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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South Jersey Industries, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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| Utility Customers in | Customer Base |
| Southern NJ Municipalities | Growth in |
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 H. Petrowski, Joseph M. Rigby, and Frank L. Sims.
The board maintains fiveseven standing committees: the Audit Committee, the Compensation Committee,
the Corporate Responsibility Committee, the Executive Committee, the Governance Committee, the Risk Committee and the GovernanceStrategy & Finance Committee.
SJI receivedIn November, 2017, the Corporate Board Gender Diversity Award in 2015 from Executive Women of New Jersey (EWNJ) recognized SJI as a member of its A Seat at the Table Honor Roll for leadinghaving three or more women on the way in boardroom gender diversity.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, | · | ||||||
| Customer Composition | CHP and landfill gas to electric) | · | Wholesale natural gas, and retail natural gas and electric commodity marketing | |||||
 | 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 21, 2017,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 |
| 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: | |||
  | returning the proxy card by mail |   | online at www.proxyvote.com |
  | through the telephone at 1-800-690-6903 |   | attending the meeting to vote IN PERSON |
TheThe Board of Directors has fixed the close of business on February 21, 2017March 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 20, 201729, 2018
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 21, 2017.May 11, 2018. The Proxy Statement, the Proxy Card and the 2016 Performance Summary2017 Annual Report 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 | |||
| Proposal 3 - | |||
| 12 | |||
| Proposal | |||
| SECURITY OWNERSHIP | |||
| Directors and Management | |||
| CORPORATE GOVERNANCE | |||
| The Board of Directors | |||
| Board Evaluation Process | |||
| Meetings of the Board of Directors and its Committees | |||
| Audit Committee Report | |||
| Compensation of Directors | |||
| Certain Relationships | |||
| EXECUTIVE OFFICERS | |||
| Compensation Discussion & Analysis | |||
| Executive Compensation Tables | |||
| FINANCIAL | |||
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 | ||
| Date: | ||
| Time: | 8:15 a.m. - doors will open to the shareholders for continental breakfast | |
| 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 | ||
| 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 | |
| · | 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 a one-year term | FOR |
| 2 | Approval, on an advisory basis, of executive compensation | FOR |
| 3 | Approval of an | 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 Non-Votes |
| 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 | 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: tenof 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
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 | Director | Positions/Committee | |||||||||
| Name | Age | Since | Occupation | Independent | Memberships | Age | Since | Occupation | Independent | Memberships | ||
| Sarah M. Barpoulis | 52 | 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 | 69 | 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 | 62 | 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 | 65 | 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 | 58 | 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 | 72 | 2008 | Retired, Director, President and CEO at Ascendant Group Ltd. and Director, President and CEO of Bermuda Electric Light Company Limited | Yes | 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 | 55 | 2011 | Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. | Yes | 2, 5 | 56 | 2011 | Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp. | Yes | 2*, 3, 5, 6 | ||
| Michael J. Renna | 50 | 2014 | President and CEO, South Jersey Industries | No | 3 | |||||||
| Joseph M. Rigby | 60 | 2016 | Retired, Chairman, President and CEO, Pepco Holdings, Inc. | Yes | 1, 4 | 61 | 2016 | Retired, Chairman, President and CEO, Pepco Holdings, Inc. | Yes | 1, 2, 7* | ||
| Michael J. Renna | 49 | 2014 | President and CEO, South Jersey Industries | No | ||||||||
| Frank L. Sims | 66 | 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 | Audit Committee | 5 | Corporate Responsibility Committee | ||
| 2 | Compensation Committee | 5 | Corporate Responsibility Committee | Compensation Committee | 6 | Risk Committee | ||
| 3 | Executive Committee | * | Committee Chairman | 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 20172018 Annual Meeting of Shareholders. The meeting is scheduled for Friday, April 21, 2017,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
materials will be made available to shareholders is March 21, 2017.29, 2018. Copies of the proxy statement, proxy card and 2016 Performance Summary2017 Annual Report 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 2016 Performance Summary2017 Annual Report for beneficial owners of our stock.
Record Date
Only shareholders of record at the close of business on February 21, 2017March 12, 2018 may vote at the meeting. On that date, the Company had 79,516,55279,595,317 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 2016 Performance Summary2017 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 2016 Performance Summary2017 Annual Report and/or this proxy statement. Shareholders sharing an address who are receiving multiple copies of this proxy statement and/or the 2016 Performance Summary2017 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 20182019 Annual Meeting of Shareholders that is received by the Company after November 11, 201720, 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 20182019 Annual Meeting of Shareholders, but not to have such proposal included in the Company’s proxy
proxy statement and form of proxy relating to that meeting. In compliance with the Company’s bylaws, notice of any such proposal must be received by the Company between January 21, 20182019 and February 20, 2018.2019. 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 respect to such proposal. Any such proposal must be submitted in writing to the Corporate Secretary at the 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 20172018 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, Michael J. Renna, Joseph M. Rigby and Frank L. Sims. 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
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 20172018 - 2018 term.2019 term:
| 4 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
| HIGHLIGHTS OF DIRECTOR NOMINEES |
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. - 2018 Proxy Statement | | 5 |
Proposal 1 Director Elections
| The Board of Directors recommends a vote “FOR” each of the following nominees: |
 | Sarah M. Barpoulis |
Skills and Qualifications:
Age:53 | 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 SEC, and is a National Association of Corporate Directors Board Leadership Fellow. | ||
| Thomas A. Bracken |
Age:70 | |||
Since 2003, Ms. Barpoulis has provided asset management and advisory services to the merchant energy sector through Interim Energy Solutions, LLC, a company she founded. Ms. Barpoulis serves on the following boards: Director, SemGroup Corporation; Director, Educare Washington, DC; and was previously a director of Reliant Energy, Inc.
 | ||
| | ||
Skills and Qualifications:
| Director Bracken’s areas of expertise and experience include corporate governance, enterprise leadership, | ||
| • | Director Bracken is a financial expert as defined by the SEC. | |
| 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.; president, Bedens Brook Club; member, advisory board, Investors Bancorp; director, NJ Hall of Fame; director, Junior Achievement of NJ.
| • | S |
Proposal 1 Director Elections
 | |
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 is a member of the board of Rowan University, Glassboro, NJ.
 | |
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.
| 6 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
 | |
Age:63 | Skills and Qualifications: | ||
| • | Director Campbell’s areas of expertise include corporate governance, enterprise leadership, human resources, and strategy formation/execution. | ||
| SJI Boards and Committees: | |||
| • | Compensation Committee | ||
| • | Corporate Responsibility Committee | ||
| • | Risk 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. | |||
| Victor A. Fortkiewicz |
Age:66 | Skills and Qualifications: | ||
| • | Director Fortkiewicz’ areas of expertise include corporate governance, enterprise leadership, governmental and regulatory, and technical/industry. | ||
| SJI Boards and Committees: | |||
| • | Chairman of the Corporate Responsibility Committee | ||
| • | Governance Committee | ||
| • | Risk 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. | |||
| Sheila Hartnett-Devlin, CFA |
Age:59 | Skills and Qualifications: | ||
| • | Director Hartnett-Devlin’s areas of expertise and experience include corporate governance, | ||
| • | Director Hartnett-Devlin is registered with FINRA and holds Series 7 and Series 24 licenses. | ||
| • | Director Hartnett-Devlin is a financial expert as defined by the SEC. | ||
| SJI Boards and Committees: | |||
| • | Governance Committee | ||
| • | Strategy & Finance Committee | ||
| • | 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 is a member of the NY Society of Security Analysts. Ms. Hartnett-Devlin is a member of the board of Mannington Mills, Inc.
 | |
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.
| South Jersey Industries, Inc. - | | 7 |
Proposal 1 Director Elections
 |
Age:73 | 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 | ||
| • | Ex-officio member of all committees | ||
| 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. | |||
| Sunita Holzer |
Age:56 | |||
Executive Vice President, Chief Human Resource Officer, Realogy Holdings Corp., Madison, NJ | |||
| Skills and Qualifications: | ||
| Director Holzer’s areas of expertise include corporate governance, enterprise leadership, | ||
| 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 of Re: Gender.
 | |
| • | ||
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.
| 8 | | South Jersey Industries, Inc. - |
Proposal 1 Director Elections
 |
Age:50 | 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. | |||
| Joseph M. Rigby |
Age: | |||
| 61 Director since: | |||
Retired, Chairman, President and CEO of Pepco Holdings, Inc. | |||
,
Washington, D. C.
| Skills and Qualifications: | ||
| Director Rigby’s areas of expertise include | ||
| • | 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 Gas Company | |
Mr. Rigby served as the former 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 Resources,
| South Jersey Industries, Inc. - 2018 Proxy Statement | | 9 |
Proposal 1 Director Elections
 | Frank L. Sims |
Age:67 | |||
Retired, Corporate Vice President and Platform Leader, Cargill, Inc., Minneapolis, MN | |||
| Skills and Qualifications: | ||
| Director Sims’ areas of expertise include corporate governance, enterprise leadership, | ||
| • | Director Sims is a financial expert as defined by the SEC. | |
| 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 | ||
Mr. Sims has served as Interim President for Fisk University since September 2015; as board member, PolyMet Mining Co. from 2008 through July 2014; and as board member, Piper Jaffray Co. from 2004 to June 2013.
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. 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 5portion 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. We have also outperformed the median of the Company’s peer group usedincentive plan payouts tied to benchmark long-term incentive compensation in terms of total shareholder return in 5 of the last 10 three-year cycles. More recently, ourSJI results was below target. SJI’s recent stock performance washas been below our peer group, and our long-term incentive plans for the performance cyclescycle ended fiscal 2014 and2017 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 2016,2017, 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 SJI core earnings, | |
| Long-term incentive compensation granted in 2017 consists of | |
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 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 aligns 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 2425 of this Proxy statement for a more detailed discussion of executive compensation policies and procedures for our named executive officers.
Pursuant to Section 14A(a)(1) of the Exchange Act, 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 Proxy 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 3 NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A(a)(2) of the Exchange Act, we are required to provide shareholders with a separate non-binding shareholder vote on the frequency of the say-on-pay proposal which is required by Section 14A(a)(1) of the Exchange Act (and as presented in Proposal 2 of this Proxy statement). Shareholders may indicate whether they would prefer a say-on-pay advisory vote every one, two or three years. Shareholders may also abstain from voting. Accordingly, shareholders are being asked to approve the following resolution:
RESOLVED, that the shareholders of the Company approve that the frequency of the non-binding say-on-pay vote be held:
This vote will not be binding on the Board or the Compensation Committee and may not be construed as overruling a decision by the Board or the Compensation Committee nor create or imply any additional fiduciary duty on the Board. Further, it will not affect any compensation paid or awarded to any named executive officer. However, the Compensation Committee
and the Board recognize the importance of receiving input from our shareholders on important issues such as executive compensation and expect to take into account the outcome of the vote when considering the frequency with which future say-on-pay votes will be held.
The Board of Directors believes an annual frequency (i.e., every year) is the optimal frequency for the say-on-pay vote. A vote every year provides shareholders and advisory firms the opportunity to evaluate the Company’s compensation policies and procedures on a regular and more frequent basis. Specifically, because the Company makes its compensation decisions on an annual basis we believe our shareholders should have an annual opportunity to approve these decisions. We also believe that an annual frequency vote provides the highest level of accountability and direct communication with our shareholders. The Board believes a biennial and triennial say-on-pay vote would make it difficult to create the meaningful and coherent communications that the votes are intended to provide because of all the compensation actions that would occur between the votes.
Our Board of Directors unanimously recommends that shareholders vote “FOR” an annual say-on-pay non-binding advisory vote.
PROPOSAL 4 APPROVAL OF THE EXECUTIVE ANNUAL INCENTIVE COMPENSATION PLAN
On March 6, 2017, the Compensation Committee of the Board of Directors (the “Committee”) adopted the South Jersey Industries 2017 Cash Incentive Compensation Plan (“Plan”), effective as of January 1, 2017, subject to shareholder approval at the Annual Meeting. The Plan is a cash incentive plan designed to incentivize employees of South Jersey Industries (the “Company”) and replaces the Company’s 2012 Annual Incentive Compensation Plan (the “Prior Plan”).
Purpose of the Proposal
The Plan is intended to permit the Company to award performance-based compensation that is fully deductible by the Company for federal income tax purposes under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and the related regulations (referred to as “Performance-Based Compensation”). Section 162(m) of the Code generally does not allow a publicly held company to obtain tax deductions for compensation of more than $1 million paid to the Chief Executive Officer and the Company’s three other most highly paid executive officers, other than our Chief Financial Officer (referred to as our “covered employees”). Payments that qualify as Performance-Based Compensation are exempt from this limitation.
One of the requirements of Section 162(m) of the Code is that shareholders approve the material terms of the performance goals pursuant to which the compensation is to be paid at least once every five years. Accordingly, we are asking our shareholders to approve the material terms of the performance goals under the Plan in accordance with Section 162(m) of the Code. If shareholders approve the material terms of the performance goals under the Plan, assuming that all other requirements under Section 162(m) of the Code are met, the Company may be able to obtain tax deductions with respect to awards issued to our “covered employees” without regard to Section 162(m) of the Code limitations. Shareholder approval is being sought so that compensation attributable to awards under the Plan may qualify as Performance-Based Compensation.
The Committee recommends that the shareholders approve the Plan.
Description of Principal Changes to the Plan
The Board has approved certain principal changes that are reflected in the Plan, which changes are subject to shareholder approval. As adopted, in order to provide the Committee with flexibility to design awards that they believe are in the best interest of the Company and its shareholders, the Plan amends and modifies various provisions from the Prior Plan, including:
Description of the Plan
The principal provisions of the Plan are summarized below. This summary does not purport to be a complete description of all the provisions of the Plan. This summary is qualified in its entirety by the actual text of the Plan, which is attached as Exhibit A.
Effective Date:The Plan will be effective January 1, 2017, subject to the approval of the Plan by the Company’s shareholders.
Purpose of the Plan:The purpose of the Plan is to provide a link between compensation and performance, to motivate participants to achieve corporate performance objectives, to enable the Company to attract and retain high quality eligible employees and to enable the Company to provide compensation that will not fail to be deductible by reason of Section 162(m) of the Code.
Awards:The Plan provides for cash incentive awards (“Cash Incentives”) that are payable based on the achievement of certain performance goals, as described in more detail below.
Administration:The Committee will administer the Plan and will have the authority to construe and interpret the Plan and Cash Incentives awarded under the Plan. The Committee also has the discretion to:
All Cash Incentives are awarded conditional on the participant’s acknowledgement, by participation in the Plan, that all decisions and determinations of the Committee are final and binding on the participant and all other persons having or claiming an interest in such Cash Incentive.
Eligibility for Participation:Employees of the Company, a subsidiary or an affiliate are eligible to participate in the Plan, as selected by the Committee to participate in the Plan.
Cash Incentives:The Committee will award Cash Incentives to participants if the performance goals established by the Committee are met. At the beginning of each performance period, the Committee will establish each participant’s potential Cash Incentive, the performance goals applicable to the Cash Incentive, and such other conditions as the Committee deems appropriate. The performance goals may provide for differing amounts to be paid based on differing levels of performance. The performance goals for Cash Incentives that are intended to be Performance-Based Compensation will be based on pre-established performance goals, as described below.
Proposal 4 Approval of the Executive Annual Incentive Compensation Plan
Pre-Established Performance Goals for Performance-Based Compensation:Payment of Cash Incentives that are intended to be Performance-Based Compensation will be based on the attainment of one or more pre-established, objective performance goals over the designated performance period. The Committee will establish the performance goals (based on the performance goals set forth below) in writing no later than the earlier of (a) 90 days after the commencement of the performance period to which the performance goals relate or (b) the date on which 25% of such performance period has been completed (or such other date as may be required or permitted under Section 162(m) of the Code), provided that the outcome of the performance goals must be substantially uncertain at the time of their establishment.
Performance Goals:The performance goals established by the Committee may be based on any one or more of the following: annual consolidated earnings per share; share price; the market share of the Company (or any business unit thereof); sales by the Company (or any business unit thereof); return factors (including, but not limited to return on equity, capital employed, or investment; risk adjusted return on capital; return on investors’ capital; return on average equity; return on assets; and return on net assets); costs of the Company (or any business unit thereof); the Company’s total shareholder return; revenues; debt level; cash flow; capital expenditures; net income or gross income; operating income; expenses; net borrowing; goals related to mergers, acquisitions, dispositions or similar business transactions; assets; regulatory compliance; employee retention/attrition rates; individual business objectives; risk management activities; corporate value measures which may be objectively determined (including ethics, compliance, environmental, diversity commitment and safety); or implementation or completion of critical projects or processes; cost reduction targets; interest-sensitivity gap levels; weighted average cost of capital; working capital; operating or profit margin; pre-tax margin; contribution margin; book value; operating expenses (including, but not limited to lease operating expenses, severance taxes and other production taxes, gathering and transportation and general and administrative costs); unit costs; EBIT; EBITDA; debt to EBIT or EBITDA; interest coverage; comparative shareholder return; book value per share; net asset value per share; growth measures; debt to total capitalization ratio; asset quality levels; investments; economic value added; stock price appreciation; market capitalization; accounts receivables day sales outstanding; accounts receivables to sales; achievement of balance sheet or income statement objectives; assets; asset sale targets; non-performing assets; satisfactory internal or external audits; improvement of financial ratings; charge-offs; amount of the gas reserves; costs of finding gas reserves; reserve replacement ratio, reserve additions, or other reserve level measures; drilling results; natural gas production, production and reserve growth; production volume; sales volume; production efficiency; inventory to sales; and inventory turns; and any other goal that is established at the discretion of the Committee other than with respect to Cash Incentives intended to be Performance-Based Compensation.
The performance goals may be particular to a participant or the division, department, branch, line of business, subsidiary or other unit in which the participant works. The performance goals may also be based on attaining a specified absolute level of the performance goals or a percentage increase or decrease in the performance goal compared to a pre-established target, previous years’ results or designated market index or comparison
group. The performance goals do not need to be uniform among participants.
Authorized Adjustments:To the extent permitted by Section 162(m) of the Code, in setting the performance goals within the time period described above, the Committee may provide for appropriate adjustments for certain corporate events as it deems appropriate, as described in more detail in the Plan.
Award Payments:As soon as administratively practicable after the end of the applicable performance period, the Committee will certify the actual levels of performance attained for the period and the amount to be paid to each participant for the performance period. The Committee’s certification will be final, conclusive and binding on participants and all other persons.
The Committee has the discretion to reduce or eliminate the Cash Award that would otherwise be payable to a participant. However, the Committee may not award a Cash Incentive in excess of the dollar amount determined on the basis of the potential established for the particular level of performance attained. With respect to Cash Awards intended to be Performance-Based Compensation, the Committee will not waive any performance goal applicable to a participant’s Cash Incentive, except in the case of the participant’s death or disability, or under such circumstances as the Committee deems appropriate in the event of a Change in Control (as defined in the Company’s 2015 Omnibus Equity Compensation Plan, as amended from time to time).
Maximum Payment:The maximum amount of any Cash Incentive intended to be Performance-Based Compensation that may be paid to any participant is $5,000,000 for each 12-month period (or portion thereof) included within the applicable performance period.
Payment Date:Cash Incentives earned will be paid as soon as administratively practicable after the end of the applicable performance period, but in no event later than 2 ½ months after the end of the performance period. A participant will not accrue any right to receive a Cash Incentive award unless the participant remains employed until the payment date for that Cash Incentive, except as described above.
Transferability of Cash Incentives:A participant’s interest under the Plan may not be transferred, except that if a participant dies before payment is made of the actual Cash Incentive to which the participant has become entitled, then that Cash Incentive will be paid to the executor or other legal representative of the participant’s estate.
No Employment Rights:Nothing in the Plan may be construed to grant any person the right to remain in employee status for any period of specific duration, and each participant will at all times remain an employee at-will and may be discharged at any time, with or without cause.
Company Policies:All Cash Incentives under the Plan are subject to any applicable Company policies adopted from time to time by the Board.
Federal Income Tax Consequences:A participant generally will not recognize income upon the grant of an award under the Plan. Upon payment of the award, the participant will recognize ordinary income in an amount equal to the cash received. When the participant recognizes ordinary income upon payment of an award, we expect that the Company will generally be entitled to a tax deduction in the same amount.
Proposal 4 Approval of the Executive Annual Incentive Compensation Plan
Although the Plan is designed so that awards may be Performance-Based Compensation, the Committee reserves the right to grant awards that do not qualify for this exception, and, in some cases, the exception may cease to be available for some or all awards that otherwise so qualify. Thus, it is possible that Section 162(m) of the Code may disallow compensation deductions that would otherwise be available to the Company.
Amendment and Termination:The Committee may at any time amend, suspend or terminate the Plan, but no amendment will be effective without shareholder approval if such approval is required to satisfy the requirements of Section 162(m) of the Code or other applicable law or regulation.
New Plan Benefits:Any awards made under the Plan will be at the discretion of our Committee. Therefore, it is not possible at present to determine awards or amounts of awards that will be granted to any person in the future. As to awards that are currently outstanding under the Plan, the amounts payable thereunder are not determinable at this time since any amounts payable thereunder are wholly dependent upon the achievement of annual performance goals, the achievement of which will not be determined until the first quarter of 2018.
The Committee unanimously recommends a vote “FOR” the approval of the South Jersey Industries 2017 Cash Incentive Compensation Plan.
PROPOSAL 5 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 2017.2018. 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 2016.2017. During 2016,2017, 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 21, 2017,28, 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 2016 (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. |
| 14 | | 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 those 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 were increased effective 2015 as outlined below and on page 35:
| The CEO stock ownership guideline is 5 times the CEO’s annual base salary. | |
| All other executive officers are required to own shares of Company Common Stock with a market value equal to 2 times their annual salary. As of December 31, | |
| Other officers are required to own shares of Company Common Stock with a market value equal to their annual base salary; | |
| elected or promoted officers will have a period of six years following their election or promotion to a new position to meet these minimum stock ownership requirements; and | |
| 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
Company’s Common Stock. In 2016, Walter M. Higgins III, a
Director of the Company, inadvertently filed an untimely report of the beneficial ownership on a Form 4. Based on our records and other information, the Company believes that all other Section 16(a) filing requirements were met for 2016.2017.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information, as of February 21, 2017,March 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. | 9,248,697 | 11.6 | % | |||||
| 55 East 52nd Street | ||||||||
| New York, NY 10055 | ||||||||
| The Vanguard Group | 7,134,564 | 8.97 | % | |||||
| 100 Vanguard Blvd | ||||||||
| Malvern, PA 19355 | ||||||||
| 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. - | | 15 |
CORPORATE GOVERNANCE
The Board of Directors
Leadership Structure
Effective May 1, 2015, the Board of Directors decided to separate the Chairman and CEO roles, with Mr. Renna assuming the role of President and CEO, and Walter M. Higgins III, becoming the non-executive Chairman of SJI’s Board of 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
boards of publicly traded companies. SJI’s Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading “Investors”.
For 2016,2017, the Board determined that Directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, Petrowski, Rigby, 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, 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 codes of ethics for our principal executive officer and principal financial 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.
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, compchair@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
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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
> 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. In 2016,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, and self and peer evaluations.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 14 times in 2016. 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 seven times during 2016 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, Chairman of the Board, 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 20162017 Annual Meeting of Shareholders. During 2016,2017, 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 nineeight times during 2016,2017, was comprised of foursix “Independent” Directors through February 11, 2016:until April 21, 2017 and five thereafter: Sheila Hartnett-Devlin, Chairman;Chairman until April 21, 2017; Sarah M. Barpoulis;Barpoulis elected Chairman on April 21, 2017; Joseph H. Petrowski;Petrowski until April 21, 2017; Joseph M. Rigby; and Frank L. Sims. Effective February 12, 2016 there are five “Independent” Directors. Walter M. Higgins III served onis an ex-officio member of the Committee from February 12, 2016 through April 29, 2016. Joseph M. Rigby was elected to the Committee effective April 29, 2016.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 physical energy transactions, approves all methodologies used in risk measurement, ensures that objective 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, 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.
these exposures,
| South Jersey Industries, Inc. - | | 17 |
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and reviewing the guidelines and policies that govern the process by which risk assessment and management is undertaken by the Board and 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
Compensation Committee
The Board’s Compensation Committee, which met six times during 2016,2017, was comprised of fourfive “Independent” Directors in 2016:2017: Keith S. Campbell, Chairman;Chairman until April 21, 2017; Sheila Harnett-Devlin;Harnett-Devlin until April 21, 2017; Sunita Holzer;Holzer elected Chairman on April 21, 2017; Joseph H. Petrowski until April 21, 2017; and Joseph H. Petrowski.M. Rigby effective April 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
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 2016,2017, was comprised of fourfive “Independent” Directors from January 2016 to April 2016 and August 26, 2016 to present, and five Directors from May 2016 through August 25, 2016:Directors: Victor A. Fortkiewicz, Chairman (May 2015 to present);Chairman; Thomas A. Bracken, Keith S. Campbell, and Sunita Holzer and JosephHolzer. Walter M. Rigby (May 2016 through August 25, 2016).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 also oversees the production of the Company’s annual Corporate Sustainability Report, which conveys how the Company links the business with sustainable practices. The 2017 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.
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 2016 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.
Governance Committee
The Board’s Governance Committee, which met foursix times during 2016,2017, was comprised of foursix “Independent” Directors from January 2016 to August 25, 2016,2017 until April 21, 2017, and five Independent Directors from August 26, 2016 to present in 2016:thereafter: Thomas A. Bracken, Chairman; Sarah M. Barpoulis;Barpoulis until April 21, 2017; Victor A. Fortkiewicz; Sheila Hartnett-Devlin elected April 21, 2017; Joseph M. Rigby (August 26, 2016 to present)until April 21, 2017 and Frank L. Sims. Walter M. Higgins III is an ex-officio member 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.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
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 make-up and the Company’s strategic forecast. This assessment includes issues of industry experience, education, general 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.
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Executive Committee
The Board’s Executive Committee which did not meetmet one time in 2016,2017. Until April 21, 2017 it was comprised of the Chairman of the SJI Board, Chairmen of the subsidiary Boards, Committee Chairs 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; Sheila Hartnett-Devlin;Sunita Holzer; and
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 businessOfficers; and affairs. Pursuanttakes action on such matters delegated to itsthe Committee by the Board.
The Committee’s Charter is available on our website at www.sjindustries.com under the Executive Committee meets on an “as needed” basis.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 additionApril 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 the 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 processesstrategy and programs. The committee also analyzes the guidelines and policies that fall withinmanagement uses to assess and manage exposure to risk, and analyzes major financial risk exposures and the purviewsteps 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 AuditCompany’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 discussed above,finance, risk management, legal and business operations.
The RMC establishes a general framework for measuring and monitoring business risks related to ensureboth 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 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.
Strategy & Finance Committee
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 all risks, 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 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 has allocated its oversight duties as follows:of Directors, South Jersey Industries, Inc.,1 South Jersey Plaza, Folsom, New Jersey 08037.
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Risk Allocation
The Board has allocated its risk oversight duties as follows:
| Risk Areas | Board Responsibility | ||
| Corporate: | |||
| · | Strategic and Financing | ||
| · | Enterprise Wide Risk Management | Risk Committee | |
| · | Major Financial Risk Exposures | Audit Committee | |
| Operational: | |||
| · | 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 Responsibility: | Corporate Responsibility Committee | ||
| · | Legal | ||
| · | Ethical | ||
| · | Corporate Image | ||
| · | Environmental | ||
| · | Safety | ||
| Compensation | Compensation Committee | ||
| · | Compensation Program | ||
| · | Retirement Plans | ||
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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
Corporate Governance
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, 2016,2017, for filing with the Securities and Exchange Commission.
Audit Committee
Sheila Hartnett-Devlin, Chairman
Sarah M. Barpoulis, ChairmanJoseph H. PetrowskiWalter M. Higgins III, Ex Officio Member
Sheila Hartnett-Devlin
Joseph M. Rigby
Frank L. Sims
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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, 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 20162017 and 20152016 are as follows:
| FY 2016 | FY 2015 | |||||||||
| Audit Fees (a) | $2,022,618 | Audit Fees (a) | $2,385,000 | |||||||
| Fees per Engagement Letter | 1,850,000 | Fees per Engagement Letter | 1,865,000 | |||||||
| FY 2015 Audit true up billed | — | FY 2014 Audit true up billed | 50,000 | |||||||
| Audit work related to 2016 | 172,618 | Audit work related to 2015 | 470,000 | |||||||
| non-routine events | non-routine events | |||||||||
| Audit-Related Fees (b) | — | Audit-Related Fees (b) | 9,000 | |||||||
| SJESP Separate Report | — | SJESP Separate Report | 5,000 | |||||||
| Non-routine projects related to the | — | Non-routine projects related to | 4,000 | |||||||
| Benefit Plans | the Benefit Plans | |||||||||
| Tax Fees (c) | 219,289 | Tax Fees (c) | 424,526 | |||||||
| Tax Compliance | 150,525 | Tax Compliance | 139,620 | |||||||
| Fees related to tangible | 17,142 | Fees related to tangible | 107,142 | |||||||
| property regulations phase II | property regulations phase II | |||||||||
| Tax Advisory – IRC Section 263A | — | Tax Advisory – IRC Section 263A | 52,770 | |||||||
| (phase I & II) | (phase I & II) | |||||||||
| Other tax advisory services | 51,622 | Other tax advisory services | 124,995 | |||||||
| All Other Fees | All Other Fees | |||||||||
| Total | $2,241,907 | Total | $2,818,526 | |||||||
| 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 | |||||||
| (a) | Fees for audit services billed or expected to be billed relating to fiscal | |
| reviews of the Company’s quarterly financial statements, comfort letters, consents and other services related to Securities and Exchange Commission matters. |
| (b) |
| (c) | Fees for tax services provided during fiscal |
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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 20152016 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., Energen 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 November 2015,2016, 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. | |
| 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 $60,000 was aligned with the peer group median. | |
| The use of additional retainers recognizes responsibilities and the time commitment associated with serving as Non-Executive Chairman or chairing a committee. | |
Based on Cook’s findings and recommendations, in 20162017 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 $85,000 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. | $ | 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 that joined the Board 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. - | | 23 |
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 $8,000 annual retainer was paid to Joseph M.
Petrowski, who served as the Chairman of the SJES Executive Committee.Committee and the SJI Midstream Executive Committee through April 21, 2017. Director Higgins, Chairman of the South Jersey Gas Company Board of Directors, did not receive an additional retainer for this role as he received additional compensation as Chairman of the SJI Board.
Independent Director Compensation for Fiscal Year 20162017
| Change in | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fees | Non-Equity | And Nonqualified | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earned | Stock | Option | Incentive Plan | Deferred | All Other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| or Paid in | Awards ($) | Awards | Compensation | Compensation | Compensation | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Cash ($) | (1) | ($) | ($) | Earnings ($) | ($) (2) | ($) | 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 | 82,500 | 81,661 | — | — | — | — | 164,161 | 98,500 | 89,977 | — | — | — | 60 | 188,537 | ||||||||||||||||||||||||||||||||||||||||||
| Thomas A. Bracken | 82,500 | 81,661 | — | — | — | 270 | 164,431 | 88,500 | 89,977 | — | — | — | 330 | 178,807 | ||||||||||||||||||||||||||||||||||||||||||
| Keith S. Campbell | 88,000 | 81,661 | — | — | — | 270 | 169,931 | 81,333 | 89,977 | — | — | — | 330 | 171,640 | ||||||||||||||||||||||||||||||||||||||||||
| Victor A. Fortkiewicz | 80,000 | 81,661 | — | — | — | 270 | 161,931 | 85,083 | 89,977 | — | — | — | 330 | 175,390 | ||||||||||||||||||||||||||||||||||||||||||
| Sheila Hartnett-Devlin | 100,500 | 81,661 | — | — | — | 270 | 182,431 | 96,500 | 89,977 | — | — | — | 330 | 186,807 | ||||||||||||||||||||||||||||||||||||||||||
| Walter M. Higgins III | 115,000 | 120,093 | — | — | — | 270 | 235,363 | 115,000 | 129,988 | — | — | — | 330 | 245,318 | ||||||||||||||||||||||||||||||||||||||||||
| Sunita Holzer | 78,000 | 81,661 | — | — | — | — | 159,661 | 84,667 | 89,977 | — | — | — | 60 | 174,704 | ||||||||||||||||||||||||||||||||||||||||||
| Joseph H. Petrowski | 92,000 | 81,661 | — | — | — | 270 | 173,931 | 30,667 | 89,977 | — | — | — | 110 | 120,754 | ||||||||||||||||||||||||||||||||||||||||||
| Joseph M. Rigby | 54,500 | 67,158 | — | — | — | — | 121,658 | 93,500 | 89,977 | — | — | — | 60 | 183,537 | ||||||||||||||||||||||||||||||||||||||||||
| Frank L. Sims | 82,500 | 81,661 | — | — | — | — | 164,161 | 89,000 | 89,977 | — | — | — | 60 | 179,037 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | Per the |
| (2) | Represents payments made by SJI for group life 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
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.
| 24 | | 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, 2016.2017.
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 20162017 Business Highlights
Key business highlights for 20162017 are as follows:
Successful execution.Growing regulated focus.Capitalizing on favorable market conditions, With a strategic shift in 2015, the company turned its focus to growing earnings from regulated investments. In October 2017, SJI executed a highly successful secondary equity offeringannounced 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 May 2016 that generated net proceeds of $203 million. The offering, which was 5 times oversubscribed, also generated significant post-offering demand as our stock price went up 7.3% the day after the transaction closed. The funds are intended to support capital investments concentrated within our regulated businesses.New Jersey with over 681,000 customers.
Commitment to ProgressSuccessful execution. AccomplishmentsDuring 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 2016 evidenced progress in support2017.
Progress Towards the Goal:
SJI continued moving along the path towards achieving its stated goal of our five-year corporate strategic objective to achievedelivering $150 million of Economic Earnings in 2020. Economic EarningsA significant milestone along the way was the successful completion of $102.8 million reflect a nearly 4% improvement overutility base rate case that recognized the prior year, as we work toward an earnings composition that relies upon our regulated businesses
significant infrastructure investment made to provide approximately 70% of earnings.date. At the same time, substantial investments being made in customer service and organizational and individual development are expected to significantly benefit future performance.
20162017 Performance.
| SJI Economics Earnings totaled $98.1 million in 2017, compared with $102.8 million in 2016. That performance was achieved despite the strategic decision to eliminate solar project development in 2017; which development contributed $9.1 million to earnings in 2016 | |
| Economic Earnings Per Share totaled | |
| • | Our commodity marketing and fuel management business, South Jersey Energy Group, contributed |
| 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 new capacity, particularly in colder months, and | |
| The contribution from South Jersey Energy Services, our energy production business, was | |
| South Jersey Industries, Inc. - | | 25 |
Executive OfficersCompensation Discussion & Analysis
Fiscal 20162017 Compensation Highlights and Key Decisions
Based 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. peers and for our other NEOs generally between the 25th percentile and median of our peers, with positioning varying by individual.
The executive compensation program remained generally unchanged for fiscal 2016,2017, given that a number of changes were adopted in fiscal 2015 following a comprehensive review ofit continues to align with the program by our independent compensation consultant. Several minor changes were adopted
The compensation program for the NEOs during fiscal 20162017 consisted of the following pay elements:
| Base Salary | + | Annual Incentive Plan (“AIP”) | + | Performance-Based Restricted Stock (“PBRS”) | + | Time-Based Restricted Stock with a Performance Hurdle (“TBRS”) |
2016 Changes to the AIP
2016 Changes to the Long-Term Incentive (“LTI”) Program
NEO Target Total Compensation
Through the comprehensive review of the executive compensation program noted above, we 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,
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. For further details on NEO target compensation in 2016,2017, refer to the section in this CD&A entitled “Detailed Discussion and Analysis.”
CEO
| percentile of the peers, and these changes were intended to |
All Other NEOs
| 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 2017 reflects the Company’s performance:
| • | 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
Pay for Performance
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 | ||
Executive Officers
Shareholder Say-on-Pay Vote and Company Response
At the Company’s Annual Meeting of Shareholders held in April 2016,2017, 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). Ninety-fiveNinety-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:
Directly and measurably link the executive compensation program to business and individual performance with a substantial portion of the compensation designed to create incentives for superior performance and meaningful consequences for below target performance and no payout below threshold performance; Set total compensation to be competitive with peer companies to attract, retain and motivate high performing business leaders; Align the interests of NEOs with shareholders so that compensation levels are commensurate with relative shareholder returns and financial performance; Balance short-term and long-term financial and strategic objectives and reward NEOs for the businesses for which they are responsible and for overall Company performance, as appropriate; Use independent compensation consultants who report directly to the Committee; and Use the peer group 50th percentile as a reference point when assessing compensation levels.
Compensation Discussion & Analysis
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. Descriptions of each component of the compensation program for the NEOs are set forth below:
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.
Compensation Discussion & Analysis Specific 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 independent compensation consultants who reaffirmed that for FYE
At the beginning of considering the NEOs’ target total pay positioning generally Following the salary increases, as well as increases to the AIP and LTI opportunities for certain NEOs, as described in the 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.
Annual Incentive Plan Each NEO had a pre-established AIP opportunity for metrics discussed below. The Target AIP Awards for the NEOs
The AIP drives and rewards short-term performance. The performance metrics used for the NEOs for objectives. Performance and resulting payouts for each metric were assessed independently. Specific metrics and weightings vary by individual based on role and responsibility as set forth below:
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 core earnings component of the annual incentive plan unless threshold performance is met. Our core earnings are defined as our economic earnings less investment tax credits and adjusted for non-operational events. 2016. Therefore, core earnings performance at or above prior year actual performance For SJI core earnings, the goals and payout scales, and actual results for
SJI core earnings of For SJG core earnings, the goals and payout scales, and actual results for
SJG core earnings of
In addition to the financial performance components used to determine the AIP awards described above, awards to NEOs 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 performance highlights for the year included: continuing to execute the Fiscal Stephen H. Clark
Jeffrey E. DuBois
David Robbins
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% at target to 150% 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,
The
Long-Term Incentives Awards Granted in For (“TBRS”) with a performance
PBRS awards are earned based on the following performance measures:
TSR directly ties to shareholder return and economic earnings growth is a financial measure that links 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-term performance awards and reflect rigorous performance The economic earnings goals are set at levels that require long-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.
Compensation Discussion & Analysis Specific performance and the resulting payout will be interpolated between the levels indicated below. PBRS can be earned from 50% of target shares 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
TBRS grants made in for deductibility under Fiscal The Compensation Committee considered the data provided by the independent compensation consultants, which reaffirmed the Compensation Committee’s understanding that, for opportunities were below market for
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs’ grants are provided in the “Grants of Plan-Based Awards and Outstanding Equity Awards” tables.
Fiscal 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 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:
For EPS growth, the goals and payout scales, and actual results for 2017 were as follows:
For ROE, the goals and payout scales, and actual results for 2017 were as follows:
For the three-year performance cycle ended December 31,
Benefits and Perquisites 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, 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”) Employees who became officers prior to 2016 are also covered by a supplemental retirement plan (the “SERP”) upon attaining age 50. Compensation under the SERP is considered as base
Non-Qualified Performance-Based Defined Contribution Plan (the “PBDCP”) Beginning in 2016, newly appointed Officers may participate in the PBDCP. Each year, Officers/NEOs in the PBDCP may receive an “Employer Credit” which is a company contribution that is a percentage of annual cash compensation ranging from 8%-12% of compensation based on the age of the
Compensation Discussion & Analysis Supplemental Saving Plan Contributions The Internal Revenue Code limits the contributions that may be made by, or on behalf of, an individual under defined contribution plans such as the Company’s 401(k) Plan. NEOs
Disability Insurance NEOs are eligible for short-term disability benefits equal to 100% of the NEO’s base salary for a certain period of time depending on years of service. Long-term disability (LTD) begins upon the expiration of temporary disability benefits and is generally paid at a rate of 60% of the NEO’s base salary up
Group Life Insurance NEOs are provided with both group life insurance and 24- Hour Accident Protection coverage. The insurance premiums for these benefits are paid by the Company and the NEO is responsible
Supplemental Survivor’s Benefit Upon the death of any NEO while employed by the Company, his/her surviving beneficiary shall receive a lump sum payment of $1,000 to be paid as soon as practical following the NEOs’ death. The surviving beneficiary will receive a lump sum death benefit based upon years of service with the Company in the
Other Benefits and Perquisites NEOs are provided an automobile to be used for business and at the NEO’s discretion, for commuting and other non-business purposes. Each NEO is responsible for any federal and/or state income taxes that result from non-business usage. The Company provides NEOs with an annual physical examination at the Company’s expense. 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 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 To assist the Committee in its evaluation of the executive compensation program for
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 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 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 peer group was further revised to add
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. Severance/Change in SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Change in Control (“CIC”) agreements which provide the Company’s senior executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Effective with the 2015 LTI grants, equity award agreements provide for “double trigger” vesting upon a change in control. Further, under the 2015 Omnibus Equity Compensation Plan, in the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested as of the date of such termination. However, if the vesting of any such award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the “Change in Control Agreements and Other Potential Post-Employment Payments” section for further details.
Compensation Discussion & Analysis Stock Ownership Guidelines and Holding Requirements The Company has stock ownership guidelines in place for NEOs to reinforce alignment with shareholders.
years to achieve their ownership guidelines. As of December 31, Additionally, a stock holding period was introduced in 2015 that requires all of the NEOs to retain at least 50 percent of vested and/or earned shares, net of taxes, until their new stock ownership guideline has been met. Clawback Policy The Company including our NEOs in the event of a material negative financial restatement due to fraud, negligence, or intentional misconduct. Anti-Hedging and Anti-Pledging Policies The Company in any hedging or monetization transactions with respect to the Company’s securities. Other Compensation-Related Matters Accounting for Share-Based Compensation Share-based compensation including restricted stock, restricted stock units and performance share awards are accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), Compensation – Stock Compensation. Impact of Tax Treatment on Compensation Section 162(m) of the Internal Revenue Code limits the deduction allowable for compensation paid to certain NEOs over $1 million. Qualified performance-based compensation is excluded from this limitation if certain requirements are met. While the Company generally attempts to preserve the federal income tax deductibility of compensation paid, to the extent consistent with its business goals, the Committee weighs the benefits of full deductibility with the other objectives of the executive compensation program and reserves the right to pay the Company’s employees, including NEOs, amounts which may or may not be deductible under Section 162(m) or other provisions of the Internal Revenue Code. Section 162(m) was changed substantially in connection with the adoption of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 (the “Act”). Under the Act, the “qualified performance-based” compensation exemption was repealed for tax years beginning in 2018, unless such compensation qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. The application and interpretation of the transition relief under the legislation is ambiguous and although we expect that certain incentive compensation will satisfy this transition relief, no assurances can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) as “qualified performance-based” compensation will, in fact, be fully deductible.
Risk Assessment The Committee reviews its compensation programs in order to help mitigate the effects of excessive risk-taking. Through a combination of incentive compensation that has a short and long-term focus, the Company tries to establish an appropriate balance between achieving short-term and long-term goals. In addition, the Committee utilizes multiple metrics to help ensure that there is not undue focus on any particular financial result to the detriment of other aspects of the business. Payout schedules related to the metrics are measured after the completion of the appropriate time horizon to help ensure a full assessment of the metric. Finally, in formulating and reviewing the executive compensation policies, the Committee considers whether the policy’s design encourages excessive risk-taking and attaches specific measurable objectives to the extent possible. During
Compensation Discussion & Analysis Executive Compensation Tables Summary Compensation Table
All Other Compensation As of Fiscal Year End
Grants of Plan-Based Awards The following table sets forth certain information concerning the grant of awards made to the Named Executive Officers during the year ended December 31, Grants of Plan-Based Awards -
Equity Awards The following table sets forth certain information concerning outstanding restricted stock awards for the Named Executive Officers as of December 31, Outstanding Equity Awards at Fiscal Year-End -
Compensation Discussion & Analysis
Stock Vesting - The following table sets forth certain information concerning the vesting of restricted stock for the Company’s Named Executive Officers during the year ended December 31, Stock Vested – Stock Awards
Pension Benefits Table
Compensation Discussion & Analysis
Nonqualified Deferred Compensation Table The following table sets forth certain information regarding the Company’s Restricted Stock Deferral Plan Company’s NEOs pursuant to previously issued performance-based, restricted stock grants. The Company does not make contributions to the plan, and all earnings referenced in the table represent dividends paid on outstanding shares of common stock. Beginning July 2017, the company implemented a Non-Qualified Deferred Compensation Plan which offers NEOs and other highly compensated employees the ability to defer pretax base compensation and AIP awards in excess of the maximum benefits that may be provided under the Saving Plan as a result of limits imposed by the Code. Generally, NEOs may elect to defer up to 75 percent of salary and up to 100 percent of AIP. Deferral elections are made annually by eligible participants in respect to compensation to be earned for the following year. There were no contributions by the NEOs under the Non-Qualified Deferred Compensation plan in 2017.
Compensation Discussion & Analysis
Change in Control Agreements and Other Potential Post-Employment Payments All Named Executive Officers are party to a Change in Control Agreement (“CIC Agreement”) that provides for severance benefits upon a qualifying termination following a change in control. A summary of the CIC Agreement terms are set below:
Accelerated vesting of all time-based equity awards and vesting of performance-based equity awards only to the extent provided in the award agreement evidencing the performance based award. In addition to the CIC Agreements, all Named Executive Officers participate in the South Jersey Industries, Inc. Officer Severance Plan effective January 1, 2013 (the “Officer Severance Plan”) that provides for the following benefits upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control:
Accelerated vesting of all time-based equity awards while performance-based awards vest only to the extent provided in the award agreement evidencing the performance-based awards.
Below is an estimate of the amounts payable to each NEO assuming various termination of employment scenarios on December 31, Termination As of Fiscal Year End
Compensation Discussion & Analysis Below is a description of the additional assumptions that were used in determining the payments in the tables above upon termination as of December 31, Retirement
NEOs are entitled to pro-rated vesting of PBRS upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRS awards upon retirement, based on the applicable 3-year vesting period and achievement of the performance condition. The amounts for Messrs. Clark and *Mr. DuBois retired from the position of Executive Vice President and Chief Operating Officer, SJI effective December 31, 2017. In connection with his retirement, he was entitled to (i) a payout of his 2017 annual incentive award in the amount of $312,375, (ii) his company car, phone, computer, and tablet, with an aggregate fair market value of $20,123, as included in the Summary Compensation Table and (iii) a pro-rated payout of all outstanding shares of restricted stock, based on his service during the applicable performance period and the actual performance achieved. Assuming a pro-rated payout at actual performance for the 2015 PBRS awards, a pro-rated payout at target level for the 2016 and 2017 outstanding PBRS awards, a pro-rated payout at actual performance for the 2015, 2016, and 2017 TBRS awards, and using the market value of the Company’s common stock as of December 31, 2017 of $31.23, the value of the outstanding restricted stock awards would be $528,880. Mr. DuBois is also entitled to certain pension benefits as described under the Pension Benefits Table. Change in Control (CIC) A change in control generally means any of the following: (1) consummation of a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not own 50 percent or more of the shares of the surviving corporation; (2) sale or other disposition of substantially all of the assets of the Company; (3) election to the Board of Directors of SJI a new majority different from the current slate, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or (4) the acquisition by any person(s) of 30 percent or more of the stock of SJI having general voting rights in the election of directors.
Section 280G Modified Cutback Termination Following a Change in Control (Good Reason or Without Cause) – The CIC Agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that the payments will be limited to the greater of (i) the dollar amount which can be paid to the NEO without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments. Equity Compensation Retirement– NEOs are entitled to pro-rated vesting of PBRS upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRS awards upon retirement, based on the applicable 3-year vesting period and achievement of the performance condition. The amounts for Messrs. Clark and Change in Control – Upon a qualifying termination following a change in control, the award agreements currently provide that all unvested PBRS awards that are outstanding vest and pay at target level performance. TBRS awards that are outstanding will fully vest. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the NEO, each following a change in control. The amounts disclosed represent the value of outstanding Termination Without a Change in Control – Under the Officer Severance Plan, upon an NEO’s qualifying termination, TBRS awards that are outstanding will fully vest. PBRS awards that are outstanding are forfeited, in accordance with the terms of the award agreements. A qualifying termination includes an involuntary termination without cause for the Company or a resignation for good reason by the NEO, absent a change in control. Stock Price – Assumed to be
Compensation Discussion & Analysis CEO Pay Ratio The ratio of our CEO’s compensation to our median employee’s compensation was calculated as required by the SEC pursuant to Item 402(u) of Regulation S-K. Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee. We determined our median employee based on 2017 W-2 gross earnings for all individuals who were employed by the Company as of December 31, 2017, excluding our CEO. This included all full-time and part-time employees of the Company aside from the CEO. Compensation was annualized for employees hired or on leaves of absence during the year. After identifying the median employee, we calculated the median employee’s total 2017 compensation in the same way as calculated for our NEOs in the Summary Compensation Table included in this Proxy Statement. Calculated in this manner, our median employee compensation was $157,088. Our CEO’s total 2017 compensation, as set forth in the Summary Compensation Table was $8,287,026. Therefore, our CEO to median employee pay ratio was 53 to 1. As described in the Summary Compensation Table on page 38, Mr. Renna’s change in pension value and nonqualified compensation earnings for 2017 is not reflective of his compensation levels going forward. If we eliminated the change in pension value and nonqualified compensation earnings from our median employee and CEO’s total compensation, our CEO to median employee pay ratio would have been 30 to 1. Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2017 relating to equity compensation plans of the Company pursuant to which grants of restricted stock, options or other rights to acquire shares may be made from time to time. Equity Compensation Plan Information
FINANCIAL
A copy of the Company’s Upon written request of any person who on the record date for the Annual Meeting was a record owner of the Common Stock, or who represents in good faith that he or she was on that date a beneficial owner of such stock and is entitled to vote at the Annual Meeting, the Company will send to that person, without charge, a copy of its By Order of the Board of Directors,
March
Please note the meeting location!
Directions to
Resorts Casino Hotel, The
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. DIRECTIONS TO RESORTS CASINO HOTEL IN ATLANTIC CITY From Philadelphia Cross the Benjamin Franklin Bridge or Walt Whitman Bridge and follow the North-South Freeway (Route 42) to the Atlantic City Expressway. At the base of the Atlantic City Expressway, turn left onto Pacific Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts. From New York Take the New Jersey Turnpike to the Garden State Parkway (Exit 11). Proceed south on the Parkway to Exit 38 (Atlantic City Expressway). Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts. From Baltimore/Washington D.C. Take I-95 North across the Delaware Memorial Bridge and follow Route 40 East to the Atlantic City Expressway. Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Pacific Avenue. Continue to North Carolina Avenue. Turn right onto North Carolina to Resorts. Preliminary Proxy Card
Admission Ticket 2018 Annual Meeting The top portion of this proxy card is your admission ticket for entry into the Annual Meeting of Shareholders. 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 at the DIRECTIONS TO RESORTS AC IN ATLANTIC CITY From
North Carolina to Resorts. From
Take
From Baltimore/Washington D.C. Take I-95 North across the Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Form 10-K and E41844-P01253
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