UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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| Preliminary Proxy Statement | |
| o | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)) |
| Definitive Proxy Statement | |
| o | Definitive Additional Materials |
| o | Soliciting Material Under Rule 14a-12 |
South Jersey Industries, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
| Payment of Filing Fee (Check the appropriate box): | |
| þ | No fee required. |
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 | |||||
 |  |
| 383.6K | 1.6% |
| Utility Customers in 118 | Customer Base |
| Southern NJ Municipalities | Growth in 2017 |
Corporate Governance and Board Diversity
SJI is governed by a Board of Directors, all of whom with the exception of one member are not SJI employees. Our Board of Directors, elected by the shareholders, is the Company’s ultimate decision-making entity, except with respect to matters reserved for shareholder consideration. The current board includes Michael J. Renna (SJI President and CEO), Walter M. Higgins III (Chairman), Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, Sunita Holzer, Joseph M. Rigby, and Frank L. Sims.
The board maintains seven standing committees: the Audit Committee, the Compensation Committee,
the Corporate Responsibility Committee, the Executive Committee, the Governance Committee, the Risk Committee and the Strategy & Finance Committee.
In November, 2017, the Executive Women of New Jersey (EWNJ) recognized SJI as a member of its A Seat at the Table Honor Roll for having three or more women on the company’s Board of Directors. In October 2016, the Forum of Executive Women recognized SJI and other companies where women directors comprise at least 25 percent of the Board.
| South Jersey Industries |
| Regulated | Non-Utility | |||||||
| South Jersey Gas | SJI Midstream | South Jersey Energy Solutions | ||||||
| Regulated Natural | FERC-Regulated | |||||||
| Gas Distribution | Gas Pipeline/Projects | SJ Energy Services | SJ Energy Group | |||||
| Company | Energy production assets (solar, | · | Fuel supply management services | |||||
| Customer Composition | CHP and landfill gas to electric) | · | Wholesale natural gas, and retail natural gas and electric commodity marketing | |||||
| [SJI Logo] | South Jersey Industries, Inc. |
1 South Jersey Plaza | |
Folsom, New Jersey 08037 | |
Tel. (609) 561-9000 | |
Fax (609) |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
| DATE: | |
| TIME: | 9:00 a.m., Eastern Time |
| PLACE: |
To the Shareholders of South Jersey Industries
NOTICE IS HEREBY GIVEN that South Jersey Industries, Inc.’s (“Company” or “SJI”) Annual Meeting of Shareholders will be held atThe Westin Mount Laurel, The GrandResorts Casino Hotel, Atlantic Ballroom, 555 Fellowship Road, Mount Laurel,1133 Boardwalk, Atlantic City, New Jersey 0805408401, on April 29, 2016,May 11, 2018, at 9:00 a.m., Eastern Time,for the following purposes:
| 1. | To elect 10 director nominees who are named in the accompanying proxy statement (term expiring |
| 2. | To hold an advisory vote to approve executive |
| 3. | To approve an amendment to the Certificate of Incorporation to change the name of the Company to SJI, Inc. |
| 4. | To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for |
| To transact other business that may properly come before the |
Voting can be completed in one of four ways:
| Voting can be completed in one of four ways: | |||||
 | |||||
 | returning the proxy card by mail |   | online at www.proxyvote.com | ||
  | through the telephone at |   | attending the meeting to vote IN PERSON | ||
TheThe Board of Directors has fixed the close of business on February 29, 2016March 12, 2018 as the record date for determining shareholders entitled to notice of, and to vote at, the Annual Meeting. Accordingly, only shareholders of record on that date are entitled to notice of, and to vote at, the meeting.
YouYou are cordially invited to attend the meeting.Attendance at the Annual Meeting will be limited to shareholders as of the record date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record date. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Whether or not you expect to attend the meeting, we urge you to vote your shares now. Please complete and sign the enclosed proxy card and promptly return it in the envelope provided or, if you prefer, you may vote by telephone or on the Internet. Please refer to the enclosed proxy card for instructions on how to use these options. Should you attend the meeting, you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
Senior Vice President, General CounselVP, Treasurer & Acting Corporate Secretary
Folsom, NJ
March 29, 20162018
YOUR VOTE IS IMPORTANT. PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR ON THE INTERNET.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on April 29, 2016.May 11, 2018. The Proxy Statement, the Proxy Card and the 2017 Annual Report to Shareholders are available at www.sjindustries.com by clicking on Investors > Financial Reporting
Table of Contents
| PROXY STATEMENT SUMMARY | 1 | ||
| GENERAL INFORMATION | 3 | ||
| Information about the Annual Meeting and Voting | 3 | ||
| PROPOSALS TO BE VOTED ON | 4 | ||
| Proposal 1 - Director Elections | 4 | ||
| Proposal 2 - Advisory Vote to Approve Executive Compensation | 11 | ||
| Proposal 3 - Approval of an Amendment of Certificate of Incorporation to change the name of the Company to SJI, Inc. | 12 | ||
| Proposal 4 - Ratification of Independent Accountants | 13 | ||
| SECURITY OWNERSHIP | |||
| Directors and Management | 14 | ||
| CORPORATE GOVERNANCE | |||
| The Board of Directors | 16 | ||
| Board Evaluation Process | 17 | ||
| Meetings of the Board of Directors and its Committees | |||
| 17 | |||
| 21 | |||
| 23 | |||
| Certain Relationships | 24 | ||
| EXECUTIVE OFFICERS | |||
| Compensation Discussion & Analysis | 25 | ||
| Executive Compensation Tables | 38 | ||
| FINANCIAL | |||
| 2017 Annual Report and Financial Information | 46 | ||
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.
Annual Meeting of Shareholders
| Annual Meeting of Shareholders | |||||
| Date: | May 11, 2018 | ||||
| Time: | 8:15 a.m. - doors will open to the | ||||
| 9:00 a.m. - meeting begins | |||||
| 10:00 a.m. - meeting adjourns | |||||
| Place: | |||||
| Admission to the meeting: | Attendance at the Annual Meeting will be limited to shareholders as of the record date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record date. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket. | ||||
| Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the 2018 Annual Shareholders’ Meeting may be used by South Jersey Industries. By attending the 2018 Annual Shareholders’ Meeting, you will be agreeing to South Jersey Industries’ use of those photographs and waive any claim or rights with respect to those photographs and their use. | |||||
| Record Date: | |||||
| Agenda: | · | Election of 10 directors, each to serve a term of one year | |||
| · | Approval, on an advisory basis, of executive compensation | ||||
| · | Approval of an amendment of our Certificate of Incorporation to change the name of the Company to SJI, Inc. | ||||
| · | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | ||||
| · | Transaction of any other business that may properly come before the meeting | ||||
| Voting: | Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for | ||||
| each director nominee and one vote for each of the proposals to be voted on. | |||||
Voting Matters and the Board’s Recommendation
The following table summarizes the items that will be brought for a vote of our stockholders at the meeting, along with the Board’s recommendation as to how shareholders should vote on each of them.
| Proposal No. | Description of Proposal | Board’s Recommendation |
| 1 | Election of 10 director candidates nominated by the Board, each to serve aone-year term | FOR |
| 2 | Approval, on an advisory basis, of executive compensation | FOR |
| 3 | Approval of an amendment of Certificate of Incorporation to change the name of the Company to SJI, Inc. | FOR |
| 4 | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | FOR |
In addition to these matters, shareholders may be asked to vote on such other business as may properly be brought before the meeting or any adjournment or postponement of the meeting.
| South Jersey Industries, Inc. - | | 1 |
Proxy Statement Summary
Votes Required for Approval
The table below summarizes the votes required for approval of each matter to be brought before the annual meeting, as well as the treatment of abstentions and broker non-votes.
| Proposal No. | Description of Proposal | Vote Required for Approval | Abstentions | Broker |
| 1 | Election of directors | Majority of votes cast | No effect | Not taken into account |
| 2 | Executive compensation | Majority of votes cast | No effect | Not taken into account |
| 3 | Amendment to Articles of Incorporation | Majority of votes cast | No effect | Not applicable |
| 4 | Ratification of independent registered public accounting firm | Majority of votes cast | No effect | Not applicable |
Director Nominees
The Board is currently comprised of: nineof 10 directors: 9 independent directors; ourand SJI President and Chief Executive Officer is also a member of the Board.Officer. The following table provides summary information about each of the 10 director nominees, including
whether the Board
considers the nominee to be independent under the New York Stock Exchange’s independence standards and ourSJI Corporate Governance Guidelines. Each director is elected annually by a pluralitymajority of votes cast.
| Director | Positions/Committee | |||||||||||
| Name | Age | Director Since | Occupation | Independent | Positions/Committee Memberships | Age | Since | Occupation | Independent | Memberships | ||
| Sarah M. Barpoulis | 51 | 2012 | Owner of Interim Energy Solutions, LLC | Yes | 1, 4 | 53 | 2012 | Owner of Interim Energy Solutions, LLC | Yes | 1*, 2, 3, 7 | ||
| Thomas A. Bracken | 68 | 2004 | President, New Jersey Chamber of Commerce | Yes | 3, 4*, 5 | 70 | 2004 | President, New Jersey Chamber of Commerce | Yes | 3, 4*, 5, 7 | ||
| Keith S. Campbell | 61 | 2000 | Chairman of the Board, Mannington Mills, Inc. | Yes | 2*, 3, 5 | 63 | 2000 | Chairman of the Board, Mannington Mills, Inc. | Yes | 2, 5, 6 | ||
| Victor A. Fortkiewicz | 64 | 2010 | Of Counsel, Cullen and Dykman, LLP | Yes | 3, 4, 5* | 66 | 2010 | Of Counsel, Cullen and Dykman, LLP | Yes | 4, 5*, 6 | ||
| Sheila Hartnett-Devlin, CFA | 57 | 1999 | Senior Vice President, American Century Investments | Yes | 1*, 2, 3 | 59 | 1999 | Retired, Senior Vice President, American Century Investments | Yes | 1, 4, 7 | ||
| Walter M. Higgins III | 71 | 2008 | Director, President and CEO at Ascendant Group Ltd. and Director, President and CEO of Bermuda Electric Light Company Limited | Yes | 1, 3* | 73 | 2008 | Retired, Director, President and CEO at Ascendant Group Ltd. and Director, President and CEO of Bermuda Electric Light Company Limited | Yes | 3* As Chairman of the Board, serves as an ex-officio member of all committees | ||
| Sunita Holzer | 54 | 2011 | Executive Vice President, Chief HumanResource Officer, Realogy Holdings Corp. | Yes | 2, 5 | 56 | 2011 | Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. | Yes | 2*, 3, 5, 6 | ||
| Joseph H. Petrowski | 62 | 2008 | Managing Partner and Founder, Mercantor Partners, LLC | Yes | 1, 2, 3 | |||||||
| Michael J. Renna | 48 | 2014 | President and CEO, South Jersey Industries | No | 50 | 2014 | President and CEO, South Jersey Industries | No | 3 | |||
| Joseph M. Rigby | 61 | 2016 | Retired, Chairman, President and CEO, Pepco Holdings, Inc. | Yes | 1, 2, 7* | |||||||
| Frank L. Sims | 65 | 2012 | Retired, Corporate Vice President and Platform Leader, Cargill, Inc. | Yes | 1, 4 | 67 | 2012 | Retired, Corporate Vice President and Platform Leader, Cargill, Inc. | Yes | 1, 3, 4, 6* | ||
 |  |  |  |  |
| The Board of Directors met 17 times in 2017. | Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she served. | It is the Board’s policy that the Independent Directors meet in Executive Session at every in-person meeting of the Board or its Committees. | During 2017, the Independent Directors met five times at the conclusion of SJI Board meetings. | Topics of these sessions included CEO and Officer Performance and Compensation, Succession Planning, Director Tenure, Retirement Age, Strategy and Discussions of Corporate Governance. Director Higgins, Chairman of the Board, chaired the meetings of the Independent Directors. |
Key to Committee Memberships
| 1 | Audit Committee | 4 | Governance Committee |
| 2 | Compensation Committee | 5 | Corporate Responsibility Committee |
| 3 | Executive Committee | * | Committee Chairman |
| 1 | Audit Committee | 5 | Corporate Responsibility Committee | |
| 2 | Compensation Committee | 6 | Risk Committee | |
| 3 | Executive Committee | 7 | Strategy & Finance Committee | |
| 4 | Governance Committee | * | Committee Chairman |
| 2 | | South Jersey Industries, Inc. - |
GENERAL INFORMATION
Information about the Annual Meeting and Voting
This statement is furnished on behalf of SJI’s Board of Directors to solicit proxies for use at its 20162018 Annual Meeting of Shareholders. The meeting is scheduled for Friday, April 29, 2016,May 11, 2018, at 9:00 a.m. at The Westin Mount Laurel, 555 Fellowship Road, Mount Laurel,Resorts Casino Hotel, Atlantic Ballroom, 1133 Boardwalk, Atlantic City, New Jersey. The approximate date proxy
materials will be
made available to shareholders is March 29, 2016.2018. Copies of the proxy statement, proxy card and 2017 Annual Report to shareholders are available on our website at www.sjindustries.com under the heading “Investors”.
Proxy Solicitation
The Company bears the cost of this solicitation, which is primarily made by mail. However, the Corporate Secretary or company employees may solicit proxies by phone, fax, e-mail or in person, but they will not be separately compensated for these services. The Company may also use a proxy-soliciting
firm at a cost
not expected to exceed $6,000, plus expenses, to distribute to brokerage houses and other custodians, nominees, and fiduciaries additional copies of the proxy materials and 2017 Annual Report to Shareholders for beneficial owners of our stock.
Record Date
Only shareholders of record at the close of business on February 29, 2016March 12, 2018 may vote at the meeting. On that date, the Company had 71,230,90979,595,317 shares of Common Stock outstanding.
Shareholders are entitled to one vote per share on each matter to be acted upon.
Quorum and Vote Required
A quorum is necessary to conduct the meeting’s business. This means holders of at least a majority of the outstanding shares of Common Stock must be present at the meeting, either by proxy or in person. Shareholders elect Directors by a majority vote of all votes cast at the meeting. The other actions proposed herein require the affirmative vote of a majority of the votes cast at the meeting. The vote required to approve any other matter that may be properly brought before the Annual Meeting will be determined in accordance
with the New Jersey
Business Corporation Act. Abstentions and broker non-votes will be treated as present to determine a quorum but will not be deemed to be cast and, therefore, will not affect the outcome of any of the shareholder questions. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
Voting of Proxies and Revocation
Properly signed proxies received by the Company will be voted at the meeting. If a proxy contains a specific instruction about any matter to be acted on, the shares represented by the proxy will be voted according to those instructions. If you sign and return your proxy but do not indicate how to vote for a particular matter, your shares will be voted as the Board of Directors recommends. A shareholder who returns a proxy may revoke it at any time before it is voted by submitting a later-dated proxy or by voting by ballot
at the meeting. If you attend the
meeting and wish to revoke your proxy, you must notify the meeting’s secretary in writing prior to the proxy voting. If any other matters or motions properly come before the meeting, including any matters dealing with the conduct of the meeting, the persons named in the accompanying proxy card intend to vote the proxy according to their judgment. The Board of Directors is not aware of any such matters other than those described in this proxy statement.
Householding of Annual Meeting Materials
Certain banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this proxy statement and the Company’s 2017 Annual Report may have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report for other shareholders in your household, either now or in the future, please contact your bank, broker, broker-dealer or other similar organization serving as your nominee.
Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, the Company will promptly provide separate copies of the 2017 Annual Report and/or this proxy statement. Shareholders sharing an address who are receiving multiple copies of this proxy statement and/or the 2017 Annual Report and who wish to receive a single copy of these materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Other Matters
Any proposal that a qualified shareholder of the Company wishes to include in the Company’s proxy statement to be sent to shareholders in connection with the Company’s 20172019 Annual Meeting of Shareholders that is received by the Company after November 30, 201620, 2018 will not be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting. To be included, proposals can be mailed to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the date of the proposal’s submission
to the Company. A shareholder of the Company may wish to have a proposal presented at the 2019 Annual Meeting of Shareholders, but not to have such proposal included in the Company’s
proxy statement and form of proxy relating to that meeting. In compliance with the Company’s bylaws, shareholdersnotice of any such proposal must providebe received by the Company between January 21, 2019 and February 20, 2019. If it is not received during this period, such proposal shall be deemed “untimely” for purposes of Rule 14a-4(c) under the Exchange Act, and, therefore, the proxies will have the right to exercise discretionary voting authority with at least 60 days, but no more than 90 days, notice priorrespect to an announced annual meeting date of (i) businesssuch proposal. Any such proposal must be submitted in writing to the shareholder wishes to raiseCorporate Secretary at the meeting and (ii) persons, if any, the shareholder wishes to nominate for election as directors at that meeting.address previously provided in this section.
The Board of Directors knows of no matters other than those set forth in the Notice of Annual Meeting of Shareholders to come before the 20162018 Annual Meeting.
| South Jersey Industries, Inc. - | | 3 |
PROPOSALS TO BE VOTED ON
PROPOSAL 1 DIRECTOR ELECTIONS
At the Annual Meeting, 10 directors are to be elected to the Board of Directors to hold office for a one-year term. The Board nominated the following persons: Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, Walter M. Higgins III, Sunita Holzer, Joseph H. Petrowski, Michael J. Renna, Joseph M. Rigby and Frank L. Sims. The Board of Directors currently consists of 10 members, all of whom are nominees. We do not anticipate that, if elected, any of the nominees will be unable to serve. If any should be unable to accept the nomination or election, the persons designated as proxies on the proxy card may vote for a substitute nominee selected by the Board of Directors.
In accordance with its Charter, the Governance Committee reviewed the education, experience, judgment, diversity
and other applicable and relevant skills of each nominee, and determined
that each nominee possesses skills and characteristics that support the Company’s strategic vision. The Governance Committee determined that the key areas of expertise include: corporate governance; cybersecurity; enterprise leadership; financial (including accounting, finance, and “financial experts” as defined by the SEC); governmental and regulatory; human resources; public/shareholder relations; risk assessment/management; strategy formation/executionexecution; and technical/industry. The Governance Committee concluded that the nominees possess expertise and experience in these areas, and the Board approved the slate of nominees. Based on their expertise and experience, the Governance Committee determined the following directors should be elected for the 20162018 - 2017 term.2019 term:
| 4 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
Our Director nominees possess skills and experience aligned to our current and future strategy and business needs. Annual Board evaluations also include an assessment of whether the Board has an appropriate mix of skills, experience and other characteristics.
All Director Nominees Have:
| • | A reputation of high integrity | • | A demonstrated knowledge of business strategy and board operations |
| • | A proven record of success | • | An understanding of corporate governance best practices and processes |
| • | An ability to exercise sound judgement | • | A commitment to contribute the time necessary to be actively involved in all decision-making activities |
| Our Director nominees exhibit an effective mix of diversity, experience and fresh perspective |
DIRECTOR AGE DIVERSITY
| South Jersey Industries, Inc. - | | 5 |
Proposal 1 Director Elections
| The Board of Directors recommends a vote “FOR” each of the following nominees: |
 | Sarah M. Barpoulis |
| | |||
Age:53 | |||
Owner of Interim Energy Solutions, LLC, Potomac, MD | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Barpoulis’ areas of expertise include corporate governance, risk assessment/management, strategy formation/execution and technical/industry. | |
| • | Director Barpoulis is a financial expert as defined by the | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | ||
| Chairman of the Audit Committee | ||
| • | ||
| • | Executive Committee | |
| • | Strategy & Finance Committee |
 | Thomas A. Bracken |
Age:70 | Skills and Qualifications: | ||
| | |||
Skills and Qualifications:
| • | Director Bracken’s areas of expertise and experience include corporate governance, enterprise leadership, governmental and regulatory, and public/shareholder relations. | |
| • | Director Bracken is a financial expert as defined by the SEC. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | Corporate Responsibility Committee | |
| • | Executive Committee | |
| • | Chairman of the Governance Committee | |
| • | ||
| Mr. Bracken has served as president of the New Jersey Chamber of Commerce since February 2011; and as president of TriState Capital Bank-New Jersey from January 2008 to February 2011. Currently, Mr. Bracken serves on the following boards: director and chairman, N.J. Alliance for Action Foundation; director, NJ Alliance for Action; director, Public Media NJ; director, Rutgers Cancer Institute of N.J. Foundation; director, Solix, Inc.; member, advisory board, Investors Bancorp; director, NJ Hall of Fame; director, Junior Achievement of NJ. | ||
Mr. Bracken has served as president of the New Jersey Chamber of Commerce since February 2011; as president of TriState Capital Bank-New Jersey from January 2008 to February 2011; as president and CEO of Sun Bancorp, Inc. and its wholly owned subsidiary Sun National Bancorp, Inc., from 2001 to 2007; as executive director of the Public Sector Group, First Union Bank from 2000 to 2001; and, as executive vice president, head of Commercial and Governmental Banking for New Jersey, New York and Connecticut, First Union Bank from 1998 to 2000. Mr. Bracken is the former director of Rome Financial Corp.; former chairman, Economic Development Corporation of Trenton, Trenton, NJ; former chairman, New Jersey Chamber of Commerce; and former chairman, New Jersey Bankers Association. Currently, Mr. Bracken serves on the following boards: director and chairman, N.J. Alliance for Action Foundation; director, NJ Alliance for Action; director, Public Media NJ; director, Rutgers Cancer Institute of N.J. Foundation; director, Solix, Inc.; president, Bedens Brook Club; member, advisory board, Investors Bancorp.
| 6 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
 | Keith S. Campbell |
Age:63 | |||
Chairman of the Board, Mannington Mills, Inc., Salem, NJ | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Campbell’s areas of expertise include corporate governance, enterprise leadership, human resources, and strategy formation/execution. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | Compensation Committee | |
| • | Corporate Responsibility Committee | |
| • | ||
| Mr. Campbell has served as chairman of the board for Mannington Mills, Inc. since 1995, as director of the Federal Reserve Bank of Philadelphia from 2008 to 2013 and as a director of Skytop Lodge, Inc. from 2000 to 2015. | ||
Mr. Campbell has served as chairman of the board for Mannington Mills, Inc. since 1995, as director on the Federal Reserve Bank of Philadelphia from 2008 to 2013 and as a director of Skytop Lodge, Inc. from 2000 to 2015. Mr. Campbell serves on the following board: board member, Rowan University, Glassboro, NJ.
 | Victor A. Fortkiewicz |
Age:66 | |||
Of Counsel, Cullen and Dykman, LLP, New York, NY | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Fortkiewicz’ areas of expertise include corporate governance, enterprise leadership, governmental and regulatory, and technical/industry. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | Chairman of the Corporate Responsibility Committee | |
| • | Governance Committee | |
| • |
Mr. Fortkiewicz has been Of Counsel, Cullen and Dykman, LLP since October 2011. He served as executive director, New Jersey Board of Public Utilities from 2005 to 2010; as assistant counsel, Office of the Governor in 2005; and as president and director, NUI Utilities & Elizabethtown Gas Company from 2003 to 2004.
Proposal 1 Director Elections
 | Sheila Hartnett-Devlin, CFA |
Age:59 | |||
Retired, Senior Vice President, American Century Investments, New York, NY | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Hartnett-Devlin’s areas of expertise and experience include corporate governance, financial, public/shareholder relations, and risk assessment/management. | |
| • | Director Hartnett-Devlin is | |
| • | Director Hartnett-Devlin is a financial expert as defined by the SEC. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | ||
| • | ||
| • | ||
| • | Director of South Jersey Energy Company | |
| • | Executive Committee member, SJI Midstream, LLC; South Jersey Energy Solutions, | |
Ms. Hartnett-Devlin has been vice president, American Century Investments since 2008 and senior vice president since 2011. She was a managing director with Cohen, Klingenstein & Marks, Inc. from September 2005 to 2008; she held several positions with Fiduciary Trust Company International beginning in 1980: executive vice president from 1997 to 2004; senior vice president from 1991 to 1997; vice president from 1985 to 1991; and, chairman, Global Investment Committee from 1996 to 2004.Ms. Hartnett-Devlin served as vice president, American Century Investments from 2008 to 2011 and senior vice president from 2011 to 2017. She is a member of the NY Society of Security Analysts. Ms. Hartnett-Devlin is a member of the board of the NY Society of Security Analysts. She was also a member of the Investment Policy Committee of Fiduciary Trust Company International from 1995 to 2004. Ms. Hartnett-Devlin serves on the following boards: director, Mannington Mills, Inc.
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 7 |
Proposal 1 Director Elections
 | Walter M. Higgins III |
Age:73 | |||
Retired, Director, President and CEO, Ascendant Group Ltd. and Director, President and CEO, Bermuda Electric Light Company Ltd., Bermuda | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Higgins’ areas of expertise include corporate governance, enterprise leadership, governmental and regulatory, and technical/industry. | |
| • | Director Higgins is a financial expert as defined by the SEC. | |
SJI Boards and Committees:
| • | Chairman of the Board | |
| • | Chairman of the Executive Committee | |
| • | Chairman of South Jersey Gas Company | |
| • | ||
| Mr. Higgins has served as chairman of the board since April 2015. He served as Director, President and CEO of Ascendant Group Ltd. from May 2012 to October 2016. Mr. Higgins also served as President and CEO of Bermuda Electric Light Company Limited from September 2012 until October 2016. He is the retired chairman, president, and CEO of Sierra Pacific Resources (now called NVEnergy). Mr. Higgins serves as a member of the board of AEGIS. | ||
Mr. Higgins has served as a board member and has been the President and CEO at Ascendant Group Ltd. since May 2012 and Director, President and CEO of Bermuda Electric Light Company Limited since September 2012. He is the retired chairman, president, and CEO of Sierra Pacific Resources (now called NVEnergy). Mr. Higgins serves as a member of the board of AEGIS.
Proposal 1 Director Elections
 | Sunita Holzer |
| | |||
Age:56 | |||
Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp., Madison, NJ | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Holzer’s areas of expertise include corporate governance, enterprise leadership, human resources, and strategy formation/execution. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | Chairman of the Compensation Committee | |
| • | Corporate Responsibility Committee | |
Ms. Holzer has served as Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. since March 2015; served as president, Human Capital insight, LLC from June 2014 to February 2015; served as executive vice president and chief human resources officer, CSC from June 2012 to May 2014; and served as executive vice president, chief human resources officer, Chubb Insurance Company from 2003 to June 2012. Ms. Holzer is an advisory board member, Re: Gender
 | |
Skills and Qualifications:
SJI Boards and Committees:
| • | Executive Committee | |
| • | ||
| Ms. Holzer has served as Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. since March 2015; served as president, Human Capital insight, LLC from June 2014 to February 2015; served as executive vice president and chief human resources officer, CSC, from June 2012 to May 2014; and served as executive vice president, chief human resources officer, Chubb Insurance Company from 2003 to June 2012. Ms. Holzer is an advisory board member of Re: Gender. | ||
Mr. Petrowski has served as Managing Partner and Founder, Mercantor Partners, LLC since 2014, and is the former CEO of the Gulf Oil/Cumberland Farms Groups. Mr. Petrowski is Chairman of Gulf Oil LP; Trustee of Boston College High School and Trinity Catholic Academy and is also on the Board of Advisors of VNG.co LLC.
| 8 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
 | Michael J. Renna |
Age:50 | |||
President and CEO, South Jersey Industries, Folsom, NJ | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Renna’s areas of expertise include enterprise leadership, financial, strategy formation/execution, and technical/industry. | |
| SJI Boards and Committees: | ||
| • | Chairman of the Board, Energy & Minerals, Inc. | |
| • | Chairman of the Board, R&T Group, Inc. | |
| • | Chairman of the Board, South Jersey Energy Company | |
| • | Executive Committee Member, South Jersey Energy Solutions, LLC; SJI Midstream, LLC; Marina Energy, LLC; and South Jersey Resources Group, LLC | |
| Mr. Renna has been President and Chief Executive Officer of South Jersey Industries, Inc. since May 1, 2015. He served as President and Chief Operating Officer of South Jersey Industries, Inc. from January 2014 to April 30, 2015; as President of South Jersey Energy Solutions, LLC from April 2011 to April 30, 2015; as President of South Jersey Energy Company from 2004 to April 30, 2015; as President of Marina Energy LLC from April 2011 to April 30, 2015; as President of South Jersey Energy Service Plus, LLC from April 2007 to April 30, 2015; as President of SJESP Plumbing Services, LLC from 2011 to April 30, 2015; as President of South Jersey Resources Group, LLC from 2012 to April 30, 2015; and as member of Executive Committee of Energenic-US, LLC since 2008. Mr. Renna previously served as Senior Vice President of South Jersey Industries, Inc. from January 2013 to January 2014; as Vice President of South Jersey Industries, Inc. from 2004 to 2013; as Chief Operating Officer of South Jersey Energy Solutions, LLC from 2005 to 2011; as Vice President of SJESP Plumbing Services, LLC from 2007 to 2011; as Vice President of South Jersey Resources Group, LLC from 2008 to 2010. | ||
SJI Boards and Committees:
| Joseph M. Rigby |
Age:61 | Skills and Qualifications: | ||
| • | Director Rigby’s areas of expertise include cyber security, enterprise leadership, financial, strategy formation/execution, and technical/industry. | ||
| • | Director Rigby is a financial expert as defined by the SEC. | ||
| SJI Boards and Committees: | |||
| • | Audit Committee | ||
| • | Compensation Committee | ||
| • | Chairman of the Strategy & Finance Committee | ||
| • | Director of South Jersey | ||
| Mr. Rigby served as the Chairman, President and CEO of Pepco Holdings, Inc. from March 2009 through March 2016. He also served as a Director of Dominion Midstream Partners. Mr. Rigby currently serves as a Director, Dominion Energy, Inc.; Director, Energy Insurance Mutual; and Director, Rutgers Board of Governors. | |||
Mr. Renna has been President and Chief Executive Officer of South Jersey Industries, Inc. since May
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 9 |
Proposal 1 2015. He has served as President and Chief Operating Officer of South Jersey Industries, Inc. from January 2014 to April 30, 2015; as President of South Jersey Energy Solutions, LLC from April 2011 to April 30, 2015; as President of South Jersey Energy Company from 2004 to April 30, 2015; as President of Marina Energy LLC from April 2011 to April 30, 2015; as President of South Jersey Energy Service Plus, LLC from April 2007 to April 30, 2015; as President of SJESP Plumbing Services, LLC from 2011 to April 30, 2015; as President of South Jersey Resources Group, LLC from 2012 to April 30, 2015; and as member of Executive Committee of Energenic-US, LLC since 2008. Mr. Renna previously served as Senior Vice President of South Jersey Industries, Inc. from January 2013 to January 2014; as Vice President of South Jersey Industries, Inc. from 2004 to 2013; as Chief Operating Officer of South Jersey Energy Solutions, LLC from 2005 to 2011; as Vice President of SJESP Plumbing Services, LLC from 2007 to 2011; as Vice President of South Jersey Resources Group, LLC from 2008 to 2010.Director Elections
 | Frank L. Sims |
Age:67 | |||
Retired, Corporate Vice President and Platform Leader, Cargill, Inc., Minneapolis, MN | Skills and Qualifications: | ||
Skills and Qualifications:
| • | Director Sims’ areas of expertise include corporate governance, enterprise leadership, risk assessment/ | |
| • | Director Sims is a financial expert as defined by the SEC. | |
| SJI Boards and Committees: | ||
SJI Boards and Committees:
| • | Audit Committee | |
| • | Governance Committee | |
| • | Executive Committee | |
| • | Chairman of the Risk Committee | |
| Mr. Sims served as the Corporate Vice President and Platform Leader at Cargill, Inc. from 2002 to 2007. He also served as Interim President for Fisk University from 2015 to 2017. Mr. Sims served as a board member for PolyMet Mining Co. from 2008 through July 2014 and for Piper Jaffray Co. from 2004 to June 2013. | ||
Mr. Sims has served as Interim President for Fisk University since September 2015, has served as board member, PolyMet Mining Co. from 2008 through July 2014; board member, Piper Jaffray Co. from 2004 to June 2013; chairman of the board, The Minneapolis Federal Reserve Bank from 2005 to 2007; corporate vice president and platform leader, Cargill, Inc. from 2002 to 2007.
The Board of Directors unanimously recommends a vote “FOR” each of the above nominees.
| 10 | | South Jersey Industries, Inc. - |
PROPOSAL 2 ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Company’s executive compensation policies and procedures are designed to attract and retain highly qualified named executive officers while linking Company performance to named executive officer compensation, which creates shareholder value.compensation. The Compensation Committee has a strong pay for performance philosophy; and, as a result, the compensation paid to our named executive officers is generally designed to be aligned with the Company’s performance on both a short-term and a long-term basis. Our recent performance over the last 10 years provides evidence that our executive compensation policies and procedures were effective in furthering these objectives. We have outperformedThe financial performance in 2017 for SJI corporate results was below target, and therefore, the S&P 500 index in fiveportion of the last 10 years, and have outperformed both the S&P 500 Index and the S&P Utilities Index in terms of the 10 year compound annual growth rate.incentive plan payouts tied to SJI results was below target. SJI’s recent stock performance has outperformed the median of the Company’s peer group used to benchmark long-term incentive compensation in terms of total shareholder return in six of the last 10 three-year cycles. More recently, for the last three performance cycles, our performance wasbeen below our peer group, and our long-term incentive plans for the performance cycle ended fiscal 2017 paid out well below target. Historically, our financial performance in 2015 was below threshold goals, resulting in annual incentive payouts well below target, while our financial performance in fiscal 2016 exceeded target goals, resulting in payouts above target. Further, our long-term incentive plan for the performance cycle ended fiscal 2015 did not pay out.payout, while the performance cycle ended fiscal 2016 paid out well below target.
For 2015,2017, the executive compensation policies and procedures for our named executive officers consisted of three parts: base salary, annual incentive awards and long-term incentive compensation. The annual incentive awards and long-term incentive compensation were again directly linked to the achievement of predefined short-term and long-term performance as follows:
| • | Annual incentive awards are paid based on both Company and individual performance, tied to |
| • | Long-term incentive compensation granted in 2017 consists of performance-based restricted stock and time-based restricted stock with a performance |
We believe theseThese components of compensation for ourSJI’s named executive officers provide the proper incentives to align compensation with the Company’s performance while enhancing shareholder value. Specifically, if the Company’s performance results meet or exceed pre-established performance
pre-established performance targets, named executive officers have an opportunity to realize significant additional compensation through annual incentive awards and long-term equity awards. In addition, the Company’s stock ownership guidelines require our named executive officers to own shares of Company stock, which alignaligns with shareholder interests. We believe this pay for performance philosophy is integral to the Company’s performance and will drive shareholder value over the long term.
Please see the “Compensation Discussion and Analysis” beginning on page 2125 of this Proxy statement for a more detailed discussion of executive compensation policies and procedures for our named executive officers.
Under SEC rules required byPursuant to Section 14A(a)(1) of the Dodd-Frank Wall Street Reform and Consumer ProtectionExchange Act, of 2010, we areSJI is required to provide shareholders with a separate non-binding shareholder vote to approve the compensation of our named executive officers, including the “Compensation Discussion and Analysis”, the compensation tables, and any other narrative disclosure in this Proxy statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation policies and procedures as described in this proxyProxy statement. Shareholders may also abstain from voting.
Accordingly, shareholders are being asked to approve the following non-binding resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee values the opinions expressed by shareholders and expects to take into account the outcome of the vote when considering future executive compensation decisions.
The Board of Directors unanimously recommends a vote “FOR” the non-binding resolution approving the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
| South Jersey Industries, Inc. - | | 11 |
PROPOSAL 3 Approval of an Amendment to our Certificate of Incorporation to Change our Name to SJI, Inc.
Our Board of Directors has approved, and recommends that you approve, an amendment to our certificate of incorporation to change the name of the Company from South Jersey Industries, Inc. to SJI, Inc. Our Board believes changing the Company’s name to SJI, Inc. is in the best interest of the Company and its shareholders and that doing so will better reflect our current business operations as a public utility and energy services holding company. Our new name will not include the term “South Jersey” and will allow our non-regulated businesses to better market to prospective customers in markets across the United States, which plays a strategic role in the achievement of the Company’s business objectives. In addition, the new name will allow for consistency with the growth of the Company’s utility portfolio.
If the proposed amendment is approved, the first paragraph of our certificate of incorporation will be amended and restated in its entirety to read as follows:
“FIRST: The name of the corporation is SJI, Inc.”
If approved by our shareholders, the proposed amendment will become effective upon the filing of articles of amendment to our certificate of incorporation with the New Jersey Secretary of State. Upon approval of this proposal and the filing of the articles of amendment with the Secretary of State of New Jersey, our Board of Directors will amend our bylaws to replace any references to “South Jersey Industries, Inc.” with “SJI, Inc.”
Our common stock is currently listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “SJI.” Whether or not the amendment is approved and the name change becomes effective, our common stock will continue to be listed on the NYSE under the symbol “SJI”.
If the name change becomes effective, the rights of shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for shareholders with certificated shares to surrender any stock certificates they currently hold as a result of the name change. After the name change, all new stock certificates issued by the Company and all uncertificated shares held in direct registration accounts, including uncertificated shares currently held in direct registration accounts, will bear the name “SJI, Inc.”
If the name change is not approved, the proposed amendment to our certificate of incorporation will not be made and the name of the Company and our ticker symbol for trading our common stock on the NYSE will remain unchanged. In making this recommendation, our Board of Directors is retaining the ability to, without further vote by our shareholders, delay or abandon the proposed name change at any time if the Board concludes that such action would be in the best interest of the Company and our shareholders.
The proposal will be approved if the number of shares voted “FOR” this proposal represents a majority of the votes cast by the shareholders.
The Board of Directors unanimously recommends a vote FOR the amendment to our certificate of incorporation to change the name of the Company from South Jersey Industries, Inc. to SJI, Inc.
| 12 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
PROPOSAL 4 RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Audit Committee and the Board of Directors, subject to the approval of the shareholders, reappointed Deloitte & Touche LLP, as the Company’s independent registered public accounting firm for 2016.2018. Unless otherwise directed, proxies will be voted “FOR” approval of this appointment. If the shareholders do not ratify this appointment by the affirmative vote of a majority of the votes cast at the meeting, other auditors will be considered by the Audit Committee.
Deloitte & Touche LLP served as the Company’s independent registered public accounting firm during 2015.2017. During 2015,2017, the audit services performed for the Company consisted of audits of the Company’s and its subsidiaries’ financial statements and attestation of management’s assessment of internal control,
as required by the Sarbanes-Oxley Act of 2002, Section 404
and the preparation of various reports based on those audits, services related to filings with the Securities and Exchange Commission and the New York Stock Exchange, and audits of employee benefit plans as required by the Employee Retirement Income Security Act. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement, if such representative desires to do so, and to respond to appropriate questions from shareholders.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointmentreappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 13 |
SECURITY OWNERSHIP
Directors and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of February 29, 2016,28, 2018, of: (a) each current director and nominee for director;(b) our principal executive officer, principal financial officer, the
three other most highly compensated executive officers during 2015 (collectively,2017 [collectively, the “Named Executive Officers”) (NEOs)]; and (c) all of the directors and executive officers as a group.
| Number of Shares of Common Stock (1) | Percent of Class | |||||||
| Sarah M. Barpoulis | 20,974 | (2) | * | |||||
| Thomas A. Bracken | 56,610 | (2) | * | |||||
| Keith S. Campbell | 49,241 | (2) | * | |||||
| Stephen H. Clark | 31,067 | * | ||||||
| Steven R. Cocchi | 1,630 | * | ||||||
| Jeffrey E. DuBois | 38,052 | * | ||||||
| Victor A. Fortkiewicz | 29,720 | (2) | * | |||||
| Sheila Hartnett-Devlin | 18,568 | (2) | * | |||||
| Walter M. Higgins III | 32,525 | (2) | * | |||||
| Sunita Holzer | 23,966 | (2) | * | |||||
| Kenneth Lynch | 8,938 | * | ||||||
| Kathleen A. McEndy | 9,980 | * | ||||||
| Gregory M. Nuzzo | 6,426 | * | ||||||
| Melissa Orsen | 0 | (3) | ||||||
| Michael J. Renna | 67,915 | * | ||||||
| Joseph M. Rigby | 8,261 | (2) | * | |||||
| David Robbins, Jr. | 28,481 | * | ||||||
| Frank L. Sims | 78,757 | (2) | * | |||||
| All directors, nominees for director and executive officers as a group (18 persons) | 511,111 | |||||||
*Less than 1%.
| (1) | Based on information furnished by the Company’s directors and executive officers. Unless otherwise indicated, each person has sole voting and dispositive power with respect to the Common Stock shown as owned by him or her. |
| (2) | Includes shares awarded to each director under a Restricted Stock Program for |
| (3) | Elected as an Officer effective January 1, 2018. |
| South Jersey Industries, Inc. - |
Security Ownership
Stock Ownership Requirements
The Board of Directors believes significant ownership of Company Common Stock better aligns the interests of management with thatthose of the Company’s shareholders. Therefore, in 2001, the Board of Directors enacted the stock requirements listed below for officers and directors. The requirements for officerswhich were effective through 2014 and have beenwere increased foreffective 2015 as outlined below and on page 33 of this proxy statement.37:
| • | The CEO stock ownership guideline is 5 times the CEO’s annual base |
| • | All other executive officers are required to own shares of Company Common Stock with a market value equal to 2 times their annual |
| • | Other officers are required to own shares of Company Common Stock with a market value equal to their annual base salary; |
| • | Members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, or within six years of an increase in the share ownership guidelines, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual cash retainer for board service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, requires the Company’s directors and executive officers to file reports with the SEC relating to their ownership of, and transactions in, the
the Company’s Common Stock. Based on our records and other information, the Company believes that all Section 16(a) filing requirements were met for 2015.2017.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information, as of March 1, 2016,12, 2018, as to each person known to the Company, based on filings with the SEC, who beneficially owns 5 percent or more of the
of the Company’s Common Stock. Based on filings made with the SEC, each shareholder named below has sole voting and investment power with respect to such shares.
| Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | ||||||
| BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 10,184,899 | 12.8% | ||||||
| The Vanguard Group 100 Vanguard Blvd Malvern, PA 19355 | 7,820,779 | 9.83% | ||||||
| South Jersey Industries, Inc. - | | |
CORPORATE GOVERNANCE
The Board of Directors
Leadership Structure
Following the retirement of Edward J. Graham as Chairman and CEO on April 30,Effective May 1, 2015, the Board of Directors decided to splitseparate the Chairman and CEO roles.roles, with Mr. Renna assumedassuming the role of President and CEO, and Walter M. Higgins III. becameIII, becoming the non-executive Chairman of SJI’s Board of Directors on May 1, 2015.Directors.
In the role, Mr. Higgins:
| • | Provides leadership to the Board |
| • | Chairs meetings of the Board of Directors |
| • | Establishes procedures to govern the Board’s work |
| • | Ensures the Board’s full discharge of its duties |
| • | Schedules meetings of the full Board and works with the committee chairmen, CEO and Corporate Secretary for the schedule of meetings for committees |
| • | Ensures proper flow of information to the Board, reviewing adequacy and timing of documentary materials in support of management’s proposals |
| • | Helps the Board fulfill the goals it sets by assigning specific tasks to members of the Board |
| • | Identifies guidelines for the conduct of the Directors, and ensures that each Director is making a significant contribution |
| • | Acts as liaison between the Board and CEO |
| • | Works with the Governance Committee and CEO, and ensures proper committee structure, including assignments and committee chairmen |
| • | Sets and monitors the ethical tone of the Board of Directors |
| • | Manages conflicts which may arise with respect to the Board |
| • | Monitors how the Board functions and works together effectively |
| • | Carries out other duties as requested by the CEO and Board as a whole, depending on need and circumstances |
Independence of Directors
The Board adopted Corporate Governance Guidelines that require the Board to be composed of a majority of Directors who are “Independent Directors” as defined by the rules of the New York Stock Exchange. No Director will be considered “Independent” unless the Board of Directors affirmatively determines that the Director has no material relationship with the Company. When making “Independence” determinations, the Board considers all relevant facts and circumstances, as well as any other facts and considerations specified by the New York Stock Exchange, by law or by any rule or regulation of any other regulatory body or self-regulatory body applicable to the Company. As part of its Corporate Governance Guidelines, the Board established a policy that Board members may not serve
on more than four other
boards of publicly traded companies. SJI’s Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading “Investors”.
TheFor 2017, the Board determined that Directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, PetrowskiRigby, and Sims, constituting all of the non-employee Directors, meet the New York Stock Exchange standards and our own standards noted above for independence and are, therefore, considered to be Independent Directors. Accordingly, as of May 2015, all but one of the Company’s Directors was considered to be “Independent.” Mr. Renna is not considered independent by virtue of his employment with the Company.
Codes of Conduct
The Company has adopted codes of conduct for all employees, Officers and Directors, which include the codecodes of ethics for our principal executive officer ourand principal financial officer and principal accounting officer within the meaning of the SEC
regulations adopted pursuant to the Sarbanes-Oxley Act of 2002. Additionally, the Company established a hotline and website for employees to anonymously report suspected violations.
Corporate Governance
Copies of the codes of ethics are available on the Company’s website at www.sjindustries.com under Investors > Corporate Governance. Copies of our codes of conduct are also available
at no cost to any shareholder who requests them in writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037, Attention: Corporate Secretary.
Communication with Directors
You may communicate with the Chairman of the Board and chairmen of the Audit, Compensation, Corporate Responsibility Governance, Risk and GovernanceStrategy & Finance Committees by sending an e-mail to chairmanoftheboard@sjindustries.com, auditchair@ sjindustries.com,auditchair@sjindustries.com, compchair@sjindustries.com, govchair@ sjindustries.com,govchair@sjindustries.com, corpresp@sjindustries.com, StratandFinChair@sjindustries.com or corpresp@sjindustries.com,riskchair@sjindustries.com respectively, or you may communicate with our outside Independent Directors
Independent Directors as a group by sending an e-mail to sjidirectors@sjindustries.com. The Charters and scope of responsibility for each of the Company’s committees are located on the Company’s website at www.sjindustries.com. You may also address any correspondence to the Chairman of the Board, chairmen of the committees or to the Independent Directors at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
| South Jersey Industries, Inc. - 2018 Proxy Statement |
Corporate Governance
Corporate Governance Materials
Shareholders can see the Company’s Corporate Governance Guidelines and Profile, Charters of the Audit Committee, Compensation Committee, Corporate Responsibility Committee, Executive Committee, Governance Committee, Risk Committee, and GovernanceStrategy & Finance Committee, and Codes of Ethics on the Company’s website at www.sjindustries.com under Investors
under Investors > Corporate Governance. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders without charge upon request to the Corporate Secretary at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Board Evaluation Process
The Governance Committee is responsible for implementing the Board Evaluation Process on an annual basis. The Governance Committee engages an independent, third-party facilitator and uses surveys and interviews to ensure robust feedback that can be used to enhance Board processes. The goal of the process is to gather input regarding Board composition and processes, and compliance with corporate governance best practices. Covered areas include essential aspects of Board leadership
and effectiveness, contribution of individual directors, overall group dynamics, and whether the experience and skillsets of the members are well aligned with SJI’s current and future strategic needs. In 2017, the process included the evaluation of the Board and its committees. In addition to the Directors, the Executive Officers participated in the process. The Governance Committee is responsible for implementing the recommendations generated from the evaluation results.
Meetings of the Board of Directors and its Committees
| | | | | |
| The Board of Directors met 17 times in 2017. | Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she served. | It is the Board’s policy that the Independent Directors meet in Executive Session at every in-person meeting of the Board or its Committees. | During 2017, the Independent Directors met five times at the conclusion of SJI Board meetings. | Topics of these sessions included CEO and Officer Performance and Compensation, Succession Planning, Director Tenure, Retirement Age, Strategy and Discussions of Corporate Governance. Director Higgins, Chairman of the Board, chaired the meetings of the Independent Directors. |
The Board of Directors met 12 times in 2015. Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she served. It is the Board’s policy that the Independent Directors meet in Executive Session following every in-person meeting of the Board or its Committees. The Independent Directors met five times during 2015 at the conclusion of SJI Board meetings. Topics of these sessions included CEO and Officer performance and compensation, succession planning, strategy and discussions of corporate governance. Director Higgins, the Lead Independent Director through April 2015 and Chairman of the Board thereafter, chaired the meetings of the Independent Directors. All current Board members and all nominees for election to the Company’s Board of Directors are required to attend the Company’s Annual Meetings of Shareholders unless unique
personal circumstances affecting the Board member or Director nominee make his or her attendance impracticable. All of the Directors attended the 20152017 Annual Meeting of Shareholders. During 2015,2017, each of the Company’s Directors also served on the Boards or Executive Committees of one or more of South Jersey Gas Company, South Jersey Energy Company, South
Jersey Energy Solutions, LLC, Marina Energy, LLC, South Jersey Resources Group, LLC, South Jersey Energy Service Plus, LLC, Energy & Minerals, Inc., R&T Group, Inc., and SJI Midstream, LLC, all of which are Company subsidiaries.
There are fiveseven standing committees of the Board: the Audit Committee; the Compensation Committee; the Corporate Responsibility Committee; the Executive Committee; the Governance Committee; the Risk Committee and the GovernanceStrategy & Finance Committee.
Audit Committee
The Board’s Audit Committee, which met eight times during 2015,2017, was comprised of six “independent”“Independent” Directors throughuntil April 30, 2015:21, 2017 and five thereafter: Sheila Hartnett-Devlin, Chairman;Chairman until April 21, 2017; Sarah M. Barpoulis; Thomas A. Bracken; Walter M. Higgins III;Barpoulis elected Chairman on April 21, 2017; Joseph H. Petrowski;Petrowski until April 21, 2017; Joseph M. Rigby; and Frank L. Sims. As of May 1, 2015, the committee was comprised of four Independent Directors: Sheila Hartnett-Devlin, Chairman; Sarah M. Barpoulis; Joseph H. Petrowski and Frank L. Sims. Effective February 12, 2016, Walter M. Higgins III was elected tois an ex-officio member of the Committee bringing the membership to five.Audit Committee. The Board determined that no member of the Audit Committee has a material relationship that would jeopardize such member’s ability to exercise independent judgment. The Board of Directors designated each member of the Audit Committee as an “audit committee financial expert” as defined by applicable Securities and Exchange Commission rules and regulations. The Audit Committee: (1) annually engages and evaluates an independent registered public accounting firm for appointment, subject to Board and shareholder approval, as auditors of the Company and has the authority to unilaterally retain, compensate and terminate the Company’s independent
registered public accounting firm; (2) reviews with the independent registered public accounting firm the scope and results of each annual audit; (3) reviews with the independent registered public accounting firm, the Company’s internal auditors and management, the quality and adequacy of the Company’s internal controls and the
internal audit function’s organization, responsibilities, budget, and staffing; and (4) considers the possible effect on the objectivity and independence of the independent registered public accounting firm of any non-audit services to be rendered to the Company. The Audit Committee members meet in Executive Session with Internal Audit and the independent accounting firm at the end of each in-person meeting.
The Audit Committee is also responsible for overseeingreviewing the Company’s Risk Management process. The Committee analyzes the guidelines and policies that management uses to assess and manage exposure to risk, and analyzes major financial risk exposures and the steps managementManagement has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite.
At each Audit Committee meeting, management presents an update of the Company’s risk management activities. The Company has two internal Risk Committees that report to the Audit Committee at least quarterly. The SJI Risk Management Committee (RMC), established by the SJI Audit Committee in 1998, is responsible for overseeing the energy transactions and the related risks for all of the SJI companies. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and business operations. The RMC establishes a general framework for measuring and monitoring business risks related to both financial and physicalthese exposures,
| South Jersey Industries, Inc. - | | |
Corporate Governance
energy transactions, approves all methodologies used inand reviewing the guidelines and policies that govern the process by which risk measurement, ensures that objectiveassessment and independent controls are in place, and presents reports to the Audit Committee reflecting risk management activity.
A South Jersey Gas Company RMC is responsible for gas supply risk management. Annually,undertaken by the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and gas supply. This RMC meets at least quarterly.Management.
The Audit Committee established policies and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services.
The Audit Committee evaluates itself on an annual basis. The Board of Directors has adopted a written Charter for the Audit Committee, which is available on our website at www. sjindustries.com,www.sjindustries.com, under the heading “Investors”. You may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Compensation Committee
The Board’s Compensation Committee, which met fivesix times during 2015,2017, was comprised of fourfive “Independent” Directors in 2015:2017: Keith S. Campbell, Chairman;Chairman until April 21, 2017; Sheila Harnett-Devlin; Sunitha Holzer;Harnett-Devlin until April 21, 2017; Sunita Holzer elected Chairman on April 21, 2017; Joseph H. Petrowski (May 2015 to present)until April 21, 2017; and Frank L. Sims (January 2015 throughJoseph M. Rigby effective April 2015).21, 2017. Walter M. Higgins III is an ex-officio member of the Compensation Committee. The Compensation Committee:Committee carries out the responsibilities delegated by the Board
relating to the review and determination of executive
compensation as well as the structure and performance of significant, long-term employee defined benefits and defined contribution plans.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1,1 South Jersey Plaza, Folsom, New Jersey 08037.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an Officer or employee of the Company, or any of its subsidiaries or affiliates. During the last fiscal year, none of the Company’s
Executive Officers served on a compensation committee or as a Director for any other publicly traded company.
Corporate Responsibility Committee
The Board’s Corporate Responsibility Committee, which met twicefour times during 2015,2017, was comprised of fourfive “Independent” Directors in 2015:Directors: Victor A. Fortkiewicz, Chairman (May 2015 to present);Chairman; Thomas A. Bracken, Chairman (January 2015 through April 2015); Keith S. Campbell;Campbell, and Sunita Holzer. Walter M. Higgins III is an ex-officio member of the Compensation Committee. The Committee provides oversight, monitoring and guidance of matters related to corporate and social citizenship, public and legal policy, environmental stewardship and compliance, political activities, sustainability, quality of work life, and economic and social vitality in the communities and markets in which the Company operates. The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors”
or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Committee also oversees the production of the Company’s annual Corporate Sustainability Report, which conveys how the Company links the business with sustainable practices. The 20152017 report is available on our website at www.sjindustries.com or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Governance Committee
The Board’s Governance Committee, which met foursix times during 2015,2017, was comprised of foursix “Independent” Directors in 2015:from January 2017 until April 21, 2017, and five Independent Directors thereafter: Thomas A. Bracken, Chairman (May 2015 to present);Chairman; Sarah M. Barpoulis until April 21, 2017; Victor A. Fortkiewicz; Sheila Hartnett-Devlin elected April 21, 2017; Joseph M. Rigby until April 21, 2017 and Frank L. Sims. Walter M. Higgins III Chairman andis an ex-officio member (January 2015 through April 2015); Sarah M. Barpoulis; Victor A. Fortkiewicz; Joseph H. Petrowski (January 2015 through April 2015); and Frank L. Sims (May 2015 to present).of the Compensation Committee. Each Committee member satisfies the New York Stock Exchange’s independence requirements. Among its functions, the Governance Committee: (1) maintains a list of prospective candidates for Director, including those recommended by shareholders; (2) reviews the qualifications of candidates for Director (to review minimum qualifications for Director candidates, please see the Company’s Corporate Guidelines available on our website at www. sjindustries.comwww.sjindustries.com under the heading “Investors”. These guidelines include consideration of education, experience, judgment, diversity and other applicable and
relevant skills as determined by an assessment of the Board’s needs when an opening exists); (3) makes recommendations to the Board of Directors to fill vacancies and for nominees for election to be voted on by the shareholders; and (4) is responsible for monitoring the implementation of the Company’s Corporate Governance Policy. The Committee’s Charter is available on our website at www. sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the current Board makeupmake-up and the Company’s strategic forecast. This assessment includes issues of industry experience, education, general
Corporate Governance
business and leadership experience, judgment, diversity, age, and other applicable and relevant skills as determined by an assessment of the Board’s needs. The diversity assessment includes a review of Board composition with regard to race, gender, age and geography.
The Governance Committee will consider nominees for the Board of Directors recommended by shareholders and submitted in compliance with the Company’s bylaws, in
writing, to the Corporate Secretary of the Company. Any shareholder wishing to propose a nominee should submit a recommendation in writing to the Company’s Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, indicating the nominee’s qualifications and other relevant biographical information and providing confirmation of the nominee’s consent to serve as a Director.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1 South Jersey Plaza, Folsom, New Jersey 08037.
| South Jersey Industries, Inc. - 2018 Proxy Statement |
Corporate Governance
Executive Committee
The Board’s Executive Committee which did not meetmet one time in 2015,2017. Until April 21, 2017 it was comprised of the Chairman of the SJI Board, Chairmen of the subsidiary Boards, Committee Chairs (and the Lead Independent Director through April 2015), and iswas chaired by the Chairman of the Board. Thereafter the committee is comprised of the Chairman of the Board, the CEO and the Chairs of the Audit, Compensation, Governance and Risk Committees. The current members are: Walter M. Higgins III, Chairman; Michael J. Renna; Sarah M. Barpoulis; Thomas A. Bracken; Keith S. Campbell; Victor A. Fortkiewicz
(May 2015 to present); Sheila Hartnett-Devlin;Sunita Holzer; and Joseph H. Petrowski.Frank L. Sims. The Executive Committee may actacts as directed by or on behalf of the Board of Directors during intervals between the meetings of the Board meetingsof Directors in managingthe event a quorum of the Board is not available and, if at the discretion of the Chairman of the Board, immediate action is needed. The Committee also: reviews and investigates other matters as
directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the composition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or involving the Company’s Officers; and takes action on such matters delegated to the Committee by the Board.
The Committee’s Charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Risk Management Committee
In April 2017, the Board formed the Risk Committee, which met twice in 2017. In 2017, the committee was comprised of five “Independent” directors: Frank L. Sims, Chairman; Keith S. Campbell; Victor A. Fortkiewicz; and Sunita Holzer. Walter M. Higgins III is an ex-officio member of the Compensation Committee. The purpose of the Risk Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risks inherent in the business of SJI and affairs. Pursuantthe control processes with respect to such risks.
The Risk Committee monitors major strategic risks and the potential impact on the execution of the Company’s strategic plans, and oversees and reviews the Company’s risk assessment process, and risk management strategy and programs. The committee also analyzes the guidelines and policies that management uses to assess and manage exposure to risk, and analyzes major financial risk exposures and the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite.
At each Risk Committee meeting, management presents an update of the Company’s risk management activities. The Company has two internal Risk Committees that report to the Risk Committee at least quarterly. The SJI Risk Management
Committee (RMC), established 1998, is responsible for overseeing the energy transactions and the related risks for all of the SJI companies. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and business operations.
The RMC establishes a general framework for measuring and monitoring business risks related to both financial and physical energy transactions, approves all methodologies used in risk measurement, ensures that objective and independent controls are in place, and presents reports to the Board Risk Committee reflecting risk management activity.
A South Jersey Gas Company RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and gas supply. This RMC meets at least quarterly.
The Committee’s Charter is available on our website at www.sjindustries.com under the Executiveheading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1 South Jersey Plaza, Folsom, New Jersey 08037.
Strategy & Finance Committee meets
In April 2017, the Board formed the Strategy & Finance Committee, which met six times in 2017. In 2017, the committee was comprised of five “Independent” directors: Joseph M. Rigby, Chairman; Sarah M. Barpoulis; Thomas A. Bracken; and Sheila Hartnett-Devlin. Walter M. Higgins III is an ex-officio member of the Compensation Committee. The purpose of the Strategy & Finance Committee is to assist the Board of Directors in fulfilling its oversight of the Company’s strategic, financial and financing plans.
The Strategy & Finance Committee provides input and support to Management in the development of the Company’s long-term strategic, operating, capital and financing plans.
The Committee’s Charter is available on an “as needed” basis.our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc.,1 South Jersey Plaza, Folsom, New Jersey 08037.
| South Jersey Industries, Inc. - 2018 Proxy Statement |
In addition to the risk management processes that fall within the purview of the Audit Committee as discussed above, to ensure
comprehensive oversight of all risks, theCorporate Governance
Risk Allocation
The Board has allocated its risk oversight duties as follows:
| Risk Areas | Board Responsibility | ||
| · | Strategic and Financing | Strategy & Finance Committee | |
| · | Enterprise Wide Risk Management | Risk Committee | |
| · | Major Financial Risk Exposures | Audit Committee | |
| Operational: | Risk Committee | ||
| · | Markets/Competition | ||
| · | Counterparty/Customer Receivables | ||
| · | Regulatory/Legislative | ||
| · | Supplier | ||
| · | Operations | ||
| · | Capital Allocation/Requirements | ||
| · | Information Technology | ||
| Financial: | Audit Committee | ||
| · | Guidelines and Policies for Risk Assessment and Management | ||
| · | Major Financial Risk | ||
| · | Financial Reporting | ||
| · | Financial Disclosure | ||
| · | Financial Controls | ||
| · | Accounting/Taxes | ||
| Corporate | Corporate Responsibility Committee | ||
| · | Legal | ||
| · | Ethical | ||
| · | Corporate Image | ||
| · | Environmental | ||
| · | Safety | ||
| Compensation | Compensation Committee | ||
| · | Compensation Program | ||
| · | Retirement Plans | ||
| 20 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
The results of the management enterprise risk management process are presented to the full Board on an annual basis. To ensure successful implementation of the risk oversight process,
the Governance Committee reviews the Charters and Corporate Governance Guidelines to ensure that the documents reflect the risk monitoring allocation approved by the Board.
Audit Committee Report
The Board’s Audit Committee comprises fivefour directors, each of whom is independent as defined under the listing standards of the New York Stock Exchange and satisfies the additional independence criteria applicable to Audit Committee members.members, and the Chairman of the Board of Directors, as an Ex Officio member. The Board has determined that each member of the Committee is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee’s activities and scope of its responsibilities are set forth in a written charter adopted by the Board, and is posted on the Company’s website at www.sjindustries.com under the heading “Investors”.
In accordance with its Charter adopted by the Board of Directors, the Audit Committee, among other things, assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s accounting, auditing and financial reporting practices. Management is responsible for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for examining those financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2015,2017, and management’s assessment of the effectiveness of the Company’s internal control over financial reporting with management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm. The Audit
Committee discussed with the independent registered public
accounting firm all communications required by generally accepted auditing standards, including those described in the Statement on Auditing Standards No. 61 (AICPA Professional Standards, Vol. 1. AU section 380), as amended, and “Communication with Audit Committees,” as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. The Audit Committee also received written disclosures from Deloitte & Touche LLP regarding its independence from the Company that satisfy applicable PCAOB requirements for independent accountant communications with audit committees concerning auditor independence, and discussed with Deloitte & Touche LLP the independence of that firm.
Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements and management assessment of the effectiveness of the Company’s internal controls over financial reporting be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2017, for filing with the Securities and Exchange Commission.
Audit Committee
Sheila Hartnett-Devlin, Chairman
Sarah M. Barpoulis,
Chairman
Walter M. Higgins III, Ex Officio Member
Sheila Hartnett-Devlin
Joseph H. Petrowski
M. Rigby
Frank L. Sims
| South Jersey Industries, Inc. - | | |
Corporate Governance
Fees Paid to the Independent Registered Public Accounting Firm
As part of its duties, the Audit Committee also considered whether the provision of services other than the audit services by the independent registered public accountants to the Company is compatible with maintaining the accountants’ independence. In accordance with its Charter,charter, the Audit Committee must pre-approve all services provided by Deloitte & Touche LLP. The Audit Committee discussed these services with the independent registered public accounting firm and Company management to
determine that they are
permitted under the rules and regulations concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 20152017 and 20142016 are as follows:
| FY 2017 | FY 2016 | |||||||||
| Audit Fees (a) | $2,270,100 | Audit Fees (a) | $2,022,618 | |||||||
| Fees per Engagement Letter | 1,940,000 | Fees per Engagement Letter | 1,850,000 | |||||||
| FY 2016 Audit true up billed | 100,000 | FY 2015 Audit true up billed | — | |||||||
| Audit work related to 2017 non-routine events | 230,100 | Audit work related to 2016 non-routine events | 172,618 | |||||||
| Audit-Related Fees (b) | — | Audit-Related Fees (b) | — | |||||||
| Tax Fees (c) | 242,000 | Tax Fees (c) | 219,289 | |||||||
| Tax Compliance | 135,000 | Tax Compliance | 150,525 | |||||||
| Fees related to tangible | 65,000 | Fees related to tangible | 17,142 | |||||||
| property regulations phase II (phase I & II) | property regulations phase II (phase I & II) | |||||||||
| Other tax advisory services | 42,000 | Other tax advisory services | 51,622 | |||||||
| All Other Fees | All Other Fees | |||||||||
| Total | $2,512,100 | Total | $2,241,907 | |||||||
| FY 2015 | FY 2014 | ||||||||||||
| Audit Fees (a) | $ | 2,409,625 | Audit Fees (a) | $2,152,750 | |||||||||
| Fees per Engagement Letter | 1,865,000 | Fees per Engagement Letter | 1,790,000 | ||||||||||
| FY 2014 Audit true up billed | 50,000 | FY 2013 Audit true up billed | 85,000 | ||||||||||
| Audit work related to 2015 non-routine events | 494,625 | Audit work related to 2014 non-routine events | 274,000 | ||||||||||
| Registration Form S-3 | — | Registration Form S-3 | 3,750 | ||||||||||
| Audit-Related Fees (b) | 9,000 | Audit-Related Fees (b) | 110,000 | ||||||||||
| Benefit Plan Audits | — | Benefit Plan Audits | 110,000 | ||||||||||
| SJESP Separate Report | 5,000 | SJESP Separate Report | — | ||||||||||
| Non-routine projects related to the Benefit Plans | 4,000 | — | |||||||||||
| Tax Fees (c) | 424,526 | Tax Fees (c) | 214,557 | ||||||||||
| Form 5500 & Form 8955-SSA | Form 5500 & Form 8955-SSA | 10,890 | |||||||||||
| Tax Compliance | 139,620 | Tax Compliance | 153,667 | ||||||||||
| Fees related to tangible property regulations phase II | 107,142 | Fees related to tangible property regulations phase II | 50,000 | ||||||||||
| Tax Advisory – IRC Section 263A (phase I & II) | 52,770 | ||||||||||||
| Other tax advisory services | 124,995 | ||||||||||||
| All Other Fees | All Other Fees | ||||||||||||
| Total | $ | 2,843,151 | Total | $2,477,307 | |||||||||
| (a) | Fees for audit services billed or expected to be billed relating to fiscal |
| (b) |
| (c) | Fees for tax services provided during fiscal |
| 22 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
Corporate Governance
Compensation of Directors
Since 2011, the Board has engaged Frederic W. Cook (Cook) as its consultant to review the Company’s Director Compensation Program (Program) to ensure that the Board attracts and retains highly qualified Directors. Each year, Cook evaluates total compensation and the structure of the Program.
For the 20142016 study, reference points were the Director compensation for the following peer companies, consistent with the group used to assess the competitiveness of the Executive Compensation Program: Avista Corp., Black Hills Corp., Laclede Group Inc., New Jersey Resources Corp., Northwestern Corp., Northwest Natural Gas Co., One Gas, Inc., Piedmont Natural Gas Co., Questar Corp., Southwest Gas Corp., UIL Holdings Corp.Spire, Inc., Vectren Corp. and
WGL Holdings Inc. In a study presented in December 2014,November 2016, Cook found as follows:
| • | On a “per Director” basis, the program approximated the median of peer group practice |
| • | Significant changes to Director compensation levels were not warranted; however, the Board could consider an increase to the restricted stock unit grant in anticipation of market movement. |
Corporate Governance
| • | The design of the Program was generally consistent with peer company policy. |
| • | The Program design strongly supports the long-term shareholder alignment objective through use of restricted stock units as the sole equity grant type and director stock ownership guidelines and the ownership guideline of five times the cash retainer of |
| • | The use of additional retainers recognizes responsibilities and the time commitment associated with serving as |
In anticipation of the election of a non-executive Chairman,Cook also presented a study regarding the compensation for that role. Cook found that based on compensation data from various sources, including the Company’s peers, the appropriate compensation for the non-executive Chairman would be in the range of $65,000 to $80,000.
Based on Cook’s findings and recommendations, in 20152017 the Company paid non-employee Directors as follows:
| I. | Compensation: Non – Employee Directors | ||||||
| A. | Board Service | ||||||
| 1. | Cash - | Annual Retainer for Board Service | $ | 60,000 | |||
| Annual Retainer for Committee Meetings | 15,000 | ||||||
| Annual Retainer (payable monthly): | $ | 75,000 | |||||
| 2. | Restricted Stock – SJI shares with a total value of $80,000 awarded annually in January. The value of the shares is based on the daily average share price for the period July 1 through December 31 of the prior year. | ||||||
| 3. | Lead Independent Director (through April 2015) - Annual Retainer (payable monthly): | $ | 13,500 | ||||
| 4. | Independent Subsidiary Chairman Retainer – Annual Retainer (payable monthly): | $ | 8,000 | ||||
| 5. | Non-Executive Chairman (commencing May 2015): | $ | 80,000 | ||||
| (Payable 50% shares; 50% cash retainer, payable monthly) | |||||||
| B. | Committee Service | ||||||
| 1. | Annual Committee Chairman Retainers (payable monthly): | ||||||
| Audit | $ | 15,000 | |||||
| Compensation | $ | 10,000 | |||||
| Governance | $ | 7,500 | |||||
| Corp. Resp. | $ | 5,000 | |||||
| 2. | Meeting Fee: $1,500 for each Committee meeting in excess of four meetings per year. | ||||||
| 3. | Ad Hoc Committees: In the event a Committee is formed for a special project, the Committee members will be paid $1,500 per meeting and the Chairman will be paid a retainer in an amount approved by the Board of Directors | ||||||
| II. | Other Benefits & Items | ||||||
| A. | $50,000 Group Life Insurance * | ||||||
| B. | $250,000 24 Hr. Accident Protection Insurance (applies to travel to or from, or conducting business for SJI) | ||||||
| C. | Restricted Stock Deferral Plan | ||||||
| D. | D&O Insurance- | $35 Million w/$10 Million Entity Sublimit | |||||
| No Deductible for D&O | |||||||
| $200,000 Deductible for Corporation | |||||||
| E. | Travel Expenses Reimbursed Upon Request | ||||||
| III. | Share Ownership Requirements | ||||||
| Non-employee members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual retainer for Board Service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. All Directors have six years to satisfy the share ownership requirement after an increase in share ownership in the share ownership guidelines. | |||||||
| * | These insurance benefits were eliminated for Directors elected after April 2011. | ||||||
| I. | Compensation: Non – Employee Directors | ||||||||||||
| A. | Board Service | ||||||||||||
| 1. | Cash - | Annual Retainer for Board and Committee Service | $ | 75,000 | |||||||||
| 2. | Restricted Stock – SJI shares with a total value of $90,000 awarded annually in January. The value of the shares is based on the daily average share price for the period July 1 through December 31 of the prior year. | ||||||||||||
| 3. | Independent Subsidiary Chairman Retainer – Annual Retainer (payable monthly): | $ | 8,000 | ||||||||||
| 4. | Non-Executive Chairman | $ | 80,000 | ||||||||||
| (Payable 50% shares; 50% cash retainer, payable monthly) | |||||||||||||
| B. | Committee Service | ||||||||||||
| 1. | Annual Committee Chairman Retainers (payable monthly): | ||||||||||||
| Audit | $ | 15,000 | |||||||||||
| Compensation | $ | 10,000 | |||||||||||
| Governance | $ | 7,500 | |||||||||||
| Corp. Resp. | $ | 7,500 | |||||||||||
| Risk | $ | 7,500 | |||||||||||
| Strategy & Finance | $ | 7,500 | |||||||||||
| 2. | Meeting Fee: | $1,500 for each Audit Committee meeting in excess of four meetings per year. | |||||||||||
| $1,500 for each Compensation Committee, Corporate Responsibility Committee, Governance Committee, Risk Committee, or Strategy & Finance meeting in excess of four meetings per year. | |||||||||||||
| 3. | Ad Hoc Committees: In the event a Committee is formed for a special project; the Committee members will be paid $1,500 per meeting and the Chairman will be paid a retainer in an amount approved by the Board of Directors. | ||||||||||||
| II. | Other Benefits & Items | ||||||||||||
| A. | $50,000 Group Life Insurance* | ||||||||||||
| B. | $250,000 24 Hr. Accident Protection Insurance (applies to travel to or from, or conducting business for SJI) | ||||||||||||
| C. | Restricted Stock Deferral Plan | ||||||||||||
| D. | D&O Insurance - | $50 Million w/$15 Million “Side A” Coverage | |||||||||||
| No Deductible for D&O | |||||||||||||
| $200,000 Deductible for Corporation | |||||||||||||
| E. | Travel Expenses Reimbursed Upon Request | ||||||||||||
| III. | Share Ownership Requirements | ||||||||||||
| Non-employee members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual retainer for Board Service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. All Directors have six years to satisfy the share ownership requirement after an increase in share ownership in the share ownership guidelines. | |||||||||||||
* These insurance benefits were eliminated for Directors that joined the Board after April 2011.
| South Jersey Industries, Inc. - | | |
Corporate Governance
In March of 2012, the Governance Committee nominated an Independent Director to serve as Chairman of the South Jersey Energy Solutions, LLC (SJES) Executive Committee. Based on the recommendation of Cook, the Board determined that
an additional retainer would be paid for independent directors who serve as Chairman of the Board of SJI and its subsidiaries. Commencing May 2012, an $8,000 annual retainer was paid to Joseph M.
Petrowski, who served as the Chairman of the SJES Executive Committee.Committee and the SJI Midstream Executive Committee through April 21, 2017. Director Higgins, Chairman of the South Jersey Gas Company Board of Directors, did not receive an additional retainer for this role as he received additional compensation as Chairman of the SJI Board.
Independent Director Compensation for Fiscal Year 2015(1)2017
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation($) (3) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
| Sarah M. Barpoulis | 81,000 | 82,783 | — | — | — | — | 163,783 | 98,500 | 89,977 | — | — | — | 60 | 188,537 | ||||||||||||||||||||||||||||||||||||||||||
| Thomas A. Bracken | 83,167 | 82,783 | — | — | — | 390 | 166,328 | 88,500 | 89,977 | — | — | — | 330 | 178,807 | ||||||||||||||||||||||||||||||||||||||||||
| Keith S. Campbell | 86,500 | 82,783 | — | — | — | 390 | 169,661 | 81,333 | 89,977 | — | — | — | 330 | 171,640 | ||||||||||||||||||||||||||||||||||||||||||
| Victor A. Fortkiewicz | 78,333 | 82,783 | — | — | — | 390 | 161,494 | 85,083 | 89,977 | — | — | — | 330 | 175,390 | ||||||||||||||||||||||||||||||||||||||||||
| Sheila Hartnett-Devlin | 96,000 | 82,783 | — | — | — | 390 | 179,161 | 96,500 | 89,977 | — | — | — | 330 | 186,807 | ||||||||||||||||||||||||||||||||||||||||||
| Walter M. Higgins III | 115,000 | 129,988 | — | — | — | 330 | 245,318 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Sunita Holzer | 76,500 | 82,783 | — | — | — | — | 159,283 | 84,667 | 89,977 | — | — | — | 60 | 174,704 | ||||||||||||||||||||||||||||||||||||||||||
| Walter M. Higgins III | 110,167 | 107,148 | — | — | — | 390 | 217,693 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Joseph H. Petrowski | 30,667 | 89,977 | — | — | — | 110 | 120,754 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Joseph M. Rigby | 93,500 | 89,977 | — | — | — | 60 | 183,537 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Frank L. Sims | 81,000 | 82,783 | — | — | — | — | 163,783 | 89,000 | 89,977 | — | — | — | 60 | 179,037 | ||||||||||||||||||||||||||||||||||||||||||
| Joseph H. Petrowski | 90,500 | 82,783 | — | — | — | 390 | 173,661 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Per the |
| Represents payments made by SJI for group life insurance | |
| accident protection insurance. |
Certain Relationships
Mr. Campbell is Chairman of Mannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid,
bid, another Company subsidiary operates a cogeneration facility that provides electricity to Mannington Mills, Inc.
Review and Approval Policies and Procedures for Related Party Transactions
Pursuant to a written policy adopted by the Company’s Governance Committee, the Company’s executive officers, and directors, and principal stockholders, including their immediate family members and affiliates, are not permitted to enter into a related party transaction with the Company without the Governance Committee’s or other independent Board committee’s prior consent, in cases in which it is inappropriate for the Governance Committee to review the transaction due to a
conflict of interest.
In approving or rejecting the proposed transaction, the Governance Committee shall consider the facts and circumstances available and deemed relevant to the Committee. The Governance Committee shall approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, the Company’s best interests, as the Governance Committee determines in the good faith exercise of its discretion.
| South Jersey Industries, Inc. - |
EXECUTIVE OFFICERS
Compensation Committee Report
We have reviewed the following Compensation Discussion and Analysis with management. Based on our review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement, Form 10-K and Annual Report for the year ended December 31, 2015.2017.
COMPENSATION COMMITTEE
Sunita Holzer, Chairman
Sarah M. Barpoulis
Keith S. Campbell ChairmanSheila Hartnett-DevlinSunita Holzer
Joseph H. PetrowskiM. Rigby
Compensation Discussion & Analysis
Introduction
This Compensation Discussion and Analysis (“CD&A”) explains the executive compensation program for the following individuals, who are referred to as the “Named Executive Officers” (“NEOs”):
| • | Michael J. Renna – President and Chief Executive Officer |
| • | Stephen H. Clark – |
| • | |
Executive Summary
|
Fiscal 20152017 Business Highlights
Key business highlights for 20152017 are as follows:
ChangesGrowing regulated focus. With a strategic shift in Leadership2015, the company turned its focus to growing earnings from regulated investments. In October 2017, SJI announced its intent to acquire the assets of Elizabethtown Gas and Elkton Gas companies from Southern Company Gas. This transformative acquisition will position SJI as the second largest natural gas provider in New Jersey with over 681,000 customers.
Successful execution. Edward J. Graham, whoDuring 2017, SJI strategically eliminated $9.1 million of investment tax credits from earnings, finishing the year with Economic Earnings totaling $98.1 million. The company also executed its eleventh fuel supply management contract and brought its sixth contract on-line in 2017.
Progress Towards the Goal:
SJI continued moving along the path towards achieving its stated goal of delivering $150 million of Economic Earnings in 2020. A significant milestone along the way was Chairman and Chief Executive Officer (“CEO”) for 11 years, retired effective April 30, 2015, and Michael J. Renna, who was President and Chief Operating Officer, assumed the President and CEO role effective May 1, 2015. The change occurred as partsuccessful completion of a succession planning process, which resulted in a seamless transition toutility base rate case that recognized the new CEO.
New Long-Range Plan. Upon assumingsignificant infrastructure investment made to date. At the Presidentsame time, substantial investments being made in customer service and CEO role, Mr. Renna worked with his senior management teamorganizational and individual development are expected to establish a long-range strategic business plan in support of SJI’s growth and value creation objectives. Specifically, SJI is aligned on four chief strategic priorities, with the goal of $150 million in economic earnings by 2020, as presented below.significantly benefit future performance.
 | |
20152017 Performance.The Company experienced challenges and achievements in 2015 in different areas of its business.
| • | SJI Economics Earnings totaled |
| • | Economic Earnings Per Share totaled $1.23 in 2017 compared with $1.34 in the prior year, reflecting the full year impact of shares issued during our 2016 equity offering, as well as the elimination of earnings from investment tax credits. |
| • | 2017 Return on Equity was 7.9%. |
| • | |
| unfavorable weather conditions until the very end of the year. Consistent with our strategic plan, the addition of new fuel management contracts is enhancing the repeatability of performance in this business. Additionally, the ability to optimize | |
| • | The contribution from South Jersey Energy Services, our energy production business, was |
| South Jersey Industries, Inc. - | | |
Executive OfficersCompensation Discussion & Analysis
Fiscal 20152017 Compensation Highlights and Key Decisions
Overall, our NEOs are compensated wellBased on the Committee’s review of the executive compensation program, we determined that for FYE 2016, NEO compensation was below market median and generally at or below the median of25th percentile. Overall, compensation decisions made for fiscal 2017 brought target total pay positioning for our peers, and in fact, their compensation is closer toCEO around the 25th percentile of our peer group. The annual incentive paid topeers and for our other NEOs was zero for all financial measuresgenerally between the 25th percentile and only paid out for achievement against certain strategic individual non-financial objectives. Further, all three-year performance-based long-term incentive awardsmedian of our peers, with performance periods ended in 2015 were forfeited as the performance targets were not met.
During fiscal 2014, the independent compensation consultant conducted a comprehensive review of the executivepositioning varying by individual.
The executive compensation program to ensure the program fully met the business and compensation objectives. Following that review, several changes to the program were adopted effectiveremained generally unchanged for fiscal 2015, which are highlighted below2017, given that it continues to align with the Company’s short-term and described in further detail in later sections of this CD&A.long-term business objectives.
The compensation program for the NEOs during fiscal 20152017 consisted of the following pay elements:
| Base Salary | + | Annual Incentive Plan (“AIP”) | + | Restricted (“PBRS”) | + | Restricted Stock Performance Hurdle (“TBRS”) |
2015 Changes to the AIP
The structure of the AIP was generally the same as in fiscal 2014, as the company believed the program continued to align with the Company’s short-term business objectives for Fiscal 2015. Mr. Graham’s AIP award as CEO was based on SJI’s economic earnings and SJI’s return on equity (“ROE”) relative to peers. As President and COO, Mr. Renna’s AIP was based on SJI’s economic earnings and balanced scorecard objectives,
consistent with the mix of measures used for other NEOs. When Mr. Renna was appointed CEO, the Board felt it was important to have a focus on transition goals and on creating a strategic plan and vision. As CEO, Mr. Renna’s AIP continued to be based on a combination of SJI’s economic earnings and balanced scorecard objectives.
2015 Changes to the Long-term Incentive (“LTI”) Program
The Committee determined to continue granting 100% performance-based LTI, and effective with the 2015 annual grant, LTI is comprised of two vehicles: Performance-Based Restricted Stock (“PBRS”), representing 70% of an NEO’s total LTI grant value and Time-Based Restricted Stock with a Performance Hurdle (“TBRS”), representing 30% of an NEO’s total LTI grant value. Performance measurement for these awards is as follows:
NEO Target Total Compensation
Through the comprehensive review of the executive compensation program noted above, it was identifiedwe determined that for FYE 2016, NEO total compensation was well below market median and generally aroundat or below the 25th25th percentile of the peers.peers for most NEOs. Factoring in the market positioning as one input, in addition to consideration of other relevant factors such as an individual’s performance and
potential, the breadth, scope and complexity of the role, internal equity and attraction and retention objectives, the Committee approved
compensation increases for Mr. Renna and all other NEOs, as further described below. Mr. Renna’s increase considered the succession planning process and anticipated promotion to CEO upon Mr. Graham’s retirement. Mr. Clark was promoted to the role of CFO and his increase reflects the broadened scope and additional responsibilities of this role. For further details on NEO target compensation in 2015,2017, refer to the section in this CD&A entitled “Detailed Discussion and Analysis”.Analysis.”
Current CEO
Former CEO
| percentile of the | ||
| our peers. |
Executive Officers
during the year (see Summary Compensation Table for details).
All Other NEOs
increases in target AIP opportunities for Mr.Messrs. Clark and Ms. Merritt-EppsRobbins, and LTI opportunitiesopportunity for Mr. ClarkClark. For FYE 2016, NEO compensation was generally below the 25th percentile of the peers, and Mr. DuBois.
| intended to bring each NEO’s target total compensation closer to median and recognize each NEO’s individual performance in his or her role. For NEOs receiving larger salary increases, these changes also reflect moving into new roles with additional responsibilities. |
| 26 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
Total Compensation Mix
While there is not a specific formula for the mix of pay elements, there is greater weighting on performance-based compensation elements over fixed pay for all of the NEOs.
Pay for Performance
Actual compensation received in Fiscal 20152017 reflects the company’sCompany’s performance:
by individual due to achievement against certain strategic non-financial objectives.
| • | The portion of the AIP for Fiscal 2017 based on SJI core earnings paid out 85% due to achieving below target performance. |
| • | PBRS awards for the performance period ended fiscal 2017 paid out 18.1%. |
| South Jersey Industries, Inc. - | | |
Executive OfficersCompensation Discussion & Analysis
performance level required to earn the award. This is the third year in a row that PBRS awards were not earned due to performance
Other Highlights
Compensation Practices
The Company and the Compensation Committee regularly monitor best practices and emerging trends in executive compensation and determine what enhancements should be made to strengthen the compensation program. Below is a list
of the compensation
practices that are (or, where noteworthy, are not) incorporated into the current executive compensation program, which are aligned with stockholders’ interests.
| Things We Do | Things We Don’t Do | ||
| ü | û | Excise tax gross ups | |
| ü | Multiple financial and stock-based metrics in incentive plans | û | Repricing or exchange of equity awards without shareholder approval |
| ü | Use of absolute and relative performance measurement in incentive plans | û û | Employment agreements |
Permit hedging or pledging of Company stock | |||
| ü | Caps on incentive awards | ||
| ü | Stock ownership guidelines and holding requirements for all NEOs | ||
| ü | Change-in-control “double-trigger” for equity award vesting and severance benefits | ||
| ü | Clawback provisions on incentive awards | ||
| ü | Limited number of perquisites | ||
| ü | Independent compensation consultant | ||
For fiscal 2016, theShareholder Say-on-Pay Vote and Company adopted a 162(m) Bonus Award (“162(m) Bonus”) under the 2015 Omnibus EquityResponse
Compensation Plan which is intended to preserve tax deductibility of AIP awards paid to the CEO and all other NEOs.
At the Company’s Annual Meeting of Shareholders held in April 2015,2017, shareholders were presented with a vote to approve, on an advisory basis, the compensation paid to the NEOs as disclosed in the “Compensation Discussion and Analysis” section of the proxy statement relating to that meeting (referred to as a “say-on-pay” proposal). 90Ninety-eight percent of the votes
cast on the say-on-pay
proposal voted in favor of the proposal, indicating their strong support of the executive compensation program. Consistent with the Company’s commitment to stockholders’ interests and SJI’s pay-for-performance approach, the Compensation Committee continued to examine the compensation program and make changes where warranted.
Detailed Discussion & Analysis
|
Executive Compensation Principles
The Company’s executive compensation program applies to all Company Officers, including NEOs and is designed to aid in achieving the Company’s strategic plan while increasing shareholder value. Executive compensation program decisions were made based on the following principles:
Align the interests of NEOs with shareholders so that compensation levels are commensurate with relative shareholder returns and financial performance; | |
Executive Officers
| South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
2017 Compensation Components
The Company’s executive compensation structure consists of base salary, AIP and LTI. AIP and LTI are directly linked to achieving predefined short-term and long-term performance goals.
goals. Descriptions of each component of the compensation program for the NEOs are set forth below:
| Pay Element | Description | Rationale | |
| Salary | Fixed cash opportunity. | Provides compensation for role, level of responsibility and experience. | |
| Annual cash compensation with variable payout depending on performance against pre-determined goals for the fiscal year. | Drives and incents annual performance across key financial and individual performance measures. | ||
| LTI is granted 70% in performance-based restricted stock (“PBRS”), based on Total Shareholder Return (“TSR”) vs. peers | condition. | 100% performance-based vehicles ensures payout only occurs if threshold level of performance is achieved. Drives long-term financial performance, shareholder value and | |
| Benefits and Perquisites | Health and welfare benefits provided consistent with those generally provided to all employees. In addition, NEOs are also eligible for certain additional retirement and | Supports attraction and retention objectives and helps ensure the overall competitiveness of the compensation program vs. the market. |
Pursuant to SEC regulations, the Summary Compensation Table on page 38 shows total compensation for our NEOs, including the change in pension value and nonqualified compensation earnings. The number shown for Mr. Renna in the Change in Pension Value and Nonqualified Compensation Earnings column for 2017 is reflective of his entering the SERP upon turning 50 in 2017. As a result, this number reflects the accumulation of his SERP benefit earned based on all of his service from his original hire date (20 years). Going forward, the number shown
in the Change in Pension Value and Nonqualified Compensation Earnings Column each year will reflect only one year of service. We believe that Mr. Renna’s year-over-year change in pension value is not representative of the compensation he received in 2017. Therefore, we included a separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for Mr. Renna and the other NEOs, as we believe this number is more representative of actual compensation.
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 29 |
Compensation Discussion & Analysis
Specific 20152017 pay decisions for each pay element were as follows:
Base Salary
The Compensation Committee determines base salaries for the NEOs each year taking into account multiple factors such as the individual’s performance and potential, breadth, scope and complexity of the role, internal equity, as well as market positioning. The Committee also considers the analyses provided by our externalindependent compensation consultants who reaffirmed that for FYE 2016, our position relative to peers is wellwas below the median and approximatesgenerally at or below the 25th25th percentile of the peer group. We made changes to bring compensation closer to median.median effective January 1, 2017. In addition, in the case of NEOs other than the CEO, the Committee takes into consideration the recommendations of the CEO.
At the beginning of 2015,2017, the Compensation Committee approved a salary increase for Mr. Renna of 25%15.7% and salary increases for each of the other NEOs ranging from 4.7%5.2% to 27.3%25.9% effective on January 1, 2015.2017. These salary increases were determined considering the NEO’sNEOs’ target total pay positioning aroundgenerally at or below the 25th percentile of the peers, internal equity, succession planning and retention objectives, as well as expansionsexpansion in an individual’s roleindividuals’ roles and responsibilities. Effective May 1, 2015,Following the salary increases, as well as increases to the AIP and LTI opportunities for certain NEOs, as described in connection with his promotion to CEO, the Committee approved an additional 10% salary increase for Mr. Renna.following sections, the CEO’s target total pay positioning was around the 25th percentile of the peers, while the other NEOs’ target total pay positioning was generally between the 25th percentile and median.
| Named Executive Officer | Annual Base Salary for 2014 $Value | Annual Base Salary Effective 1/1/2015 $Value | Annual Base Salary Effective 5/1/2015 $Value |
| Michael J. Renna | 400,000 | 500,000 | 550,000 |
| Stephen H. Clark | 275,000 | 350,000 | no change |
| Jeffrey E. DuBois | 350,000 | 390,000 | no change |
| Gina Merritt-Epps | 320,000 | 335,000 | no change |
| Kathleen A. McEndy | 275,000 | 300,000 | no change |
| Edward J. Graham | 721,000 | 775,000 | n/a |
| Named Executive Officer | Annual Base Salary at FYE 2016 $Value | Annual Base Salary Effective 1/1/2017 $Value | ||||||
| Michael J. Renna | 605,000 | 700,000 | ||||||
| Stephen H. Clark | 385,000 | 410,000 | ||||||
| Jeffrey E. DuBois | 404,000 | 425,000 | ||||||
| David Robbins Jr. | 270,000 | 340,000 | ||||||
| Kathleen A. McEndy | 330,000 | 360,000 | ||||||
Annual Incentive Plan
Each NEO had a pre-established AIP opportunity for 2015.2017. Actual AIP awards can range from 0 to 150 percent of each NEO’s target AIP opportunity based on the achievement of the performance
performance metrics discussed below. The 20152017 target AIP award opportunity for each Named Executive is set forth below:
Executive Officers
Target AIP Awards for the NEOs
| 2014 Target AIP Awards | 2015 Target AIP Awards | |||||||||||||||
| Named Executive Officer | % of Salary | $Value | % of Salary | $Value | ||||||||||||
| Michael J. Renna | 70% | 280,000 | 75% | 412,500 | ||||||||||||
| Stephen H. Clark | 50% | 137,500 | 60% | 210,000 | ||||||||||||
| Jeffrey E. DuBois | 60% | 210,000 | 60% | 234,000 | ||||||||||||
| Gina Merritt-Epps | 45% | 144,000 | 50% | 167,500 | ||||||||||||
| Kathleen A. McEndy | 60% | 165,000 | 60% | 180,000 | ||||||||||||
| Edward J. Graham | 75% | 540,750 | 75% | 581,250 | ||||||||||||
| 2016 Target AIP Awards | 2017 Target AIP Awards | |||||||||||||||
| Named Executive Officer | % of Salary | $ Value | % of Salary | $ Value | ||||||||||||
| Michael J. Renna | 85 | % | 514,250 | 100 | % | 700,000 | ||||||||||
| Stephen H. Clark | 60 | % | 231,000 | 70 | % | 287,000 | ||||||||||
| Jeffrey E. DuBois | 70 | % | 282,800 | 70 | % | 297,500 | ||||||||||
| David Robbins Jr. | 60 | % | 162,000 | 70 | % | 238,000 | ||||||||||
| Kathleen A. McEndy | 60 | % | 198,000 | 60 | % | 216,000 | ||||||||||
From January 1, 2015 until the effective date of his promotion on May 1, 2015, Mr. Renna’s target AIP award was $375,000. His target AIP award amount increased to $412,500 in conjunction with his salary increase upon his appointment to the CEO role.
The AIP drives and rewards short-term performance. The performance metrics used for the NEOs for 20152017 were based
on various metrics, including SJI economiccore earnings, South Jersey Gas (“SJG”) economiccore earnings, (same as GAAP for 2015), relative ROE vs. peers, and individual balanced scorecard
objectives. Performance and resulting payouts for each metric were assessed independently. Specific metrics and weightings vary by individual based on role and responsibility.responsibility as set forth below:
2015 AIP
Metrics and Weightings
| Economic Earnings | Core Earnings | |||||||||||||||||||||||||||
| Named Executive Officer | SJI | South Jersey Gas (“SJG”) | Return on Equity vs. Peers | Balanced Scorecard | SJI | South Jersey Gas (“SJG”) | Balanced Scorecard | |||||||||||||||||||||
| Michael J. Renna | 75% | 25% | 75 | % | 25 | % | ||||||||||||||||||||||
| Stephen H. Clark | 50% | 25% | 25% | 50 | % | 50 | % | |||||||||||||||||||||
| Jeffrey E. DuBois | 25% | 50% | 25% | 50 | % | 50 | % | |||||||||||||||||||||
| Gina Merritt-Epps | 50% | 50% | ||||||||||||||||||||||||||
| David Robbins | 25 | % | 25 | % | 50 | % | ||||||||||||||||||||||
| Kathleen A. McEndy | 50% | 50% | 50 | % | 50 | % | ||||||||||||||||||||||
| Edward J. Graham | 75% | 25% | ||||||||||||||||||||||||||
| South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
2017 Core Earnings Pay/Performance Scales and Actual Results
The annual incentive goals and payout scales are set at the beginning of the fiscal year, based on expected levels of performance for that coming year. No payment is made to our named executive officers for the economiccore earnings component of the annual incentive plan unless threshold performance is met. Threshold Economic EarningsOur core earnings are defined as our economic earnings less investment tax credits and adjusted for non-operational events. The threshold core earnings performance level for 2015 isSJI in 2017 was set equal to our actual EconomicSJI core earnings in
Earnings performance for 2014.2016. Therefore, Economic Earningscore earnings performance at or above prior year actual performance iswas required for any payout for our Economic EarningsSJI core earnings component. SpecificThe target core earnings performance level for SJG in 2017 was set below actual SJG core earnings in 2016 to reflect the 2017 SJG budget. Actual performance and the payout ispayouts are interpolated between the levels.levels set forth below.
For SJI Economic Earnings,core earnings, the goals and payout scales, and actual results for 20152017 were as follows:
| SJI Economic Earnings Pay/Performance Scale | ||||||||||||||||||||
| SJI Economic Earnings | SJI Economic Earnings $ | SJI Core Earnings Pay/Performance Scale | ||||||||||||||||||
| Performance Level | Year-over-Year Growth | Value ($000s) | Payout as a % of Target | SJI Core Earnings $ Value ($M) | Payout as a % of Target | |||||||||||||||
| Maximum | ³10% | 114,377 | 150 | % | ≥106.5 | 150 | % | |||||||||||||
| Target | 5% | 109,178 | 100 | % | 99.1 | 100 | % | |||||||||||||
| Threshold | 0% | 103,979 | 50 | % | 90.0 | 50 | % | |||||||||||||
| Below Threshold | <0% | <103,979 | 0 | % | <90.0 | 0 | % | |||||||||||||
| Actual Performance | <0% | 99,000 | 0 | % | 96.3 | 85 | % | |||||||||||||
Executive OfficersSJI core earnings of $96.3 million represents 7% growth over prior year.
For SJG Economic Earnings (same as GAAP for 2015),core earnings, the goals and payout scales, and actual results for 20152017 were as follows:
| SJG Economic Earnings Pay/Performance Scale | ||||||||
| Performance Level | SJG Economic Earnings $Value ($000s) | Payout as a % of Target | ||||||
| Maximum | 75,353 | 150% | ||||||
| Target | 72,353 | 100% | ||||||
| Threshold | 69,353 | 50% | ||||||
| Below Threshold | <69,353 | 0% | ||||||
| Actual Performance | 66,578 | 0% | ||||||
| SJG Core Earnings Pay/Performance Scale | ||||||||
| Performance Level | SJG Core Earnings $ Value ($M) | Payout as a % of Target | ||||||
| Maximum | ≥70.0 | 150 | % | |||||
| Target | 67.0 | 100 | % | |||||
| Threshold | 64.0 | 50 | % | |||||
| Below Threshold | <64.0 | 0 | % | |||||
| Actual Performance | 72.6 | 150 | % | |||||
For Return on Equity vs. peers for Mr. Graham, the goals and payout scales, and actual results for 2015 were as shown below.SJG core earnings of $72.6 million represents 5.1% growth over prior year.
| Relative ROE vs. SJI Peers | ||||||||
| Performance Level | SJI’s Percentile Positioning vs. Peers | Payout as a % of Target | ||||||
| Maximum | ³80th | 150% | ||||||
| Target | 50th | 100% | ||||||
| Threshold | 35th | 50% | ||||||
| Below Threshold | <35th | 0% | ||||||
| Actual Performance – Relative ROE | 55.9 | 109.8% | ||||||
Resulting payouts for each NEO, based on each individual’s respective weighting on financial metrics, are as follows:2017 Balanced Scorecard Summary Objectives
| SJI Economics Earnings | ||||||||||||
| Named Executive Officer | Payout as a % of Target | Weighting% | Weighted Payout as a % of Target | |||||||||
| Michael J. Renna | 0% | 75% | 0% | |||||||||
| Gina Merritt-Epps | 0% | 50% | 0% | |||||||||
| Kathleen A. McEndy | 0% | 50% | 0% | |||||||||
| SJI Economics Earnings | SJG Economics Earnings | |||||||||||||||||||||||||||
| Named Executive Officer | Payout as a % of Target | Weighting % | Weighted Payout as a % of Target | Payout as a % of Target | Weighting % | Weighted Payout as a% of Target | Total Weighted Payout as a% of Target | |||||||||||||||||||||
| Stephen H. Clark | 0% | 50% | 0% | 0% | 25% | 0% | 0% | |||||||||||||||||||||
| Jeffrey E. DuBois | 0% | 25% | 0% | 0% | 50% | 0% | 0% | |||||||||||||||||||||
Executive Officers
| SJI Economics Earnings | Relative ROE vs. Peers | |||||||||||||||||||||||||||
| Named Executive Officer | Payout as a % of Target | Weighting% | Weighted Payout as a % of Target | Payout as a % of Target | Weighting % | Weighted Payout as a % of Target | Total Weighted Payout as a % of Target% | |||||||||||||||||||||
| Edward J. Graham | 0% | 75% | 0% | 109.8% | 25% | 27.45% | 27.45%* | |||||||||||||||||||||
*Mr. Graham’s payment is prorated due to his retirement on April 30, 2015.
In addition to the financial performance components used to determine the AIP awards described above, awards to NEOs other than the former CEO, are based on individual balanced scorecard performance. An individual balanced scorecard (“BSC”) is a strategic performance management tool that has four quadrants that may be used to measure financial and non-financial goals. The BSC measures may include financial, customer, process and learning and growth.
The CEO’s goalsperformance highlights for the year included establishingincluded: continuing to execute the long-term visionstrategy, achieving strategic growth milestones, promoting a culture of safety and strategy, executive teamexceptional customer service and expanded talent and leadership development and building strong relationships with the Board and all stakeholders. For 2015, the remaining Named Executive Officers goals were aligned with the strategic business plan.efforts.
Fiscal 2015 Performance2017 performance highlights for the Named Executive Officers:other NEOs:
Michael J. RennaStephen H. Clark
| Managed capitalization and liquidity in support of strategic |
| · | Enhanced management information reporting for both internal and |
| · | Enhanced efficiency through departmental reorganization and maintained focus on staff development |
| · | Supported new business opportunities and acquisition activity |
Jeffrey E. DuBois
| · | Provided leadership to strategic projects and programs including regulatory and infrastructure initiatives |
| · | Continued progress in promoting a culture of exceptional service and driving customer growth |
| · | Reinforced a culture of safety through training and communication and ensured program compliance |
| · | Implemented comprehensive succession plan |
David Robbins
| · | Provided leadership to achievement of accelerated infrastructure improvement targets |
| · | Optimized and implemented improvements for customer experience |
| · | Reinforced commitment to safety and ensured achievement of 2017 safety goals |
| · | Improved functionality, efficiency and productivity across the |
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 31 |
Compensation Discussion & Analysis
Kathleen A. McEndy
| · | Continued progress aligning organization and talent with key objectives and providing leadership development |
| · | Deployed stakeholder relations resources in support of major initiatives. Strengthened communications capabilities. |
| · | Executed AC building plan and developed retrofit plan for Folsom building |
| · | Strengthened succession planning process |
Steven H. Clark
Jeffrey E. DuBois
Gina M. Merritt-Epps
Kathleen A. McEndy
BSC objectives are predefined at or close to the beginning of the calendar year in which they are to be performed. The objectives are tied to business plans for the applicable year. The Compensation Committee approves the objectives for the CEO at the beginning of the year and assesses his performance at the close of the calendar year based on a review of his performance in comparison to his specific goals. The BSC for the other Named Executive Officers is determined based on the CEO’s review of each entity’s business initiatives and individual performance assessments that are then
ratified by the Compensation Committee. The Compensation Committee approves the BSC payment of the AIP for each Named Executive Officer.
Payment for achieving balanced scorecard objectives range from 0% at below threshold, 50% at threshold, 100 percent100% at target to 150 percent150% at maximum. Payment for achieving results between these levels is interpolated.
The level of performance achieved for each BSC objective is dependent upon the terms of the objective itself, relative to each NEO’s performance. For 2017, our NEOs’ BSC payouts reflect each NEO’s performance versus their individual BSC objectives as described above, as well as our Company’s overall achievements over the year versus our strategic initiatives Based on the performance level achieved, our CEO received a 150% payout on the individual BSC portion of the AIP (weighted 25% of his total AIP payout). Individual BSC payouts for our other NEOs, received the following BSC ratingsweighted 50% of their total AIP payouts, were as follows: 125% for 2015 individual performanceMessrs. Clark and weighted payouts:DuBois and 150% for Mr. Robbins and Ms. McEndy.
| Named Executive Officer | Actual BSC Performance Rating | Payout as a % of Target | Weighting % | Weighted Payout as a % of Target | ||||||||||||
| Michael J. Renna | 3.25 | 110% | 25% | 27.5% | ||||||||||||
| Stephen H. Clark | 3.45 | 110% | 25% | 27.5% | ||||||||||||
| Jeffrey E. DuBois | 3.23 | 105% | 25% | 26.25% | ||||||||||||
| Gina Merritt-Epps | 3.00 | 100% | 50% | 50.0% | ||||||||||||
| Kathleen A. McEndy | 3.45 | 110% | 50% | 55.0% | ||||||||||||
Executive Officers
Actual AIP Payouts
There was no payout for any financial metric for the NEOs. The 20152017 AIP target opportunity for each NEO and actual payout, reflecting actual core earnings and individual BSC results is set forth below:
| Named Executive Officer | Target AIP Opportunity | SJI Economic Earnings Weighted % Payout | BSC Objectives Weighted % Payout | Total Payout as a % of Target | Total AIP Award Received for 2015 Performance | Target AIP Opportunity ($) | Core Earnings Weighted % Payout | BSC Objectives Weighted % Payout | Total Payout as a % of Target | Total AIP Award Received for 2017 Performance ($) | ||||||||||||||||||||||||||||||
| Michael J. Renna | 412,500 | 0% | 27.5% | 27.5% | 113,437 | 700,000 | 63.75 | % | 37.5 | % | 101.25 | % | 708,750 | |||||||||||||||||||||||||||
| Gina Merritt-Epps | 167,500 | 0% | 50.0% | 50.0% | 83,750 | |||||||||||||||||||||||||||||||||||
| Stephen H. Clark | 287,000 | 42.5 | % | 62.5 | % | 105 | % | 301,350 | ||||||||||||||||||||||||||||||||
| Jeffrey E. DuBois | 297,500 | 42.5 | % | 62.5 | % | 105 | % | 312,375 | ||||||||||||||||||||||||||||||||
| David Robbins | 238,000 | 58.75 | % | 75 | % | 133.75 | % | 318,325 | ||||||||||||||||||||||||||||||||
| Kathleen A. McEndy | 180,000 | 0% | 55.0% | 55.0% | 99,000 | 216,000 | 42.5 | % | 75 | % | 117.5 | % | 253,800 | |||||||||||||||||||||||||||
Long-Term Incentives
| Named Executive Officer | Target AIP Opportunity | SJI Earnings | SJG Economic Earnings Weighted % Payout | BSC Objectives Weighted % Payout | Total Payout as a % of Target | Total AIP Award Received for 2015 Performance | ||||||||||||||||||
| Stephen H. Clark | 210,000 | 0% | 0% | 27.5% | 27.5% | 57,750 | ||||||||||||||||||
| Jeffrey E. DuBois | 234,000 | 0% | 0% | 26.25% | 26.25% | 61,425 | ||||||||||||||||||
| Named Executive Officer | Target AIP Opportunity | Economic Earnings Weighted % Payout | Relative ROE vs. Peers Weighted % Payout | Total Payout as a % of Target | Total AIP Award Received for 2015 Performance* | |||||||||||||||
| Edward J. Graham | 581,250 | 0% | 27.45% | 27.45% | 53,184 | |||||||||||||||
.
* Mr. Graham’s payment is prorated due to his retirement on April 30, 2015.
Awards Granted in 20152017
For 2015,2017, the LTI component of the executive compensation program for NEOs consists of 70% performance-based restricted stock (“PBRS”) grants and 30% time-based restricted stock
(“TBRS”) with a performance hurdle.condition to satisfy the conditions for tax deductibility under Section 162(m) of the Code.
20152017 PBRS Award
PBRS awards are earned based on the following performance measures:
| • | |
| • | |
TSR directly ties to shareholder return and economic EPSearnings growth and ROE areis a financial measuresmeasure that linklinks awards to longer-term operating performance and financial goals.
The relative TSR goals are set at levels consistent with market practice for similar relative TSR based long termlong-term performance awards.awards and reflect rigorous performance hurdles.
The economic EPS and ROEearnings goals are set at levels that require long termlong-term growth for any payouts to be received for these components.
The PBRS goals and payout scales are set at the beginning of the three-year performance period. The Committee has developed a schedule to determine the actual amount of the LTI awards earned, evaluated for each measure separately, as shown below.
| 32 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
Specific performance and the resulting payout will be interpolated between the levels indicated below. PBRS can be earned from 0 to 200 percent50% of target shares granted.granted if threshold performance is met and up to 200% of target shares granted if maximum performance
is met. No shares are earned for performance below threshold performance level.
Provided below are the pay-and-performance scales for the 20152017 PBRS awards:
| TSR vs. SJI Peers | |||||||||
| Performance Level | SJI’s 3-Year TSR Percentile Positioning vs. | Payout as a of Target | |||||||
| Maximum | 200 | % | |||||||
| Stretch | 80th | % | |||||||
| Target | 50th | % | |||||||
| Threshold | 35th | % | |||||||
| Below Threshold | <35th | % | |||||||
Executive Officers
| Compound Annual Economic EPS Growth | Compound Annual Economic Earnings Growth | |||||||||||||||
| Performance Level | SJI’s 3-Year Compound Annual EPS Growth | Payout as a %of Target | SJI’s 3-Year Compound Annual Economic Earnings Growth | Payout as a % of Target | ||||||||||||
| Maximum | ³10% | 200% | ≥15 | % | 200 | % | ||||||||||
| Target | 6% | 100% | 9 | % | 100 | % | ||||||||||
| Threshold | 2% | 50% | 3 | % | 50 | % | ||||||||||
| Below Threshold | <2% | 0% | <3 | % | 0 | % | ||||||||||
| Average ROE | ||||||||
| Performance Level | SJI’s 3-Year Average ROE | Payout as a %of Target | ||||||
| Maximum | ³15% | 200% | ||||||
| Target | 11% | 100% | ||||||
| Threshold | 9% | 50% | ||||||
| Below Threshold | <9% | 0% | ||||||
20152017 TBRS Award
TBRS grants made in 20152017 vest in three equal installments in March 2016,2018, January 20172019 and January 2018,2020, subject to achieving the performance hurdlecondition of at least 7% ROE in 2015. Actual2017. This performance condition is intended to satisfy the conditions
for deductibility under Section 162(m) of the Code. Actual ROE for 20152017 was 10%7.9%, exceeding the ROE performance hurdle.condition. The 20152017 TBRS grants are subject to continued time-based vesting.
Fiscal 2017 LTI Award Opportunities
For 2015, theThe Compensation Committee considered the data provided by the externalindependent compensation consultants, which reaffirmed the Compensation Committee’s understanding that, for FYE 2016, total compensation for the NEOs is wellwas below market median and generally aroundat or below the 25th25th percentile. In particular, the LTI target
opportunities arewere below market.market for 2016. Given the relatively low market pay position and considering pay for
performance alignment for some of the NEOs, the Committee approved increases to LTI increasestarget opportunities for 2017 for Messrs. Renna and Clark and DuBois. In addition, upon Mr. Renna’s promotion to CEO. The Committee approved an incremental LTI grant on May 1, 2015 resulting from his increased salary, pro-rated for his time served as CEO.set forth below.
| 2014 Target LTI | 2015 Target LTI | 2016 Target LTI | 2017 Target LTI | |||||||||||||||||||||||||||||
| Named Executive Officer | % of Salary | $Value | % of Salary | $Value | % of Salary | $ Value | % of Salary | $ Value | ||||||||||||||||||||||||
| Michael J. Renna | 100% | 400,000 | 150% | 825,000 | 170 | % | 1,028,500 | 200 | % | 1,400,000 | ||||||||||||||||||||||
| Stephen H. Clark | 60% | 165,000 | 70% | 245,000 | 85 | % | 327,250 | 100 | % | 410,000 | ||||||||||||||||||||||
| Jeffrey E. DuBois | 80% | 280,000 | 100% | 390,000 | 100 | % | 404,000 | 100 | % | 425,000 | ||||||||||||||||||||||
| Gina Merritt-Epps | 70% | 224,000 | 70% | 234,500 | ||||||||||||||||||||||||||||
| David Robbins | 100 | % | 270,000 | 100 | % | 340,000 | ||||||||||||||||||||||||||
| Kathleen A. McEndy | 70% | 192,500 | 70% | 210,000 | 85 | % | 280,500 | 85 | % | 306,000 | ||||||||||||||||||||||
| *Edward J. Graham | 150% | 1,081,500 | 150% | 1,162,500 | ||||||||||||||||||||||||||||
*Mr. Graham’s award will be based on actual performance and prorated based on his April 30, 2015 retirement date.
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs 2015NEOs’ 2017 LTI
grants are provided in the “Grants of Plan-Based Awards and Outstanding Equity Awards tables”.Awards” tables.
| South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
Fiscal 2015 LTI Grant Payout
The LTI goals and payout scales are set prior to the beginning of the upcoming three-year performance cycle. Specifically, for the LTI performance cycle ended in fiscal 2015,2017, goals were set prior to the beginning of fiscal 20132015 and were based 50%40% on three-year TSR vs. the peer group, 30% on 3-year compound annual EPS growth, and 50%30% on three-year EPS performance, both relative to
peers.3-year average ROE. The relative LTI goals were set at appropriate
levels that fully supported the pay-for-performance philosophy. In addition, the relative goals are designed to be consistent with typical market practices among companies also setting LTI goals relative to peers.
For relative TSR, the goals and payout scales, and actual results for 2017 were as follows:
Executive Officers
| Performance Level | SJI Relative TSR Positioning vs. | ||||||||
| Payout as a of Target | |||||||||
| Maximum | 200 | % | |||||||
| Stretch | 80th | 150 | % | ||||||
| Target | 50th | % | |||||||
| Threshold | 35th | % | |||||||
| Below Threshold | <35th | % | |||||||
| Actual Performance – Relative TSR | |||||||||
| % | |||||||||
For EPS growth, the goals and payout scales, and actual results for 2017 were as follows:
| Performance Level | SJI EPS CAGR | Payout as a % of Target | ||||||
| Maximum | 10.0 | % | 200 | % | ||||
| Target | 6.0 | % | 100 | % | ||||
| Threshold | 2.0 | % | 50 | % | ||||
| Below Threshold | <2.0 | % | 0 | % | ||||
| Actual Performance – EPS CAGR | –7.8 | % | 0 | % | ||||
For ROE, the goals and payout scales, and actual results for 2017 were as follows:
| Performance Level | SJI ROE Average | Payout as a % of Target | ||||||
| Maximum | 15.0 | % | 200 | % | ||||
| Target | 11.0 | % | 100 | % | ||||
| Threshold | 9.0 | % | 50 | % | ||||
| Below Threshold | <9.0% | 0 | % | |||||
| Actual Performance – ROE Average | 9.4 | % | 60.2 | % | ||||
For the three-year performance cycle ended December 31, 2017 (Fiscal 2015 (Fiscal 2013 LTI grant cycle)PBRS award), the Company’s total shareholder returnweighted payout based on the performance above is 18.1%.
Benefits and earnings per share in comparison with the peer group was below the threshold level of performancePerquisites
required to earn a payout. Therefore, for the third year in a row, the PBRS grants have not paid out, reflective of SJI’s pay-for-performance approach.
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance,
insurance, disability insurance, 401(k) Plan) on the same terms as all other employees. In addition to those benefits, NEOs are eligible for the following benefits:
Non-Qualified Supplemental Retirement Plan (the “SERP”)
are currently not eligible for the SERP because they have not met the age requirement.
| salary plus annual incentives. SeePension Benefits Tablesection for further detail. In 2016, the plan was closed to new participants. |
Non-Qualified Performance-Based Defined Contribution Plan (the “PBDCP”)
| NEO. The annual Employer Credit is subject to the Company achieving a pre-set annual performance metric hurdle. PBDCP account balances are not vested until age 50. Plan participants that terminate prior to age 50, forfeit their entire account balance. |
| 34 | | South Jersey Industries, Inc. - 2018 Proxy Statement |
Compensation Discussion & Analysis
Supplemental Saving Plan Contributions
| are reimbursed the amount of Company contributions that may not be made because of this limitation. Amounts paid pursuant to this policy are included in the Summary Compensation Table. |
Disability Insurance
Disability Insurance
| to a monthly maximum benefit of $10,000. Due to limitations in the group LTD benefits, in 2017, a supplemental LTD plan was implemented to cover up to 60% of |
Group Life Insurance
the NEO is responsible
| for resultant federal, state or local income taxes. Amounts paid pursuant to this policy are included in the Summary Compensation Table. |
Supplemental Survivor’s Benefit
service with the Company in the
| amounts of six months base salary for 10-15 service years; nine months base salary for 15-25 service years; and 12 months base salary for 25+ service years. Such payment is offset by proceeds from the NEOs’ retirement plans in the year of death.
|
Other Benefits and Perquisites
Approach for Developing the Executive Compensation Program
Role of the Compensation Committee
SJI’s executive compensation program is administered by the Committee. The Committee members meet the New York Stock Exchange’s independence standards. In determining the independence of members of the Compensation Committee, the Board considers all factors specifically relevant to determining whether the director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including: (i) the source of the director’s compensation, including any consulting, advisory or other compensation fees; and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of the employee compensation and benefit programs for the NEOs.
The Committee annually evaluates the CEO’s performance. Taking performance into consideration, along with recommendations from the compensation consultant (discussed below), the Committee
then establishes and approves compensation levels for the CEO, including annual base salary and AIP and long-term stock incentive awards. The Committee also reviews recommendations from the CEO regarding the CEO’s evaluation of, and pay recommendations for, the other NEOs. The Committee evaluates and approves the recommendations, as appropriate. All performance goals for the NEOs’ AIP awards are established at the beginning of each year for use in the performance evaluation process. The Committee reviews direct compensation (base salary, AIP and long-term incentives) annually. The Committee meets regularly in executive sessions without members of management present to evaluate the executive compensation program and reports regularly to the Board of Directors on its actions and recommendations.
The Committee reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a 3-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the independent compensation and benefits consultant.
Role of Independent Consultants
Executive Officers
To assist the Committee in its evaluation of the executive compensation program for 2017, the Committee retained an independent compensation consultant, ClearBridge Compensation Group, LLC (“ClearBridge”). ClearBridge’s role as independent advisor to the Committee includes:
Approach for Developing the Executive Compensation Program
Role of the Compensation Committee
SJI’s executive compensation program is administered by the Committee. The Committee members meet the New York Stock Exchange’s independence standards. In determining the independence of members of the Compensation Committee, the Board considers all factors specifically relevant to determining whether the director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including: (i) the source of the director’s compensation, including any consulting, advisory or other compensation fees; and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of the employee compensation and benefit programs for the NEOs.
The Committee annually evaluates the CEO’s performance. Taking these performance evaluations into consideration, along with recommendations from the compensation consultant (discussed below), the Committee then establishes and
approves compensation levels for the CEO, including annual base salary and AIP and long-term stock incentive awards. The Committee also reviews recommendations from the CEO regarding the CEO’s evaluation of, and pay recommendations for, the other NEOs. The Committee evaluates and approves the recommendations, as appropriate. All performance goals for the NEOs’ AIP awards are established at the beginning of each year for use in the performance evaluation process. The Committee reviews direct compensation (base salary, AIP and long-term incentives) annually. The Committee meets regularly in executive sessions without members of management present to evaluate the executive compensation program and reports regularly to the Board of Directors on its actions and recommendations.
The Committee reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a 3-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the executive compensation consultant, ClearBridge Compensation Group, LLC (“ClearBridge”).
Role of Independent Consultants
To assist the Committee in its evaluation of the executive compensation program for 2015, the Committee retained an independent compensation consultant, ClearBridge Compensation Group, LLC (“ClearBridge”). ClearBridge’s role as independent advisor to the Committee includes:
Reviewing management recommendations to ensure alignment with business and compensation objectives
Attending Committee meetings to provide information and recommendations regarding the executive compensation program while being available to participate in executive sessions and communicate with the Committee between meetings, as appropriate
Compensation Discussion & Analysis During 2017, in connection with its review of South Jersey Industries’ Executive benefit programs, the Committee also retained an independent benefits consultant, Pinnacle Financial Group (“Pinnacle”) to provide consulting services for the nonqualified deferred compensation plan and the supplemental long term disability plan. Pinnacle assisted with the plan design, financial analysis, record-keeper selection, education and communication with plan eligibles, and plan implementation. The Committee reviewed its engagement with ClearBridge and Pinnacle and believes there are no conflicts of interest between these firms and the Committee. In reaching this conclusion, the Committee considered the factors regarding compensation advisor independence set forth in the SEC rule effective July 27, 2012 and the NYSE proposed listing standards released on September 25, 2012 that were adopted by the SEC on January 11, 2013. Role of the Compensation Peer Group Along with reviewing the executive compensation program, the Committee reviews and determines the appropriate peer group companies for benchmarking purposes. Consistent with the goal of providing competitive compensation, the executive compensation programs are compared to those programs in place at identified peer companies. For 2017, the Committee, in consultation with its independent consultant, ClearBridge, selected a peer group that was comprised of 12 similarly sized gas and multi-utility companies with comparable revenue and market capitalization. The peer group consists of the following companies:
This peer group was consistent with the peer group used in 2016, with the following exceptions: ONE Gas, Inc. was added given its size and business relevance and UIL Holdings was removed following its acquisition by Iberdrola USA. For fiscal 2018, the peer group was further revised to add National Fuel Gas Company, PNM Resources, Inc., and Portland General Electric Company given their size and business relevance and remove Piedmont Natural Gas Co. following its acquisition by Duke Energy, and Questar Corporation following its acquisition by Dominion Resources. The Company used the above peer group for purposes of benchmarking salary, AIP, LTI, and TDC. The Committee relied on the peer group for all formal benchmarking. The Committee believes that the peer group data and industry compensation studies give the Committee an independent and accurate view of the market “value” of each position on a comparative basis. While the Company does not target any particular percentile at which to align pay, the Committee uses the peer group 50th percentile as a reference point when assessing compensation levels. The purpose of referencing the 50th percentile is to inform the Company of the relevant competitive market when making pay decisions and enable the Company to attract and retain qualified executives while at the same time protecting shareholder interests. Although the 50th percentile is used as a reference point, actual levels of pay depend on a variety of factors such as experience and individual and Company performance. Based on this information from ClearBridge and the performance evaluations (See “Role of the Compensation Committee” for more detail), the Committee determines the salary, target AIP, LTI and TDC for each NEO.
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