Registrant Contributions in Last Fiscal Year ($) |
| Aggregate Earnings in Last Fiscal Year ($)(2) |
| Aggregate Withdrawals/ Distributions ($) |
| Aggregate Balance at Last Fiscal Year End ($) | Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | |||||||||||
Jeffrey B. Guldner: |
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| Jeffrey B. Guldner: | ||||||||||||||||
DCP(3) |
| 57,801 |
| 0 |
| 126,688 |
| 0 |
| 1,777,657 | |||||||||||||||||
Supplemental RSUs(4) |
| 0 |
| 0 |
| 0 |
| 0 |
| 431,831 | |||||||||||||||||
| Andrew D. Cooper: | |||||||||||||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
Theodore N. Geisler: |
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DCP(3) |
| 30,938 |
| 0 |
| 6,804 |
| 0 |
| 111,353 | |||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
Geisler DCP Discretionary Credits(5) |
| 0 |
| 50,000 |
| 21,892 |
| 0 |
| 304,332 | |||||||||||||||||
Andrew D. Cooper: |
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DCP(3) |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 | |||||||||||||||||
Adam C. Heflin: |
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DCP(3) |
| 28,000 |
| 0 |
| 482 |
| 0 |
| 28,482 | |||||||||||||||||
Maria L. Lacal: |
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DCP(3) |
| 796,545 |
| 0 |
| 70,793 |
| 0 |
| 1,191,321 | |||||||||||||||||
Lacal DCP Discretionary Credits(5) |
| 0 |
| 0 |
| 100,606 |
| 0 |
| 1,396,645 | |||||||||||||||||
Supplemental RSUs(4) |
| 0 |
| 0 |
| 0 |
| 0 |
| 285,378 | |||||||||||||||||
RSUs(6) |
| 0 |
| 0 |
| 0 |
| 0 |
| 620,973 | |||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
Robert E. Smith: |
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DCP(3) |
| 385,147 |
| 0 |
| 72,619 |
| 0 |
| 1,106,607 | |||||||||||||||||
Jacob Tetlow: |
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DCP(3) Tetlow DCP Discretionary Credits(5) |
| 95,022 0 |
| 0 0 |
| 44,445 22,200 |
| 0 0 |
| 637,899 308,180 | (1) The amount of the executive contribution is solely from the voluntary deferral by the executive of the executive’s designated compensation and does not include any separate Company contribution. These deferred amounts are included in the “Salary” and “Non-Equity Incentive Plan Compensation” columns in the Summary Compensation Table. (2) A portion of the amounts reported in this column is the above-market portion of interest accrued under the deferred compensation plan (also reported as compensation in the Summary Compensation Table), including: Mr. Guldner — $40,507; Mr. Geisler — $8,496; Mr. Heflin — $117; Ms. Lacal — $45,254; Mr. Smith — $18,645; and Mr. Tetlow — $20,739. (3) The historical contributions of each NEO to their aggregate balance at December 31, 2022, including “market rate” interest (as defined by the SEC) from the date of each contribution, is as follows: Mr. Guldner — $1,177,155; Mr. Geisler — $104,166; Mr. Heflin — $28,365; Ms. Lacal — $1,148,278; Mr. Smith — $1,047,842; and Mr. Tetlow — $99,982. Of the totals in this column, the following amounts have been reported in the Summary Compensation Table in this Proxy Statement or in the Company’s prior Proxy Statements: Mr. Guldner — $890,743; Mr. Geisler — $107,528; Mr. Heflin — $28,117; Ms. Lacal — $1,289,377; Mr. Smith — $1,034,536; and Mr. Tetlow — $115,761;. (4) Supplemental RSUs were granted to NEOs in 2011 (except Messrs. Guldner and Lacal) and vested over a four-year period and earned additional Supplemental RSUs resulting from notional dividends on the vested underlying awards. The amount in the “Aggregate Balance at Last Fiscal Year End” column is calculated by multiplying the closing market price of our common stock at the end of 2022 ($76.04 per share as of December 30, 2022) by the number of vested Supplemental RSUs as follows: Mr. Guldner — 5,679 and Ms. Lacal — 3,753. (5) The terms of the Geisler, Tetlow and Lacal DCP Discretionary Credits are discussed under “Discussion of the Nonqualified Deferred Compensation – DCP” below. (6) Ms. Lacal’s RSUs vested in September 2022 when she retired. These RSUs will be released in accordance with the vesting schedule associated with each RSU grant. The amount in the “Aggregate Balance at Fiscal Year End” column is calculated by multiplying the closing market price of our common stock on September 30, 2022 ($64.51) by the number of vested RSUs. | ||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
DCP(3) | |||||||||||||||||||||||||||
100 | |
| 2024 Proxy Statement | ||||||
The Pinnacle West Capital Corporation and Affiliates • On December 15, 2004, the Board authorized the adoption of a new nonqualified | Participation is limited to officers, the Company’s senior management group, A participant who is an employee is allowed to defer up to 50% of the participant’s base salary and up to 100% of the participant’s bonus, including regular awards under annual incentive plans, but not special awards. A participant who is a member of the Board is allowed to defer up to 100% of the annual cash fees payable to the participant. Amounts deferred by participants are credited with interest at various rates. The DCP provides for a single rate of interest that will be determined by the plan committee, but which rate shall in no event be less than the rate of interest equal to the 10-year U.S. Treasury Note rate as published on the last business day of the first week of October preceding a plan year. The plan committee set the rate at 7.5% for plan year Deferral elections of base salary and Director’s fees must be made prior to the calendar year in which such base salary or Director’s fees will be paid. A deferral election with respect to a bonus must be made before the first day of the calendar year in which the bonus is earned. When making a deferral election, a participant also makes an election regarding the time and form of the participant’s distributions from the DCP. Distributions from the DCP must be made in accordance with Section 409A of the Code. Distributions may be made (1) in January of the fifth year following the year in which an amount was deferred, (2) on account of an unforeseeable financial emergency, (3) either (i) termination of employment or (ii) the later of termination of employment or attainment of age 55, or (4) on account of death before termination of employment. In the event of termination of employment, attainment of age 55 or death, the benefit is payable in a lump sum or in 5, 10, or 15 equal annual installments, as elected by the participant. Benefits in the other circumstances are generally paid in a lump sum. | ||||
The Company made a discretionary credit award to Mr. Tetlow in 2019 pursuant to the DCP consisting of the same terms and conditions as Mr. Geisler’s. In February 2021, the Company amended Mr. Tetlow’s award as follows: $100,000 as of July 1, 2019, $50,000 on January 1, 2020 and an additional $100,000 on January 1 of each of the next three years thereafter, provided Mr. Tetlow remains employed by the Company on each such crediting date (the “Tetlow DCP Discretionary Credits”). The amounts of the Tetlow DCP Discretionary Credits previously credited will fully vest if, prior to December 31, 2024, Mr. Tetlow is promoted to Executive Vice President, the Company terminates Mr. Tetlow’s employment without cause, or in the event of his death or disability and any credits not yet allocated to Mr. Tetlow at the date of the promotion, termination by APS without cause, death or disability, will be forfeited. In May 2021, Mr. Tetlow was promoted to Executive Vice President upon which his awards credited on July 1, 2019 and January 1, 2020 and 2021 vested and will be payable to Mr. Tetlow following his seperation from the Company.
|
2024 Proxy Statement | | ||||
The Company provided credits to Ms. Lacal in 2008 and amended the award in 2011 consisting of $200,000 on December 17, 2008, $40,000 on January 1, 2010, $50,000 on January 1, 2011, and an additional $50,000 each of the next three years thereafter on January 1 (the “2008 Company Credits”). The 2008 Company Credits vested when Ms. Lacal attained age 55 and were paid to Ms. Lacal following her retirement from the Company.
The Company made a discretionary credit award to Ms. Lacal in 2014 pursuant to the DCP consisting of $50,000 on January 1, 2015 and $50,000 on January 1, 2016 (the “2014 Lacal DCP Discretionary Credits”). The 2014 Lacal DCP Discretionary Credits earn interest in accordance with the DCP. The 2014 Lacal DCP Discretionary Credits vested on April 30, 2017 and were paid to Ms. Lacal following her retirement from the Company.
Additionally, the Company made a discretionary credit award to Ms. Lacal in 2016 pursuant to the DCP consisting of $125,000 on July 1, 2017 and an additional $125,000 on July 1, 2018 (the “2016 Lacal DCP Discretionary Credits” and together with the 2008 Company Credits and 2014 Lacal DCP Discretionary Credits, the “Lacal DCP Discretionary Credits”). The 2016 Lacal DCP Discretionary Credits earn interest in accordance with the DCP. The 2016 Lacal DCP Discretionary Credits vested on July 1, 2019 and were paid to Ms. Lacal following her retirement from the Company.
NEO.
In 2014, APS entered into a Medical Retention Agreement with Ms. Lacal. The purpose of this agreement was to award a retention incentive that can be used to obtain medical insurance of Ms. Lacal’s choice. Pursuant to this agreement, APS paid Ms. Lacal a single lump sum payment of $260,000 upon her retirement with APS.
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is paid in the form of a monthly annuity to the NEO’s spouse for life following his death and benefit payments commence when the NEO would have attained age 55, and (2)that the Account Balance Formula is paid in the form of an immediate lump sum to his spouse.their spouses. Messrs. Guldner, Cooper, Geisler, Cooper,and Smith and Tetlow would have received $4,830,406; $237,612; $82,951; $645,551$5,993,477; $225,875; $466,129; and $537,959,$871,231, respectively, in the event of a Termination Event other than death, due on December 31, 2022,2023, and these amounts are based on the assumption that the benefit would be payable in five-year installment payments beginning on January 1, 20222024 for Messrs. Guldner and Smith and beginning on June 1, 2027 (attainment of age 55) for Mr. Tetlow.Smith. The amounts for Messrs. GeislerCooper and SmithGeisler are based on the assumption that the benefit would be payable as a monthly annuity beginning on January 1, 2022.
2024 for Mr. Cooper and January 1, 2029 for Mr. Geisler (due to a change to his distribution election).
102 | | | 2024 Proxy Statement | ||||||
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| 2024 Proxy Statement | 103 | ||||
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Company the ability to include a limited excise tax gross-up provision in connection with recruiting a new executive to the Company. In 2018, the Committee removed this exception. Since 2021, the Change of Control Agreements for all NEOs, except Mr. Guldner, contain a “best net benefit” provision which provides that the Company’s payments to the officer can be reduced to the extent that no portion of the reduced payments shall be subject to certain excise taxes under the Internal Revenue Code of 1986, but only if the officer’s net after-tax benefit is greater than his or her net after-tax benefit would have been if such reduction were not made and the officer paid the excise tax.
104 | |
| 2024 Proxy Statement | ||||||
We assume full vesting of outstanding performance shares (at the target level) and RSUs upon a change of control. The performance shares and RSUs, plus, where applicable, dividend equivalents, for the NEOs vest upon a change of control whether or not there is a subsequent termination of employment (subject, however, to the Board’s ability to override the vesting).
Retirement benefits payable to Mr. Guldner and Ms. Lacal include full vesting of outstanding performance shares granted prior to 2022 awards and prorated vesting for awards granted in 2022 awards (at the target level) full vesting of outstanding RSUs granted prior to 2023 and the next vesting RSU 2023 awards, plus, in all cases where applicable, dividend equivalents. Because Ms. Lacal retired on September 30, 2022, the amounts represent the actual benefits payable to Ms. Lacal upon her retirement, including a medical retention payment of $260,000.
Death or disability benefits payable to all NEOs include full vesting of 2022 performance shares (at the target level) and RSUs,RSU awards granted after January 1, 2022 and thereafter, plus, in all cases where applicable, dividend equivalents; all outstanding awards for Mr. Guldner contain the death or disability treatment described above; and death and disability benefits payable to Mr. Geisler include $250,000$300,000 of the Geisler DCP Discretionary Credits, plus interest.
The amounts in the “All Other Termination Events” columns consist of a payment upon termination without cause of $250,000$300,000 of the Geisler DCP Discretionary Credits, plus interest, for Mr. Geisler because all amounts of the Geisler DCP Discretionary Credits previously credited vest and become payable if the Company terminates Mr. Geisler’s employment without cause.
Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | Retirement ($) | All Other Termination Events ($) | Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | Retirement ($) | All Other Termination Events ($) | |||||||||||||||||||
Performance Shares | 8,334,561 | (1) | 6,998,772 | 4,435,412 | 0 | Performance Shares | 9,785,686 | (1) | (1) | 7,464,032 | 3,702,442 | 0 | ||||||||||||||||
RSUs | 3,045,654 | (1) | 3,045,654 | 3,184,408 | 0 | RSUs | 3,403,484 | (1) | (1) | 3,403,484 | 2,402,918 | 0 | ||||||||||||||||
Severance Benefits | 5,911,390 |
| 0 | 0 | Severance Benefits | 6,878,402 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Present Value of Medical, Dental, and Life Insurance Benefits | 42,987 |
| 0 | 0 | Present Value of Medical, Dental, and Life Insurance Benefits | 43,726 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Outplacement Services | 10,000 |
| 0 | 0 | Outplacement Services | 10,000 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Excise Tax Gross-Up | 7,137,514 |
| 0 | 0 | Excise Tax Gross-Up | 8,200,688 | 0 | 0 | 0 | 0 | ||||||||||||||||||
TOTAL: | 24,482,106 |
| 10,044,426 | 7,619,820 | 0 | TOTAL: | 28,321,986 | 10,867,516 | 10,867,516 | 6,105,360 | 0 | (1) The performance shares and RSUs are accelerated upon a change of control only if the Board does not exercise its override authority. | ||||||||||||||||
| Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | |||||||||||
| Performance Shares | 1,362,812 | (1) | 1,372,862 | 0 | ||||||||||
| RSUs | 856,197 | (1) | 781,979 | 0 | ||||||||||
| Severance Benefits | 2,859,872 | 0 | 0 | |||||||||||
| Present Value of Medical, Dental, and Life Insurance Benefits | 40,919 | 0 | 0 | |||||||||||
| Outplacement Services | 10,000 | 0 | 0 | |||||||||||
| TOTAL: | 5,129,800 | 2,154,841 | 0 | |||||||||||
|
2024 Proxy Statement | | ||||
Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | |||||||||||||||
Performance Shares | 1,794,646 | (1) | 988,292 | 0 | ||||||||||||||||||
RSUs | 1,047,932 | (1) | 621,550 | 0 | ||||||||||||||||||
Severance Benefits | 2,570,888 |
| 0 | |||||||||||||||||||
Present Value of Medical, Dental, and Life Insurance Benefits | 40,603 |
| 0 | |||||||||||||||||||
Outplacement Services | 10,000 |
| 0 | |||||||||||||||||||
Geisler DCP Discretionary Credits | 0 |
| 304,332 | |||||||||||||||||||
TOTAL: | 5,464,069 |
| 1,914,174 | 304,332 | (1) The performance shares and RSUs are accelerated upon a change of control only if the Board does not exercise its override authority. | |||||||||||||||||
Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | ||
Performance Shares | 755,847 | (1) | 581,630 | 0 | |
RSUs | 530,254 | (1) | 408,341 | 0 | |
Severance Benefits | 2,051,762 |
| 0 | 0 | |
Present Value of Medical, Dental, and Life Insurance Benefits | 39,748 |
| 0 | 0 | |
Outplacement Services | 10,000 |
| 0 | 0 | |
TOTAL: | 3,387,611 |
| 989,971 | 0 | |
(1) The performance shares and RSUs are accelerated upon a change of control only if the Board does not exercise its override authority. | |||||
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Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | Component of Pay | Qualifying Termination of Employment in Connection With a Change of Control ($) | Death or Disability ($) | All Other Termination Events ($) | |||||||||||||||
Performance Shares |
| 838,037 | (1) | 927,764 | 0 | |||||||||||||||||
RSUs |
| 1,406,106 | (1) | 1,406,106 | 0 | |||||||||||||||||
Severance Benefits |
| 3,662,750 |
| 0 | ||||||||||||||||||
Present Value of Medical, Dental, and Life Insurance Benefits |
| 4,015 |
| 0 | ||||||||||||||||||
Outplacement Services |
| 10,000 |
| 0 | ||||||||||||||||||
TOTAL: |
| 5,920,908 |
| 2,333,870 | 0 | (1) The performance shares and RSUs are accelerated upon a change of control only if the Board does not exercise its override authority. | ||||||||||||||||
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• |
We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation. Since all our employees are located in the United States, as is our CEO, we did not make any cost-of-living adjustments in identifying the median employee.
We combined all of the elements of the median employee’s compensation for 20222023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $147,857.$153,935. The difference between such employee’s salary, wages, overtime, and premium pay, and an estimated cash incentive assuming a target payout under the APS2023 Incentive PlanPlans and the employee’s annual total compensation includes the amount the Company contributed under the 401(k) plan for the employee, the actual amount paid under the APS2023 Incentive PlanPlans, and the estimated aggregate change in the actuarial present value from December 31, 20212022 to December 31, 20222023 of the employee’s accumulated benefits payable under all defined pension plans.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 20222023 Summary Compensation Table included in this Proxy Statement for Mr. Guldner.
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Year | Summary | Compensation | Average Summary | Average |
| Value of Initial Fixed $100 | Net Income | APS Adjusted | |
Total | Peer Group Return ($)(6) | ||||||||
(a) | (b) | (c) | (d) | (e) |
| (f) | (g) | (h) | (i) |
2022 | 8,358,317 | 9,453,300 | 2,542,827 | 2,749,796 |
| 484 | 525 | ||
2021 | 8,100,157 | 5,532,436 | 2,842,352 | 2,219,429 |
| 619 | 632 | ||
2020 | 6,849,455 | 5,416,048 | 2,619,339 | 1,926,894 |
| 551 | 588 | ||
(1) The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Guldner (our CEO also known as the Principal Executive Officer “PEO”) for each corresponding year in the “Total” column of the Summary Compensation Table. (2) The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Guldner, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Guldner during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Guldner’s total compensation for each year to determine the compensation actually paid:
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| Year | Reported Summary | Reported Value of | Equity Award | Reported Change | Pension Benefit | Compensation |
| 2022 | 8,358,317 | (4,577,787) | 6,135,632 | (890,667) | 427,805 | 9,453,300 |
| 2021 | 8,100,157 | (4,079,762) | 2,111,502 | (1,021,838) | 422,377 | 5,532,436 |
| 2020 | 6,849,455 | (3,316,740) | 2,281,910 | (782,970) | 384,393 | 5,416,048 |
| (a) The grant date fair value of equity awards represents the amount reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year. | ||||||
| Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(3) | Average Compensation Actually Paid to Non-PEO NEOs ($)(4) | Value of Initial Fixed $100 Investment Based on: | ||||||||||||||||||||||||
Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(6) | Net Income (millions)(7) | APS Adjusted Earnings (millions)(8) | ||||||||||||||||||||||||||
| 2023 | 9,322,192 | 10,889,494 | 2,944,101 | 3,263,608 | 95 | 107 | 519 | 556 | |||||||||||||||||||||
| 2022 | 8,358,317 | 9,453,300 | 2,542,827 | 2,749,796 | 96 | 117 | 501 | 525 | |||||||||||||||||||||
| 2021 | 8,100,157 | 5,532,436 | 2,842,352 | 2,219,429 | 85 | 116 | 636 | 632 | |||||||||||||||||||||
| 2020 | 6,849,455 | 5,416,048 | 2,619,339 | 1,926,894 | 92 | 99 | 570 | 588 | |||||||||||||||||||||
| Year | Reported Summary Compensation Table Total for PEO ($) | Reported Value of Equity Awards ($)(a) | Equity Award Adjustments ($)(b) | Reported Change in the Actuarial Present Value of Pension Benefits ($)(c) | Pension Benefit Adjustments ($)(d) | Compensation Actually Paid to PEO ($) | ||||||||||||||
| 2023 | 9,322,192 | (5,028,405) | 7,440,754 | (1,223,951) | 378,904 | 10,889,494 | ||||||||||||||
| 2022 | 8,358,317 | (4,577,787) | 6,135,632 | (890,667) | 427,805 | 9,453,300 | ||||||||||||||
| 2021 | 8,100,157 | (4,079,762) | 2,111,502 | (1,021,838) | 422,377 | 5,532,436 | ||||||||||||||
| 2020 | 6,849,455 | (3,316,740) | 2,281,910 | (782,970) | 384,393 | 5,416,048 | ||||||||||||||
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| Year | Year-End Fair Value of Equity Awards Granted During the Covered Fiscal Year that are Outstanding and Unvested as of the End of the Covered Fiscal Year | Year over Year Change in Fair Value as of the End of the Covered Fiscal Year of Outstanding and Unvested Equity Awards Granted in Prior Years | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Same Covered Fiscal Year | Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior Years that Vested in the Covered Fiscal Year | Fair Value at the End of the Prior Fiscal Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Fiscal Year | Value of Dividends or other Earnings Paid on Stock Awards in the Covered Fiscal Year Not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments | ||||||||||||||||
| 2023 | 5,041,324 | 961,712 | 0 | 840,730 | 0 | 596,988 | 7,440,754 | ||||||||||||||||
| 2022 | 5,292,090 | 102,694 | 0 | 303,819 | 0 | 437,029 | 6,135,632 | ||||||||||||||||
| 2021 | 2,680,491 | (646,196) | 0 | (184,196) | 0 | 261,403 | 2,111,502 | ||||||||||||||||
| 2020 | 2,138,995 | (93,395) | 0 | 80,020 | 0 | 156,290 | 2,281,910 | ||||||||||||||||
| Year | Service Cost | Prior Service Cost | Total Pension Benefit Adjustments | ||||||||
| 2023 | 378,904 | 0 | 378,904 | ||||||||
| 2022 | 427,805 | 0 | 427,805 | ||||||||
| 2021 | 422,377 | 0 | 422,377 | ||||||||
| 2020 | 384,393 | 0 | 384,393 | ||||||||
| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs | Average Reported Value of Equity Awards | Average Equity Award Adjustments(a) | Average Reported Change in the Actuarial Present Value of Pension Benefits | Average Pension Benefit Adjustments(b) | Average Compensation Actually Paid to Non-PEO NEOs | ||||||||||||||
| 2023 | 2,944,101 | (1,282,494) | 1,687,847 | (229,852) | 144,005 | 3,263,608 | ||||||||||||||
| 2022 | 2,542,827 | (1,239,053) | 1,333,714 | (6,888) | 119,197 | 2,749,796 | ||||||||||||||
| 2021 | 2,842,352 | (977,983) | 522,865 | (360,916) | 193,111 | 2,219,429 | ||||||||||||||
| 2020 | 2,619,339 | (878,815) | 625,410 | (571,556) | 132,516 | 1,926,894 | ||||||||||||||
| 2024 Proxy Statement | | ||||
(a)The amounts deducted or added in calculating the total average equity award adjustments are as follows:
(b)The amounts deducted or added in calculating the total pension benefit adjustments are as follows:
(5)Cumulative TSR, as required by Item 402(v) of Regulation S-K, is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. (6)Cumulative peer group TSR, as required by Item 402(v) of Regulation S-K, is calculated using the same methodology used in calculating the Company’s cumulative TSR. Further, in calculating the peer group cumulative TSR, the returns of each component issuer is weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: EEI Index. (7)The dollar amounts reported represent the amount of net income reflected in PNW’s audited financial statements for the applicable year, as required. For further details, see Consolidated Statements of Income in the Pinnacle West/APS Annual Report on Form 10-K for fiscal year ended December 31, 2023. (8)Adjusted APS earnings (“APS Adjusted Earnings”) is APS earnings calculated in accordance with GAAP, as adjusted for purposes of the annual incentive plans, as follows: (i) for the APS 2020 Annual Incentive Award Plan and the APS 2020 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were adjusted from $568.0 million to $587.7 million due to an accrual for the Coal Communities Transition Plan that was required under the accounting rules but that related to a future expense; (ii) for the APS 2021 Annual Incentive Award Plan and the APS 2021 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were not adjusted; (iii) for the APS 2022 Annual Incentive Award Plan and the APS 2022 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were not adjusted; and (iv) for the APS 2023 Annual Incentive Award Plan and the APS 2023 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were adjusted from $547.3 million to $555.6 million due to a budget correction to a tax allocation that was made within the Pinnacle West consolidated group of companies. |
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| Year | Year End Fair Value of Equity Awards Granted During the Covered Fiscal Year that are Outstanding and Unvested as of the end of the Covered Fiscal Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Same Covered Fiscal Year | Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior Years that Vested in the Covered Fiscal Year | Fair Value at the End of the Prior Fiscal Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Fiscal Year | Value of Dividends or other Earnings Paid on Stock Awards in the Covered Fiscal Year not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments |
| 2022 | 5,292,090 | 102,694 | 0 | 303,819 | 0 | 437,029 | 6,135,632 |
| 2021 | 2,680,491 | (646,196) | 0 | (184,196) | 0 | 261,403 | 2,111,502 |
| 2020 | 2,138,995 | (93,395) | 0 | 80,020 | 0 | 156,290 | 2,281,910 |
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| Year | Service Cost | Prior Service Cost | Total Pension Benefit Adjustments |
| 2022 | 427,805 | 0 | 427,805 |
| 2021 | 422,377 | 0 | 422,377 |
| 2020 | 384,393 | 0 | 384,393 |
(3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s NEO’s as a group (excluding Mr. Guldner, who has served as our CEO since 2019) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Guldner) included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2022, Theodore N. Geisler, Andrew D. Cooper, Adam C. Heflin, Maria L. Lacal, Robert E. Smith and Jacob Tetlow; (ii) for 2021, Theodore N. Geisler, James R. Hatfield, Maria L. Lacal and Robert E. Smith; and (iii) for 2020, James R. Hatfield, Theodore N. Geisler, Daniel T. Froetscher, Maria L. Lacal and Robert E. Smith. (4) The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group (excluding Mr. Guldner), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Guldner) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Guldner) for each year to determine the compensation actually paid, using the same methodology described above in Note 2:
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| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs | Average Reported Value of Equity Awards | Average Equity Award Adjustments(a) | Average Reported Change in the Actuarial Present Value of Pension Benefits | Average Pension Benefit Adjustments(b) | Average Compensation Actually Paid to Non-PEO NEOs |
| 2022 | 2,542,827 | (1,239,053) | 1,333,714 | (6,888) | 119,197 | 2,749,796 |
| 2021 | 2,842,352 | (977,983) | 522,865 | (360,916) | 193,111 | 2,219,429 |
| 2020 | 2,619,339 | (878,815) | 625,410 | (571,556) | 132,516 | 1,926,894 |
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| Year | Average Year End Fair Value of Equity Awards Granted During the Covered Fiscal Year that are Outstanding and Unvested as of the end of the Covered Fiscal Year | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Same Covered Fiscal Year | Year over Year Average Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior Years that Vested in the Covered Fiscal Year | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Fiscal Year | Average Value of Dividends or other Earnings Paid on Stock Awards in the Covered Fiscal Year not Otherwise Reflected in Fair Value or Total Compensation | Total Average Equity Award Adjustments |
| 2022 | 1,214,197 | 17,094 | 0 | 31,981 | 0 | 70,442 | 1,333,714 |
| 2021 | 657,909 | (157,946) | 0 | (49,765) | 0 | 72,667 | 522,865 |
| 2020 | 571,275 | (54,641) | 0 | 55,533 | 0 | 53,243 | 625,410 |
| Year | Average Service Cost | Average Prior Service Cost | Total Average Pension Benefit Adjustments |
| 2022 | 119,197 | 0 | 119,197 |
| 2021 | 193,111 | 0 | 193,111 |
| 2020 | 132,516 | 0 | 132,516 |
(5) Cumulative TSR, as required by Item 402(v) of Regulation S-K, is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. (6) Cumulative peer group TSR, as required by Item 402(v) of Regulation S-K, is calculated using the same methodology used in calculating the Company’s cumulative TSR. Further, in calculating the peer group cumulative TSR, the returns of each component issuer is weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: Edison Electric Institute Index. (7) The dollar amounts reported represent the amount of net income reflected in PNW’s audited financial statements for the applicable year. (8) Adjusted APS earnings (“APS Adjusted Earnings”) is APS earnings calculated in accordance with GAAP, as adjusted for purposes of the annual incentive plans, as follows: for the APS 2020 Annual Incentive Award Plan and the APS 2020 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were adjusted from $568.0 million to $587.7 million due to an accrual for the Coal Communities Transition Plan that was required under the accounting rules but that related to a future expense; for the APS 2021 Annual Incentive Award Plan and the APS 2021 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were not adjusted; and for the APS 2022 Annual Incentive Award Plan and the APS 2022 Annual Incentive Award Plan for Palo Verde Employees, APS earnings were not adjusted. | ||||
APS Adjusted Earnings
Relative TSR
Stock price
Capital spend
Operations and maintenance spend
Customer satisfaction
Safety
110 | |
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 | Compensation Actually Paid (PEO) |  | Compensation Actually Paid (Average for Non-PEO NEOs) |  | Company TSR | ||||||||||||
| 2024 Proxy Statement | 111 | ||||
Net income in 2023 was favorably impacted in part by warmer than expected weather and an appellate court decision that reversed recovery of a portion of the deferred cost referenced above. However, net income in 2023 continued to be impacted by the 2019 rate case decision. Although we don’t use net income in our executive compensation program, we do use earnings in the 20222023 Incentive Plans, as discussed below.
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| | Compensation Actually Paid (Average for Non-PEO NEOs) | | Net Income (millions) | ||||||||||||
112 | | | 2024 Proxy Statement | ||||||
| Compensation Actually Paid (PEO) | | Compensation Actually paid (Average for Non-PEO NEOs) | | APS Adjusted Earnings (millions) | ||||||||||||
| 2024 Proxy Statement | 113 | ||||
As
 | Company TSR | | Peer Group TSR (EEI Index TSR) | ||||||||
Value of $100 Invested as of December 31, 2019, with Dividends Reinvested
114 | |
| 2024 Proxy Statement | ||||||
Section 14AAppointment of D&T as the Exchange Act requires U.S. public corporations to provide for an advisory (non-binding) vote on the frequency of holding advisory Say-on-Pay votes every six years. As such, the Company is presenting this proposal, which gives you, as a shareholder, the opportunity to express your view on whether Say-on-Pay votes should occur every one, two or three years. You have the option to vote for any one of the three options, or to abstain from the matter.
As discussed above, the Company has designed its executive compensation program to align executives’ interests with those of our shareholders, make executives accountable for business and individual performance by putting pay at risk, and attract, retain and reward executive talent required to achieve our corporate objectives and to increase long-term shareholder value.
Starting with our annual meeting held in 2011, we have held annual Say-on-Pay advisory votes. The Board of Directors has determined that continuing the annual advisory Say-on-Pay vote is the best approachIndependent Registered Public Accounting Firm for the Company because:
It provides contemporaneous and more direct feedback from our shareholders regarding our compensation practices and policies;
It provides a higher level of accountability to the shareholders;
An annual vote furthers our commitment to maintaining high standards of corporate governance; and
If we receive a negative response to our “Say-on-Pay” vote, we will be able to make changes to our practices quickly and receive shareholder feedback on those changes within a year.
Similar to the Say-on-Pay vote, because your vote is advisory, it will not be binding upon the Human Resources Committee or the Board. However, we value our shareholders’ opinions and will consider the outcome of the vote in determining how often we will hold a Say-on-Pay vote.
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We are asking the Company’s shareholders to approve the First Amendment to the 2021 Plan to: (i) increase the maximum number of shares of the Company’s common stock authorized for issuance over the term of the 2021 Plan by 3,082,390 shares from 1,250,148 shares to 4,332,538 shares; (ii) change the time-based vesting of restricted stock and restricted stock units subject to the five percent limitation from three years to one year; and (iii) extend the term of the 2021 Plan to June 1, 2033, unless terminated earlier by the Board.
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As we describe in the CD&A, equity based long-term compensation is an important element of our compensation program. On February 22, 2023, our Board, upon recommendation of the Human Resources Committee (for purposes of this proposal, the “Committee”), approved the First Amendment. The First Amendment is subject to shareholder approval at the Annual Meeting and, if approved by our shareholders, will become effective on June 1, 2023.
As of the Record Date, we have a total of 1,078,821 shares of common stock subject to outstanding awards under the 2021 Plan and only 433,149 shares of common stock available for issuance under the 2021 Plan. We currently estimate that the 2021 Plan will run out of available shares in approximately one year. The First Amendment would increase the number of shares authorized for issuance pursuant to the 2021 Plan by 3,082,390 shares from 1,250,148 shares to 4,332,538 shares.
Additionally, the 2021 Plan currently limits the number of shares that may be subject to certain types of awards to five percent in the aggregate of the shares of stock available for grant. Among the types of awards subject to this limitation are time-based restricted stock and restricted stock units which vest in less than three years. The First Amendment would lower the time-based vesting of restricted stock and restricted stock units subject to this limitation from three years to one year.
Finally, the First Amendment would extend the term of the 2021 Plan from June 1, 2031 to June 1, 2033. All other provisions under the 2021 Plan will remain in full force and effect under the Amended 2021 Plan
For purposes of this proposal, the term “Amended 2021 Plan” refers to the 2021 Plan as amended by the First Amendment. The First Amendment and the Amended 2021 Plan are attached as Appendix A.
The Amended 2021 Plan will allow us to continue to attract, retain, and motivate employees, officers, directors, and consultants (including prospective employees, officers, directors, and consultants) of the Company and its affiliates (“Participants”) by aligning their interests and efforts with the long-term interests of the Company and the Company’s shareholders. The Amended 2021 Plan is our sole plan for providing equity incentive compensation to eligible Participants and is a vital component of our compensation program. Increasing the number
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of shares of common stock that may be issued under equity awards ensures that we will have an adequate reserve of shares available for issuance in order to attract, retain, and motivate individuals and to provide an incentive to increase long-term shareholder value.
The Board believes that equity and cash awards motivate high levels of performance and align the interests of our employees and leadership with those of our shareholders by giving Participants the perspective of an “owner” with an equity stake in the Company. Equity and cash awards also provide an effective means of recognizing our employees’ and leadership’s contributions to our success. The Board also believes that the ability to grant equity and cash awards is a competitive necessity in our industry, and that such awards are essential to recruiting and retaining highly successful employees, officers, directors, and consultants who help us meet our goals, as well as rewarding and encouraging our current employees, officers, directors, and consultants. Finally, the Board believes that the ability to grant equity and cash awards will continue to be important to the future success of the Company. If the First Amendment is not approved and we are unable to grant equity compensation in the future, we may need to consider other compensation alternatives, such as increasing cash compensation.
The Board, based on the recommendation of the Committee, is recommending that shareholders approve an amendment to the 2021 Plan to, among other things, increase the authorized shares of common stock available for issuance under the 2021 Plan by 3,082,390 shares. The Committee, which administers the 2021 Plan, has exercised its business judgment in concluding that the amendment and increasing the number of shares of common stock reserved under the 2021 Plan is in the Company’s best interests.
In reaching its decision, the Committee considered the limits recommended by independent shareholder advisory groups and determined a number that it believes complies with such guidelines while providing the Company with sufficient share reserve to cover the awards we anticipate granting to eligible participants. The Company is committed to effectively managing our equity compensation share reserve while minimizing shareholder dilution.
The Amended 2021 Plan includes the following features, which we believe reflect emerging trends and strong governance practices with respect to equity compensation plans:
NoEvergreenProvision. The 2021 Plan does not include an “evergreen” feature that automatically replenishes the shares available for future grants.
NoLiberalShareCountingProvisions. The 2021 Plan does not include liberal share counting provisions.
LimitationonRepricing. The 2021 Plan prohibits the direct and indirect repricing of previously granted options and Stock Appreciation Rights (“SAR”) without prior shareholder approval.
NoDiscountedOptionsorSARs. The 2021 Plan includes an express requirement that all options and SARs be issued with an exercise price that is not less than the fair market value of a share of Company stock on the grant date.
NoPaymentofDividendEquivalentsforAwardsthatVestBasedonPerformanceGoalsuntilPerformanceGoalsareAchieved. The 2021 Plan precludes the payment of dividend equivalent awards for any time-based restricted stock unit award unless and until the award vests or, with respect to a performance share unit or performance share award, unless and until the participant attains the applicable performance goals.
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ForfeitureandRecaptureofAwards. The award agreement for any award granted pursuant to the 2021 Plan provides for the recapture or clawback of all or any portion of the award to comply with the Company’s Clawback Policy, as may be in effect from time to time, and applicable law.
AnnualLimitationonDirectorCompensation. The 2021 Plan imposes a $500,000 limit on the total compensation that may be paid to any one non-employee director during any calendar year.
NoLiberalChangeofControlDefinition. The 2021 Plan contains a definition of change of control whereby potential acceleration of awards will only occur in the event of the closing of an actual change of control transaction.
Set forth below is a summary of the material features of the Amended 2021 Plan. The summary is qualified in its entirety by the full text of the Amended 2021 Plan, which is attached to this Proxy Statement in Appendix A. Capitalized terms used but not defined herein have the meanings given to them in the Amended 2021 Plan. The closing price of the Company’ stock on the Record Date was $74.01 per share.
The Amended 2021 Plan will be administered by the Committee. The Committee will consist of at least two Directors, each of whom qualifies as a “non-employee Director” as defined in Rule 16b-3(b)(3) of the Securities Exchange Act of 1934. The Committee’s powers include, but are not limited to, determining eligibility to receive an award, determining the amount and types of awards that may be granted to a participant, determining all other terms and conditions that apply to awards, and deciding all matters that must be determined in connection with an award. Decisions by the Committee will be final, conclusive, and binding.
In some cases, the Committee may delegate the power and authority to grant awards to eligible individuals, provided, however, that the Committee may not delegate to executive officers the power or authority to make, cancel, or suspend awards to executive officers or members of the Board. Such delegation may be revoked or modified by the Committee at any time.
Persons eligible to participate in the Amended 2021 Plan include all employees, officers, and Board members of the Company and its affiliates. In addition, on a case-by-case basis, the Committee may grant awards to consultants, subject to the terms and conditions determined by the Committee. As of December 31, 2022, approximately 5,861 employees and officers and 10 non-employee Directors were eligible to participate in the 2021 Plan.
Awards may also be made to prospective employees, officers, Board members, or consultants. Such awards must specifically provide that no portion of the award will vest, become exercisable or be issued prior to the date on which the individual becomes employed or begins providing services to the Company or its affiliates.
The maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is currently 1,250,148. If this proposal is approved by the Company’s shareholders, this maximum aggregate amount will increase by 3,082,390 shares to 4,332,538 shares, and the Amended 2021 Plan would then have approximately 3,515,539 shares available for grant as of the Record Date.
The amount of stock reserved for issuance pursuant to the Amended 2021 Plan is subject to proportionate adjustment by the Committee in the event of any issuance of rights or warrants to purchase securities, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to the shares of stock, or any similar corporate transaction or event in respect of the stock.
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For purposes of calculating the number of shares of stock available for awards under the Amended 2021 Plan, the following share counting rules shall apply:
Shares of stock that are potentially deliverable under any award granted under the Amended 2021 Plan, or any award outstanding under any Prior Plan on or after the Effective Date, that expires or is canceled, forfeited, or otherwise terminated without delivery of such shares, will not be counted against the limit of shares available for issuance under the Amended 2021 Plan and will again be available for grant under the Amended 2021 Plan.
Shares of stock that could have been issued in connection with an award but are not delivered because such award is settled in cash, will not be counted against the limit of shares available for issuance under the Amended 2021 Plan and will again be available for grant under the Amended 2021 Plan.
Dividend equivalent awards that are paid in cash will not be counted against the limit of shares available for issuance under the Amended 2021 Plan. However, dividend equivalent awards that are paid in stock will be counted against the limit of shares available for issuance under the Amended 2021 Plan.
The exercise of a stock-settled SAR or net-cashless exercise of an option (or a portion thereof) will reduce the number of shares of stock available for issuance under the Amended 2021 Plan by the entire number of shares of stock subject to the SAR or option (or applicable portion thereof), even though a smaller number of shares of stock will be issued upon such an exercise.
Shares of stock tendered to pay the exercise price of an option or tendered or withheld to satisfy a tax withholding obligation arising in connection with an award will not become available for grant or sale under the Amended 2021 Plan.
Shares of stock purchased on the open market with cash proceeds generated by the exercise of an option will not increase or replenish the number of shares available for grant under the Amended 2021 Plan.
The Committee may adopt such other reasonable rules and procedures as it deems to be appropriate for purposes of determining the number of shares of stock that are available for awards under the Amended 2021 Plan.
The maximum number of shares of stock that may be issued as incentive stock options under the Amended 2021 Plan is 1,000,000.
The Amended 2021 Plan imposes a limit on the value of grants (based on the grant date value of the awards) to any individual non-employee Board member, plus the aggregate amount of all cash fees earned and paid or payable to any one non-employee Board member for the same year, in a total amount of $500,000 per calendar year.
Any shares of stock delivered pursuant to an award under the Amended 2021 Plan may consist, in whole or in part, of authorized but unissued stock or treasury stock or stock purchased on the open market.
No fractional shares shall be issued pursuant to the Amended 2021 Plan. Unless the Committee specifies otherwise in an award agreement or pursuant to any policy adopted by the Committee, cash will be given in lieu of fractional shares.
Each of the following types of awards may be granted pursuant to the Amended 2021 Plan:
A restricted stock award gives the participant the right to receive a specified number of shares of stock at a purchase price determined by the Committee (including, and typically, zero). Restricted stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose. Except as otherwise provided by the Committee, during the restriction period, participants holding shares of restricted stock may not exercise voting rights with respect to such shares. These
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restrictions may lapse separately or in combination at such times, in such circumstances, in such installments, or otherwise, as determined by the Committee. As a general rule, if a participant terminates employment (or terminates service in the case of a Board member), when the stock is subject to restrictions, the participant forfeits the unvested restricted stock. The Committee may, in its discretion, waive the restrictions in whole or in part in the event of a termination of employment (or a termination of service in the case of a Board member).
A restricted stock unit award gives the participant the right to receive stock, or a cash payment equal to the fair market value of the stock (determined as of a specified date), subject to any vesting or other restrictions the Committee deems appropriate. The restrictions will lapse in accordance with a schedule or other conditions as determined by the Committee. As a general rule, if a participant terminates employment (or terminates service in the case of a Board member) when the restricted stock units are subject to restrictions, the participant forfeits the unvested restricted stock units. The Committee may, in its discretion, waive the restrictions in whole or in part in the event of a termination of employment (or a termination of service in the case of a Board member).
A stock grant award gives the participant the right to receive, or the right to purchase at a predetermined price, shares of stock free from vesting restrictions. The purchase price, if any, for a stock grant award shall be payable in cash or other form of consideration acceptable to the Committee. A stock grant award may be granted or sold as consideration for past services, other valid consideration, or in lieu of cash compensation due to any participant.
A stock unit award gives the participant the right to receive a designated number of shares of stock, or a cash payment equal to the fair market value (determined as of a specified date) of a designated number of shares of stock, in the future, free of any vesting restrictions. A stock unit award may be granted in respect of past services, other valid consideration, or in lieu of cash compensation due to any participant.
A dividend equivalent award gives the participant the right to receive a payment based on the dividends declared on the shares of stock that are subject to any restricted stock unit, stock unit, performance share unit or performance share award, and will be credited as of the dividend payment dates during the period between the date of grant and the date the award is exercised, vests or expires, as determined by the Committee. In no event may a dividend equivalent award, made with respect to a restricted stock unit award that vests based on the achievement of performance goals, or with respect to a performance share unit or performance share award, be paid unless and until such award vests or is earned by satisfaction of the applicable performance goals. A dividend equivalent award shall initially be expressed in terms of cash or shares of stock, depending on the way in which the dividends to which it relates are declared. The Committee will specify when the dividend equivalents will be converted to cash or stock, the formula for conversion, and any restrictions or limitations on the conversion. Dividend equivalents will not be granted with respect to options, SARs, or performance cash awards.
A performance share award gives the participant the right to receive a specified number of shares of stock if one or more performance goals specified by the Committee are satisfied. Performance may be measured over one or more performance periods (not shorter than 12 months in duration) as determined by the Committee.
A performance share unit award gives the participant the right to receive a specified number of shares of stock or cash in an amount equal to the fair market value of the stock (determined as of a specified date) if one or more performance goals specified by the Committee are satisfied. Performance may be measured over one or more performance periods (not shorter than 12 months in duration) as determined by the Committee.
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A performance cash award gives the participant the right to receive a cash payment if certain performance goals specified by the Committee are satisfied. Performance may be measured over one or more performance periods (not shorter than 12 months in duration) as determined by the Committee.
An option entitles the participant to purchase shares of stock in the future at a specified price. The Committee may grant both incentive stock options and nonqualified stock options under the 2021 Plan. Incentive stock options will only be granted to participants who are employees and are intended to comply in all respects with the requirements of Code Section 422 and any applicable regulations. The exercise price of all stock options granted under the 2021 Plan will be at least 100% of the fair market value of the stock on the date that the option is granted (or, in the case of certain incentive stock options, 110% of the fair market value of the stock on the grant date). Stock options may be exercised as determined by the Committee, provided that the term of any option granted under the 2021 Plan shall not exceed ten years from the date of grant (or, in the case of certain incentive stock options, five years from the grant date). The exercise price for any option shall be paid in cash or shares of stock held longer than six months, however, the Committee may prescribe other methods by which the exercise price of an option may be paid and the methods by which shares of stock may be delivered to participants; however, the exercise price may not be paid with a promissory note.
A SAR entitles the participant to share in the appreciation on one share of stock. Appreciation is calculated as the excess of (i) the fair market value on the date of exercise over (ii) the base value of the SAR as determined by the Committee, which shall not be less than the fair market value on the date of grant (or such higher amount determined by the Committee). SARs shall vest and become exercisable in equal installments on anniversaries of the date of grant and shall expire on the earlier of a participant’s termination of employment (or termination of service in the case of a Board member) or the tenth anniversary of the date of grant, and payment for SARs shall be made in stock. The Committee will determine the terms and conditions of any SAR at the time of the grant.
The Amended 2021 Plan prohibits the Committee from directly or indirectly repricing previously granted options or SARs without shareholder approval. In particular, the Committee may not amend or modify downward, or lower or reprice the exercise price of any previously granted option or SAR after the date of grant, or take any action that would be treated as a repricing under applicable listing rules. Moreover, options and SARs may not be surrendered in consideration of or in exchange for cash, other awards, or a new option or SAR, as applicable, having an exercise price below the exercise price of the option or SAR being surrendered or exchanged (except in connection with a change of control or adjustment in capitalization).
As a general rule, awards granted pursuant to the Amended 2021 Plan may not be transferred by a participant, except by will or by the laws of descent or distribution. The Committee, in its discretion, may permit the transfer of any award to a family member or family trust. No incentive stock option will be transferable in any way that would violate Code Section 422 or any applicable regulations.
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Any portion of the payments and benefits provided in connection with any award granted under the Amended 2021 Plan will be subject to recapture or clawback to the fullest extent called for by the Company’s Clawback Policy, as may be in effect from time to time, and to the extent necessary to comply with applicable law. The Committee also may include other clawback provisions in the applicable award agreements as it determines to be appropriate. By accepting an award, each participant in the Amended 2021 Plan agrees to be bound by, and to comply with, the terms of any such recapture or clawback provisions and with any Company request or demand for recapture or clawback.
Unless the Committee, with the approval of the Board, provides otherwise in an award agreement, if a change of control occurs, immediately prior to the change of control (as defined in the Amended 2021 Plan):
Any time-based or other restrictions imposed on restricted stock or restricted stock unit awards shall lapse and all restricted stock units and stock units shall become immediately payable and shall be paid in stock or cash, in accordance with the terms of the applicable award agreement.
Performance shares or performance share unit awards that are payable in stock shall be converted to stock grant awards, which shall be immediately vested. In converting performance shares or performance share units to a stock grant, the participants shall receive the number of shares of stock that would have been earned at the target level of performance, unless the Committee determines that a higher level of attained performance is reasonably ascertainable as of a specified date prior to the closing of the change of control transaction. Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis.
Any performance share unit awards that are payable in cash shall become immediately vested. Participants then shall generally receive a cash payment equal to the fair market value of the specified number of shares of stock payable pursuant to the award at the target level of performance, unless the Committee determines that a higher level of attained performance is reasonably ascertainable as of a specified date prior to the closing of the change of control transaction. Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis.
Performance cash awards shall generally be deemed to be satisfied and earned at the target level of performance, unless the Committee determines that a higher level of attained performance is reasonably ascertainable as of a specified date prior to the closing of the change of control transaction. Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis.
Any and all options and SARs shall become exercisable immediately before the closing of the change of control transaction. If pursuant to the terms of the award agreement, a SAR is to be paid in cash, the SAR will be deemed to be exercised on the closing of the transaction that results in the change of control, and a participant will receive the resulting cash payment within ten days following the closing of the change of control transaction.
Any dividend equivalent awards shall be paid in cash or stock as determined in accordance with the applicable award agreement.
If an award is subject to Code Section 409A, a change of control may not result in the acceleration of the timing of any payment unless the transaction that results in the change of control also constitutes a “change of control event” as such term is used in the applicable Treasury Regulations. If, due to the above provisions, the payment of an award may not be accelerated, the Board, prior to the change of control, shall take such action as it, in good faith, determines to be necessary to assure that there will be no material impairment to either the value of the award to the participant or the participant’s opportunity for future appreciation in respect of such award.
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Notwithstanding the foregoing change of control provisions, prior to a change of control, the Board may determine that no change of control shall be deemed to have occurred or that some or all of the enhancements to the rights of participants described above shall not apply to specified awards. The Board may exercise such override authority only if, before or immediately upon the occurrence of the specified event that would otherwise constitute a change of control, the Board, as constituted prior to the change of control, reasonably concludes, in good faith, that: (i) participants holding awards affected by action of the Board override shall be protected by legally binding obligations of the Company or the surviving entity or the parent thereof because such awards (A) shall remain outstanding following consummation of all transactions involved in or contemplated by such change of control or (B) shall be assumed and adjusted by the surviving entity resulting from such transactions or the parent thereof, or shall be exchanged for new awards issued by the surviving entity resulting from such transaction or the parent thereof; and (ii) changes in the terms of the award resulting from such transactions will not materially impair the value of the awards to the participants or their opportunity for future appreciation in respect of such awards. The Board may exercise such override authority with respect to an award which the Company concludes is subject to (and not excepted from) the requirements of Code Section 409A only in a manner and to the extent permissible under Code Section 409A.
The Committee, with the Board’s approval, may terminate, amend, or modify the Amended 2021 Plan at any time, except where shareholder approval for an amendment is required by applicable law, regulation, or stock exchange rule. No amendment, modification, or termination of the Amended 2021 Plan or any award agreement shall in, any material manner, adversely affect any award previously granted under the Amended 2021 Plan without the consent of the participant. Notwithstanding the foregoing, the participant’s consent is not required if, among other things, the change is required to cause the benefits under the Amended 2021 Plan to comply with the provisions of Code Section 409A.
Unless terminated sooner, the Amended 2021 Plan will expire on, and no award may be granted after, June 1, 2033 (the “Expiration Date”). Awards outstanding on the Expiration Date will remain in effect according to the terms of the award agreement and the Amended 2021 Plan.
The Company has the power to withhold, or to require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local withholding tax requirements (including the participant’s FICA obligation) on any award under the Amended 2021 Plan. The Company has the discretion to determine the withholding amount, or the Company may permit a participant to elect the withholding amount, within permissible limits as it deems appropriate, but in no event will such withholding amount be less than the minimum or more than the maximum amount necessary to satisfy federal, state, and local tax withholding requirements in the applicable jurisdiction on any award. To the extent that alternative methods of withholding are available under applicable tax laws, the Company has the power to choose among such methods.
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The following summary describes the federal income tax treatment that will apply to awards under the Amended 2021 Plan. This summary is based on the law as in effect on January 1, 2023. This summary is not exhaustive and does not describe state, local, or foreign income taxes, which may also be applicable.
As a general rule, with the exception of a stock grant, a participant will not recognize taxable income with respect to any award at the time of grant. A participant will recognize ordinary taxable income on a stock grant award at the time of grant.
Upon exercise of a nonqualified stock option, the lapse of restrictions on restricted stock, or upon the payment of SARs, restricted stock units, stock units, performance shares, performance share units, performance cash, or dividend equivalents, the participant will recognize ordinary taxable income in an amount equal to the difference between the amount paid for the award, if any, and the fair market value of the stock or amount received on the date of exercise, lapse of restriction, or payment. The Company will be entitled to a concurrent deduction equal to the ordinary income recognized by the participant.
A participant who is granted an incentive stock option will not recognize taxable income at the time of exercise. However, the excess of the stock’s fair market value over the option price could be subject to the alternative minimum tax in the year of exercise (assuming the stock received is not subject to a risk of forfeiture and is not transferable). If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the sales price and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will not meet the requirements for this favored tax treatment and the tax consequences described for nonqualified stock options will apply.
Code Section 409A imposes restrictions on nonqualified deferred compensation. Failure to satisfy these rules results in accelerated taxation, an additional tax to the holder of the amount equal to 20% of the deferred amount, and a possible interest charge. Stock options and SARs granted with an exercise price that is not less than the fair market value of the underlying shares on the date of grant will not give rise to deferred compensation for this purpose unless they involve additional deferral features. The Company intends (but does not and cannot guarantee) that awards granted under the Amended 2021 Plan will comply with the requirements of Code Section 409A or an exception thereto and intends to administer and interpret the Amended 2021 Plan in such a manner.
Benefits under the Amended 2021 Plan will depend on the Committee’s actions and discretion and the fair market value of the Company’s stock at various future dates. Consequently, it is not possible to determine the future benefits that will be received by participants in the Amended 2021 Plan if the First Amendment is approved.
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Plan Category(1) |
| Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(2) (A) |
| Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(3) (B) |
| Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))(4) (C) | |
Equity compensation plans approved by security holders |
| 1,340,572 |
|
| — |
| 864,533 |
Equity compensation plans not approved by security holders |
| — |
|
| — |
| — |
TOTAL: |
| 1,340,572 |
|
| — |
| 864,533 |
(1) Equity compensation plan information is as of December 31, 2022. (2) This amount includes shares subject to outstanding performance share awards, restricted stock unit awards, and stock awards at the maximum amount of shares issuable under such awards. However, payout of the performance share awards is contingent on the Company reaching certain levels of performance during a three-year performance period. If the performance criteria for these awards are not fully satisfied, the award recipient will receive less than the maximum number of shares available under these grants and may receive nothing from these grants. (3) The weighted-average exercise price in this column does not take performance share awards, restricted stock unit awards, or stock awards into account, as those awards have no exercise price. (4) Awards under the 2021 Plan can take the form of options, stock appreciation rights, restricted stock, performance shares, performance share units, performance cash, stock grants, stock units, dividend equivalents, and restricted stock units. Additional shares cannot be awarded under the 2012 Long-Term Incentive Plan (the “2012 Plan”) and the 2007 Long-Term Incentive Plan (the “2007 Plan”). However, if an award under the 2012 Plan or the 2007 Plan is forfeited, terminated or canceled or expires, the shares subject to such award, to the extent of the forfeiture, termination, cancellation or expiration, may be added back to the shares available for issuance under the 2021 Plan. | |||||||
Amounts in column (a) in the table above include shares subject to awards outstanding under three equity compensation plans that were previously approved by our shareholders: (a) the 2007 Plan, which was approved by our shareholders at our 2007 annual meeting of shareholders and under which no new stock awards may be granted; (b) the 2012 Plan, as amended, which was approved by our shareholders at our 2012 Annual Meeting of Shareholders and the first amendment to the 2012 Plan was approved by our shareholders at our 2017 Annual Meeting of Shareholders and under which no new stock awards may be granted; and (c) the 2021 Plan which was approved by our shareholders at our 2021 annual meeting of shareholders. See Note 14 of the Notes to Consolidated Financial Statements in the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for additional information regarding these plans.
The Company does not have any equity compensation plans under which shares can be issued that have not been approved by the shareholders.
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The Audit Committee has appointed Deloitte & Touche LLP (“D&T”)&T as the Company’s independent accountantregistered public accounting firm for the year ending December 31, 20232024 and, as a matter of good corporate governance, has directed management to submit such appointment for ratification by the shareholders at the Annual Meeting. In the event the shareholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Company’s and the shareholders’ best interests.
| The Board of Directors unanimously recommends a vote FOR ratification of the appointment of independent | |||||||
D&T’s technical expertise, particularly with respect to the complex area of utility regulatory accounting;
Management’smanagement’s and D&T’s review of D&T’s historical and recent performance;
Thethe quality and candor of D&T’s communications with the Audit Committee and management;
D&T’s independence and tenure as our auditor, including the benefits and independence risks of having a long-tenured auditor, and controls and processes that help ensure D&T’s independence (see the additional information below);
Howhow effectively D&T demonstrated its independent judgment, objectivity, and professional skepticism; and
Thethe fees paid to D&T, which are reviewed and approved by the Audit Committee and then monitored by the Audit Committee throughout the year.
|
2024 Proxy Statement | | ||||
Throughthrough more than 8090 years of experience with the Company and APS, D&T has gained institutional knowledge of, and deep expertise regarding, our business operations, including the complexities of a business that is highly regulated at both the state and federal level, our accounting policies and practices, and our internal controls over financial reporting; and
Bringingbringing on a new auditor requires a significant time commitment that could result in additional costs to the Company, as well as distract management’s focus on financial reporting and internal controls.
Thethe Audit Committee’s oversight of D&T, which included meeting with D&T multiple times in 2022, private2023, meetings in executive session without the presence of management from time to time as requested by the Audit Committee members, and a committee-directed process for selecting the lead partner;
Pre-approvalpre-approval policies of all services performed by D&T for the Company, and allowing the engagement of D&T only when the Audit Committee or its Chair believes D&T is best suited for the job;
D&T conducts periodic internal quality reviews of its audit work and rotates lead partners every five years; and
Asas an independent public accounting firm, D&T is subject to Public Company Accounting Oversight Board (“PCAOB”) inspections, independent peer reviews, and PCAOB and SEC oversight.
Policy
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Types of service |
| 2021 ($) |
| 2022 ($) | Types of service | 2022 ($) | 2023 ($) | |||||||||||
Audit Fees(1) |
| 3,085,950 |
| 3,328,421 | ||||||||||||||
Audit-Related Fees(2) |
| 416,908 |
| 622,235 | ||||||||||||||
Tax Fees |
| 0 |
| 0 | Tax Fees | 0 | 0 | |||||||||||
All Other Fees |
| 0 |
| 0 | (1) The aggregate fees billed for services rendered for the audit of annual financial statements and for review of financial statements included in reports on Form 10-K and Form 10-Q, respectively (2) The aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not included in Audit Fees reported above, which primarily consist of fees for employee benefit plan audits and environmental, social and governance assurance readiness performed in 2021 and 2022. | |||||||||||||
116 | | | 2024 Proxy Statement | ||||||
The Audit Committee has discussed and reviewed the audited financial statements of the Company as of and for the fiscal year ended December 31, 2022,2023, with the Company’s management and the independent accountant, D&T. The Audit Committee is directly responsible for the oversight of the Company’s independent accountant. Management is responsible for the Company’s financial reporting process, including the Company’s system of internal controls and for the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America. The independent accountant is responsible for auditing and rendering an opinion on those financial statements, as well as auditing certain aspects of the Company’s internal controls.
The Audit Committee’s responsibility is to monitor these processes. The Audit Committee has discussed with D&T the matters required to be discussed by the applicable requirements of the PCAOB and the SEC.
The Audit Committee has obtained from D&T, and reviewed, the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence. The Committee discussed with D&T any relationships that may impact D&T’s objectivity and independence and satisfied itself as to the accountant’s independence.
Based on the foregoing, the Audit Committee has recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, for filing with the SEC.
|
2024 Proxy Statement | | ||||
Name | Number of Shares Beneficially Owned(1) (#) | Percent of Class (%) | |||||||||||
| Name and Address | Name and Address | Number of Shares Beneficially Owned(1) (#) | Percent of Class (%) | ||||||||||
Directors: |
|
| Directors: | ||||||||||
Glynis A. Bryan | 5,175 | * | Glynis A. Bryan | 7,343 | * | ||||||||
Richard P. Fox | 13,477 | * | Richard P. Fox | 16,076 | * | ||||||||
Gonzalo A. de la Melena, Jr. | 2,593 | * | Gonzalo A. de la Melena, Jr. | 4,601 | * | ||||||||
Jeffrey B. Guldner | 44,862 | * | Jeffrey B. Guldner | 70,816 | * | ||||||||
Dale E. Klein, Ph.D. | 26,720 | * | |||||||||||
Kathryn L. Munro | 36,280 | * | Kathryn L. Munro | 40,221 | * | ||||||||
Bruce J. Nordstrom | 34,679 | * | Bruce J. Nordstrom | 36,587 | * | ||||||||
Paula J. Sims | 11,012 | * | Paula J. Sims | 13,097 | * | ||||||||
William H. Spence | 2,843 | * | William H. Spence | 4,751 | * | ||||||||
Kristine L. Svinicki | 726 | * | Kristine L. Svinicki | 2,738 | * | ||||||||
James E. Trevathan, Jr. | 6,017 | * | James E. Trevathan, Jr. | 8,211 | * | ||||||||
David P. Wagener | 20,196 | * | |||||||||||
Other NEOs: |
|
| |||||||||||
| Theodore N. Geisler | |||||||||||||
| Theodore N. Geisler | |||||||||||||
Theodore N. Geisler | 8,477 | * | 12,794 | * | |||||||||
Andrew D. Cooper | 1,088 | * | Andrew D. Cooper | 3,919 | * | ||||||||
Adam C. Heflin | 2,452 | * | Adam C. Heflin | 5,773 | * | ||||||||
Maria L. Lacal(2) | 30,723 | * | |||||||||||
Robert E. Smith | 8,754 | * | Robert E. Smith | 11,348 | * | ||||||||
Jacob Tetlow | 6,700 | * | |||||||||||
All Directors and Executive Officers as a Group (22 Persons): | 279,162 | * | |||||||||||
5% Beneficial Owners:(3) |
| * | |||||||||||
BlackRock, Inc. and certain related entities(4) 55 East 52nd Street New York, NY 10055 | 1.003.796 | 8.90 | |||||||||||
State Street Corporation and certain related entities(5) One Lincoln Street Boston, MA 02111 | 7,444,711 | 6.58 | |||||||||||
The Vanguard Group Inc.(6) 100 Vanguard Boulevard Malvern, PA 19355 | 14,225,294 | 12.57 | |||||||||||
Lazard Asset Management, LLC(7) 30 Rockefeller Plaza New York, New York 10112 | 7,065,285 | 6.24 | |||||||||||
| All Directors and Executive Officers as a Group (18 Persons): | All Directors and Executive Officers as a Group (18 Persons): | 258,207 | * | ||||||||||
5% Beneficial Owners:(2) | 5% Beneficial Owners:(2) | * | |||||||||||
The Vanguard Group Inc.(3) 100 Vanguard Boulevard Malvern, PA 19355 | |||||||||||||
BlackRock, Inc. and certain related entities(4) 50 Hudson Yards Street New York, NY 10001 | |||||||||||||
State Street Corporation and certain related entities(5) One Congress Street, Suite 1 Boston, MA 02114 | |||||||||||||
Capital Research Global Investors and certain related entities(6) 333 South Hope Street, 55th Fl. Los Angeles, CA 90071 | |||||||||||||
118 | |
| 2024 Proxy Statement | ||||||
| Name and Address | Number of Shares Beneficially Owned(1) (#) | Percent of Class (%) | ||||||
Barrow Hanley Global Investors(7) 2200 Ross Avenue, 31st Floor Dallas, TX 75201 | 5,721,114 | 5.05 | ||||||
| (2)The Company makes no representations as to the accuracy or completeness of the information in the filings reported in footnotes 3-7. (3)The Vanguard Group, Inc. Schedule 13G/A filing, dated February 13, 2024, reports beneficial ownership as of December 29, 2023 of 14,282,050 shares with shared voting power as to 171,980 shares, shared dispositive power as to 548,487 shares, and sole dispositive power as to 13,733,563 shares. (4)BlackRock, Inc. Schedule 13G/A filing, dated January 25, 2024, relating to a parent holding company and certain affiliates, reports beneficial ownership as of December 31, 2023 of 10,042,715 shares, with sole voting power as to 9,568,295 shares and sole dispositive power as to 10,042,715 shares. The Company maintains commercial relationships with BlackRock, Inc. and its subsidiaries. The Company does not consider these relationships to be material. (5)State Street Corporation Schedule 13G/A filing, dated January 29, 2024, relating to a parent holding company and certain affiliates, reports beneficial ownership as of December 31, 2023 of 6,818,811 shares, with shared voting power as to 4,717,301 and shared dispositive power as to 6,799,130 shares. The Company maintains commercial relationships with State Street Corporation and its subsidiaries. The Company does not consider these relationships to be material. (6)Capital Research Global Investors Schedule 13G filing, dated February 7, 2024, reports beneficial ownership as of December 29, 2023 of 6,507,809 shares, with sole voting and dispositive power. Capital Research Global Investors disclaims beneficial ownership of these shares. (7)Barrow Hanley Global Investors Schedule 13G, dated February 13, 2024, reports beneficial ownership as of December 31, 2023 of 5,721,114 shares, with sole voting power as to 4,114,048 shares, with shared voting power as to 1,607,066 and sole dispositive power as to 5,721,114 shares.
|
Adam Heflin
|
2024 Proxy Statement | | ||||
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, a beneficial owner of 60 shares of common stock of the Company, the proponent of a shareholder proposal, has stated that he intends to present a proposal at the Annual Meeting. The proposal and supporting statement, for which the Board of Directors accepts no responsibility, is set forth below. The Board of Directors opposes the shareholder proposal for the reasons set forth following the shareholder proposal.
The Board of Directors recommends a vote AGAINST this proposal.
Proposal6—IndependentBoardChairman
Shareholders request that the Board of Directors adopt an enduring policy, and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO.
Whenever possible, the Chairman of the Board shall be an Independent Director.
The Board has the discretion to select a Temporary Chairman of the Board who is not an Independent Director to serve while the Board is seeking an Independent Chairman of the Board on an accelerated basis.
Although it is a best practice to adopt this policy soon this policy could be phased in when there is a contract renewal for our current CEO or for the next CEO transition.
The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company. The job of the CEO is to manage the company. The job of the Chairman is to oversee the CEO and management.
A Lead Director is no substitute for an independent Board Chairman. A lead director is not responsible for the strategic direction of the company. And a Chairman/CEO can ignore the advice and feedback from a lead director. There is no example of a lead director prevailing when there is a disagreement between the Chairman/CEO and the lead director. According to the 2022 Pinnacle West annual meeting proxy the Lead Director has limited duties and lacks in having exclusive powers.
These are some of the principle tasks of the lead director according to the Pinnacle West Corporate Governance Guidelines:
Serves as a liaison between the non-independent Chairman and the directors, a role that others probably also play.
Gives advice to the Chairman, that the Chairman need not follow, on scheduling of meetings.
Gives input that the Chairman can ignore on meeting agendas — but only if the Chairman makes a request.
Presides at meeting of some of the directors.
Plus management fails to give shareholders enough information on this topic to make a more informed decision. There is no management comparison of the exclusivepowers of the Office of the Chairman and the de minimis exclusivepowers of the Lead Director.
Ms. Kathryn Munro, Pinnacle West Lead Director, violates the most important attribute of a Lead Director — independence. As director tenure goes up director independence goes down. Ms. Munro has 23-years excessive director tenure at Pinnacle West.
It is amazing the number of companies that claim that they have a robust role for the lead director and the person chosen is the director with the most excessive tenure. Excessive tenure can simply mean that the director is a person whose greatest skill is getting along with management.
Please vote yes:
IndependentBoardChairman—Proposal6
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The Board of Directors has carefully reviewed the proposal and recommends that the shareholders vote AGAINST it.
The Board believes that our shareholders’ interests are best served when we retain the ability to select the appropriate person to serve in the chairman’s role based on our current needs and circumstances at any given time. Our current leadership structure, which is designed to meet our unique business needs and the strengths of our Board, provides effective independent oversight of Pinnacle West. Moreover, mandating a leadership structure removes the flexibility for the Board to determine, in any given situation, the structure they believe is in the best interests of the Company and its shareholders. Adopting a restrictive, “one-size-fits-all” policy as requested by the proposal, which assumes a single leadership structure works at all times, removes valuable flexibility for the Board to select the right structure at the right time.
Our independent Lead Director has significant authority under our Corporate Governance Guidelines to lead our Board and direct topics for discussion. Duties of our Lead Independent Director include:
serving as a liaison between the Chairman of the Board and the independent Directors;
approving the schedule of Board meetings to assure that there is sufficient time for discussion of all agenda items;
approving agendas for the Board meetings;
approving information sent to the Board in connection with Board and Committee meetings;
presiding at all meetings at which the Chairman of the Board is not present, including executive sessions of the independent Directors;
calling meetings of the independent Directors when necessary and appropriate;
overseeing the Board and Board committee self-assessment process;
being available for appropriate consultation and direct communication with the Company’s shareholders and other interested parties;
is authorized to retain outside advisors and consultants who report directly to the Board on board-wide issues; and
performs such other duties as the Board may from time-to-time delegate
We believe these powers provide an effective balance between strong Company leadership and appropriate safeguards and oversight by independent Directors.
Our current independent Lead Director, Kathryn Munro, performs each of the substantive responsibilities outlined above as well as the following additional duties: meets regularly with our CEO to delve deeply into matters of interest to the Board, to provide feedback on past Board meetings and to seek specific information for future Board meetings; consults regularly with Board members, particularly the non-management Directors, to encourage strong communication among each Board member; and leads, as chairman of the Nominating and Corporate Governance Committee, the Board’s annual self-evaluation process.
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Contrary to the proposal’s claims, Ms. Munro is independent under all applicable independence standards, including the independence standards set by the New York Stock Exchange. Ms. Munro has continuously received very strong support from shareholders in her annual election to the Board, including over 90% support at the 2022 Annual Meeting of Shareholders. As a former chief executive with significant board and board leadership experience, Ms. Munro brings valuable and independent views to the Board, where she provides thoughtful, independent leadership for both fellow directors and senior management. As members of the Board, we can attest to Ms. Munro’s leadership and oversight of the CEO and management. To imply that Ms. Munro is not an effective independent Lead Director is both misleading and inaccurate. Ms. Munro is one of the most engaged and effective directors we fellow Board members have had the opportunity to work with. Ms. Munro sets the example by providing meaningful challenge to the CEO and the management team when she believes it is necessary. As noted in the letters from Mr. Guldner and Ms. Munro, the Board voted in February to change the Board member serving as Lead Director effective in May of 2023. This change is part of an orderly transition in connection with Ms. Munro’s scheduled retirement from the Board in May of 2024. Ms. Munro is now scheduled to step down from the role of Lead Director in May of 2023. Ms. Paula Sims is scheduled to assume the role of Lead Director at that time. The Board thanks Ms. Munro for her independent leadership and guidance. Ms. Munro has been an outstanding leader for the Board and our Company and we thank her for her service.
In addition to the strong role and significant responsibilities of our independent Lead Director, the Board has in place many other mechanisms that promote Board independence, management accountability and a balanced governance structure:
the Board’s five standing committees are each chaired by independent directors and are 100% independent;
the Board’s non-management directors meet in executive session without management present;
all directors, except for Mr. Guldner, meet the independence requirements of the New York Stock Exchange Listing Standards and the Company’s Director Independence Standards;
we have cumulative voting for director elections;
we hold annual elections for directors and have an effective director retirement policy;
we do not have any supermajority provisions in our Bylaws;
we have an active shareholder engagement program;
the Board conducts annual evaluations of the Board and each Board committee; and
our shareholders enjoy strong shareholder rights, including the right to request a special meeting of shareholders and a market-standard proxy access right (the ability to nominate director candidates, and have those nominees included in our proxy statement).
Your Board will continue to evaluate our leadership structure to determine the appropriate board leadership structure for the Company. We believe our current model best serves our dynamic and successful Company at this time.
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| Shares held in your name or shares for which you are the beneficial owner but not the shareholder of record may be voted electronically during the formal business portion of the Annual Meeting. Shares held in the Pinnacle West 401(k) Plan cannot be voted during the Annual Meeting. If you hold shares in the Pinnacle West Investor Advantage Plan or brokerage account, and you plan to vote prior to the Annual Meeting by internet, telephone, or by scanning the QR code, you will need to submit your vote no later than 11:59 p.m. | |||||
You may change your vote by: re-voting by telephone; re-voting by internet; or re-voting during the formal business portion of the Annual Meeting. For shares held in your name, you may change your vote by re-submitting a signed Proxy Card. In addition, for shares held in your name, you may also revoke a previously submitted Proxy Card by mailing to our Corporate Secretary a written notice of revocation. For shares for which you are the beneficial owner but not the shareholder of record, you may change your vote by re-submitting a signed Voting Instruction Form to your broker. In addition, for shares for which you are the beneficial owner but not the shareholder of record, you should contact your broker if you would like to revoke your vote. Your vote is confidential. Only the following persons have access to your vote: election inspectors; individuals who help with the processing and counting of votes; and persons who need access for legal reasons. All votes will be counted by an independent inspector of elections appointed for the Annual Meeting. | |||||
You may change your vote by: re-voting by telephone; re-voting by Internet; or re-voting during the formal business portion of the Annual Meeting. For shares held in your name, you may change your vote by re-submitting a signed proxy card. In addition, for shares held in your name, you may also revoke a previously submitted proxy card by filing with our Corporate Secretary a written notice of revocation. For shares for which you are the beneficial owner but not the shareholder of record, you may change your vote by re-submitting a signed voting instruction form to your broker. In addition, for shares for which you are the beneficial owner but not the shareholder of record, you should contact your broker if you would like to revoke your vote.
Your vote is confidential. Only the following persons have access to your vote: election inspectors; individuals who help with the processing and counting of votes; and persons who need access for legal reasons. All votes will be counted by an independent inspector of elections appointed for the Annual Meeting.
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The votes cast “for” must exceed the votes cast “against” to approve the first amendment to the 2021 Plan. Abestentions and broker non-votes will have no effect on the outcome of thethis proposal.
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The Board is not aware of any other matters that will be brought before the shareholders for a vote. If any other matters properly come before the meeting, the proxy holders will vote on those matters in accordance with the recommendations of the Board or, if no recommendations are given, in accordance with their own judgment.
Callcall the Company’s Shareholder Services Department at 1-602-250-3011;
Mailmail a request to Shareholder Services at P.O. Box 53999, Mail Station 8602, Phoenix, Arizona, 85072-3999; or
E-maile-mail a request to: shareholderdept@pinnaclewest.com.
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Transactionstransactions in which rates or charges are fixed in conformity with law or governmental authority (such as APS rates approved by the ACC);
Transactionstransactions in which the rates or charges are determined by competitive bid; or
Thethe payment of compensation by the Company to the executive officers, directors,Directors, or nominees for directors.
The son of Maria L. Lacal, Executive Vice President
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| Our Company | ||||||||
Pinnacle West Capital Corporation: | http://www.pinnaclewest.com | |||||||
APS: | http://www.aps.com | |||||||
AnnualMeeting | ||||||||
Annualmeetingonline: | http://www.virtualshareholdermeeting.com/PNW | |||||||
Proxymaterials: | http://www.proxyvote.com | |||||||
BoardofDirectors | ||||||||
PinnacleWestBoard: | http://www.pinnaclewest.com/about-us/corporate-governance/board-of-directors/ | |||||||
BoardCommittees | ||||||||
AuditCommitteeCharter: | http://www.pinnaclewest.com/about-us/corporate-governance/committee-summary/audit-committee | |||||||
CorporateGovernanceandPublic Responsibility Committee Charter: | http://www.pinnaclewest.com/about-us/corporate-governance/committee-summary/corporate-governance-committee | |||||||
FinanceCommitteeCharter: | http://www.pinnaclewest.com/about-us/corporate-governance/committee-summary/finance-committee | |||||||
HumanResourcesCommitteeCharter: | http://www.pinnaclewest.com/about-us/corporate-governance/committee-summary/human-resources-committee/ | |||||||
NuclearandOperating Committee Charter: | http://www.pinnaclewest.com/about-us/corporate-governance/committee-summary/nuclear-and-operating-committee/ | |||||||
GovernanceDocuments | ||||||||
CodeofEthicsandBusinessPractices: | http://www.pinnaclewest.com/about-us/corporate-governance/code-of-ethics-and-business-practices/ | |||||||
CodeofEthicsforFinancialExecutives: | http://www.pinnaclewest.com/about-us/corporate-governance/code-of-ethics-for-financial-executives/ | |||||||
CorporateGovernanceGuidelines: | http://www.pinnaclewest.com/about-us/corporate-governance/corporate-governance-guidelines/ | |||||||
Other | ||||||||
APS’sCleanEnergyCommitment: | http://www.aps.com/cleanenergy/ | |||||||
CorporateResponsibilityReport: | http://www.pinnaclewest.com/corporate-responsibility/ | |||||||
PoliticalParticipationPolicy: | http://www.pinnaclewest.com/about-us/corporate-governance/Political-Participation-Policy | |||||||
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FIRSTAMENDMENTTOTHEPINNACLEWESTCAPITALCORPORATION2021LONG-TERMINCENTIVEPLAN
Pinnacle West Capital Corporation, an Arizona corporation (the “Company”), previously established, and the shareholders previously approved, the Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan (the “Plan”). By adoption of this First Amendment, the Company desires to amend the Plan as set forth below.
This First Amendment shall be effective, if approved by the Company’s shareholders at the Company’s 2023 Annual Meeting, as of June 1, 2023.
The Plan’s Expiration Date is hereby amended to June 1, 2033.
Article 4 (Shares Subject to the Plan) is hereby amended to replace Subsection 4.1 in its entirety with the following:
NUMBEROFSHARES. Subject to the possible increases provided by Section 4.2 with respect to shares of Stock that become available under the 2012 Plan and the other Prior Plans and adjustments as provided in Section 4.4, the aggregate number of shares of Stock reserved and available for grant (or to be used to determine the value of an Award payable in cash) pursuant to the Plan is 4,332,538 shares of Stock.
Article 13 (Other Provisions Applicable to All Awards) is hereby amended to replace paragraph (d) of Subsection 13.1 in its entirety with the following:
Restricted Stock or Restricted Stock Units with respect to which the restrictions lapse solely based on the passage of time and which vest in less than one year;
This First Amendment amends only the provisions of the Plan referred to above, and those provisions not amended by this First Amendment shall continue in full force and effect. Notwithstanding the foregoing, this First Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions and the intent of this First Amendment.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be executed by its duly authorized representative on this _____ day of _______________, 2023.
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PINNACLEWESTCAPITALCORPORATION
2021LONG-TERMINCENTIVEPLAN
(ASAMENDEDBYTHEFIRSTAMENDMENT)
EFFECTIVEDATE:June1,2023
APPROVEDBYSHAREHOLDERS:May19,2021
EXPIRATIONDATE:June1,2033
ARTICLE1ESTABLISHMENT;IMPACTONPRIORPLANS;PURPOSE;GLOSSARY
ESTABLISHMENT;IMPACTONPRIORPLANS. Pinnacle West Capital Corporation, an Arizona corporation (the “Company”) hereby establishes the Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan (the “Plan”). Provided that the Plan is approved by the Company’s shareholders as described in Section 2.1, below, as of June 1, 2021 (the “Effective Date”), the Plan will supersede and replace the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan (the “2012 Plan”) and all other Prior Plans. The 2012 Plan and the Prior Plans shall remain in effect until all awards granted under such plans have been exercised, forfeited or canceled or have otherwise expired or terminated in accordance with the terms of such awards. Except as otherwise provided in Section 2.1, no awards will be made pursuant to the 2012 Plan or the Prior Plans on or after the Effective Date.
PURPOSE. The purpose of the Plan is to permit the Committee to grant Awards, thereby giving the Participants a stake in the growth and prosperity of the Company and encouraging the continuance of their service with or to the Company or its Affiliates. To further this purpose, the Awards that may be granted pursuant to the Plan are Restricted Stock, Restricted Stock Units, Stock Grants, Stock Units, Dividend Equivalents, Performance Shares, Performance Share Units, Performance Cash, Options, and Stock Appreciation Rights.
GLOSSARY. Defined terms used in this Plan are set forth in the attached Glossary, which is incorporated into and made part of this Plan.
ARTICLE2EFFECTIVEDATE;EXPIRATIONDATE
EFFECTIVEDATE. The Plan was approved by the Board on February 17, 2021, subject to approval by the Company’s shareholders at the Company’s 2021 Annual Meeting of Shareholders. If approved by the shareholders, the Plan will become effective as of the Effective Date. If shareholder approval is not obtained, the Plan shall be void and without effect and awards may continue to be issued pursuant to the terms of the 2012 Plan.
EXPIRATIONDATE. Unless sooner terminated pursuant to Section 15.1, the Plan will expire on, and no Award may be granted under the Plan after, the tenth anniversary of the Effective Date (the “Expiration Date”). Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan and the Award Agreement.
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ARTICLE3ADMINISTRATION
COMMITTEE. The Plan shall be administered by the Human Resources Committee of the Board, which shall consist of at least two individuals, each of whom qualifies as a “non-employee director” as defined in Rule 16b-3.
ACTIONBYTHECOMMITTEE. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all of the members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee.
AUTHORITYOFCOMMITTEE. The Committee has the power and authority to take the following actions:
Designate Participants to receive Awards;
Determine the type or types of Awards and the time or times when Awards are to be granted to each Participant;
Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;
Determine the terms and conditions of any Award, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of restrictions or limitations, and accelerations or waivers thereof, based in each case on such considerations as the Committee determines;
Determine whether, to what extent, and in what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or whether an Award may be canceled, forfeited, exchanged or surrendered;
Prescribe the form of each Award Agreement, which need not be identical for each Participant;
Decide all other matters that must be determined in connection with an Award;
Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
Subject to the provisions of Section 3.3(d), Section 14.1 and Section 15.2, amend or modify any outstanding Award to the extent the terms of such Award are within the power and authority of the Committee as provided under the Plan;
Interpret the terms of, and determine any matter arising pursuant to, the Plan or any Award Agreement, including, without limitation, correcting any defects or supplying any omissions or reconciling any inconsistency in the Plan or in any Award Agreement;
Determine the effect of all matters and questions relating to whether a Participant has experienced a Termination of Employment (or a Termination of Service with respect to a member of the Board); and
Make all other decisions or determinations that may be required pursuant to the Plan or an Award Agreement as the Committee deems necessary or advisable to administer the Plan.
Any action authorized to be taken by the Committee pursuant to the Plan may be taken or not taken by the Committee in the exercise of its discretion as long as such action or decision not to act is not inconsistent with a provision of this Plan.
DECISIONSBINDING. The Committee’s interpretation of the Plan or any Award Agreement and all decisions and determinations by the Committee with respect to the Plan and any Award are final, binding, and conclusive on all parties. All authority of the Board and the Committee with respect to Awards issued pursuant to this Plan, including the authority to amend outstanding Awards, shall continue after the Expiration Date so long as any Award remains outstanding.
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DELEGATIONOFAUTHORITY. As permitted by law and the rules of any established securities market on which the Stock is traded, the Committee may delegate any authority granted to it pursuant to this Plan; provided, however, that the Committee may not delegate to the Company’s executive officers the power and authority to make, cancel, or suspend Awards to executive officers or members of the Board Any delegation made pursuant to this Section 3.5 shall be subject to such restrictions or limitations as may be imposed by the Committee and may be revoked or modified by the Committee at any time.
ARTICLE4SHARESSUBJECTTOTHEPLAN
NUMBEROFSHARES. Subject to the possible increases provided by Section 4.2 with respect to shares of Stock that become available under the 2012 Plan and the other Prior Plans and adjustments as provided in Section 4.4, the aggregate number of shares of Stock reserved and available for grant (or to be used to determine the value of an Award payable in cash) pursuant to the Plan is 4,332,538 shares of Stock.
SHARECOUNTING. For purposes of determining the number of shares of Stock available for Award under the Plan from time-to-time:
The number of shares of Stock available for grant under this Plan shall be reduced by one (1) share of Stock for each share subject to an Award granted under this Plan.
If any Award granted under this Plan, or any award outstanding under the 2012 Plan and any Prior Plan on or after the Effective Date, is forfeited, terminated, canceled or otherwise expires, the number of shares of Stock subject to such Award, 2012 Plan award or Prior Plan award, shall thereafter be available for grant or added to the shares of Stock available for grant under this Plan on a one-for-one basis.
If shares of Stock are not delivered in connection with any Award because the Award is settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan and will again be available for grant.
The exercise of a stock-settled SAR or broker-assisted “cashless” exercise of an Option (or a portion thereof) will reduce the number of shares of Stock available for issuance by the entire number of shares of Stock subject to that SAR or Option (or applicable portion thereof), even though a smaller number of shares of Stock will be issued upon such an exercise.
Dividend Equivalent Awards paid in Stock shall be counted against the shares available for issuance under the Plan by the number of shares of Stock used to satisfy such Dividend Equivalent Award.
Shares of Stock tendered to pay the exercise price of an Option or tendered, withheld or otherwise relinquished by the Participant to satisfy a tax withholding obligation arising in connection with any Award will not become available for grant under the Plan. Moreover, shares of Stock purchased on the open market with cash proceeds generated by the exercise of an Option will not increase or replenish the number of shares available for grant.
If the provisions of this Section 4.2 are inconsistent with the requirements of any regulations promulgated by the Internal Revenue Service pursuant to Section 422 of the Code, the provisions of such regulations shall control over the provisions of this Section 4.2, but only as this Section 4.2 applies to Incentive Stock Options.
The Committee may adopt such other reasonable rules and procedures as it deems to be appropriate for purposes of determining the number of shares of Stock that are available for grant pursuant to Section 4.1.
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STOCKDISTRIBUTED. Any shares of Stock delivered pursuant to an Award may consist, in whole or in part, of authorized but unissued Stock or treasury Stock or Stock purchased on the open market.
ADJUSTMENTS. In the event of any issuance of rights or warrants to purchase securities, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to the shares of Stock, or any similar corporate transaction or event in respect of the Stock, then the Committee shall, in the manner and to the extent that it deems appropriate and equitable to the Participants and not inconsistent with the terms of this Plan, cause a proportionate adjustment to be made in (a) the maximum number of shares of Stock provided in Section 4.1, (b) the maximum number of shares of Stock set forth in Section 11.2(f) and any other similar numeric limit expressed in the Plan, (c) the number of shares of Stock, units, or other rights subject to the then outstanding Awards, (d) the price, if applicable, for each share of Stock, or unit, or other right subject to then outstanding Awards without change in the aggregate purchase price or value as to which such Awards remain exercisable or subject to restrictions, (e) the performance targets or goals appropriate to any outstanding Awards, or (f) any other terms of an Award that are affected by the event. Moreover, in the event of any such transaction or occurrence, the Committee may provide in substitution for any or all outstanding Awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection therewith the surrender of all Awards so replaced. The foregoing provisions of this Section 4.4 also apply to any merger, consolidation, liquidation, spin-off or split-off of the Company or any Affiliate, but only to the extent that the application of the provisions of this Section 4.4 are consistent with the provisions of Article 14 if such transaction constitutes a Change of Control. Any adjustments made pursuant to this Section 4.4 shall be made in a manner consistent with the requirements of Section 409A of the Code and, in the case of Incentive Stock Options, any such adjustments shall be made in a manner consistent with the requirements of Section 424(a) of the Code.
NOOTHERRIGHTS. Except as expressly provided in Article 9 or Article 14, no Participant shall have any rights by reason of any merger, consolidation, liquidation, issuance of rights or warrants to purchase securities, recapitalization, reclassification, stock dividend, spin-off, split-off, stock split, reverse stock split or other distribution with respect to the shares of Stock, or any similar corporate transaction or event in respect of the Stock. Except as expressly provided in Article 14, no issuance by the Company of shares of Stock of any class, or securities convertible into shares of Stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the exercise price of any Award.
REPLACEMENTAWARDS. In the event of any corporate transaction in which the Company or an Affiliate acquires a corporate entity which, at the time of such transaction, maintains an equity compensation plan pursuant to which awards of stock options, stock appreciation rights, restricted stock, performance shares, performance share units, stock grants, stock units, dividend equivalents, restricted stock units or any other form of equity based compensation are then outstanding (the “Acquired Plan”), the Committee may make Awards to assume, substitute or convert such outstanding awards in such manner as may be determined to be appropriate and equitable by the Committee; provided, however, that the number of shares of Stock subject to any Award shall always be a whole number by rounding any fractional share to the nearest whole share. Options or SARs issued pursuant to this Section 4.6 shall not be subject to the requirement that the exercise price of such Award not be less than the Fair Market Value of Stock on the date the Award is granted. Shares used in connection with an Award granted in substitution for an award outstanding under an Acquired Plan under this Section 4.6 shall not be counted against the number of shares of Stock reserved under this Plan under Section 4.1. Any shares of Stock authorized and available for issuance under the Acquired Plan shall, subject to adjustment as described in Section 4.4, be available for use in making Awards under this Plan
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with respect to persons eligible under such Acquired Plan, by virtue of the Company’s assumption of such Acquired Plan, consistent with the rules of any national securities exchange on which the Stock is then listed, as such rules may be amended or replaced from time to time.
MAXIMUMAWARDPAYABLETONON-EMPLOYEEDIRECTORS. Notwithstanding any other provision in the Plan to the contrary, the aggregate grant date fair value (computed as of the Date of Grant in accordance with applicable financial accounting rules) of all Awards granted to any non-employee member of the Board during any single calendar year, plus the aggregate amount of all cash fees earned and paid or payable to such director for services rendered for the same year, shall not exceed $500,000.
ARTICLE5ELIGIBILITYANDPARTICIPATION
ELIGIBILITY. Persons eligible to participate in this Plan include non-employee members of the Board and employees and officers of the Company; members of the board of directors (or other governing board), officers and employees of any Affiliate; and, to the extent permitted by law and the rules of any established securities market on which the Stock is traded, members of the board of directors (or other governing board), officers and employees of any entity of which the Company or an Affiliate, directly or indirectly, owns 20% or more of the voting or economic interest. The Committee may determine, on a case-by-case basis, to make Awards under the Plan to Consultants on such terms as it may determine, consistent with the provisions of the Plan. Prospective Participants to whom Awards are granted in connection with written offers of an employment or service agreement with the Company or an Affiliate also may be granted Awards. The provisions of any Award granted to a prospective Participant must specifically provide that no portion of the Award will vest, become exercisable, or be issued prior to the date on which such individual becomes employed by or begins providing services to the Company or any Affiliate.
ACTUALPARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible Participants those to whom Awards shall be granted and shall determine the nature and amount of each Award.
ARTICLE6GENERALRULESAPPLICABLETOALLAWARDS
AWARDAGREEMENTS. All Awards shall be evidenced by an Award Agreement. The Award Agreement shall include such terms and provisions as the Committee determines to be appropriate. The terms of the Award Agreement may vary depending on the type of Award, the employee or classification of the employee to whom the Award is made and such other factors as the Committee determines to be appropriate.
STAND-ALONEANDTANDEMAWARDS. Awards granted pursuant to the Plan may be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan, the 2012 Plan, or any Prior Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
TERMOFAWARD. The term of each Award shall be for the period determined by the Committee, provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years from the Date of Grant.
TERMINATIONOFSERVICE. Subject to the provisions of this Plan, the Committee shall determine and set forth in the applicable Award Agreement the extent to which a Participant shall have the right to retain and/or exercise an Award following Termination of Employment (or Termination of Service in the case of a member of the Board). Such provisions need not be
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uniform among all types of Awards and may reflect distinctions based on the reasons for such terminations, including, but not limited to, death, Disability, a Change of Control, a termination for cause, or reasons relating to the breach or threatened breach of restrictive covenants.
FORMOFPAYMENTFORAWARDS. Subject to the terms of the Plan, the Award Agreement, and any applicable law, payments or transfers to be made by the Company or an Affiliate on the grant, exercise, or settlement of an Award may be made in such forms as the Committee determines at or after the time of grant, including, without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by the Committee.
ARTICLE7RESTRICTEDSTOCKANDRESTRICTEDSTOCKUNITAWARDS
GRANTOFRESTRICTEDSTOCK.
IssuanceandRestrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to receive dividends or vote the Restricted Stock). These restrictions may lapse separately or in combination at such times, in such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in the Award Agreement, Participants holding shares of Restricted Stock may not exercise voting rights with respect to the shares of Restricted Stock during the restriction period.
Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon a Termination of Employment (or Termination of Service in the case of a member of the Board) during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of a Termination of Employment (or Termination of Service in the case of a member of the Board) resulting from specified causes. The Committee also may waive in whole or in part any other restrictions or forfeiture conditions relating to a Restricted Stock Award.
CertificatesforRestrictedStock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, the certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may retain physical possession of the certificate until such time as all applicable restrictions lapse.
RESTRICTEDSTOCKUNITAWARDS. Restricted Stock Unit Awards will grant the Participant the right to receive a specified number of shares of Stock, or a cash payment equal to the Fair Market Value (determined as of a specified date) of a specified number of shares of Stock, subject to any vesting or other restrictions deemed appropriate by the Committee. These restrictions may lapse separately or in combination at such times, in such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon a Termination of Employment (or Termination of Service in the case of a member of the Board) during the applicable restriction period, Restricted Stock Units that are at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide in any Restricted Stock Unit Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of a Termination of Employment (or Termination of Service in the case of a member of the Board)
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resulting from specified causes. The Committee also may waive in whole or in part any other restrictions or forfeiture conditions relating to a Restricted Stock Unit Award. Payment for Restricted Stock Units shall be made in the manner and at the time designated by the Committee in the Award Agreement. In the Award Agreement, the Committee may provide that payment will be made in cash or Stock, or in a combination thereof.
ARTICLE8STOCKGRANTANDSTOCKUNITAWARDS
STOCKGRANTAWARDS. A Stock Grant Award grants the Participant the right to receive (or purchase at such price as determined by the Committee) a designated number of shares of Stock free of any vesting restrictions. The purchase price, if any, for a Stock Grant Award shall be payable in cash or other form of consideration acceptable to the Committee. A Stock Grant Award may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such Participant.
STOCKUNITAWARDS. A Stock Unit Award grants the Participant the right to receive a designated number of shares of Stock, or a cash payment equal to the Fair Market Value (determined as of a specified date) of a designated number of shares of Stock, in the future free of any vesting restrictions. A Stock Unit Award may be granted as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such Participant.
ARTICLE9DIVIDENDEQUIVALENTAWARDS
DIVIDENDEQUIVALENTAWARDS. A Dividend Equivalent Award will grant the Participant the right to receive a payment based on the dividends declared on the shares of Stock that are subject to any Restricted Stock Unit, Stock Unit, Performance Share Unit, or Performance Share Award, to be credited as of dividend payment dates during the period between the Date of Grant and the date the Award is exercised, vests or expires, as determined by the Committee. In no event may a Dividend Equivalent Award made with respect to a Restricted Stock Unit Award that vests based on the achievement of Performance Goals, or with respect to a Performance Share Unit or Performance Share Award, be paid unless and until such Award vests or is earned by satisfaction of the applicable Performance Goals. A Dividend Equivalent Award shall initially be expressed in terms of cash or shares of Stock, depending on the way in which the dividends to which it relates are declared. Such Award shall be converted to cash or additional shares of Stock, as the case may be, by such formula and at such time and subject to such limitations as may be determined by the Committee. A Dividend Equivalent Award may not be made in connection with any Option, SAR, or Performance Cash Award. A Dividend Equivalent may be paid with interest if so provided in an Award Agreement.
ARTICLE10PERFORMANCESHARES;PERFORMANCESHAREUNITS;ANDPERFORMANCECASHAWARDS
PERFORMANCESHAREAWARDS. A Performance Share Award grants the Participant the right to receive a specified number of shares of Stock depending on the satisfaction of any one or more Performance Goals during one or more Performance Periods, as determined by the Committee. Subject to Article 14, payment for vested Performance Shares shall be made in Stock.
PERFORMANCESHAREUNITAWARDS. A Performance Share Unit Award grants the Participant the right to receive a specified number of shares of Stock or a cash payment equal to the Fair Market Value (determined as of a specified date) of a specified number of shares of Stock depending on the satisfaction of any one or more Performance Goals during one or more
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Performance Periods, as determined by the Committee. Payment for Performance Share Unit Awards shall be made in Stock or cash, or in a combination thereof, as specified in the Award Agreement.
PERFORMANCECASHAWARDS. A Performance Cash Award grants the Participant the right to receive an amount of cash depending on the satisfaction of any one or more Performance Goals during one or more Performance Periods, as determined by the Committee.
PERFORMANCEGOALS;PERFORMANCEPERIODS. The Performance Goals and Performance Periods applicable to any Performance Share, Performance Share Unit, or Performance Cash Award shall be based on the Performance Goals and Performance Periods selected by the Committee and designated in the Award Agreement.
ARTICLE11STOCKOPTIONS
GENERAL. Option Awards are subject to the following terms and conditions:
ExercisePrice. The exercise price per share of Stock pursuant to an Option shall be equal to the Fair Market Value of one share of Stock as of the Date of Grant unless the Committee sets a higher exercise price in the Award Agreement.
TimeandConditionsofExercise. Unless the Committee specifies otherwise in the Award Agreement, the Option shall become exercisable in equal annual installments on the anniversaries of the Date of Grant and shall expire on the earlier of the Participant’s Termination of Employment (or Termination of Service in the case of a member of the Board) or the tenth anniversary of the Date of Grant. The Committee also may prescribe performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
Payment. The exercise price for any Option shall be paid in cash or shares of Stock held for longer than six months (through actual tender or by attestation). In the Award Agreement, the Committee also may prescribe other methods by which the exercise price of an Option may be paid and the form of payment (except payment may not be made in the form of a promissory note) including, without limitation, any net-issuance arrangement or other property acceptable to the Committee (including broker-assisted “cashless exercise” arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants.
RepricingofOptions. Notwithstanding any other provision in the Plan to the contrary, without approval of the Company’s shareholders, the Committee may not amend, or modify downward, or lower, or reprice the exercise price of any previously granted Option after the Date of Grant or take any action that would be treated as a repricing under applicable listing rules of any national securities exchange on which the Stock is then listed, quoted, or traded. In addition, an Option may not be surrendered in consideration of or exchanged for cash, other Awards, or a new Option having an exercise price below the exercise price of the Option being surrendered or exchanged, except in connection with a Change of Control or as otherwise provided in Section 4.4 with respect to an adjustment in capitalization.
INCENTIVESTOCKOPTIONS. Incentive Stock Options, which are Options intended to meet the requirements of Section 422 of the Code, shall be granted only to Participants who are employees. The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the requirements of Section 11.1 and the following additional provisions:
Exercise. In no event may any Incentive Stock Option be exercisable for more than ten years from the Date of Grant.
LapseofOption. An Incentive Stock Option shall lapse in the following circumstances:
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The Incentive Stock Option shall lapse ten years from the Date of Grant, unless an earlier time is specified in the Award Agreement;
The Incentive Stock Option shall lapse upon a Termination of Employment for any reason other than the Participant’s death or Disability, unless otherwise provided in the Award Agreement; and
If the Participant incurs a Termination of Employment on account of death or Disability before the Option lapses pursuant to paragraph (1) or (2) above, the Incentive Stock Option shall lapse on the earlier of (i) the scheduled expiration date of the Option, or (ii) 12 months after the date of the Participant’s Termination of Employment on account of death or Disability. Upon the Participant’s death or Disability, any Incentive Stock Options exercisable at the Participant’s death or Disability may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament in the case of death, or, if the Participant fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.
IndividualDollarLimitation. The aggregate Fair Market Value (determined as of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any one calendar year may not exceed $100,000 or such other limitation as may then be imposed by Section 422(d) of the Code or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.
TenPercentOwners. An Incentive Stock Option may be granted to any employee who, at the Date of Grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the Date of Grant and the Option is exercisable for no more than five years from the Date of Grant.
RighttoExercise. Except as provided in Section 11.2(b)(3), during a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.
LimitationsonNumberofSharesSubjecttoAwards. The maximum number of shares that may be issued under the Plan as Incentive Stock Options is 1,000,000.
NoticeofDisqualifyingDisposition. If any Participant shall make any disposition of Stock delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions) or any successor provision of the Code, such Participant shall notify the Company of such disposition within ten days of such disposition.
ARTICLE12STOCKAPPRECIATIONRIGHTS
GENERAL. SAR Awards are subject to the following terms and conditions:
TimeandConditionsofExercise. Unless the Committee specifies otherwise in the Award Agreement, the SAR shall become exercisable in equal annual installments on the anniversaries of the Date of Grant and shall expire on the earlier of the Participant’s Termination of Employment (or Termination of Service in the case of a member of the Board) or the tenth anniversary of the Date of Grant. The Committee also may prescribe performance or other conditions, if any, that must be satisfied before all or part of a SAR may be exercised.
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PaymentofSARAmount. Upon exercise of the SAR, the Participant shall be entitled to receive payment of an amount determined by multiplying (a) the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise over the Fair Market Value (or such higher amount determined by the Committee at the Date of Grant) of a share of Stock on the Date of Grant by (b) the number of shares with respect to which the SAR is exercised. Unless the Committee provides otherwise in the Award Agreement, payment for the SAR shall be made in shares of Stock having a Fair Market Value as of the date of exercise equal to the amount of the payment due. The Committee may provide in the Award Agreement that payment for the SARs will be made in cash within 30 days following the date of exercise.
RepricingofSARs. Notwithstanding any other provision in the Plan to the contrary, without approval of the Company’s shareholders, the Committee may not amend or modify downward, or lower or reprice the exercise price of any previously granted SAR after the Date of Grant or take any action that would be treated as a repricing under applicable listing rules of any national securities exchange on which the Stock is then listed, quoted, or traded. In addition, a SAR may not be surrendered in consideration of or exchanged for cash, other Awards, or a new SAR having an exercise price below the exercise price of the SAR being surrendered or exchanged, except in connection with a Change of Control or as otherwise provided in Section 4.4 with respect to an adjustment in capitalization.
ARTICLE13OTHERPROVISIONSAPPLICABLETOALLAWARDS
LIMITATIONONAWARDSWITHRAPIDORNOVESTING. No more than five percent in the aggregate of the shares of Stock available for grant or reference purposes pursuant to Section 4.1 may be subject to the following types of Awards:
Stock Grants or Stock Units other than those awarded to members of the Board or members of the board of directors of APS pursuant to regular retainer arrangements;
Options that become fully vested prior to the third anniversary of the Date of Grant;
SARs that becomes fully vested prior to the third anniversary of the Date of Grant;
Restricted Stock or Restricted Stock Units with respect to which the restrictions lapse solely based on the passage of time and which vest in less than one year;
Restricted Stock or Restricted Stock Units with respect to which the restrictions lapse based on the satisfaction of Performance Goals and that fully vest before the expiration of the one-year period following the Date of Grant; and
Performance Shares or Performance Share Units that fully vest before the expiration of the one-year period following the Date of Grant.
An Award will not be included in the aggregate Awards subject to the requirements of this Section 13.1 solely because the Award Agreement provides for the immediate vesting of the Award upon a Participant’s death or Disability or upon the occurrence of a Change of Control. In addition, replacement Awards granted pursuant to Section 4.6 shall be disregarded in calculating compliance with the limitations of this Section 13.1. In addition, an Award will not be included in the aggregate Awards subject to the requirements of this Section 13.1 solely because the Award Agreement provides that an incremental portion of the Award may become vested proportionally during the vesting periods described above. For example, an Option or SAR that becomes vested in equal monthly, quarterly or annual increments over a period of three years will not be subject to the limitations of this Section 13.1.
LIMITSONTRANSFER.
General. Except as provided in Section 13.2(b) or Section 13.3, no right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to, or in favor of,
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any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate. Except as provided in Section 13.2(b) or Section 13.3, and except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or pursuant to a domestic relations order (that would otherwise qualify as a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, but for the fact that the order pertains to an Award) in favor of a spouse or, if applicable, until the expiration of any period during which any restrictions are applicable or any Performance Period as determined by the Committee. Notwithstanding any provision of the Plan to the contrary, the Incentive Stock Options granted under the Plan shall not be transferable in any way that would violate Treasury Regulation Section 1.422-(a)(2).
TransferstoFamilyMembers. The Committee shall have the authority to adopt a policy that is applicable to existing Awards, new Awards, or both, which permits a Participant to transfer Awards during his or her lifetime to any Family Member. In the event an Award is transferred as permitted by such policy, such transferred Award may not be subsequently transferred by the transferee (other than another transfer meeting the conditions set forth in the policy) except by will or the laws of descent and distribution. A transferred Award shall continue to be governed by and subject to the terms and limitations of the Plan and relevant Award Agreement, and the transferee shall be entitled to the same rights as the Participant, as if the transfer had not taken place.
BENEFICIARIES. Notwithstanding Section 13.2, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death, and, in accordance with Section 11.2(b)(3), upon the Participant’s Disability. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is provided to the Company.
STOCKCERTIFICATES. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange or quotation system on which the shares of Stock are listed, quoted or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations, as the Board deems advisable in order to comply with any such laws, regulations, or requirements.
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DEFERRALPURSUANTTODEFERREDCOMPENSATIONPLAN. The Award Agreement for any Award other than an Option or Restricted Stock Award may allow the Participant to defer receipt of any compensation attributable to the Award pursuant to the terms and provisions of the Deferred Compensation Plan of 2005 for Employees of Pinnacle West Capital Corporation and Affiliates or any successor or other non-qualified deferred compensation plan. Any such Award Agreement shall comply with the requirements of Section 409A of the Code.
CLAWBACK. Notwithstanding any provision of the Plan to the contrary, any portion of the payments and benefits provided in connection with any Award granted pursuant to the Plan shall be subject to recapture or clawback to the fullest extent called for by the Company’s Clawback Policy, as may be in effect from time to time, and to the extent necessary to comply with applicable law, including, but not limited to, the final rules issued by the Securities and Exchange Commission and any national securities exchange on which the Stock is then listed pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Exchange Act, or Section 304 of the Sarbanes-Oxley Act of 2002. The Committee also may include other clawback provisions in the Award Agreement as it determines to be appropriate. By accepting an Award, each Participant agrees to be bound by, and comply with, the terms of any such recapture or clawback provisions and with any Company request or demand for recapture or clawback.
ARTICLE14CHANGEOFCONTROL
GENERALRULE. Unless the Committee, with the approval of the Board, provides otherwise in an Award Agreement, if a Change of Control occurs, immediately prior to the Change of Control:
Any and all Options and SARs granted hereunder shall become exercisable immediately before the closing of the transaction that will result in the Change of Control and all necessary steps shall be taken to allow the Participants to immediately exercise such Options or SARs so that any Stock issued upon such exercise shall be able to participate in the transaction that results in the Change of Control. If, pursuant to the terms of the Award Agreement, a SAR is to be paid in cash, the SAR will be deemed to be exercised on the closing of the transaction that results in the Change of Control. The cash payment then will be made within ten days following the closing of the transaction that results in the Change of Control.
Any time-based or other restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse. All Restricted Stock Units and Stock Units shall become immediately payable and shall be paid in Stock or cash, in accordance with the terms of the applicable Award Agreement. All necessary steps shall be taken to allow any Stock issued in payment for the Restricted Stock Units or Stock Units (and any shares of Restricted Stock that become unrestricted) to participate in the transaction that results in the Change of Control. If pursuant to the terms of the Award Agreement, a Restricted Stock Unit is to be paid in cash, the Restricted Stock Unit will be settled as of the closing of the transaction that results in the Change of Control and the cash payment then will be made within ten days following the closing of the transaction that results in the Change of Control.
Any Awards of Performance Shares or Performance Share Units that are payable in Stock shall be converted to Stock Grants, which shall be immediately vested. All Stock payable in connection with the Stock Grant shall be issued immediately before the closing of the transaction that will result in the Change of Control and all necessary steps shall be taken to allow any Stock so issued to participate in the transaction that result in the Change of Control. In converting Performance Shares or Performance Share Units to a Stock Grant, the Participants shall receive the number of shares of Stock that would have been earned at the target level of performance; provided, however, that if, in the judgment of the
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Committee, the level of performance as of the last day of the month that is at least 30 days prior to the closing of the transaction that results in the Change of Control is reasonably ascertainable and such performance exceeds the target level of performance, the Participants shall receive the number of shares of Stock that would have been earned at such attained level of performance rather than the target level of performance.
Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis. For example, if four equally weighted goals are established in connection with a particular Award, and the attained level of performance exceeds the target level for one of such goals, 25% of the Award will be earned at the attained level and the remaining 75% will be earned at the target level.
Any Awards of Performance Share Units that are payable in cash shall become immediately vested. The Participants then shall receive a cash payment equal to the Fair Market Value of the specified number of shares of Stock payable pursuant to the Award at the target level of performance; provided, however, that if, in the judgment of the Committee, the level of performance as of the last day of the month that is at least 30 days prior to the closing of the transaction that results in the Change of Control is reasonably ascertainable and such performance exceeds the target level of performance, such attained level of performance shall be used. Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis as further described in Section 14.1(c). The cash payment then will be made within ten days following the closing of the transaction that results in the Change of Control.
Performance Cash Awards shall be deemed to be satisfied and earned at the target level of performance; provided, however, that if, in the judgment of the Committee, the level of performance as of the last day of the month that is at least 30 days prior to the closing of the transaction that results in the Change of Control is reasonably ascertainable and such level and such performance exceeds the target level of performance, such attained level of performance shall be used. Whether the attained level of performance exceeds the target level will be determined on a goal-by-goal basis as further described in Section 14.1(c). Performance Cash Awards then shall be paid within ten days following the closing of the transaction that results in the Change of Control.
Any Dividend Equivalent Awards shall be paid in cash or Stock as determined in accordance with the applicable Award Agreement. All Stock payable in connection with the Dividend Equivalent shall be issued immediately before the closing of the transaction that will result in the Change of Control and all necessary steps shall be taken to allow any Stock so issued to participate in the transaction that result in the Change of Control. Any cash payment shall be made within ten days following the closing of the transaction that results in the Change of Control.
With respect to an Award that the Company concludes is subject to Section 409A of the Code, a Change of Control may not result in the acceleration of the timing of any payment unless the transaction that results in the Change of Control also constitutes a “change of control event” as such term is used in Treasury Regulation Section 1.409A-3(i)(5). Such transaction shall be considered to be a Change of Control for all other purposes of such an Award, however, unless prohibited by regulations issued pursuant to Section 409A. For example, such transaction will result in the lapse of any time-based or other restrictions on a Restricted Stock or Restricted Stock Unit Award. If due to the above provisions the payment of an Award may not be accelerated, the Board, prior to the Change of Control, shall take such action as it in good faith determines to be necessary to assure that there will be no material impairment to either the value of the Award to the Participant or the Participant’s opportunity for future appreciation in respect of such Award.
BOARDOVERRIDE. Notwithstanding the foregoing provisions of Section 14.1, the Board, prior to a Change of Control, may determine that no Change of Control shall be deemed to have
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occurred or that some or all of the enhancements to the rights of Participants under all or a portion of the outstanding Awards upon a Change of Control, as provided under Section 14.1 or the Award Agreement, shall not apply to specified Awards. The Board may exercise such override authority only if, before or immediately upon the occurrence of the specified event that would otherwise constitute a Change of Control, the Board, as constituted prior to the Change of Control, reasonably concludes, in good faith, that: (a) Participants holding Awards affected by action of the Board under this Section 14.2 shall be protected by legally binding obligations of the Company or the surviving entity or the parent thereof because such Awards (i) shall remain outstanding following consummation of all transactions involved in or contemplated by such Change of Control or (ii) shall be assumed and adjusted by the surviving entity resulting from such transactions or the parent thereof, or (iii) shall be exchanged for new awards issued by the surviving entity resulting from such transaction or the parent thereof; and (b) changes in the terms of the Award resulting from such transactions will not materially impair the value of the Awards to the Participants or their opportunity for future appreciation in respect of such Awards. The Board may exercise such override authority with respect to an Award which the Company concludes is subject to (and not excepted from) the requirements of Section 409A of the Code only in a manner and to the extent permissible under Section 409A.
PARTICIPANTCONSENTNOTREQUIRED. Nothing in this Article 14 or any other provision of this Plan is intended to provide any Participant with any right to consent to or object to any transaction that might result in a Change of Control and each provision of this Plan shall be interpreted in a manner consistent with this intent. Similarly, nothing in this Article 14 or any other provision of this Plan is intended to provide any Participant with any right to consent to or object to any action taken by the Board pursuant to Section 14.2.
ARTICLE15AMENDMENT,MODIFICATION,ANDTERMINATION
AMENDMENT,MODIFICATION,ANDTERMINATIONOFTHEPLAN. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that any such action of the Committee shall be subject to the approval of the shareholders to the extent necessary to comply with any applicable law, regulation, or rule of the stock exchange on which the shares of Stock are listed, quoted or traded. Without limiting the forgoing, and except as provided in Section 4.4, neither the Board nor the Committee may, without the approval of shareholders (a) increase the number of shares available for grant under the Plan, (b) permit the Committee to grant Options or SARs with an exercise price that is below Fair Market Value on the Date of Grant, (c) permit the Committee to extend the exercise period for an Option or SAR beyond ten years from the Date of Grant, (d) reprice or reduce the exercise price or base value of any previously granted Options or SARs (or take any action that would be treated as a repricing under applicable listing rules of the stock exchange on which the Stock is then listed, quoted or traded), and (e) amend any provision of the Plan (including but not limited to Section 11.1(d) and Section 12.1(c)) to permit the repricing of any previously granted Options or SARs.
AWARDSPREVIOUSLYGRANTED. Except as provided in the next sentence, no termination, amendment, or modification of the Plan or any Award Agreement shall adversely affect in any material way the rights of the holder under any Award previously granted pursuant to the Plan without the prior written consent of the holder of the Award. The consent of the holder of an Award is not needed if the change (a) is required by law or regulation, (b) does not adversely affect in any material way the rights of the holder, or (c) is required to comply with the provisions of Section 409A of the Code and applicable regulations or other interpretive authority. Additional rules relating to amendments to the Plan or any Award Agreement to assure compliance with Section 409A of the Code are set forth in Section 16.16.
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ARTICLE16GENERALPROVISIONS
NORIGHTSTOAWARDS. No Participant, employee, or other person shall have any right to be selected to receive an Award, or having been so selected, to be selected to receive a future Award, except as otherwise provided by an agreement, the relevant provisions of which have been approved by the Committee. Neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.
NOSHAREHOLDERSRIGHTS. No Award gives the Participant any of the rights of a shareholder of the Company unless and until unrestricted shares of Stock are issued to the Participant or the restrictions on any shares previously issued lapse, except as specifically otherwise provided in the Plan or the Award Agreement.
WITHHOLDING. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. With the Committee’s consent as expressed in an Award Agreement or in any policy adopted by the Committee, the Company may permit the Participant to satisfy a tax withholding requirement by (a) directing the Company to withhold shares of Stock to which the Participant is entitled pursuant to the Award in an amount necessary to satisfy the Company’s applicable federal, state, local or foreign income and employment tax withholding obligations with respect to such Participant, (b) tendering previously-owned shares of Stock held by the Participant for six months or longer to satisfy the Company’s applicable federal, state, local, or foreign income and employment tax withholding obligations with respect to the Participant, (c) a broker-assisted “cashless” transaction, or (d) personal check or other cash equivalent acceptable to the Company. To the extent alternative methods of withholding are available under applicable tax laws, the Company shall have the power to choose among such methods. Notwithstanding the foregoing or the provision of any Award Agreement, a Participant may not pay the amount of taxes required by law to be withheld using Stock if, in the opinion of counsel to the Company, there is a substantial likelihood that the use of such form of payment or the timing of such form of payment would subject the Participant to a substantial risk of liability under Section 16 of the Exchange Act, or there is a substantial likelihood that the use of such form of payment would result in adverse accounting treatment to the Company.
NORIGHTTOCONTINUEDEMPLOYMENTORSERVICE. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Affiliate.
UNFUNDEDSTATUSOFAWARDS. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. Although bookkeeping accounts may be established with respect to Participants under this Plan, any such accounts shall be used merely as a bookkeeping convenience. Neither the Participant nor any other persons shall have any interest in any fund or in any specific asset or assets of the Company or any other entity by reason of any Award, except to the extent provided hereunder.
RELATIONSHIPTOOTHERBENEFITS. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate, except as otherwise provided in such plan.
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EXPENSES. The expenses of administering the Plan shall be borne by the Company.
TITLESANDHEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
FRACTIONALSHARES. No fractional shares of Stock shall be issued pursuant to the Plan. Unless the Committee specifies otherwise in the Award Agreement or pursuant to any policy adopted by the Committee, cash will be given in lieu of fractional Shares.
SECURITIESLAWCOMPLIANCE. With respect to any person who is, on the relevant date, obligated to file reports pursuant to Section 16 of the Exchange Act, transactions pursuant to this Plan are intended to comply with all applicable conditions of Rule 16b-3. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on the exercise of any Award as may be required to satisfy the requirements of Rule 16b-3. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be void to the extent permitted by law and voidable as deemed advisable by the Committee.
GOVERNMENTANDOTHERREGULATIONS. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. The Committee shall impose such restrictions on any Award as it may deem advisable, including, without limitation, restrictions under applicable federal securities law, under the requirements of any national securities exchange on which the Stock is then listed, and under any blue sky or state securities laws applicable to such Award.
GOVERNINGLAW. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the jurisdiction of incorporation of the Company.
SEVERABILITY. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed as deemed stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
SUCCESSORS. All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, purchase of all or substantially all of the business and/or assets of the Company or otherwise.
SURVIVALOFPROVISIONS. The rights, remedies, agreements, obligations and covenants contained in or made pursuant to this Plan, any Award Agreements, and any notices or agreements made in connection with this Plan shall survive the execution and delivery of such notices and agreements and the delivery and receipt of such shares of Stock.
COMPLIANCEWITHSECTION409A.
GeneralCompliance. Some of the types of Awards that may be granted pursuant to the Plan (including, but not necessarily limited to, Restricted Stock Unit Awards, Performance Share Awards, Performance Share Unit Awards, Performance Cash Awards and Stock Unit Awards) may be considered to be “non-qualified deferred compensation” subject to the
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requirements of Section 409A of the Code. If an Award is subject to the requirements of Section 409A of the Code, the Company intends (but cannot and does not guarantee) that the Award Agreement and this Plan comply fully with and meet all of the requirements of Section 409A of the Code or an exception thereto and the Award Agreement shall include such provisions, in addition to the provisions of this Plan, as may be necessary to assure compliance with Section 409A of the Code or an exception thereto. An Award subject to Section 409A of the Code also shall be administered in good faith compliance with the provisions of Section 409A of the Code as well as applicable guidance issued by the Internal Revenue Service and the Department of Treasury. To the extent necessary to comply with Section 409A of the Code, any Award that is subject to Section 409A of the Code may be modified, replaced or terminated by the Committee. Notwithstanding any provision of this Plan or any Award Agreement to the contrary, in the event that the Committee determines that any Award is or may become subject to Section 409A of the Code, the Company may adopt such amendments to the Plan and the related Award Agreements, without the consent of the Participant, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effective dates), or take any other action that the Committee determines to be necessary or appropriate to either comply with Section 409A of the Code or to exclude or exempt the Plan or any Award from the requirements of Section 409A of the Code.
DelayforSpecifiedEmployees. If, at the time of a Participant’s Separation from Service, the Company has any Stock which is publicly traded on an established securities market or otherwise, and if the Participant is considered to be a Specified Employee, to the extent any payment for any Award is subject to the requirements of Section 409A of the Code and is payable upon the Participant’s Separation from Service, such payment shall not commence prior to the first business day following the date which is six months after the Participant’s Separation from Service (or if earlier than the end of the six-month period, the date of the Participant’s death). Any amounts that would have been distributed during such six-month period will be distributed on the day following the expiration of the six-month period.
ProhibitiononAccelerationorDeferral. Under no circumstances may the time or schedule of any payment for any Award that is subject to the requirements of Section 409A of the Code be accelerated or subject to further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. If the Company fails to make any payment pursuant to the payment provisions applicable to an Award that is subject to Section 409A of the Code, either intentionally or unintentionally, within the time period specified in such provisions, but the payment is made within the same calendar year, such payment will be treated as made within the specified time period. In addition, in the event of a dispute with respect to any payment, such payment may be delayed in accordance with the regulations and other guidance issued pursuant to Section 409A of the Code.
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GLOSSARY
“2012 Plan” means the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan.
“Acquired Plan” means an equity compensation plan described by Section 4.6.
“Affiliate” means any subsidiary or parent of the Company that is: (i) a member of a “controlled group of corporations” (within the meaning of Section 414(b) of the Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group; or (ii) a member of a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group. In applying Section 1563(a)(1), (2) and (3) of the Code for purposes of determining the members of a controlled group of corporations under Section 414(b) of the Code, the language “at least 50%” shall be used instead of “at least 80%” each place it appears in Section 1563(a)(1), (2) and (3) and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining the members of a group of trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, the language “at least 50%” shall be used instead of “at least 80%” each place it appears in Treasury Regulation Section 1.414(c)-2. For purposes of determining whether an event constitutes a Change of Control as defined below, “Affiliate” status shall be determined on the day immediately preceding the date of the transaction or event.
“APS” shall mean Arizona Public Service Company, an Affiliate of the Company and (except for purposes of determining whether a Change of Control has occurred) any successor corporation.
“Award” means any Restricted Stock, Restricted Stock Unit, Stock Grant, Stock Unit, Dividend Equivalent, Performance Share, Performance Share Unit, Performance Cash, Option, or Stock Appreciation Right granted to a Participant under the Plan.
“Award Agreement” means any written agreement, contract, or other instrument or document, including an electronic agreement or document, evidencing an Award.
“Beneficial Owner” shall have the same meaning as given to that term in Rule 13d-3 of the Exchange Act, provided that any pledgee of the voting securities of the Company or APS shall not be deemed to be the Beneficial Owner thereof prior to its disposition of, or acquisition of voting rights with respect to, such securities.
“Board” means the Board of Directors of the Company.
“Change of Control” means and shall be deemed to have occurred as of the date of the occurrence of any of the following events:
Any person, other than an Affiliate, through a transaction or series of transactions, is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company or APS representing 20% or more of the combined voting power of the then outstanding securities of the Company or APS, as the case may be; provided, however, that, for purposes of this clause (1), any acquisition directly from the Company of (A) securities of the Company or (B) securities of APS representing 40% or less of the voting power of the then outstanding securities of APS, shall not constitute a Change of Control;
The closing of a merger or consolidation of (A) the Company with any other corporation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, less than 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) APS
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with any other corporation which would result in the voting securities of APS outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, less than 60% of the combined voting power of the securities of APS or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; provided that, for purposes of this subparagraph (2), a merger or consolidation effected to implement a recapitalization of the Company or of APS (or similar transaction) in which no person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company or of APS representing 20% or more of the combined voting power of the then outstanding securities of the Company or of APS (excluding any securities acquired by that person directly from the Company or an Affiliate) shall not result in a Change of Control;
The sale, transfer or other disposition of all or substantially all of the assets of either the Company or APS to a person other than the Company or an Affiliate; or
Individuals who, as of the Effective Date, constitute the board of directors of the Company (the “Company Incumbent Board”) or of APS (the “APS Incumbent Board”) cease for any reason to constitute at least two-thirds of the members of the Company or APS board of directors, as the case may be; provided, however, that for purposes of this subparagraph (4), (A)(1) any person becoming a member of the Company board of directors after the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the members then comprising the Company Incumbent Board will be considered as though such person were a member of the Company Incumbent Board and (2) the Company Incumbent Board shall not include a director whose initial assumption of office as a director was in connection with an actual or threatened election contest relating to the election of directors, and (B)(1) any person becoming a member of the APS board of directors after the Effective Date whose election, or nomination for election by APS’ shareholder(s), was approved by a vote of at least two-thirds of the members then comprising the APS Incumbent Board or by the Company, as a majority shareholder of APS, considered as though such person were a member of the APS Incumbent Board and (2) the APS Incumbent Board shall not include a director whose initial assumption of office as a director was in connection with an actual or threatened election contest relating to the election of directors.
Notwithstanding the foregoing, a Change of Control will not be deemed to have occurred until (i) any required regulatory approval has been obtained, and (ii) the transaction that would otherwise be considered a Change of Control closes.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the committee of the Board designated to administer the Plan pursuant to Section 3.1.
“Company” means Pinnacle West Capital Corporation, an Arizona corporation and (except for purposes of determining whether a Change of Control has occurred) any successor corporation.
“Consultant” means any consultant, adviser, or independent contractor who provides services to the Company or an Affiliate as an independent contractor and not as an employee; provided that the Consultant may become a Participant in this Plan only if he or she (i) is a natural person; (ii) provides bona fide services to the Company or an Affiliate; and (iii) provides services that are not in connection with the offer or sale of the Company’s securities in a capital-raising transaction and do not promote or maintain a market for the Company’s securities.
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“Date of Grant” means, as determined by the Committee, the latest to occur of (i) the date as of which the Committee approves an Award, (ii) the date on which an Award to a prospective employee, officer, or non-employee member of the Board first becomes effective, or (iii) such other date as may be specified by the Committee in the Award Agreement.
“Disability” means “disability” as that term is defined in Section 22(e)(3) of the Code unless a different definition is provided in the Award Agreement.
“Dividend Equivalent” means a right granted to a Participant pursuant to Article 9.
“Effective Date” means the date set out in Section 2.1.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Expiration Date” means the date set out in Section 2.2.
“Fair Market Value” means the closing price for the Stock as reported on the national securities exchange on which the Stock is then listed for that date or, if no such prices are reported for that date, the closing price on the next preceding date for which such prices were reported.
“Family Member” means a Participant’s spouse and any parent, stepparent, grandparent, child, stepchild, or grandchild, including adoptive relationships, or a trust, or any other entity in which these persons (or the Participant) have more than 50% of the beneficial interest.
“Incentive Stock Option” means an Option granted pursuant to and in compliance with Section 11.2.
“Non-Qualified Stock Option” means an Option granted pursuant to Section 11.1 that is not intended to be an Incentive Stock Option.
“Option” means a right granted to a Participant pursuant to Article 11. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
“Participant” means a person who has been granted an Award.
“Performance Cash” means a right granted to a Participant pursuant to Section 10.3.
“Performance Goals” means the one or more goals established by the Committee for a Performance Period based upon business criteria or other performance measures determined by the Committee in its discretion.
“Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured, provided that no Performance Period may be shorter than 12 months in duration.
“Performance Share” means a right granted to a Participant pursuant to Section 10.1.
“Performance Share Unit” means a right granted to a Participant pursuant to Section 10.2.
“Plan” means this Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan, as it may be amended from time to time.
“Prior Plans” means the Pinnacle West Capital Corporation 2002 Long-Term Incentive Plan, the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan, and any other similar plan adopted by the Company at any time in the past, which has not yet lapsed or expired.
“Restricted Stock” means Stock granted to a Participant pursuant to Section 7.1.
“Restricted Stock Unit” means a right granted to a Participant pursuant to Section 7.2.
“Rule 16b-3” means Rule 16b-3 as promulgated and interpreted by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation thereto as in effect from time to time.
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“Separation from Service” is a term that applies only in the context of an Award that the Company concludes is subject to Section 409A of the Code. In that limited context, the term “Separation from Service” means either: (i) the termination of a Participant’s employment with the Company and all Affiliates due to death, retirement or other reasons; or (ii) a permanent reduction in the level of bona fide services the Participant provides to the Company and all Affiliates to an amount that is less than 50% of the average level of bona fide services the Participant provided to the Company and all Affiliates in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treasury Regulation Section 1.409A-1(h)(1)(ii).
Solely for purposes of determining whether a Participant has a “Separation from Service,” a Participant’s employment relationship is treated as continuing while the Participant is on military leave, medical or sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months, or if longer, so long as the Participant’s right to reemployment with the Company or an Affiliate is provided either by statute or contract). If the Participant’s period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six-month period. Whether a Termination of Employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.
In the case of a non-employee member of the Board, Separation from Service means that such member has ceased to be a member of the Board. Whether an independent contractor Consultant has incurred a Separation from Service will be determined in accordance with Treasury Regulation Section 1.409A-1(h).
“Specified Employee” means an employee who, as of the date of his or her Separation from Service, is (i) an officer of the Company or any Affiliate having an annual compensation greater than $185,000, (ii) a five-percent owner of the Company or any Affiliate, or (iii) a one-percent owner of the Company or any Affiliate having an annual compensation from the Company and all of its Affiliates of more than $150,000. The dollar limitations set forth above shall be adjusted to reflect cost of living increases in accordance with Section 416(i)(1)(A) of the Code. An employee will be treated as a Specified Employee for a particular calendar year if the employee meets any of the above requirements (applied in accordance with regulations issued pursuant to Section 416 of the Code and disregarding Section 416(i)(5)) at any time during the 12-month period ending on December 31 of the prior calendar year. Whether an employee is a Specified Employee will be determined exclusively in accordance with regulations issued pursuant to Section 409A of the Code and the minutes of the October 17, 2007 meeting of the Board, as such minutes may be amended, replaced or superseded from time to time.
“Stock” means the common stock of the Company or any security that may be substituted for Stock or into which Stock may be changed pursuant to Article 4.
“Stock Appreciation Right” or “SAR” means a right granted to a Participant pursuant to Article 12.
“Stock Grant Award” means the grant of Stock to a Participant pursuant to Section 8.1.
“Stock Unit” means a right granted to a Participant pursuant to Section 8.2.
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“Termination of Employment” or “Termination of Service” means the cessation of performance of services for the Company. For this purpose, transfer of a Participant among the Company and any Affiliate, or transfer from a position as a member of the Board to Employee, shall not be considered a Termination of Service or a Termination of Employment with the Company. In the context of an Award that is subject to the requirements of Section 409A of the Code, the terms “Termination of Service” and “Termination of Employment” mean a Separation from Service.
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The business of the meeting will follow the order set forth in the Agenda, subject to the Chairman’s discretion.
Only shareholders of record on March 10, 2023,14, 2024, or their proxy holders, may participate in the meeting, vote, or submit a question for the question and answer session.
Shareholders, or their designated representatives, presenting shareholder proposals or their designated representative may speak during the business session when called upon by the Chairman and only to present the proposal. The shareholder or representative will have up to two minutes to present his or her proposal. The Chairman reserves the right to mute or disconnect the shareholder or representative if either of these rules are not complied with by the shareholder or the representative.
The Company will consider questions that are submitted prior to the adjournment of the formal portion of the meeting and that are submitted online in the designated field on the web portal; submissions must include the submitting shareholder’s name and number of shares the shareholder owns or controls, together with the question in the question field.
If multiple questions are submitted by a single shareholder, the Company will consider only one question per shareholder until all shareholders have had the opportunity to have a single question considered and only if time permits; the order in which questions are considered will be at the discretion of the Chairman.
Shareholder questions must be of general interest to all shareholders. This meeting is not to be used as a forum to present economic, political, social, or other views. The questions of all shareholders are welcome; however, the purpose of the meeting will be observed and the Company will not respond to questions that: (a) are not written in the form of a question; (b) are irrelevant to the business of the Company or the conduct of its operations; (c) are related to pending or threatened litigation or legal issues; (d) contain references that are offensive, derogatory, or otherwise not in good taste; (e) are unduly prolonged; (f) are substantially repetitious of questions submitted by other shareholders; (g) are discussions related to personal issues; or (h) do not comply with these Rules of Conduct. The Chairman has discretion as to whether or not a question will be answered. The determination by the Chairman as to whether a question will be answered or complies with these Rules of Conduct will be binding.
Questions from multiple shareholders on the same topic or that are otherwise related may be grouped, summarized, and answered together.
In the event we are not able to answer all the questions that are asked during the meeting, thosethe unanswered questions, and our response,responses, will be posted on our website shortly after the meeting, as long as they comply with the Rules of Conduct.
The recording of the Annual Meeting in any manner is strictly prohibited without the express written permission of the Company.
The Chairman shall have all authority necessary to preside over the meeting and may make any and all determinations with respect to the conduct of the meeting and procedures to be followed during the meeting.
In the event of any disorder or meeting disruption, the Chairman may immediately adjourn the meeting or take such other action as the Chairman deems necessary.
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2024 Proxy Statement | | ||||
