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Section 1: DEF 14A (DEF 14A)

DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant                              Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material pursuant to §240.14a-12


XCEL ENERGY INC.

(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

          

 

  (2) Aggregate number of securities to which transaction applies:

          

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

          

 

  (4) Proposed maximum aggregate value of transaction:

          

 

  (5)   Total fee paid:

          

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

          

 

  (2) Form, Schedule or Registration Statement No.:

          

 

  (3) Filing Party:

          

 

  (4) Date Filed:

          

 

 

 

 


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LOGO

 

Xcel Energy®
LEADING THE ENERGY FUTURE
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT


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Powering the lives of our customers and communities is at the

core of what we do each day. We are committed to delivering

clean energy without sacrificing reliability or affordability.

 

We understand the tremendous responsibility we have to ensure public safety,

drive economic growth in our communities and protect the environment.

 

This responsibility is deeply ingrained in our DNA.

 

      
      

 


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LOGO   

 

Ben Fowke

Chairman of the Board, President and

Chief Executive Officer

April 3, 2018

Dear Fellow Shareholders:

Xcel Energy looks forward to welcoming you to St. Cloud, Minnesota for our 2018 Annual Shareholders’ Meeting! We have many exciting things underway across our service territories and I look forward to showcasing our operations, community involvement, and team in our northern territory, a vibrant and major portion of our business.

2017 was another outstanding year for Xcel Energy. Highlights of the year include:

 

    Meeting or exceeding our annual ongoing earnings guidance for the 13th consecutive year
    Increasing our dividend for the 14th consecutive year
    Exceeding total shareholder return for our 21-member industry peer group on a one-, three-, and five-year basis
    Gaining further recognition as a leader, innovator, and partner in our communities for clean energy solutions
    Delivering strong results on reliability, safety, and affordability, the table stakes of our business

We have many opportunities in front of us, including strategic investments that will serve our customers and our shareholders well into the future. Xcel Energy’s future is bright, and I look forward to sharing more with you regarding our plans for:

 

    Leading the clean energy transition through our “steel for fuel” growth strategy, providing shareholder, customer, and environmental value
    Enhancing our customers’ experience, building customer loyalty and satisfaction
    Keeping customer bills low, all while delivering outstanding service and value

Details for meeting attendance are included in this proxy statement. You can also listen to the meeting via webcast at www.xcelenergy.com.

Also enclosed are details for how and when to vote and other important information. Your vote is very important, so please cast it promptly.

Thank you for your confidence in us. I hope to see you in St. Cloud.

Sincerely,

 

LOGO

Ben Fowke

Chairman, President and Chief Executive Officer


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LOGO   

 

Chris Policinski

Lead Independent Director

April 3, 2018

Dear Fellow Shareholders:

On behalf of the Board of Directors, I join Ben in inviting you to Xcel Energy’s 2018 Annual Shareholders’ Meeting. Your Board is committed to effective governance that delivers both strong results for you and great value for customers.

We are proud to have delivered those results consistently over time. Our sound governance practices combine the benefits of strong, independent oversight with broad expertise and strong management that — working together — allow us to successfully execute innovative strategies in a complex and changing industry. Our practices ensure effective Board operations, encourage independent thought and judgment, and execute appropriate levels of Board oversight to produce these consistent and strong results.

We are committed not only to delivering outstanding results, but also representing your interests. These and other practices are detailed in the proxy statement, which I encourage you to review as you cast your vote.

As your Lead Independent Director, I am focused on the important obligations that our Board owes to you, our shareholders. My responsibilities include reviewing and approving the agenda for our Board meetings to ensure they cover key areas of Company focus, working with the Chairman to provide the directors information needed to effectively govern, developing and executing succession plans to ensure strong independent oversight over the long term, and acting as a regular communications channel between our independent directors and our chief executive officer — duties all designed to ensure the efficient operations of the Board and effective oversight of the Company.

It is my privilege to serve as Xcel Energy’s Lead Independent Director, and I look forward to continuing my service to the Company. Know that your Board remains focused on delivering value to you, today and long into the future.

Thank you for investing in Xcel Energy. We look forward to another great year.

Sincerely,

 

LOGO

Chris Policinski

Lead Independent Director


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Table of Contents

 

   
Notice of 2018 Annual Shareholders’ Meeting        
Proxy Summary     1  
Corporate Governance     7  

Leadership Structure and Roles

    9  

Risk Oversight

    10  

Board Committees

    11  

Practices

    13  

Board Planning and Composition

    15  

Board Statistics

    16  

Governing Documents

    17  
Proposal No. 1 Election of Directors     18  

Nominees

    19  
Beneficial Ownership of Certain Shareholders     25  

Share Ownership of Directors and Officers

    25  

Largest Owners of Xcel Energy’s Shares

    26  
Proposal No. 2 Advisory Vote on Executive Compensation     27  

Recommendation and Background

    27  
Compensation Discussion and Analysis     28  

Highlights

    29  

2017 Performance

    29  

2017 Compensation

    29  

Compensation Philosophy

    29  

Executive Compensation Practices

    30  

Impact of 2017 Say on Pay Vote

    30  

What We Pay and Why

    31  

Establishing Target Compensation

    31  

Peer Group

    31  

Executive Compensation Elements

    32  

Mix of Total Compensation

    33  

Overview of Target Total Compensation for 2017

    33  

Base Salary

    33  

Annual Incentive

    34  

Long-term Incentives

    35  

Retirement and Deferred Compensation Benefits

    37  

Additional Compensation Program Features and Policies

    37  

Severance Policy

    37  

Employment Contracts

    37  

Stock Ownership Requirements

    37  

Equity Grant Practices

    38  

Hedging and Pledging

    38  

Recoupment

    38  

Risk Assessment

    39  

Deductibility of Executive Compensation under IRC Section 162(m)

    39  
   
Report of the Compensation Committee     40  
Executive Compensation Tables     41  
CEO Pay Ratio     54  
Director Compensation     55  

Annual Equity Grant

    55  

Director Compensation Table

    55  

Director Stock Ownership Guidelines

    56  

Stock Equivalent Program

    56  
Proposal No. 3 Ratification of the Appointment of Deloitte  & Touche LLP as Xcel Energy Inc.’s Independent Registered Public Accounting Firm for 2018     57  
Report of the Audit Committee     58  
Independent Registered Public Accounting Firm     59  

Audit and Non-Audit Fees

    59  

Audit Committee Pre-Approval Policies

    59  
Additional Information     60  

Related Person Transactions

    60  

Section 16(a) Beneficial Ownership Reporting Compliance

    60  
Questions and Answers about the Proxy Materials and the Annual Meeting     61  
Exhibit A     A-1  
Driving Directions     Inside Back Cover  
Annual Meeting Guidelines     Back Cover  
 

 

 


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Forward-Looking Statements

The statements contained in this proxy statement about our future performance, including, without limitation, future financial and operational results, strategies, prospects, consequences and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”), and available on our website: www.xcelenergy.com. These reports address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this proxy statement. In addition, any forward-looking statements included herein represent our estimates only as of the date hereof and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws.


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Xcel Energy Inc.

414 Nicollet Mall, Minneapolis, MN 55401    

 

  Notice of 2018 Annual Shareholders’ Meeting

 

 

 
 

Meeting Information

 

    

Voting Information

 

•   Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting.

 

•   Your broker will NOT be able to vote your shares with respect to the election of directors and most of the other matters presented at the meeting unless you have given your broker specific instructions to do so. We strongly encourage you to vote.

 

•   You may vote via the internet, by telephone, or, if you have received a printed version of these proxy materials, by mail.

 

•   See “Questions and Answers about the Proxy Materials and the Annual Meeting” beginning on page 61 of this proxy statement for more information.

 

 

  Time and Date  

11:00 a.m. CDT

May 16, 2018

 

    
  Attend in Person  

River’s Edge Convention Center
10 4th Avenue South
St. Cloud, Minnesota 56301

 

    
  Record Date  

March 20, 2018

 

    
        

 

Annual Meeting Agenda

Proposals

  1. Election of 12 directors named in the proxy statement

 

  2. Approval of executive compensation in an advisory vote

 

  3. Ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2018

 

  4. Transaction of other business that may properly come before the meeting

 

Attending in Person

 

    You do not need to attend the annual meeting to vote if you submit your proxy in advance.
    To attend the annual meeting, you will need to:
    provide proof of your stock ownership as of the record date;
    reserve an admission ticket; and
    provide government-issued photo identification (such as a driver’s license) prior to entering the meeting.
    Doors open at 10:15 a.m.
    Meeting starts at 11:00 a.m.
    Please refer to the Questions and Answers Section under “Are there any rules regarding admission to the Annual Meeting?” on page 63 and “How do I make a reservation to attend the Annual Meeting?” on page 64.

Notice of Internet Availability of Proxy Materials or this proxy statement and proxy card are being distributed on or about April 3, 2018. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 16, 2018: Our 2018 proxy statement and Annual Report are available free of charge at www.proxydocs.com/xel

You are receiving these proxy materials in connection with the solicitation by the Board of Directors (“Board”) of Xcel Energy Inc. (referred to in this proxy statement as “Xcel Energy,” the “Company,” “we,” “us,” and “our”) of proxies to be voted at Xcel Energy’s 2018 Annual Meeting of Shareholders. Please vote on the proposals described in this proxy statement.

Thank you for investing in Xcel Energy.

 


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LOGO

 

Proxy Summary Proxy Summary Voting Matters and Board Recommendations: Board Vote Recommendation Page Reference (for more detail) Proposal No. 1 Proposal No. 2 Proposal No. 3 Election of Directors Candidates provide the needed experience and expertise to govern the Company and ensure strong independent oversight. Advisory Vote on Executive Compensation Xcel Energy’s executive compensation plan is market based, performance driven, and aligned with shareholder interests. Ratification of the Appointment of Deloitte & Touche LLP as the Independent Registered Public Accounting Firm for 2018 All independence standards have been met and sound practices are employed to ensure strong, independent financial governance. FOR each nominee Page 18 FOR Page 27 FOR Page 57 How to Vote If you held shares of Xcel Energy common stock as of the record date (March 20, 2018), you are entitled to vote at the annual meeting. By Internet — Go to the website at www.proxypush.com/xel, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card or on your Notice of Internet Availability of Proxy Materials. By Telephone — Call 1-866-883-3382, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card. By Mail — If you received a full paper set of materials, date and sign your proxy card exactly as your name appears on your proxy card and mail it in the enclosed, postage-paid envelope. If you received a Notice of Internet Availability of Proxy Materials, you may request a proxy card by following the instructions in your Notice. You do not need to mail the proxy card if you are voting by internet or telephone. In Person — At the annual meeting. 2018 Xcel Energy Proxy Statement 1


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Proxy Summary Corporate Governance Our proven track record of delivering strong financial and operational results is rooted in a foundation of excellent corporate governance and a culture of compliance. Shareholder Value Strong Operational and Financial Results Sound Corporate Governance Strong Governance Practices Independent Oversight Shareholder Rights Regular executive sessions Tenure and overboarding policies Annual Board and committee evaluations Annual strategy and risk review 11 independent directors Lead Independent Director elected annually Committees composed entirely of independent directors Directors elected by majority vote Annual advisory vote on executive compensation No supermajority approval provisions Proxy access right Good mix of diverse directors with varied experience and tenure Board governance process for cybersecurity Direct Board interaction with employee groups New director elected Committee assignments refreshed Commitment to robust succession planning Direct governance outreach to shareholders representing more than 40% of outstanding shares Direct investor relations outreach to active institutional investors representing nearly 70% of shares Governance Highlights Our Board is composed of the right skill mix and has a healthy succession cadence. 9 92% 33% 92% 67% Years Average Tenure Are Independent Are Female and/or Minority Have C-suite Experience Have Environmental Experience Recognized for two consecutive years as one of Corporate Responsibility Magazine’s 100 Best Corporate Citizens for performance related to the environment, employee relations, corporate governance, financial results and community support 2018 Xcel Energy Proxy Statement 2


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LOGO

 

Proxy summary Financial Results Retaining the trust and confidence of our shareholders, customers and policymakers remains a top priority. Our 2017 results demonstrate our continued ability to deliver on that commitment. Total Shareholder Return Xcel Energy 21-Member Peer Group EEI Investor-Owned Electrics(1) 21.9% 8.8% 11.7% 48.3% 21.9% 26.1% 115.3% 78.8% 83.7% One Year Three Year Five Year Track Record of Success 2016-2017 2005-2017(CAGR) Ongoing eps growth(2) 4.1% 5.9% Met or exceeded ongoing EPS guidance for 13 consecutive years Dividend Growth 5.9% 4.4% Increased dividend for 14 consecutive years Stock Price 18.2% 8.3% CAGR reflects YE 2005 to YE 2017 Honored on the Forbes Global 2000 list of Top Regarded Companies (1) EEI index is market capitalization-weighted and was comprised of 43 companies as of December 31, 2017. (2) Ongoing EPS is a non-GAAP number and is defined in Exhibit A, which reconciles this amount to GAAP EPS for each period. 2018 Xcel Energy Proxy Statement 3


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LOGO

 

Proxy summary Our Strategy We strive to be the preferred and trusted provider of the energy our customers need. Given the changing energy landscape, we will continually adapt our business to meet the evolving needs of our customers, investors and policymakers. With oversight by our Board of Directors, we are working to do so through our three strategic priorities—lead the clean energy transition, keep bills low and enhance the customer experience. Priority Lead the Clean Energy Transition Notable Accomplishments Announced the largest multi-state investment plan for wind capacity in the country; plans for 12 new wind farms Reduced carbon emissions by 35% since 2005, with plans to reduce by 50% by 2022 and by approximately 60% by 2030, assuming we are able to execute on our plans(3) Named the No. 1 U.S. utility wind energy provider by the American Wind Energy Association since 2005 Keep Bills Low Average residential electricity bill has decreased by 3% since 2013 Held operating and maintenance expenses relatively flat for the past three years Renegotiated biomass contracts that are estimated to save customers in excess of $600 million over the next decade Recognized by the Department of Energy for energy efficiency cooling programs that help customers save energy and money Enhance the Customer Experience Launched a program in Minnesota for customers to purchase up to 100% renewable energy at a fixed price, with Colorado to follow in 2018 Helped customers save more than 1,000 gigawatt hours through our energy efficiency programs Honored by our customers with three awards for exceptional customer service through the Edison Electric Institute (3) Emissions reduction percentage is calculated for electricity used to serve Xcel Energy customers. 2018 Xcel Energy Proxy Statement 4


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Proxy summary Responsible by Nature We see our success today and in the future not simply as a measure of profit but equally as our broader impact on the public good. The safe, clean, reliable and affordable energy we provide enables our local economies and individuals to thrive and communities across our territory to grow, develop and achieve their goals. Priority Plans and Progress Environmental Responsibility We are working to provide cleaner energy in a way that is affordable for our customers. Plan to grow renewables from 27% of our generation portfolio today to more than 45% in 2022 Plan to retire over 40% of owned coal-fueled capacity by the end of 2026, as compared to 2005 levels Offer more than 150 energy efficiency and conservation programs Reduced water consumption by more than 40%, sulfur dioxide emissions by 72%, and nitrogen oxide emissions by 76% since 2005 Community Responsibility We are committed to help strengthen the communities in which we live and work. Employees and our Foundation donated more than $8 million in 2017 in support of STEM education, economic stability, environmental stewardship, and access to the arts and culture Provided 71% of our normal goods and services spend—more than $2.5 billion—to local businesses in 2017 Contributed funds back into our communities as a significant property taxpayer in the states where we live and work Provided nearly $60 million in energy assistance for low-income, elderly and other at-risk customers in 2017 Long-Term View Our investors look to us to help them create a secure future for their clients, and we effectively manage risk to retain that trust. We are preparing for the long term: our business will look different in an increasingly digitized world, requiring different skills and investments. Transitioning our generation portfolio to more renewable sources, adding 3,680 megawatts of wind by the end of 2021 Operating our nuclear fleet to provide reliable, affordable, carbon-free energy for customers through license life Investing over $1 billion in grid intelligence and security in the next decade to enable more renewable and distributed generation Piloting and planning for more batteries and electric vehicles as generation, storage and vehicle advancements occur Investing in our workforce by offering competitive wages and benefits, and nurturing our talent pipeline through interns, diverse and veteran hiring, and supporting youth STEM education Learn more about Xcel Energy’s environmental, social and economic contributions in our annual Corporate Responsibility Report, published in June at xcelenergy.com/CorporateResponsibility 2018 Xcel Energy Proxy Statement 5


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Proxy summary Results-Driven Compensation Our compensation programs are performance based and market competitive, aligning incentive opportunities with the performance expected of us by our shareholders and customers. Performance Market Equity-based Based Competitive Incentive Majority of executive compensation is at risk, and pay is aligned with performance Motivates achievement of financial, operational and stock price performance goals Enables us to attract and retain talented leaders Compares us to a 21-member industry peer group Focuses on long-term shareholder value Aligns executive interests with those of shareholders and rewards for strategic success Annual Incentive Pay Customer Reliability Employee 60% 20% 20% Customer Safety, Affordability and Loyalty Grid Reliability Employee Safety Long-term Incentive Pay Total Shareholder Return Environment Leadership Continuity 50% 30% 20% Relative to Peer Companies Reduction in CO2 Emissions Continued Service Timeframe Notable Accomplishments Achieved best-ever performance in employee safety, public safety and electric system reliability Held operating and maintenance expenses relatively flat for the past three years Ensured solid nuclear operations with a 91% capacity factor and both stations in NRC Column 1 status Reduced carbon emissions by 35% since 2005 Recognized among Fortune magazine’s Most Admired Utilities, based on quality of products/services, quality of management and long-term investment value 2018 Xcel Energy Proxy Statement 6


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Corporate Governance    

 

 

Corporate Governance

Serving shareholders well is a key priority for your Board. We believe that the most effective oversight comes from:

 

    Strong and effective practices in corporate governance and ethical business conduct as we believe these practices create the business culture that results in successful performance.

 

    Directors that represent a diverse range of experience and perspectives to provide the collective skills, qualifications and attributes necessary to provide sound governance.

 

    A Board that works well as a whole and plans for its own refreshment with members bringing their experience to the table and dialoguing freely with each other and management to create an environment that results in well functioning oversight.

Xcel Energy has the practices, the Board, and the management team to deliver consistent and strong results for shareholders.

We regularly monitor issues and trends in corporate governance and employ practices that best serve shareholders. Current practices include:

 

    Leadership and organization most appropriate to our business. Ours is a rapidly changing business that benefits from industry experience and expertise coupled with strong independent oversight. Through the roles of the Chairman and CEO, Lead Independent Director, and committees of independent directors, we are best positioned to continue delivering strong results. We annually review and confirm this structure to ensure it remains the best suited for our business.

 

    Sound practices to ensure effective Board operations and independent oversight. To ensure the Board remains focused on the right issues over time, Xcel Energy employs sound practices to regularly review and refresh charters and practices in light of current enterprise risk assessments.

 

    Effective Board planning and succession. Succession planning is important for both management and the Board. We employ good practices to ensure Board refreshment over time while maintaining director experience to ensure effective oversight over the long term.

 

    Strong governance practices. Serving shareholders well is a top priority for Xcel Energy. We keep abreast of developments in corporate governance and practices and adopt those that best serve our shareholders.

 

    Regular oversight of key corporate policies. Our governance practices set the foundation for excellent management and operations for the Company. Corporate policies communicate expectations to employees so that they understand and adhere to good business conduct.

 

2018 Xcel Energy Proxy Statement  |  7

 


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    Corporate Governance

 

    

 

Highlights of our practices are summarized on the following table, followed by additional explanation of key features.

 

 

Summary of Governance Practices

 

 

Structure

 

 

Lead Independent Director

 

 

Specified duties to ensure robust independent oversight and effective flow of information between management and independent directors.

 

 

Committees

 

 

Membership and chairs determined to leverage directors’ expertise and development to provide effective oversight over their tenure.

 

 

Independence and Expertise    

 

 

Governance, Compensation and Nominating Committee (“GCN”) regularly reviews and validates director independence and assesses desired expertise for potential new directors to ensure the Board is appropriately refreshed and well positioned to effectively manage risks and execute strategies. The Board also determines which directors qualify as Audit Committee financial experts and meet independence standards under the requirements of Nasdaq and the Securities and Exchange Commission.

 

 

Practices

 

 

Risk Management

 

 

Regular updates to the Board on enterprise risk and assignment of new and emerging risks to the appropriate committee. Regular updates on compliance risk assessment and Audit Committee oversight of plans to mitigate those risks.

 

 

Strategy Session

 

 

Regular session to review industry landscape, hear from outside experts and refine strategies for execution. The Board and committees receive updates throughout the year on progress made on the key initiatives to execute those strategies.

 

 

Annual Evaluations

 

 

Formal and regular process for evaluating the effectiveness of Board and committee operations including surveys, individual director conversations with the Lead Independent Director, and executive session discussions to address identified areas for improvement.

 

 

Training

 

 

Every committee regularly identifies training topics to keep fresh on emerging issues, and directors are encouraged to participate in topical conferences and off-site training opportunities.

 

 

Tenure Policies

 

 

Term Limit

 

 

Directors may not serve on the Board for more than 15 years (directors at the time of the merger in 2000 are exempt from this requirement).

 

 

Mandatory Retirement

 

 

 

Directors must retire at age 72.

 

Change in Principal Employment

 

 

 

Directors must offer to resign upon any substantial change in principal employment.

 

 

Shareholder Rights

 

 

Shareholder Voting

 

 

Opportunity to annually vote for directors, provide an advisory vote on executive compensation and ratify the selection of auditors.

 

 

No Supermajority

 

 

There are no supermajority voting provisions.

 

 

Opportunities to be Heard

 

 

Open forum at annual meeting and published lines of communication to our directors and management.

 

 

Proxy Access

 

 

Ability to nominate director candidates for election, in accordance with the terms of our bylaws.

 

 

Corporate Policies

 

 

Code of Conduct

 

 

Annual review and approval of policy and annual training of directors, officers and employees.

 

 

Stock Ownership Requirements

 

 

 

Directors and executive officers are required to maintain specific levels of stock ownership.

 

 

Hedging and Pledging

 

 

 

Policies that prohibit hedging and restrict pledging of our stock.

 

 

Political Contributions,

Lobbying and Government

Communications

 

 

 

More disclosure than required by law, including an annual disclosure of political contributions on Xcel Energy’s website.

 

Environmental

 

 

Commitment to environmental compliance and industry initiatives to enhance value to customers and shareholders.

 

 

8  |  2018 Xcel Energy Proxy Statement


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Corporate Governance    

 

 

Leadership Structure and Roles

Our Board consists of a combined Chairman/CEO position, complemented with a Lead Independent Director chosen from our independent directors. This structure, along with other corporate governance practices discussed below, provides sound and independent oversight of the Company. The Board believes that this structure is best suited for the Company at this time and serves shareholders well. We annually review this structure to confirm it is most effective for our business.

The Chairman/CEO role brings to the Board the experience and expertise of both the Company and the industry. The skills and experience of the CEO are well suited for the role of Chairman, putting the Board in the best position to identify and assess key industry drivers and important changes in the energy and consumer landscape to support development of effective strategies. In light of the opportunities and challenges facing the Company and the importance of the Chairman role, the Board believes that shareholders are best served by having a combined role of Chairman and CEO.

Mr. Fowke currently serves in this role, providing the benefit of his extensive experience in the regulated energy industry to both the Company and the Board. His thorough understanding of the opportunities and challenges facing the industry is valuable at both the Board and management levels. For example, he was recognized by Public Utility Fortnightly as one of the 2017 Top Forty industry innovators for Xcel Energy’s steel-for-fuel strategy that aggressively advances a clean energy agenda that benefits customers, shareholders and the environment.

The Lead Independent Director plays an important role in our governance structure, working with both the independent directors and management to ensure the Company is well positioned with sound strategy, solid risk management and effective governance. Mr. Policinski serves in this role, having been elected to serve a one-year term in May 2017, his second consecutive year in this role.

The final piece of this governance structure is the independent directors. The Board currently consists of eleven independent directors. Our directors are strong individuals, comfortable with their roles representing shareholders and maintaining objectivity in the Board’s deliberations. They conduct business via a sound committee structure that advocates risk management and mitigation as assigned by the Board and reports back to the Board for an efficient and effective process.

The Board believes that this structure ensures that directors receive the information, industry insights and direction needed to form successful strategies while maintaining the independence necessary to ensure effective governance and oversight. Our business is rather unique in that it is price-regulated, operates under a complex set of federal, state and local regulations, and is undergoing significant change. Working with the Lead Independent Director, the Chairman can both educate the Board and lead the development of strategy, providing information and insight on the Company’s opportunities, challenges and performance.

 

 

Board of Directors

 

      

Lead Independent Director

 

 

Independent Oversight

   

 

Responsibilities

(Per our Guidelines on Corporate Governance)

 

•  11 of 12 directors are independent.

 

•  Independent directors regularly meet in executive session without management present at Board and committee meetings.

 

•  Each director may request items to be addressed at Board meetings.

 

•  Directors may request additional information from management at any time.

 

•  All committees are composed entirely of independent directors.

 

•  CEO performance is addressed annually by the GCN, and all other independent members of the Board participate in the CEO’s performance evaluation.

   

•  Presides at all meetings of the Board at which the Chairman is not present.

 

•  Presides at all Board executive sessions of the independent directors.

 

•  Maintains regular communications with the independent directors, including an annual evaluation process.

 

•  Serves as a liaison between the Chairman and the independent directors.

 

•  Approves the agenda, materials provided to the directors and the meeting schedules.

 

•  Calls meetings of the independent directors, as necessary.

 

•  Consults and communicates with major shareholders, if requested.

 

•  Develops and maintains a process for CEO and Board succession planning with the GCN.

     
       

Term and Selection

 

•  Elected by the independent directors annually.

 

•  Is generally expected to serve for at least one, but no more than four, years.

 

 

2018 Xcel Energy Proxy Statement  |  9

 


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    Corporate Governance

 

    

 

Risk Oversight

A key accountability of the Board is the oversight of material risk, and our Board employs a strong process for doing so. As outlined below, management and each Board committee has responsibility for overseeing the identification and mitigation of key risks and reporting their assessments and activities to the full Board.

Management identifies and analyzes risks to determine materiality and other attributes such as timing, probability and controllability. Management broadly considers our business, the utility industry, the domestic and global economies, and the environment, and employs a robust compliance program when identifying, assessing, managing and mitigating risk.

 

 

Key Components of Management’s Oversight and Mitigation of Risk

 

 

Identify and analyze materiality of risks through:

 

 

•  Formal key risk assessment

 

•  Financial disclosure process

 

•  Hazard risk management process

 

•  Internal auditing and compliance with financial and operational controls

 

•  Business planning process

 

•  Development of strategic goals and key performance indicators

 

 

Provide regular presentations to the Board regarding risk assessment and mitigation, including:    

 

 

•  Comprehensive risk overview

 

•  Legal and regulatory risks

 

•  Operating risks

 

•  Financial risks

 

•  Compliance risks

 

 

Manage and mitigate risks through use of management structures and groups, including:

 

 

 

•  Management councils

 

•  Management risk committees

 

•  Advice from internal corporate areas

 

Employ a robust compliance program for the mitigation of risk, including:

 

 

 

•  Adherence to our Code of Conduct and other compliance policies

 

•  Operation of formal risk management structures and groups

 

•  Focused management to mitigate the risks inherent in the implementation of our strategy

 

The Board approaches risk oversight and mitigation as an integral and continuous part of its governance of the Company. First, the Board as a whole regularly reviews management’s key risk assessment and analyzes areas of existing and future risks and opportunities. Next, the Board assigns oversight of certain critical risks to each of its four standing committees to ensure these risks are both well understood and provided focused oversight by the committee with the most applicable expertise. New risks identified during the risk assessment process are considered and assigned as appropriate, typically during the annual Board and committee evaluation process, with committee charters and annual work plans updated accordingly. Committees regularly report on their oversight activities, and certain risk topics may be brought to the full Board for consideration where deemed appropriate to ensure broad Board understanding of the nature of the risk. Finally, the Board conducts an annual strategy session where the Company’s future plans and initiatives are reviewed and confirmed in light of the current and projected landscape.

The Audit Committee is responsible for reviewing the adequacy of risk oversight and affirming that appropriate oversight occurs. Current risk assignments are as follows:

 

 

Responsible Party            

 

 

 

Area of Risk Oversight

 

 

Board of Directors

 

 

 

Overall identification, management and mitigation of risk, with a focus on strategic risks

 

 

Audit Committee

 

 

Financial reporting and internal control risks

Adequacy of risk oversight

Compliance risk assessment and mitigation

 

 

Finance Committee

 

 

 

Financial risks, including liquidity, credit, capital market and insurance risks

 

 

GCN Committee

 

 

Executive compensation-related risks

Political activity risks

Board and management succession risks

 

 

Operations, Nuclear, Environmental and Safety (“ONES”) Committee

 

 

 

Operating risks, including nuclear, environmental, physical and cybersecurity risks

 

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Corporate Governance    

 

 

This tiered and structured approach provides a comprehensive risk-management framework that ensures shareholder interests are protected. For example, given its emergence as a threat, the Board employs comprehensive oversight of the risks associated with cybersecurity and the physical security of our assets, with the topic addressed twice at the Board level, as well as at the ONES and Audit Committees throughout the year. While the ONES Committee has primary committee responsibility for this topic due to the operational issues involved, the Board has determined that the topic is of sufficient importance to warrant this comprehensive oversight approach. Augmenting this oversight, the Board conducts annual drills to practice its response in a possible emergency situation to ensure it is well prepared and positioned to perform in a possible crisis.

The Board also employs a process of ensuring compliance practices are sound, a particularly important topic given our highly regulated business. Management performs a regular compliance risk assessment as a companion to the enterprise risk assessment, providing a focused overview of the unique areas of compliance risk the Company faces. The Audit Committee is regularly apprised of compliance risks via regular briefings and written updates to ensure these risks are appropriately managed and mitigated.

Board Committees

Structures

As noted, the Board employs a committee structure to assist in conducting its work and regularly refreshes that work in light of regular risk assessments. By assigning responsibilities to committees with particular expertise and focus, the Board can ensure it fulfills its duties in an efficient and effective manner.

Committees are made up exclusively of independent directors, with members of Audit and GCN meeting additional independence criteria. Each operates under a written charter that clearly defines its responsibilities, which is regularly reviewed and approved at both the committee and Board level. Committees have the authority to engage outside experts, advisors, and counsel to assist in their duties, as needed. In addition, each committee undertakes a regular evaluation process and members participate in training on relevant topics to ensure the committee functions well and directors are well educated on issues. Additional information regarding these governance practices is provided in the Practices section below.

For topics having broad implications for Xcel Energy, the full Board may hear or act on any issue, and committees may provide updates up to the full Board for its information and consideration. Likewise, a committee may delegate all or a portion of its responsibilities to a subcommittee, as appropriate. This flexibility can be employed as appropriate to ensure risks are effectively overseen and managed.

 

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    Corporate Governance

 

    

 

 

Audit Committee          

(6 Meetings; 6 Executive Sessions)

O’Brien (chair)

Sampson

Westerlund

Williams

Yohannes

 

•  All members are financially literate and independent under the applicable Nasdaq and SEC requirements

 

•  Mr. O’Brien and Ms. Williams have been determined to be audit committee financial experts under the definitions provided by the SEC

 

•  No member serves on the audit committees of more than three public boards

    Oversees the financial reporting process, including the integrity of our financial statements, compliance with legal and regulatory requirements and our Code of Conduct, and the independence and performance of internal and external auditors.
    Reviews the annual audited financial statements and quarterly financial information with management and the independent registered public accounting firm.
    Appoints our independent registered public accounting firm.
    Reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor and control the exposures, including the Company’s risk assessment and risk management guidelines and policies.
    Reviews the compliance risks and implementation and effectiveness of our compliance and business conduct program.
    Reviews the scope and the planning of the annual audit with both the independent registered public accounting firm and internal auditors.
    Reviews the findings and recommendations of both internal auditors and the independent registered public accounting firm and management’s response to those recommendations.
Finance Committee

(7 Meetings; 5 Executive Sessions)

Williams (chair)

Davis

Owens

Sampson

Wolf

Yohannes

 

•  All members are independent

    Oversees corporate capital structure and budgets and recommends approval of major capital projects.
    Oversees financial plans and key financial risks.
    Oversees dividend policies and makes recommendations as to dividends.
    Oversees insurance coverage and banking relationships.
    Reviews investment objectives of our nuclear decommissioning trust and trusts for our employee benefit plans.
    Oversees investor relations.
    Reviews and recommends new business.
Governance, Compensation and Nominating Committee (GCN)

(4 Meetings; 3 Executive Sessions)

Davis (chair)

Policinski

Prokopanko

Sheppard

Westerlund

 

•  All members meet the Nasdaq standards for independence

    Determines Board organization, selection of director nominees and setting of director compensation.
    Recommends Lead Independent Director and Board committee memberships.
    Ensures effective CEO and Board succession planning.
    Evaluates performance of the CEO.
    Approves executive officer compensation, including incentives and other benefits.
    Oversees compensation and governance-related risks.
    Establishes corporate governance principles and procedures.
    Oversees Company’s Code of Conduct policy.
    Reviews the Company’s lobbying expenditures, contributions, and key lobbying activity and the related Company policy.
    Reviews the Company’s workforce strategy and risks and the process for management development and long-range planning.
    Reviews proxy disclosures regarding directors’ and executive officers’ compensation and benefits.
    Prepares the Report of the Compensation Committee included in this proxy statement.
Operations, Nuclear, Environmental and Safety Committee (ONES)

(4 Meetings; 4 Executive Sessions)

Sheppard (chair)

O’Brien

Owens

Prokopanko

Wolf

 

•  All members are independent

    Oversees nuclear strategy, operations and performance, including the review of the results of reports and major inspections and evaluations.
    Oversees the operating issues and performance of the Company’s significant electric and natural gas operations.
    Reviews environmental strategy, compliance, performance issues and initiatives.
    Reviews material risks relating to our nuclear operations and environmental and safety performance, as well as risks, performance and compliance with operations measures of our electric and natural gas systems.
    Oversees physical and cyber security risks related to plants and operations.
      Reviews safety performance, strategy and initiatives.

 

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Corporate Governance    

 

 

Practices

Evaluations

The Board and committees conduct an annual assessment process to evaluate the effectiveness of their processes, identify issues or topics for further exploration and provide feedback on the quality and timeliness of information from management, among other things. The process includes a survey of the directors, individual interviews with the Lead Independent Director, discussion in both regular and executive sessions, and feedback to management. The Board believes this assessment process is an important component of the governance process and helpful in driving continued improvement in the overall effectiveness of Board and committee oversight.

Training

Committees are regularly apprised of new and emerging requirements and trends facing the industry. Each committee conducts training on topics relevant to its responsibilities, and committees regularly seek input to prioritize training topics. In addition, the ONES Committee participates in site visits to gain understanding of our operations, including tours of our nuclear plants, and the full Board has toured certain facilities to gain even deeper understanding of various aspects of our business. For example, in 2017, directors visited the command center for execution of our Productivity through Technology project, a key initiative to deploy major software systems. Directors are encouraged to participate in outside training on topics related to corporate governance and industry issues. In addition, under our Guidelines on Corporate Governance, each new director is expected to participate in a detailed orientation process and each sitting director is expected to participate in periodic continuing education.

The Company publishes continuing education opportunities periodically for director consideration and facilitates participation. During 2017, members of the Board attended outside training on topics such as financial governance, emerging trends in audit issues, and education on nuclear issues.

Strategy Session

The Board annually conducts a strategy session to consider new and emerging industry trends, consult with outside experts, and assess current strategies and key initiatives to ensure the Company is well positioned for the future. This session offers the opportunity for a fluid exchange of information and ideas, helping to refine the current approach, identify new opportunities and risks, and establish key objectives to be monitored throughout the year as the strategies are executed. Agendas for future Board meetings are set in consideration of these objectives.

Succession Planning

The Board employs robust practices to ensure strong continuity of skills and leadership over time through sound succession planning. The GCN regularly develops and the Board regularly reviews succession plans for the CEO and top leaders, as well as plans to develop and/or acquire talent in key positions of management. Likewise, the GCN regularly reviews timing of changes in Board make-up given director tenure and age requirements to identify the timing and needed skills for seeking new directors for Board positions, as well as paths for Board leadership positions, such as committee chairs. The Board has been successful in recruiting and bringing on new directors with unique skills that are important to our business and will continue to develop and execute plans to ensure sound governance, strong leadership, and business continuity through effective succession planning.

Shareholder Engagement and Investor Outreach

Our Company believes that regular, transparent communication with our shareholders and other stakeholders is essential to Xcel Energy’s long-term success. We have continued our practice of engaging with shareholders throughout the year on a range of topics. Presentations at financial conferences, meetings with analysts and investment firms, regular outreach on governance topics, and responding to inquiries are examples of the activities we employ to engage our shareholders. During 2017, our governance outreach with our largest shareholders represented more than 40 percent of outstanding shares, we participated in 20 sell-side/industry conferences or non-deal road shows and held over 160 individual and group meetings with approximately 395 institutional investors, representing nearly 70 percent of shares held by active managers. The Board received regular updates on such efforts. The Board also offers channels for shareholders to contact it with any inquiry or issue, and responds as appropriate.

Communications with the Board

The Board welcomes your input. You may communicate with the Board in two ways: First, you may send correspondence to the Company’s principal offices in care of the Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. Second, you may contact the directors directly via email at BoardofDirectors@xcelenergy.com. These emails are sent automatically to an independent director designated to receive such communications. The email is simultaneously sent to the Corporate Secretary’s office, who may act as agent for the independent directors and coordinate the response. If the receiving director requests the Company to respond on behalf of the directors, a copy of the Company-prepared response is provided to the receiving director. If the receiving director does not request a response, the agent acting for the receiving director will provide a summary of the actions taken. The Company reserves the option to review and change this policy if directed by the Board due to the nature and volume of the correspondence.

 

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    Corporate Governance

 

    

 

Determining Executive Officer and Director Compensation

The GCN has broad authority to develop and implement compensation policies and programs for executive officers and directors. The GCN may retain independent, external compensation consultants to assist in this effort and may change consultants at any time during the year if it determines that a change would be in the best interests of the Company and its shareholders.

To assist in setting 2017 compensation, the GCN retained Meridian Compensation Partners, LLC (“Meridian”) as its independent, executive compensation consultant. Meridian is an independent consulting firm delivering advisory services to compensation committees and does not perform any assignments for the Company other than providing executive and director compensation services for the GCN.

Several internal controls exist to ensure the independent judgment of Meridian:

 

    Meridian reports directly to the GCN and not to Company management.

 

    Meridian routinely participates in executive sessions of the GCN without members of management present.

 

    The GCN has the exclusive authority to hire, retain, and set the compensation for its executive compensation consultant and advisors.

The GCN assessed Meridian’s independence pursuant to Nasdaq and SEC rules and concluded that no conflict of interest exists that prevents it from independently advising the GCN. In its oversight of our 2017 executive compensation program, the GCN worked with Meridian, the CEO and the Executive Vice President, Group President, Utilities and Chief Administrative Officer. The GCN receives additional support from the Senior Vice President, Corporate Secretary and Executive Services; the Senior Vice President, Human Resources and Employee Services; and the Executive Vice President, General Counsel. In 2017, the CEO and other officers provided recommendations with respect to:

 

    The corporate performance objectives and goals, on which awards of both annual and long-term incentive compensation are based.

 

    Attracting, retaining and motivating executive officers.

 

    Information regarding financial performance, budgets and forecasts as they pertain to executive compensation.

 

    Market information regarding compensation levels, practices, and trends.

Additional information regarding the determination of executive compensation is included in the Compensation Discussion and Analysis (“CD&A”) beginning on page 28.

 

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Corporate Governance    

 

 

Board Planning and Composition

We believe that the most effective oversight comes from a Board of Directors that represents a diverse range of experience and perspectives that provide the collective skills, qualifications, and attributes necessary to provide sound governance. We also believe it is important for the Board to work well as a whole, with members bringing their experience to the table and dialoguing freely with each other and with management to create an environment that results in well functioning oversight. The GCN regularly reviews with the Board the experience and attributes desired for effective governance in our changing industry and evaluates the current Board make-up in light of these criteria.

Director Experience and Attributes

We seek directors with experience and expertise in the following areas:

 

Leadership and Strategy     

 

LOGO

Directors who hold or have held significant leadership positions provide the Company with unique insights. These people generally possess extraordinary leadership qualities as well as the ability to identify and develop those qualities in others. They demonstrate a practical understanding of organizations, processes, strategy, risk management and corporate governance, and know how to drive change and growth.

 

    
Finance     

 

LOGO

 

Accurate financial reporting and thorough auditing are critical to our success. We seek to have a number of directors who qualify as audit committee financial experts, and we expect all of our directors to be literate in finance and financial reporting processes.

 

 

    
Risk Management     

 

LOGO

 

Effectively managing risk in a rapidly changing environment is critical to our success. Directors should have a sound understanding of the most significant risks facing the Company and the experience and leadership to provide effective oversight of risk management processes.

 

 

    
Environmental Issues     

 

LOGO

 

 

The production of energy has environmental implications, and how we address rapidly evolving environmental regulation has important strategic implications. Directors with experience in addressing complex environmental regulations or siting major facilities bring valuable expertise to our Board.

 

 

    
Nuclear Operations     

 

LOGO

 

A portion of our business deals with nuclear regulations and operations. Therefore, we seek at least one director with experience in nuclear risk management and nuclear power operations to provide effective oversight and expertise to our business.

 

 

    
Regulated Industry     

 

LOGO

Our businesses are heavily regulated and are directly affected by governmental actions. Likewise, cultivating a strong culture of compliance is critical to our business success and maintaining our strong reputation and brand. As such, we seek directors with experience with government or with highly regulated businesses who possess insight and understanding of effective strategies and compliance.

 

    
Customer and Community     

 

LOGO

Understanding the interests and needs of stakeholders such as our customers, communities and policymakers is important in a business as critical as ours; effective engagement with stakeholders is likewise important to our business success. Marketing and branding expertise is also important as our business becomes more competitive and as we seek to better understand and communicate with stakeholders. We seek directors who have experience in consumer businesses and are committed to excellence in service.

 

    

 

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    Corporate Governance

 

    

 

In addition to experience and expertise, the GCN and Board consider several additional factors in assessing Board composition and director nominees:

 

LOGO   Independence      LOGO   Diversity      LOGO  

Tenure and Board

Refreshment

•  Regular assessments of regulatory requirements, including potential competitive restrictions and interlocks

 

•  Other positions and directorships held are considered

    

•  Diversity of backgrounds, experience and thought is important in ensuring effective risk oversight

 

•  Ethnicity, gender, age, disability, veteran status, sexual orientation, race, national origin, color, religion, creed, geographic representation, education and personality are considered

 

    

•  Diversity in tenure creates good mix of perspectives

 

•  Emerging business needs and desired skills are considered when evaluating potential Board candidates

  Independence is a critical requirement for good governance

 

  The Board reviews independence annually, when candidates are evaluated and upon position changes for an existing director

    

•  Embracing diversity is one of our core corporate values

 

  Our Guidelines on Corporate Governance identify diversity as an important consideration when seeking candidates for the Board

    

  Longer-tenured directors bring a deep understanding of the Company

 

  Newer members bring fresh perspectives or expertise related to an emerging issue

It is critical for the Company and shareholders to have a well rounded, diverse Board that functions well as a whole. In evaluating director nominees, the GCN considers experience in the areas identified above and expects director nominees to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In addition, for incumbent directors, the GCN considers attendance, past performance on the Board and contributions to the Board and applicable committees.

Board Statistics

Director Independence

Each of our director nominees other than Mr. Fowke is independent. The Board has satisfied, and expects to continue to satisfy, its objective to have no more than two directors who are not independent serving on the Board at any time.

The Board determined director independence under the standards established by the Nasdaq, which we have adopted with a four-year look back. In addition, a director who is an employee or representative of a significant supplier of any Xcel Energy business unit or legal entity will not be “independent” unless we entered into the relationship with the supplier as a result of competitive purchasing practices. When evaluating director independence, the Board has determined that the receipt of regulated electric and gas service from the Company does not constitute a material relationship.

The Board reviews ordinary course of business transactions in which directors have an interest as part of the Board’s annual independence review. The Board specifically considered the Company’s ordinary course transactions with U.S. Bancorp when determining Mr. Davis’ independence. During 2017, U.S. Bancorp affiliates provided service to the Company, for which we paid U.S. Bancorp approximately $1.4 million, or less than .01 percent of U.S. Bancorp’s annual revenue. The services provided included trustee services, service as a non-lead participant for our and our subsidiaries’ syndicated revolving credit facilities and service as one of four co-lead underwriters, but not as the lead billing and delivery underwriter, on a public debt securities offering by one of our subsidiaries. U.S. Bank’s involvement with our revolving credit facilities and as an underwriter were not advisory in nature and did not involve access to strategic decision-making information.

The Board considered the nature and relative size of the transactions, the lack of Mr. Davis’ personal involvement in the transactions and the routine commercial nature of such transactions. Based on its consideration of these factors, the Board determined that none of the transactions impaired Mr. Davis’ independence. In addition, none of the transactions were related-party transactions because Mr. Davis did not have a direct or indirect material interest in the listed transactions.

Director Attendance

During 2017 the Board met six times, and the independent directors met in executive session without management present on all six occasions. The average attendance for all directors at Board and committee meetings was approximately 99 percent. Eleven of our directors attended 100 percent of Board and applicable committee meetings, while one director was slightly lower at 93 percent. Each director also attended a half-day strategy session and related executive session. We do not have a formal policy, but encourage our directors to attend the annual meeting of shareholders. All then-serving directors attended the 2017 annual meeting.

 

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Corporate Governance    

 

 

Director Tenure

The Board believes that diversity in tenure creates a good mix of perspectives with longer-tenured directors bringing a deep understanding of the Company while others bring a fresh perspective and expertise helpful to keeping abreast of a changing industry. The GCN considers emerging business needs and desired skills when evaluating potential candidates. Over the past five years, the Board has added three new directors. As of the date of this proxy statement, the Board consists of 12 directors, whose tenure is shown below.

 

 

LOGO

New Director Nominee

The Board determined to expand the size of the Board in 2017 by one additional director and currently has a total of 12 members. The GCN reviewed the skills and expertise of the Board and determined the Board would benefit from an additional member with expertise in economic and project development, complex stakeholder relationships, and capital and investment management. The GCN sought recommendations of the directors and during a conversation among the Chairman, the Lead Independent Director and the Chair of the GCN, they identified Mr. Owens (who had previously presented to the Board) as a potential candidate. After reviewing Mr. Owens’ qualifications and interviewing him, the GCN recommended him for election to the Board, which the Board approved in August 2017. Mr. Owens’ extensive experience in the electric industry and working with the diverse stakeholders that impact our business brings valuable experience and strategic insight to the Board.

We believe our slate of director nominees provides a well rounded and well qualified Board that collectively provides effective oversight and governance of the Company.

Governing Documents

The following materials relating to our corporate governance can be found on our website at www.xcelenergy.com, under “Company — Investor Relations — Governance Documents” and are also available free of charge to shareholders who request them.

 

•    Guidelines on Corporate Governance

 

 

•    Governance, Compensation and Nominating Committee Charter

 

•    Amended and Restated Articles of Incorporation          

 

 

•    Operations, Nuclear, Environmental and Safety Committee Charter

 

•    Bylaws

 

 

•    Finance Committee Charter

 

•    Audit Committee Charter

 

 

Shareholders may request our governing documents by writing our offices at: Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. We publish any amendments to the Code of Conduct and waivers of the Code of Conduct for our executive officers or directors on our website.

Shareholder Recommendation of Directors

Any shareholder may recommend potential nominees to the GCN for consideration for membership on the Board. Recommendations can be made by sending a written statement of the qualifications of the recommended individual to the Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. Such recommendations should be received by October 1, 2018 to be considered for the 2019 annual meeting. The GCN will evaluate candidates recommended by shareholders on the same basis as it evaluates other candidates.

Proxy Access

In February 2016, we amended our bylaws to permit any shareholder (or group of no more than 20 shareholders) owning three percent or more of our common stock continuously for at least three years to nominate up to an aggregated limit of two candidates or 20 percent of our Board (whichever is greater) for inclusion in our proxy statement. Notice of such nominees for the 2019 annual meeting must be received no earlier than November 4, 2018 and no later than close of business on December 4, 2018. Notice should be addressed to the Corporate Secretary, Xcel Energy Inc., 414 Nicollet Mall, Minneapolis, Minnesota 55401. Requirements for such nominations and nominees are detailed in our bylaws, which are available on our website at www.xcelenergy.com, under “Company —Investor Relations — Governance Documents”.

 

2018 Xcel Energy Proxy Statement  |  17

 

9 years average director tenure


Table of Contents

 

    Proposal No. 1

 

    

 

Proposal No. 1

Election of Directors

Serving shareholders well is a key priority for your Board. We believe a well qualified and diverse mix of directors best positions the Board to effectively govern and achieve strong results. Demonstrated leadership, judgment, and expertise, combined with diversity, integrity, and experience, are some of the important characteristics for Board members. Such characteristics are evaluated when considering director candidates.

Twelve nominees have been recommended by the GCN and nominated by the Board. We believe this slate of directors brings not only the right expertise and experience to the Board, but also the right attributes to ensure constructive and free exchange of ideas and opinions with each other and with management.

Eleven of the twelve nominees are Xcel Energy directors who were elected by shareholders at the 2017 annual meeting. In August, the Board elected to bring on the significant industry expertise and experience of Mr. David Owens, whose background is detailed below. Because Gail K. Boudreaux resigned at the end of 2017 due to a significant change in her career responsibilities that could not accommodate her continued membership, the Board has elected to remain at twelve members.

Each nominee has agreed to be named in this proxy statement and to serve if elected. Should any nominee become unable to serve for any reason, the persons named as proxies reserve full discretion to vote “FOR” any other persons who may be recommended by the GCN and nominated by the Board, or the Board may reduce the number of nominees. If elected at the 2018 annual meeting, the nominees will hold office until the 2019 annual meeting and until their successors have been elected and qualified.

Vote Required

Each director shall be elected by majority vote, meaning a nominee must receive more votes “FOR” election than the votes cast “AGAINST.” Any director who does not receive a majority of the votes cast “FOR” election must offer his or her resignation for consideration by the Board under the process outlined on page 61. Proxies solicited by the Board will be voted “FOR” each of the nominees, unless a different vote is specified.

 

   

   Your Board recommends a vote “FOR” the election to the Board of each of the following nominees.

 

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Proposal No. 1    

 

 

Nominees

 

LOGO

     

Director Qualifications and Experience:

Mr. Davis’ executive experience in the highly regulated banking industry provides the Board with valuable leadership skills, strategic insight, and commercial acumen. His extensive financial expertise is valuable in our capital-intensive industry and his background in delivering strong results for a complex financial institution brings valuable skills to the Board. Mr. Davis also serves as a director of several nonprofit and educational institutions in the communities that we serve, bringing an enhanced awareness of our stakeholder base that is valuable to our business. Mr. Davis previously served as Lead Independent Director for four years.

 

Business Experience:

•  Executive Chairman, U.S. Bancorp, a multi-state financial holding company (April 2017 to April 2018)

•  Chairman, U.S. Bancorp (2007 to April 2017) and CEO (2006 to April 2017)

•  President, U.S. Bancorp (2006 to January 2016)

 

Committees:

•  GCN (Chair)

•  Finance

 

LOGO

     

Director Qualifications and Experience:

With a long and distinguished career in the utility industry, Mr. Fowke provides the strategic focus and leadership needed to position the Company well for the future. Having served as the Company’s Chief Financial Officer, he has a strong background in finance, financial reporting, and shareholder outreach. His extensive experience in environmental issues, operations, and the energy business makes Mr. Fowke keenly familiar with the risks we face and provides unique insight into effective management of those risks that has delivered strong results over the long term. His tenure and involvement in the utility industry provides significant expertise on regulatory and policy issues that are central to our business, and he is active in representing and advocating for the industry on important national issues such as security and tax reform. With his service as a director of nonprofit institutions and utility industry organizations, he provides good understanding of not only the opportunities and challenges of our business, but also the customers and communities we serve.

 

Business Experience:

•  Chairman of the Board and CEO, Xcel Energy Inc. (2011 to present)

•  President, Xcel Energy Inc. (2009 to present)

•  Chief Operating Officer, Xcel Energy Inc. (August 2009 to August 2011)

•  Various Executive Positions with Xcel Energy Inc. since 2002

 

Committees:

•  None

 

2018 Xcel Energy Proxy Statement  |  19

Richard K. Davis Age 60 Director since 2006 Executive Chairman, U.S. Bancorp Public Company Directorships U.S. Bancorp (2006 to present) The Dow Chemical Company (2015 to present) Ben Fowke Age 59 Director since 2009 Chairman of the Board, President and CEO, Xcel Energy Inc. Public Company Directorships None


Table of Contents

 

    Proposal No. 1

 

    

 

 

LOGO     

Director Qualifications and Experience:

Mr. O’Brien’s extensive executive experience provides to the Board valuable strategic insight, leadership skills, and a sound understanding of delivering effective operations in an expansive and capital-intensive business. His acumen in financial reporting and accounting has been determined by our Board to qualify him as an audit committee financial expert. He is currently consulting in the areas of strategy and leadership and operating effectiveness with select mining and private equity firms considering investments in the mining industry. His background in both the mining and electric and gas industries is directly relevant to our business and he brings both valuable experience in effective management of environmental issues and expertise in industry and regulatory issues to our Board.

 

Business Experience:

•  Independent Consultant (October 2015 to current)

•  President and CEO, Boart Longyear Limited, a global provider of drilling services, equipment and performance tooling for mining and drilling companies globally (April 2013 to October 2015)

•  CEO, Newmont Mining Corporation, a global gold mining company (September 2012 to February 2013)

•  President and CEO, Newmont Mining Corporation (July 2007 to September 2012)

 

Committees:

•  Audit (Chair)

•  ONES

 

LOGO     

Director Qualifications and Experience:

With 30 years of leadership experience in the energy industry, Mr. Owens brings a wealth of knowledge and skill to the Board. In his role at the Electric Edison Institute, the electric utility industry trade association, he oversaw key areas such as environmental, energy supply and finance, and state and federal regulatory and policy issues, all important topics for our business. He is a recognized expert in the energy field and has been a leader in shaping constructive public policy frameworks to support the industry’s transition to new and cleaner technologies. An active member in the community, Mr. Owens serves on the boards of a number of professional, academic, and community-based organizations.

 

Business Experience:

•  Executive Vice President, Business Operations Group and Regulatory Affairs, Edison Electric Institute (October 1992 to June 2017)

 

Committees

•  Finance

•  ONES

 

20  |  2018 Xcel Energy Proxy Statement

Richard T. O’Brien Age 64 Director since 2012 Independent Consultant Public Company Directorships Vulcan Materials Company (2008 to present) Boart Longyear Limited (2013 to 2015) Newmont Mining (2007 to 2013) Inergy, L.P. (2006 to 2012) David K. Owens Age 69 Director since 2017 Retired Executive, Electric Edison Institute Public Company Directorships None


Table of Contents
   

 

Proposal No. 1    

 

 

 

LOGO     

Director Qualifications and Experience:

Mr. Policinski leads a rapidly growing, multinational food and agricultural cooperative, experience that positions him to provide valuable leadership and strategic insight in effectively addressing environmental and other major issues. As president and CEO of the third-largest United States cooperative, Mr. Policinski has a wealth of experience in effectively managing operations, addressing new risks and regulatory requirements, and delivering value via effective growth management. He is well versed in finance and the financial reporting process. An active member of the community, Mr. Policinski serves as a director of a number of nonprofits, educational institutions and trade industry groups and provides a solid understanding of the communities we serve.

 

Business Experience:

•  President and CEO, Land O’Lakes, Inc., an agricultural and dairy cooperative (October 2005 to present)

•  Senior leadership positions at Land O’Lakes, Inc. and The Pillsbury Company, a grain processor and food production company

 

Committees

•  GCN

 

LOGO     

Director Qualifications and Experience:

Having led large and complex businesses, Mr. Prokopanko brings valuable leadership skills and strategic insight to the Board. Throughout his career he has created growth, managed expansive operations, built key assets and effectively addressed environmental issues, all valuable skills to contribute to the Board. His experience in commodities, with capital-intensive businesses, and as a director for other public companies likewise contributes valuable and relevant expertise to the Board. Mr. Prokopanko works with and serves on the boards of several nonprofit organizations and brings a thoughtful understanding of the communities we serve.

 

Business Experience:

•  President and CEO, The Mosaic Company, producer of phosphate and potash crop nutrients (January 2007 to August 2015)

•  Executive Vice President and COO, The Mosaic Company (July 2006 to January 2007)

•  Senior leadership positions, Cargill Corporation, trading, purchasing and distributing grain and other agricultural commodities (1999 to 2006)

 

Committees:

•  GCN

•  ONES

 

2018 Xcel Energy Proxy Statement  |  21

Christopher J. Policinski Age 59 Director since 2009 Lead Independent Director since May 2016 President and CEO, Land O’Lakes, Inc. Public Company Directorships Hormel Foods Corporation (2012 to present) James T. Prokopanko Age 64 Director since 2015 Retired President and CEO, The Mosaic Company Public Company Directorships Regions Financial (2016 to present) Vulcan Materials Company (2009 to present) The Mosaic Company (2004 to 2015)


Table of Contents

 

    Proposal No. 1

 

    

 

 

LOGO     

Director Qualifications and Experience:

As leader of a management development and strategy planning business, Ms. Sampson brings valuable expertise and business experience to the Board. She provides valuable perspective in ethics and business conduct, talent acquisition, retention and development, diversity and social responsibility, all of which are important issues to our stakeholders. Her experience as a business owner provides insight into finance and the financial reporting processes. Ms. Sampson is the former CEO of the Greater Minneapolis Area Chapter of the American Red Cross and is a former board member of various religious and philanthropic organizations within the communities we serve.

 

Business Experience:

•  CEO, President and Owner, The Sampson Group, Inc., a management development and strategic planning business (1996 to present)

•  Former CEO, Greater Minneapolis Area Chapter of the American Red Cross

 

Committees:

•  Audit

•  Finance

 

LOGO     

Director Qualifications and Experience:

Mr. Sheppard brings to the Board extensive leadership experience in electric utilities, a solid understanding of the issues facing our industry, and valuable expertise on effective and efficient operations. He is a recognized expert in the nuclear industry, having overseen nuclear operations for major utilities and currently consulting on nuclear projects under development across the globe. In 2017, Mr. Sheppard was appointed to the board of directors of Ontario Power Generation, a generating company owned by the Province of Ontario, Canada, by the Ontario, Canada Minister of Energy. His experience provides valuable insight, knowledge, business acumen, and judgment that is valuable to our nuclear operations and is extremely helpful to the Board.

 

Business Experience:

•  Independent Consultant (January 2011 to present)

•  Senior Vice President and Chief Nuclear Officer, Southern California Edison, an electric utility (September 2010 to December 2010)

•  Independent Consultant (January 2010 to August 2010)

•  Chairman, President and CEO, STP Nuclear Operating Company (April 2003 to December 2009)

•  Senior positions, South Texas Project, Sequoyah Fuels Corp. and Robinson Nuclear Project (1990 to 2003)

 

Committees:

•  ONES (Chair)

•  GCN

 

22  |  2018 Xcel Energy Proxy Statement

A. Patricia Sampson Age 69 Director since 1985 CEO, President and Owner, The Sampson Group, Inc. Public Company Directorships None James J. Sheppard Age 69 Director since 2011 Independent Consultant Public Company Directorships None


Table of Contents
   

 

Proposal No. 1    

 

 

 

LOGO     

Director Qualifications and Experience:

Mr. Westerlund has extensive experience in corporate governance and environmental and workforce issues, bringing valuable insight to the Board. Having served as a senior executive in a Fortune 500 company, he contributes leadership skills and business acumen to the Board. Mr. Westerlund was responsible for environmental health and safety, corporate compliance, security, real estate activities, and human resources, including labor and employee relations, and benefits while at Ball Corporation, and he brings extensive knowledge of compliance, corporate governance, compensation, and equal employment opportunity issues to the Board. He serves on the boards of a number of community organizations.

 

Business Experience:

•  Executive Vice President, Administration and Corporate Secretary, Ball Corporation, a supplier of metal packaging, aerospace and other technologies and services (2006 to September 2011)

•  Senior level positions with Ball Corporation prior to 2006

 

Committees:

•  Audit

•  GCN

 

LOGO     

Director Qualifications and Experience:

Ms. Williams brings extensive experience in leadership with a major investment management company, providing valuable and unique strategic insights to the Board. Her strong financial background is particularly valuable in our capital-intensive industry and she has been determined to be an audit committee financial expert by our Board. She brings extensive expertise in risk assessment and management that is valuable for our business. She is active in the community and serves as a trustee of a number of nonprofit and educational boards.

 

Business Experience:

•  Partner, Wellington Management Company, LLP, an investment and asset management company for institutional investors (1995 to 2005)

•  Leadership positions, Loomis, Sayles & Co., Inc., an investment management company, and Imperial Chemical Industries Pension Fund (prior to 1995)

 

Committees:

•  Finance (Chair)

•  Audit

 

2018 Xcel Energy Proxy Statement  |  23

David A. Westerlund Age 67 Director since 2007 Retired Executive Vice President, Administration and Corporate Secretary, Ball Corporation Public Company Directorships None Kim Williams Age 62 Director since 2009 Retired Partner, Wellington Management Company LLP Public Company Directorships Weyerhaeuser Corporation (2006 to present) E.W. Scripps Co. (2006 to present)


Table of Contents

 

    Proposal No. 1

 

    

 

LOGO     

Director Qualifications and Experience:

With a career as a senior executive in consumer products industries, Mr. Wolf brings strategic insight, business acumen and valuable experience to the Board. He served as Chief Financial Officer of a major corporation and contributes valuable experience in and knowledge of finance, reporting and governance. Having led both organizations and the integration of organizations, Mr. Wolf has a sound understanding of business risk and effective risk management oversight. He serves as a director of several nonprofit and educational organizations.

 

Business Experience:

•  President, Wolf Interests, Inc., an investment company (June 2010 to present)

•  Chief Integration Officer, MillerCoors Brewing Company LLC, a consumer beverage product company (2008 to June 2010)

•  Prior leadership positions including Global Chief Financial Officer with Molson Coors Brewing Company and Chief Financial Officer with Coors Brewing Company

 

Committees:

•  Finance

•  ONES

 

LOGO     

Director Qualifications and Experience:

With extensive experience in banking and economic development, Mr. Yohannes provides valuable strategic insight and leadership skills. He was nominated by President Barack Obama to serve as the United States Ambassador to the Organization for Economic Cooperation and Development in 2014. Prior to his government service, Mr. Yohannes specialized in financial services and the renewable energy sector. He is passionate about protecting the environment and provides experience in effectively addressing environmental issues. Mr. Yohannes is active in his community and has served on various nonprofit boards and civil organizations.

 

Business Experience:

•  United States Ambassador and Permanent Representative to the Organization for Economic Cooperation and Development, including the International Energy Agency and the Nuclear Energy Agency (April 2014 to January 2017)

•  Chief Executive Officer, Millennium Challenge Corporation, an independent U.S. Government foreign aid agency (November 2009 to April 2014)

 

Committees:

•  Audit

•  Finance

 

24  |  2018 Xcel Energy Proxy Statement

Timothy V. Wolf Age 64 Director since 2007 President, Wolf Interests, Inc. Public Company Directorships Rally Software Development Company (2011 to 2015) Borders Group, Inc. (2009 to 2011) Daniel Yohannes Age 65 Director since 2017 Former United States Ambassador to the Organization for Economic Cooperation and Development Public Company Directorships None


Table of Contents
   

 

Beneficial Ownership of Certain Shareholders    

 

 

Beneficial Ownership of Certain Shareholders

Share Ownership of Directors and Officers

The table below provides the beneficial ownership of our common stock as of March 20, 2018 for: (a) each director and director nominee; (b) the executive officers named in the Summary Compensation Table; and (c) the directors and current executive officers as a group. Unless otherwise indicated, each person has sole investment and voting power (or shares such powers with his or her spouse) of the shares noted. None of the listed individual directors, officers, or director nominees beneficially owned more than one percent of our common stock. The directors and executive officers as a group beneficially owned less than one percent of our common stock on March 20, 2018. None of the shares owned by our directors or executives are subject to any type of pledge.

 

Name and Principal

Position of Beneficial Owner

  

Common

Stock(1)

    

Restricted

Stock

    

Total

Shares

Beneficially

Owned

   

Stock

Equivalents(2)

 

Richard K. Davis

Director

     7,697        —          7,697       63,190  

Richard T. O’Brien

Director

     2,000        —          2,000       44,285  

David K. Owens

Director

     —          —          —         2,121  

Christopher J. Policinski

Director

     2,000        —          2,000       77,288  

James T. Prokopanko

Director

     1,000        —          1,000       11,098  

A. Patricia Sampson

Director

     2,469        —          2,469       136,135  

James J. Sheppard

Director

     1,000        —          1,000       38,237  

David A. Westerlund

Director

     7,750        —          7,750       111,230  

Kim Williams

Director

     1,188        —          1,188       79,164  

Timothy V. Wolf

Director

     1,300        —          1,300 (3)      58,828  

Daniel Yohannes

Director

     1,000        —          —         3,311  

Ben Fowke

Chairman, President and Chief Executive Officer

     736,904        6,621        743,525       70,322  

Robert Frenzel

Executive Vice President and Chief Financial Officer

     12,169        14,662        26,831       —    

Kent Larson

Executive Vice President and Group President, Operations

     92,433        —          92,433       36,010  

Marvin McDaniel, Jr.(4)

Executive Vice President and Chief Administrative Officer

     112,284        —          112,284       41,084  

Scott Wilensky

Executive Vice President, General Counsel

     120,068        —          120,068       18,380  

Directors and Current Executive Officers

as a group (23 persons)

     1,299,652        24,768        1,324,420       1,001,529  

 

(1)  On March 20, 2018, the closing price of our common stock on the Nasdaq was $44.26.

 

(2)  Common stock equivalents represent (i) the share equivalents of our common stock held by executive officers under our deferred compensation plan as of March 22, 2018, and (ii) stock equivalent units held under the directors’ SEP as of March 20, 2018. For information on common stock equivalents granted during 2017 and holdings at December 31, 2017, see page 56. The information in this column is not required by the rules of the SEC because these share equivalents carry no voting rights and the recipient does not have the right to acquire any underlying shares within 60 days of March 20, 2018. Nevertheless, we believe that this information provides a more complete picture of the financial stake that our directors and executive officers have in the Company.

 

(3)  Mr. Wolf’s son owns 300 of these shares. Mr. Wolf disclaims beneficial ownership of these shares.

 

(4)  Mr. McDaniel will retire in the second quarter of 2018.

 

2018 Xcel Energy Proxy Statement  |  25

 


Table of Contents

 

    Beneficial Ownership of Certain Shareholders

 

    

 

Largest Owners of Xcel Energy’s Shares

The table below provides information as to each person or entity known to us to be the beneficial owner of more than five percent of our common stock:

 

  Name and Address of Beneficial Owner   

 

Number of Shares

Beneficially Owned

    

 

Percent  

of Class  

    BlackRock, Inc.

    55 East 52nd Street

    New York, NY 10055

   42,686,068(1)      8.4%

    The Vanguard Group

    100 Vanguard Blvd.

    Malvern, PA 19355

   37,798,075(3)      7.4%

    JPMorgan Chase & Co.

    270 Park Ave.

    New York, NY 10017

   33,296,831(2)      6.5%

    State Street Corporation

    One Lincoln Street

    Boston, MA 02111

   25,198,863(4)      5.0%

 

(1)  The information contained in the table and this footnote with respect to BlackRock, Inc. is based solely on a Schedule 13G/A filed by the listed person with the SEC on February 8, 2018. The filing indicates that as of December 31, 2017, BlackRock, Inc. had sole voting power for 37,697,319 shares and sole dispositive power for 42,686,068 shares.

 

(2)  The information contained in the table and this footnote with respect to JPMorgan Chase & Co. is based solely on a Schedule 13G/A filed by the listed person with the SEC on January 26, 2018. The filing indicates that as of December 29, 2017, JPMorgan Chase & Co. had sole voting power for 30,127,070 shares, shared voting power for 230,393 shares, sole dispositive power for 32,855,110 shares and shared dispositive power for 401,189 shares.

 

(3) The information contained in the table and this footnote with respect to The Vanguard Group, Inc. is based solely on a Schedule 13G/A filed by the listed person with the SEC on February 9, 2018, The filing indicates that as of December 31, 2017, The Vanguard Group, Inc. reported that it had sole voting power for 777,610 shares, shared voting power for 268,424 shares, sole dispositive power for 36,848,825 shares and shared dispositive power for 949,250 shares. The Vanguard Group, Inc. also reported that (i) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 553,140 shares as a result of its serving as investment manager of collective trust accounts and (ii) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 616,994 shares as a result of its serving as investment manager of Australian investment offerings.

 

(4)  The information contained in the table and this footnote with respect to State Street Corporation is based solely on a Schedule 13G filed by the listed person with the SEC on February 13, 2018. The filing indicates that as of December 31, 2017, State Street Corporation reported that it had shared voting power for 25,198,863 shares and shared dispositive power for 25,198,863 shares.

 

26  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Proposal No. 2    

 

 

Proposal No. 2

Advisory Vote on Executive Compensation

Recommendation and Background

Our Board recognizes that performance-based executive compensation is an important element in driving long-term shareholder value. We are seeking shareholders’ views on the compensation of named executive officers identified in the Executive Compensation Tables section of this proxy statement through an advisory vote on the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s 2018 proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

The Company’s goal for its executive compensation program is to align executive leadership’s interests with those of our shareholders, customers and employees. The Board believes our executive compensation program satisfies this goal and is strongly aligned with the long-term interests of our shareholders.

Shareholders are urged to read the CD&A and other information included in the Executive Compensation Tables section of this proxy statement. The GCN and the Board believe that the information provided in these sections demonstrate that our executive compensation program aligns our executives’ compensation with our short-term and long-term performance and provides the compensation and incentives needed to attract, motivate and retain key executives who are crucial to our long-term success.

As an advisory vote, this proposal is not binding upon the Company. However, the GCN, which is responsible for designing and administering our executive compensation program, values the opinions expressed by shareholders in their vote on this proposal and will continue to consider the outcome of the vote when making future compensation decisions for named executive officers.

Vote Required

The Board will consider shareholders to have approved our executive compensation if the shares voted “FOR” the proposal exceed the shares voted “AGAINST.” Abstentions and broker non-votes will have no effect on this matter. Proxies solicited by the Board will be voted “FOR” the approval of our executive compensation, unless a different vote is specified.

 

  

  Your Board recommends a vote “FOR” approval of the advisory vote on compensation.

 

2018 Xcel Energy Proxy Statement  |  27

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Compensation Discussion and Analysis

In this section, we describe the material components of our executive compensation program for 2017 for named executive officers (“NEOs”), who appear in the Summary Compensation Table and other compensation tables contained in this Proxy Statement.

Compensation Discussion and Analysis Table of Contents

 

Section

 

 

Element

 

  

Page

 

 
   

Highlights

 

        
   

 

2017 Performance

 

    

 

29

 

 

 

 

 

2017 Compensation

 

    

 

29

 

 

 

 

 

Compensation Philosophy

 

    

 

29

 

 

 

 

 

Executive Compensation Practices

 

    

 

30

 

 

 

 

 

Impact of 2017 Say on Pay Vote

 

    

 

30

 

 

 

   

What We Pay and Why

 

        
   

 

Establishing Target Compensation

 

    

 

31

 

 

 

 

 

Peer Group

 

    

 

31

 

 

 

 

 

Executive Compensation Elements

 

    

 

32

 

 

 

 

 

Mix of Total Compensation

 

    

 

33

 

 

 

 

 

Overview of Target Total Compensation for 2017

 

    

 

33

 

 

 

 

 

Base Salary

 

 

    

 

33

 

 

 

 

 

Annual Incentive

 

    

 

34

 

 

 

 

 

Long-term Incentives

 

    

 

35

 

 

 

 

 

Retirement and Deferred Compensation Benefits

 

    

 

37

 

 

 

   

Additional Compensation Program Features and Policies

 

        
   

 

Severance Policy

 

    

 

37

 

 

 

 

 

Employment Contracts

 

    

 

37

 

 

 

 

 

Stock Ownership Requirements

 

    

 

37

 

 

 

 

 

Equity Grant Practices

 

    

 

38

 

 

 

 

 

Hedging and Pledging

 

    

 

38

 

 

 

 

 

Recoupment

 

    

 

38

 

 

 

 

 

Risk Assessment

 

    

 

39

 

 

 

   

 

Deductibility of Executive Compensation under IRC Section 162(m)

 

    

 

39

 

 

 

 

28  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Highlights

2017 Performance

We are executing our strategy for long-term customer and shareholder value. Our progressive financial, safety and reliability records position us well to maintain affordability as we continue to provide cleaner generation and the options customers want.

 

 

     LOGO   

Financial

Results

     LOGO   

Continue to Improve

Safety and Reliability

LOGO  

 

•  One-, three- and five-year TSR better than our peer benchmarks

 

•  Met or exceeded ongoing EPS guidance for 13 consecutive years

 

•  Increased our dividend for 14 consecutive years

    

 

•  Best-ever performance in employee safety, public safety and system reliability performance

 

•  Solid nuclear operations with a 91% capacity factor and both stations in NRC Column 1 status

LOGO   

Lead the Clean Energy

Transition

  LOGO   

Keep Bills

Low

     LOGO   

Enhance the

Customer Experience

 

•  Announced the largest multi-state investment plan for wind capacity in the country

 

•  Reduced carbon emissions by 35% since 2005

 

 

•  Average residential electricity bill has decreased by 3% since 2013

 

•  Held operating and maintenance expenses relatively flat for the past three years

    

 

•  Launched a program in Minnesota for customers to purchase up to 100% renewable energy

 

•  Helped customers save more than 1,000 gigawatt hours through our energy efficiency programs

2017 Compensation

No significant changes were made to our executive compensation program for 2017, which continues to be primarily variable compensation based on performance outcomes. We continue to monitor evolving best practices to ensure our talent needs for attraction, motivation and retention are met, and we continue to assess certain features of our programs compared to market practices. Based on a review of recent trends, we updated our stock ownership policy to increase the CEO ownership requirement to six times base salary, up from five times.

Our solid operational and financial performance resulted in the following 2017 compensation outcomes:

 

    The 2017 annual incentive program achieved 129 percent of targeted results. This payout is reflective of our strong focus on both operational and financial performance, as described in the Annual Incentive section beginning on page 34.

 

    Performance-based long-term incentive awards that settled in 2017 achieved 200 percent of targeted performance payout. This result is reflective of our very strong relative TSR performance and achievement of our environmental commitment to reduce carbon dioxide emissions, as described in the Long-Term Incentives section on pages 35 to 36.

Compensation Philosophy

Our executive compensation programs are designed to align the interests of our executives with the interests of our shareholders, customers and employees. Our compensation philosophy is based on the following principles:

 

LOGO   

Performance

Based

     LOGO   

Market

Competitive

     LOGO   

Equity-based

Incentive

 

•  Majority of executive compensation is at risk, and pay is aligned with performance

 

•  Motivates achievement of financial, operational and stock price performance goals

    

 

•  Enables us to attract and retain talented leaders

 

•  Compares us to a 21-member industry peer group

    

 

•  Focuses on long-term shareholder value

 

•  Aligns executive interests with those of shareholders and rewards for strategic success

This philosophy, which includes significant emphasis on pay for performance, is applied consistently across all executives; however, individual compensation may be differentiated based on scope of responsibilities, experience, and contributions to Company results.

 

2018 Xcel Energy Proxy Statement  |  29

 

Shareholder value strong operational and financial results sound corporate governance


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Executive Compensation Practices

Our compensation practices for NEOs are outlined below. These practices reflect our compensation philosophy and help ensure sound corporate governance practices.

 

           
        What We Do         

 

 

 

Pay for performance with a substantial percentage of each NEO’s total direct compensation being variable, at risk and aligned with performance-based metrics

    
          Conduct an annual “say-on-pay” advisory vote  
          Use an appropriate peer group when establishing compensation  
          Review tally sheets when making executive compensation decisions  
          Balance short- and long-term incentive performance goals to reflect operating and strategic objectives  
          Strong emphasis on long-term equity compensation  
          Align executive compensation with shareholder returns through long-term incentives  
          Include caps on individual payouts in incentive plan  
          Subject equity grants to non-solicitation covenants  
          Set significant stock ownership guidelines for NEOs, other executives and non-employee directors  
          Require shares to be held until stock holding ownership achieved  
          Mitigate undue risk-taking in compensation programs  
          Include recoupment provisions in our annual and long-term incentive programs  
          Maintain an independent GCN  
       

 

 

Retain an independent compensation consultant

 

 
           
   What We Don’t Do     

 

 

 

Provide employment contracts

 
          Permit executives to hedge their company stock  
          Provide tax gross-ups for new executive officer participants in the Senior Executive Severance Policy  
          Provide tax gross-ups on executive perquisites except for circumstances regarding relocation  
          Provide unusual or excessive perquisites  
         

Supplement service credit to newly hired officers under any of the Company’s qualified or nonqualified retirement plans

 

 
           

 

Impact of 2017 Say on Pay Vote

Each year, Xcel Energy provides shareholders with a non-binding “say-on-pay” vote on its executive compensation programs.

The GCN evaluated results of the say-on-pay vote, and in light of the broad shareholder support of our executive compensation programs, the GCN decided to maintain the core design of our compensation programs. The GCN will continue to consider the outcome of future say-on-pay votes, in addition to various other factors, when making future compensation decisions.

 

LOGO

96% of the votes cast were in favor of our executive compensation programs and policies

 

 

30  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

What We Pay and Why

Establishing Target Compensation

At the GCN’s request, Meridian, its independent compensation consultant, presented its annual market assessment comparing our executive compensation programs and compensation against our peer group for:

 

  base salary;

 

  total cash compensation (base salary plus target annual incentive); and

 

  total direct compensation (total cash compensation plus target long-term incentive).

To provide a broad perspective of the competitive market, Meridian analyzed data for various market pay levels, including the 25th, 50th and 75th percentiles. We consider compensation to be market competitive if it is within a competitive range of the median of the peer group.

For 2017, the GCN made pay decisions based on this annual market assessment of compensation and specific factors about each NEO, including individual performance, experience, internal equity, Company results, scope and responsibility, retention and the NEO’s role in succession planning.

The GCN exercises its independent judgment to approve the compensation level for the CEO. For all other executive officers, the GCN considers the CEO’s recommendation for setting compensation levels. The GCN approved compensation for the CEO and all other executive officers that is aligned with the Company’s overall compensation philosophy described above.

Peer Group

Our peer group of 21 U.S.-based publicly traded energy services companies is generally consistent from year to year (subject to changes resulting from mergers and acquisitions) and was developed by Meridian to approximate the competitive market in which we compete for talent. The companies were selected primarily based on the following criteria:

 

  Utilities with similar revenue and market capitalization.

 

  Part of the market for which we compete for talent and investor capital.

 

  Similar operating models and challenges with their regulated utility businesses.

 

  Included in an executive compensation survey database for which compensation information is available for a cross-section of executive and managerial roles.

The peer group, at year-end, was comprised of the following companies:

 

2017 Peer Group Companies

  

Ameren

   Duke Energy    PG&E Corporation

American Electric Power

   Edison International    PPL

CenterPoint Energy

   Entergy    Public Service Enterprise Group

CMS Energy

   Eversource Energy    Scana

Consolidated Edison

   Exelon    Sempra Energy

Dominion Resources

   First Energy    Southern Company

DTE Energy

   NextEra Energy    WEC Energy Group

In December 2016 at the time 2017 compensation was assessed:

 

  The median revenue for the peer group was $11.5 billion as compared to our revenue of $11.7 billion.

 

  The median market capitalization for the peer group was $22.9 billion as compared to our market capitalization of $20.9 billion.

 

2018 Xcel Energy Proxy Statement  |  31

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Executive Compensation Elements

The following table provides information regarding the elements of total direct compensation for our NEOs in 2017:

 

    

Base Salary

  

Annual Incentive

   Long-Term Incentive: Performance Shares    Long-Term Incentive: Restricted Stock Units

Primary Purpose

   Motivate, Attract and Retain
   Reward for ongoing work performed    Reward short-term performance   

Reward long-term performance

   Continuity    Align interest with customers, shareholders and employees
Recipients    All NEOs
Reviewed    Annually
Payment    Ongoing    In February following end of performance period

Cash/Equity

  

Cash

  

Cash or equity at

executive officer’s
election

  

Majority is equity with balance as cash

  

Equity

Performance Period    Ongoing    1 year    3 years

Perquisites offered by the Company are very limited in nature and scope. In addition, we provide the following retirement and post-employment programs:

 

 

Retirement and Post-employment programs

 

 

Pension Plan (qualified and nonqualified)

 

•   Provides retirement income for eligible participants based on fixed plan-based formulas.

 

 

Supplemental Executive Retirement Plan (SERP)

 

•   CEO is the sole participant; closed to new participants in 2008.

 

•   Provides supplemental retirement income in addition to the pension benefits.

 

 

401(k) Savings and Deferred Compensation Plan

 

•   Provides for savings opportunities by deferring salary up to tax code limitations (401(k)) and salary, annual incentive and/or long-term incentive (Deferred Compensation).

 

 

Severance and Change in Control

 

•   Provides compensation and benefits in the case of involuntary termination without cause.

 

 

32  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Mix of Total Compensation

We balance the mix of compensation by delivering a blend of short- and long-term incentives that are consistent with prevailing market practice. This approach has effectively resulted in 87 percent of total direct compensation for the CEO and 74 percent of total direct compensation for other NEOs to be in the form of variable compensation, with the remainder representing fixed compensation. The GCN and the Board believe this design encourages a balance of short- and long-range strategic thinking, which is important given the long-term nature of utility operations and the capital investment necessary for such operations.

The following charts illustrate the mix of total direct compensation for the CEO and other NEOs at target performance.

 

 

LOGO

Overview of Target Total Compensation for 2017

The GCN set 2017 base salary, target annual incentive awards and target long-term incentive awards for all Xcel Energy executive officers, including the NEOs. These compensation levels align and the mix of pay is competitive with the market for the utility industry. The table below shows the base salary and target awards for short-term and long-term incentives for each NEO.

 

   

Annualized

Base Salary

($)

   

Annual

Incentive

Target (% of

Base Salary)

    Long-Term Incentive Targets        
Named Executive Officer      

Performance

Shares

($)

   

Restricted Stock

Units

($)

   

Total

($)

 

Ben Fowke, Chairman, President and CEO

    1,250,000       125     5,200,000       1,300,000       9,312,500  

Robert Frenzel, Executive Vice President, CFO

    625,000       75     1,020,000       255,000       2,368,750  

Kent Larson, Executive Vice President and Group President, Operations

    575,000       75     1,000,000       250,000       2,256,250  

Marvin McDaniel, Jr., Executive Vice President, Group President, Utilities and Chief Administrative Officer

    575,000       75     1,000,000       250,000       2,256,250  

Scott Wilensky, Executive Vice President, General Counsel

    520,000       65     740,000       185,000       1,783,000  

Base Salary

Base salary provides a fixed element of regular income. The amount of base salary set by the GCN is competitive in the utility industry. A key consideration is the median base salary rates at peer companies, although the GCN has flexibility to review other relevant factors as outlined in our compensation philosophy. The base salaries for the NEOs were, in aggregate, just below the median of base salaries of our peer companies.

 

2018 Xcel Energy Proxy Statement  |  33

 

Chairman, president and ceo all other neos (average)


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Annual Incentive

In February 2017, our management recommended goals to the GCN based on an evaluation of prior performance and available objective metrics and benchmarks. These goals are designed to discourage short-term thinking or behavior that could threaten the value of the Company or the investment of its shareholders. The Committee established the annual incentive program (“AIP”), which determines awards based on these goals as approved and Company financial performance as follows:

 

    Up to 150 percent of a target award, which is determined by multiplying base salary and the target percent, is based on the weighted actual achievement of our operational metrics outlined below and a funding factor multiplier, that is based on ongoing EPS results, which can be adjusted for certain identified financial impacts.

 

    Up to an additional 50 percent is based on attaining superior financial performance as measured by ongoing EPS.

 

    When combined, award payouts range from 0 percent to 200 percent of a participant’s target award.

The table below discloses the GCN approved corporate operational goals and actual results for the AIP in 2017:

 

2017    

Corporate    

Goals    

  

  Key Performance  

Indicator

  Threshold
 Performance 
  Target
 Performance 
  Maximum
 Performance 
  2017 Actual
 Performance 
    % Payout       % Weight     Weighted
  Calculation  

 

Customer    

  

 

Net Promoter Score
(Residential
Customers)

 

 

40th percentile 

 

 

60th percentile 

 

 

70th percentile 

 

 

47th percentile 

 

 

67.50%

 

 

20%

 

 

13.50%

  

Public Safety

(Damages Per 1000
Locates)

  1.45   1.34   1.25   1.24   150.00%   20%   30.00%
  

O&M Growth

(over 2016)(1)

  1.8%   0%   (1.8)%   (1.0)%   127.78%   20%   25.56%

Reliability    

  

Electric System
Reliability

(SAIDI)

  99   93   87   84   150.00%   20%   30.00%

Employee    

  

Employee Safety
(DART)(2)

  0.68   0.52   0.48   0.47   150.00%   20%   30.00%

Results on Operational Metrics 

  100%   129.06%

 

(1)  The O&M growth excludes: (1) any non-ongoing O&M expense reported externally; and (2) any regulatory cost deferrals/amortizations or expense changes with clearly identified revenue offsets in excess of $5M and approved by the CFO (i.e., mutual aid).

 

(2)  DART will be reduced to Threshold level if an employee fatality occurs or increased to Maximum level if no employee fatality occurs and there are no direct personal primary voltage electrical contacts that result in an DART Recordable injury or unplanned natural gas ignitions and the DART Recordable Incident Rate is above Threshold.

Annual incentive awards are, in part, based on ongoing EPS, which can be adjusted for certain identified financial impacts. For 2017, no adjustments were made to ongoing EPS. When ongoing EPS is below a certain threshold, awards will not be paid. If ongoing EPS is in the lower end of initial earnings guidance, or $2.25 to $2.35, then operational results can be modified by a funding factor multiple of 50 percent to 100 percent. If ongoing EPS is at $2.31 or greater, then the operational results can be modified by a funding factor multiple of 100 percent to 150 percent, not to exceed a 200 percent of target payout. For 2017, the operational results were not modified by the funding factor, resulting in 129 percent of target, as noted in the above table.

The GCN then considered individual performance in the achievement of corporate operational and financial goals to determine award amounts. The GCN focused on contributions made to O&M savings related to continuous improvement efforts, as well as operational and finance strategies that resulted in strong financial performance. As a result, the GCN adjusted awards upwards by $100,000 for each of Messrs. Frenzel, Larson and McDaniel in recognition of their leadership on these initiatives. Final award values are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 41.

 

34  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Long-Term Incentives

Grant of 2017-2019 LTI Awards

Long-term incentive compensation is approximately 70 percent of the CEO’s target total direct compensation and 55 percent of the average of the other NEOs’ target total direct compensation and is primarily performance-based. Prior to vesting, long-term incentive awards may not be sold, encumbered or otherwise transferred by the participant. Stock earned under long-term incentive compensation is subject to our Stock Ownership Policy (see pages 37 to 38).

For 2017, our long-term incentive program had two components, which provided a balance between performance-oriented opportunities and service-based opportunities:

 

  Performance shares targeted to deliver 80 percent of each executive officer’s long-term incentive opportunity; and

 

  RSUs targeted to deliver the remaining 20 percent.

 

 

LOGO

The following section describes the performance-based long-term incentive grants for the three-year period ending December 31, 2019.

 

 

Performance Shares based on

the Company’s Relative TSR

  

 

Performance Shares based on

Carbon Dioxide Emissions Reduction

LOGO    LOGO

For performance between percentiles, the number of performance shares earned shall be determined by straight line interpolation.

 

 

Based on the achievement of specified levels of the Company’s TSR relative to our peer group, with the payout ranging from 0 percent to 200 percent.

 

 

 

Based on the achievement of specified reductions in carbon dioxide emissions, with the payout ranging from 0 percent to 200 percent.

 

 

The goal links the interest of executive officers with shareholders by rewarding management for creating shareholder value when compared to utility industry peer companies.

 

 

 

This goal supports our strong environmental stewardship.

 

Dividend equivalents are credited on each granted award during the three-year cycle to the same extent that dividends are paid on shares of our common stock.

 

Credited dividend equivalents are paid solely to the extent the underlying performance share vests based on the achievement of the applicable performance goal. If the applicable threshold performance goal is not achieved at the end of the three-year performance cycle, then all associated performance shares and dividend equivalents would be forfeited.

 

Each performance share represents one share of Xcel Energy common stock.

 

 

Grant awards, at Target:

 

•   CEO: 80,010

 

•   Other NEOs range: 11,386 to 15,694

 

 

 

Grant awards, at Target:

 

•   CEO: 48,006

 

•   Other NEOs range: 6,832 to 9,417

 

 

Paid as cash, shares or a combination, as elected.

 

 

 

Generally paid as shares.

 

 

2018 Xcel Energy Proxy Statement  |  35

 

50% 30% 20% performance shares—relative tsr performance shares—carbon emissions reduction restricted stock units—service-based target performance: 50th percentile xcel energy’s tsr percentile ranking vs peer group target performance: 33% reduction three year average percent reduction in co2 emissions


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

Restricted Stock Units Subject to Service-Based Vesting

These RSUs, granted in 2017, vest upon the third anniversary of the grant, provided that the NEO remains continuously employed until such anniversary. They serve as an important continuity and retention tool. Each RSU represents one share of our common stock.

Dividend equivalents are credited on each RSU during the vesting period to the same extent that dividends are paid on shares of our common stock, but such dividend equivalents are paid solely to the extent the underlying RSU vests based on the satisfaction of the service requirement. Awards will vest on a pro rata basis for NEOs who are at least 55 years of age and have 10 years of service in the event that any such NEO leaves the company for any reason, other than with cause, during the term of the grant.

For 2017, the CEO was awarded 32,004 RSUs and the other NEOs were awarded from 4,555 to 6,278 RSUs.

The Performance Share and RSU grants are included in the Grants of Plan-Based Awards Table on page 43.

Settlement of 2015-2017 LTI Awards

For 2015, the long-term incentive program had two components — Performance Shares and Restricted Stock Units. The following section describes the results of these award grants for the three-year period ended December 31, 2017.

 

 

Performance Shares based on

the Company’s Relative TSR

 

 

Performance Shares based on

Carbon Dioxide Emissions Reduction

LOGO   LOGO

 

 

TSR is a measure of shareholder value creation and our ranking illustrates superior performance over peer companies. The performance outcome is at the 94th percentile which results in a 200 percent of target payout.

  

 

Result is due to implementing renewables, being a leader in resource plans, energy efficiency programs and favorable market conditions. The performance outcome is above the maximum payout or a 28.31 percent reduction over 2005 levels, which results in a 200 percent of target payout.

1  CO2 emissions associated with all owned and purchased electricity, whether serving our customers or sold into the market.

 

 

Earned awards:

 

•   CEO: 165,188

 

•   Other NEOs range: 15,533 to 32,120

 

  

 

Earned awards:

 

•   CEO: 99,112

 

•   Other NEOs range: 9,391 to 19,272

 

 

These awards include dividend equivalents credited over the three-year performance cycle.

 

Restricted Stock Units Subject to Service-Based Vesting

In 2015, we granted each NEO RSUs that vested upon the third anniversary of the grant, provided such NEO remained continuously employed for the three-year period.

The CEO earned 33,038 RSUs and the other NEOs earned awards ranging from 3,131 to 6,424 RSUs, all of which included dividend equivalents credited over the three-year cycle.

The Performance Shares and RSUs awards that were earned are included in the Option Exercises and Stock Vested Table on page 45.

 

36  |  2018 Xcel Energy Proxy Statement

Target performance: 50th percentile actual result: 94th percentile Target performance: 23% reduction actual result: 28% reduction


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Retirement and Deferred Compensation Benefits

In 2017, the Company provided retirement benefits to executive officers under the Xcel Energy qualified and nonqualified pension plans. The role of the pension plans in executive compensation is the same as it is for other employees: to provide income during retirement and aid in the retention of qualified employees. The qualified pension plan includes earnings up to the Internal Revenue Service’s established limits and the benefit may be payable in a manner that results in individual income tax advantages. The nonqualified pension plan includes earnings, if any, above the same Internal Revenue Service limit. The 2017 Internal Revenue Service earnings limit was $270,000.

The Company maintains a Supplemental Executive Retirement Plan (“SERP”), which was closed to new participants in 2008. Benefits continue to accrue for Mr. Fowke who remains the sole participant in the SERP. The SERP provides a benefit to the participant, which is offset by the qualified and nonqualified pension plan benefits. Covered compensation for the purposes of calculating SERP benefits includes base salary and annual incentive awards. Long-term incentive payments are not included in covered compensation. The SERP benefit is valued as a 20-year annuity, but is payable as a lump sum after the participant’s termination of employment. Unreduced benefits are payable at age 62; benefits are payable as early as age 55, reduced 5 percent for each year that the benefit commencement date precedes age 62.

Each executive officer is eligible to participate in Xcel Energy’s 401(k) Savings Plan and Deferred Compensation Plan. These plans allow executive officers, like other eligible employees, to defer a portion of their base salary and all or a portion of their annual incentive award up to certain IRS limits. They also allow executive officers to defer all or a portion of their performance-based long-term incentive awards. For 2017, the Company matched 50 percent of base salary deferrals (up to 8 percent deferred), netting to a maximum 4 percent, for eligible matching contributions. One of the purposes of the Deferred Compensation Plan is to allow for a full employer matching contribution that cannot be contributed under the Company’s qualified retirement plans due to the Internal Revenue Service Code limitations.

Additional Compensation Program Features and Policies

Severance Policy

The Company provides severance benefits to NEOs in accordance with the Xcel Energy Senior Executive Severance and Change in Control Policy (as amended, the “Severance Policy”). The Board or the GCN may name additional participants. The GCN believes the Severance Policy provides a competitive severance benefit that retains key talent during a critical and potentially protracted period of uncertainty and provides a competitive pay arrangement in the event the Company undergoes a change in control and the executive is not retained following the completion of such event. Outside of change in control situations, the Severance Policy also encourages executive officers to focus on the interests of Xcel Energy and its shareholders without undue concern that the officer will be terminated without compensation and benefits.

The benefits payable under the Severance Policy are discussed in more detail under Potential Payments Upon Termination or Change in Control beginning on page 50.

Employment Contracts

Neither our CEO nor any of our other executive officers have employment contracts.

Stock Ownership Requirements

Our Stock Ownership Policy is an important feature of our compensation philosophy that helps to ensure alignment of executive interests with those of our shareholders. The share ownership guideline for each executive is based on the executive’s position. Executives are expected to achieve the applicable ownership requirement within five years of the date they assume their current executive position by holding shares paid from incentives or by other methods.

If an executive is not in compliance with the ownership requirement within the required time period, the executive must elect to receive payment of any incentive awards in stock and must retain 100 percent of the net shares (after-tax) delivered to him or her until the ownership requirement is met.

 

2018 Xcel Energy Proxy Statement  |  37

 


Table of Contents

 

    Compensation Discussion and Analysis

 

    

 

As of March 20, 2018, all current NEOs have achieved, or are on track to achieve, the stated share ownership requirement by the date specified for achievement. All shares of common stock that the executive owns as well as amounts deferred into Xcel Energy stock fund count toward compliance with the ownership guidelines. The table below shows the value of shares of common stock that each NEO must hold by the required dates expressed as a multiple of base salary.

 

           
CEO         6x base salary    
           
Named Executive Officers         3x base salary        
           
All Other Executive Officers         2x - 3x base salary        
           

Equity Grant Practices

We follow these practices regarding the timing of equity compensation grants:

 

    Performance shares and RSUs are normally approved on the date of the regularly scheduled December GCN meeting and granted on the first trading day of the fiscal year.

 

    Off-cycle grants to employees and new hires are made after the trading window opens following the earnings release for the quarter in which the triggering event occurred.

 

    Grants to newly promoted executive officers or otherwise made as described above are made either (i) on the day the GCN approves the grant for a promotion that has already occurred or is occurring concurrently; or (ii) on the effective date of a promotion for promotions or grants that become effective at a future date.

 

    In years where we pay out annual incentive awards, we issue the common shares and restricted shares of our common stock to executives who have elected to receive their award in common stock on the regularly scheduled date of the February GCN meeting.

Hedging and Pledging

We prohibit the use of any hedging or similar transactions related to our shares for directors and all employees, including executives. In addition, the pledging of shares by executive officers and directors is only allowed if the executive officer or director receives approval from the securities trading policy committee prior to pledging the shares. No directors or executive officers have pledged shares of our common stock. The Board believes that these policies are consistent with our philosophy that senior executives’ and directors’ interests should be aligned with those of our long-term shareholders through equity ownership.

Recoupment

The Company has recoupment (or clawback) provisions in place to provide the right to recover certain payments made to executives or other employees as required by Dodd-Frank.

In addition, Xcel Energy may recover all or a portion of paid annual and long-term incentive awards:

 

    For a period of up to three years if there is a miscalculation that results in a materially incorrect payment.

 

    If an individual is terminated for fraud or misconduct.

Further, Xcel Energy may cancel outstanding and unvested LTI grants for individuals who were determined to be engaged in fraud or misconduct and whose actions resulted in, or were reasonably likely to result in, a material adverse impact to the Company, whether operational, financial or reputational.

 

38  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Compensation Discussion and Analysis    

 

 

Risk Assessment

Our compensation programs are designed to motivate performance while not promoting behaviors that create undue risk. The GCN considers several risk factors in establishing executive compensation programs, when setting compensation levels and when selecting target measures for variable compensation programs. These factors include:

 

    Designed to align shareholder, customer and employee interests.

 

    Performance metrics are clear, easily identifiable and are based on variables that are generally accepted in the market, such as EPS and TSR.

 

    Performance metrics align to our business strategy.

 

    Long-term incentives have three-year vesting periods to encourage long-term decision making and value creation.

 

    Incentive metrics are subject to auditing and internal controls, which apply to performance achievement and reporting of results.

 

    Payout ranges are understood and capped.

 

    Performance, structure and target incentive opportunities are comparable to those of our industry or peer companies.

 

    Our Stock Ownership Policy requires that executive officers retain a substantial stake in the Company so that executive interests are long-term in nature.

 

    Recoupment provisions are in place as described above on both annual and long-term incentives.

Deductibility of Executive Compensation under IRC Section 162(m)

Beginning January 1, 2018, as a result of the passage and signing of the Tax Reform and Jobs Act, the $1,000,000 limitation on deductible compensation will apply to the chief executive officer, chief financial officer, any other named executive officers and anyone who previously was a covered person under such rules. In addition, beginning January 1, 2018, the exemption for performance-based compensation will be eliminated, except for certain written binding contracts that were in effect on November 2, 2017 that are not modified in any material respect on or after that date. The GCN expects to continue granting compensation designed to achieve the objectives described above under Compensation Philosophy.

 

2018 Xcel Energy Proxy Statement  |  39

 


Table of Contents

 

    Report of the Compensation Committee

 

    

 

Report of the Compensation Committee

The GCN, in its capacity as the compensation committee of the Board, has reviewed and discussed with management the CD&A in this proxy statement. Based on the review and discussions referred to above, the GCN recommended to the Company’s Board that the CD&A be included in the Company’s proxy statement on Schedule 14A.

Compensation Committee

Richard K. Davis, Chair

Christopher J. Policinski

James T. Prokopanko

James J. Sheppard

David A. Westerlund

 

40  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

Executive Compensation Tables

Summary Compensation Table

The following table summarizes the primary elements of compensation paid or granted to our named executive officers. See the CD&A above for a description of our executive compensation program to gain an understanding of the information disclosed in this and the following tables.

 

  Name and Principal Position   Year    

Salary

($)(1)

   

Bonus

($)(2)

   

Stock

Awards

($)(3)

   

Non-Equity

Incentive Plan

Compensation

($)(4)

   

Change in

Pension Value

and Non-

qualified

Deferred

Compensation

Earnings

($)(5)

   

All Other

Compensation

($)(6)

   

        Total        

($)

 

  Ben Fowke

    2017       1,250,000             6,500,012       2,016,563       2,854,922       54,902       12,676,399  

 

  Chairman, President and CEO

 

 

 

 

2016

 

 

 

 

 

 

1,200,000

 

 

 

 

 

 

 

 

 

 

 

 

5,800,001

 

 

 

 

 

 

1,828,800

 

 

 

 

 

 

2,638,417

 

 

 

 

 

 

52,902

 

 

 

 

 

 

11,520,120

 

 

 

 

 

 

2015

 

 

    1,200,000             6,123,614       1,224,275       830,969       54,312       9,433,170  

  Robert Frenzel

    2017       625,000             1,698,003       352,485       52,034 (8)      26,037       2,753,559  

 

Executive Vice President, Chief Financial Officer

 

 

 

 

 

2016

 

(7) 

 

 

 

 

397,500

 

 

 

 

 

 

 

 

 

 

 

 

2,120,102

 

 

 

 

 

 

266,700

 

 

 

 

 

 

14,402

 

(8) 

 

 

 

 

281,226

 

 

 

 

 

 

3,079,930

 

 

  Kent Larson

    2017       575,000             1,250,040       656,571       274,121       25,742       2,781,474  

 

Executive Vice President and Group President, Operations

 

 

 

 

 

2016

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

 

 

 

 

1,230,008

 

 

 

 

 

 

523,875

 

 

 

 

 

 

373,654

 

 

 

 

 

 

24,608

 

 

 

 

 

 

2,702,145

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,050,008

 

 

 

 

 

 

 

 

 

532,956

 

 

 

 

 

 

 

 

 

499,192

 

 

 

 

 

 

 

 

 

24,585

 

 

 

 

 

 

 

 

 

2,656,741

 

 

 

 

  Marvin McDaniel, Jr(9)

    2017       575,000             1,250,040       656,571       290,912       25,714       2,798,237  

 

Executive Vice President, Group President, Utilities and Chief Administrative Officer

 

 

 

 

 

2016

 

 

    550,000             1,230,008       523,875       366,599       25,950       2,696,432  
 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,050,008

 

 

 

 

 

 

 

 

 

532,956

 

 

 

 

 

 

 

 

 

236,108

 

 

 

 

 

 

 

 

 

24,741

 

 

 

 

 

 

 

 

 

2,393,813

 

 

 

 

  Scott Wilensky

    2017       520,000             925,039       436,223       118,647       20,530       2,020,439  

 

Executive Vice President, General Counsel

 

 

 

 

2016

 

 

    505,000             940,665       354,346       231,611       23,812       2,055,434  
 

 

 

 

2015

 

 

    505,000             969,291       340,798       283,364       12,280       2,110,733  

 

(1)  Amounts in this column reflect base salary earned for the corresponding year regardless of whether any portions were deferred under the 401(k) Savings Plan or otherwise.

 

(2)  The Company did not pay any supplemental bonus awards to the NEOs.

 

(3)  Amounts in this column reflect the aggregate grant date fair value of long-term incentive awards granted. The majority of the amounts in this column do not represent earned or paid compensation as awards are still subject to performance and/or vesting conditions. The remaining amounts include awards earned under the AIP that the executive officer elected to receive in shares of unrestricted and restricted common stock, in lieu of a portion of the cash payment. In each instance, the grant date fair value was computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, as described below:

 

    Restricted shares and unrestricted shares granted under the AIP are valued based on the closing price of Xcel Energy’s common stock, as reported on the stock exchange where our stock was listed, on the trading date preceding the issuance date; shares are issued following the close of the performance year, and include a premium (5 percent for unrestricted common stock or 20 percent for restricted stock) for the election to receive shares of stock in lieu of cash.

 

    The long-term incentive grants are valued based on the market price of our common stock on the grant date of the award, based on the assumption that target performance will be achieved or the service requirement will be met and the awards and future credited dividend equivalents will vest and will not be forfeited.

The aggregate grant date fair value of equity grants is equal to the closing price of Xcel Energy’s common stock, as determined above. The aggregate grant date fair value of performance share awards granted in 2017 that have a variable vesting value, assuming the maximum performance conditions are achieved, is reflected in the table below:

 

     

Ben

  Fowke  

        

Robert

  Frenzel  

        

Kent

  Larson  

        

Marvin

  McDaniel, Jr.  

        

Scott

  Wilensky  

Performance Shares

   $10,400,020         $2,040,018         $2,000,048         $2,000,048         $1,480,030

 

(4)  Amounts in this column reflect annual incentive awards earned under our AIP, as more fully described in the Annual Incentive section on page 34. The amounts in this column are part of the AIP earned, regardless of whether any portion was deferred under the Deferred Compensation Plan. These amounts do not include amounts that the executive elected to receive in shares of unrestricted and restricted shares in lieu of a portion of the cash payment. The value of stock received in lieu of the cash payment plus associated premiums are reflected in the Stock Awards column for the respective years.

 

2018 Xcel Energy Proxy Statement  |  41

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

 

(5)  Amounts in this column reflect the increase in the present value of the executive officer’s benefits under all pension plans established by the Company, using methods that are consistent with those used in our financial statements. The change from the prior year is generally due to (a) the additional years of service earned by the executive officer under the plans, (b) the change in the final average salary from the prior year used to determine plan benefits, (c) the interest earned on accumulated benefits during the year (that is, the decrease in the deferral period until benefits commence as the executive officer approaches retirement), and (d) changes in actuarial assumptions including interest rates.

 

(6)  Amounts included in All Other Compensation include the Company match under the 401(k) Savings Plan, Company contributions to the nonqualified savings plan, imputed income on life insurance paid by the Company, amounts related to our executive physical program, and amounts related to relocation expenses for one of our NEOs. None of these amounts exceed $10,000 except the following:

 

    Contributions to the nonqualified savings plan: Mr. Fowke $41,000; Mr. Frenzel $16,000; Mr. Larson $14,000; and Mr. McDaniel $14,000.

 

    For Mr. Frenzel, the 2016 value included $276,793 in relocation expense reimbursement which included $12,085 in income tax reimbursement for taxes related to the relocation reimbursement.

Except for the executive physical imputed amount, programs included in the “All Other Compensation” column were available to all eligible and qualifying employees of Xcel Energy.

Under corporate policy, the corporate aircraft may not be scheduled for personal use. Executive officers and their families may use the corporate aircraft for personal travel only when the aircraft is already scheduled to fly to the same destination on Company business. Because the aircraft may only be used for personal travel if the aircraft already is scheduled to fly to the same destination, there is no incremental cost to the Company for such personal use. We have significant corporate operations in Minneapolis, Minnesota, and Denver, Colorado, and some executive officers, including several of the NEOs, split time between those offices and use the corporate aircraft to travel between Minneapolis and Denver. Executive officers may also have the occasional personal use of event tickets when such tickets are not being used for business purposes, for which we have no incremental costs.

 

(7) Mr. Frenzel was hired effective May 3, 2016.

 

(8) Mr. Frenzel became a participant after completion of one full year of service. The value represents the amount he would earn assuming he remains employed at Xcel Energy under the pension plan.

 

(9) Mr. McDaniel will retire in the second quarter of 2018.

 

42  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

Grants of Plan-Based Awards Table

The following table provides information regarding incentive awards and other stock-based awards granted during 2017 to the NEOs.

 

  Name   

Grant

Date

    

Date of

Committee

Action(1)

         Estimated Future Payouts Under    
Non-Equity Incentive Plan
Awards(2)
    

    Estimated Future Payouts Under    

Equity Incentive Plan Awards(3)

    

Grant

Date Fair

Value of

Stock

and Option

Awards

($)(4)

 
        

Threshold

($)

    

Target

($)

    

Maximum

($)

    

Threshold

(#)

    

Target

(#)

   

Maximum

(#)

    
                   

Ben Fowke

     1/3/17        12/13/16                 24,003        80,010 (a)      160,020        3,250,006   
     1/3/17        12/13/16                 14,402        48,006 (b)      96,012        1,950,004   
     1/3/17        12/13/16                        32,004 (c)             1,300,002   
                         781,250        1,562,500        3,125,000                                     

Robert Frenzel

     1/3/17        12/13/16                 4,708        15,694 (a)      31,388        637,490   
     1/3/17        12/13/16                 2,825        9,417 (b)      18,834        382,519   
     1/3/17        12/13/16                        6,278 (c)             255,012   
                  $ 140,625      $ 281,250 (d)    $ 562,500     
                         117,188        234,375        468,750                                     

Kent Larson

     1/3/17        12/13/16                 4,616        15,387 (a)      30,774        625,020   
     1/3/17        12/13/16                 2,770        9,232 (b)      18,464        375,004   
     1/3/17        12/13/16                        6,155 (c)             250,016   
                         215,625        431,250        862,500                                     

Marvin McDaniel, Jr.(5)

     1/3/17        12/13/16                 4,616        15,387 (a)      30,774        625,020   
     1/3/17        12/13/16                 2,770        9,232 (b)      18,464        375,004   
     1/3/17        12/13/16                        6,155 (c)             250,016   
                         215,625        431,250        862,500                                     

Scott Wilensky

     1/3/17        12/13/16                 3,416        11,386 (a)      22,772        462,499   
     1/3/17        12/13/16                 2,050        6,832 (b)      13,664        277,516   
     1/3/17        12/13/16                        4,555 (c)             185,024   
                         169,000        338,000        676,000                                     

 

(1)  The GCN approved the long-term incentive awards on December 13, 2016, effective as of January 3, 2017, and approved the annual incentive on February 21, 2017, effective as of January 1, 2017.

 

(2)  Amounts show target annual incentive awards pursuant to the AIP. Target annual incentive awards, as a percentage of base salary, were set as follows: 125 percent for Mr. Fowke, 75 percent for Messrs. Frenzel, Larson and McDaniel and 65 percent for Mr. Wilensky. Payouts of annual incentive awards are dependent on the level of achievement of corporate financial and operational goals approved by the GCN, with each individual having the opportunity to earn from 0 percent to 200 percent of the target annual incentive award based on the level of achievement of the goals. With approval of the GCN, an executive officer may elect to receive shares of restricted or common stock in lieu of all or a portion of the cash payment for which they were otherwise entitled under the AIP. To the extent an executive officer elected to receive restricted or unrestricted shares in lieu of a cash payment for 2017 under the AIP, the dollar value of the future payout of those equity awards at threshold, target and maximum are disclosed in dollar amounts in the columns under the caption “Estimated Future Payouts Under Equity Incentive Plan Awards.” The values shown include the individual’s elected forms of payment and associated premium and therefore may include a 5 percent premium (should the participant elect to receive unrestricted common shares) or a 20 percent premium (should the participant elect to receive restricted shares). The actual payments of the cash component of these awards are included in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 41.

 

(3)  The amounts show the threshold, target, and maximum payouts for grants of performance shares and target payout for RSUs. Performance shares are dependent on the level of achievement of performance conditions approved by the GCN, with each individual having the opportunity to earn from 0 percent to 200 percent of the target performance share award based on the level of achievement.

 

  Share amounts in this column reflect long-term incentive stock-based awards to all NEOs, as described further in (a) through (c) below. Dollar amounts in this column also reflect annual incentive awards that the NEO has elected to receive in restricted and/or unrestricted shares of our common stock, as described further in (d) below and footnote 2 above.

 

  (a)   performance shares based on a relative TSR with a measurement date of December 31, 2019
  (b)   performance shares based on reducing carbon emissions with a measurement date of December 31, 2019
  (c)   RSUs vesting on December 31, 2019
  (d)   dollar value of payouts for 2017 Annual Incentive Program to be received as restricted stock, which has a 20 percent premium, or common stock, which has a 5 percent premium, in accordance with an executive officer’s election (see footnote 2)

 

  All share amounts reflected were issued under the 2015 Omnibus Incentive Plan. Performance share payout values, while based on level of performance, are also determined by the price of our common stock at payout. The lines reflecting dollar values are for the AIP payouts, pursuant to the 2015 Omnibus Incentive Plan, to be received in restricted and/or unrestricted shares of common stock in accordance with an executive officer’s election (see footnote 2 above). The number of shares to be received for annual incentive award payouts is determined based on the fair market value of our common stock at the time the shares are issued following the close of the performance year. The value of the shares actually issued to each executive officer pursuant to 2017 annual incentive awards is included in the “Stock Awards” column in the Summary Compensation Table.

 

(4)  This column shows the grant date fair value pursuant to FASB ASC Topic 718 for equity awards.

 

(5)  Performance shares and RSUs granted to Mr. McDaniel will be prorated to reflect his retirement in the second quarter of 2018.

 

2018 Xcel Energy Proxy Statement  |  43

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

Outstanding Equity Awards at Fiscal Year-End Table

The following table provides additional information regarding restricted stock, performance shares and RSUs that were outstanding on December 31, 2017 for the NEOs. Fractional share amounts have been rounded to the nearest whole share.

 

     Stock Awards             Equity Incentive Plan Awards
  Name   

Number of Shares or

Units of Stock That

Have Not Vested

(#)

    

Market Value of

Shares or Units of

Stock That Have Not

Vested

($)(1)

            

Number of Unearned Shares,

Units or Other Rights

That Have Not Vested

(#)(2)

  

Market or Payout Value of

Unearned Shares, Units or

Other Rights That Have Not

Vested

($)(1)(2)

Ben Fowke

       9,331(3)        448,937         171,763(6)      8,263,501
     13,137(4)        632,039         103,057(7)      4,958,080
              34,354(8)      1,652,761
            163,740(9)      7,877,513
              98,244(10)    4,726,508
              32,748(11)    1,575,503
                                111,754(12)    5,376,506

Robert Frenzel

       7,747(5)        372,720           31,059(6)      1,494,244
              18,636(7)         896,587
                6,212(8)         298,879
              32,118(9)      1,545,178
              19,272(10)       927,166
                                    6,424(11)       309,055

Kent Larson

       2,297(3)        110,525           36,426(6)      1,752,454
              21,855(7)      1,051,452
                7,285(8)         350,501
              31,489(9)      1,514,952
              18,893(10)       908,951
                                    6,298(11)       303,000

Marvin Mc Daniel, Jr.(13)

       2,193(3)        105,497           36,426(6)      1,752,454
              21,855(7)      1,051,452
                7,285(8)         350,501
              31,489(9)      1,514,952
              18,893(10)       908,951
                                    6,298(11)       303,000

Scott Wilensky

              25,913(6)      1,246,666
              15,548(7)         748,000
                5,183(8)         249,333
              23,301(9)      1,121,027
              13,982(10)       672,656
                                    4,661(11)       224,235
(1)  Values were calculated based on a $48.11 closing price of our common stock, as reported on the NYSE on December 29, 2017. Actual performance shares and performance share payout values, while based on level of performance, are also determined by the price of our common stock at payout. Values reflected in the table for performance shares granted in 2016 and 2017 assume maximum level performance.

 

(2)  Amounts reflected exclude performance share awards and RSUs that have a measurement period that ended on December 31, 2017. The GCN certified payment of these awards on February 20, 2018; the amounts for these awards are included in the amounts in the column titled “Number of Shares Acquired on Vesting” in the Option Exercises and Stock Vested Table on page 45.

 

(3)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2015 for which they were otherwise entitled under the AIP. The restrictions lapsed on March 1, 2018.

 

(4)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2016 for which they were otherwise entitled under the AIP. Two-thirds of the restrictions have lapsed and the remaining one-third of the restrictions will lapse on March 1, 2019 or the next available trading day if the designated date is not a trading day.

 

(5)  Represents restricted stock, and credited dividends, that the executive officers elected to receive in lieu of cash compensation for annual incentive awards granted in 2017 for which they were otherwise entitled under the AIP. One-third of the restrictions lapsed March 1, 2018, and the remaining two thirds of the restrictions will lapse in equal installments on March 1, 2019 and March 1, 2020 or the next available trading day if the designated date is not a trading day.

 

(6)  Represents performance shares granted in 2016, and credited dividend equivalents, based on a relative TSR for the performance period January 1, 2016 to December 31, 2018. The measurement date for the vesting of these awards is December 31, 2018.

 

(7)  Represents performance shares granted in 2016, and credited dividend equivalents, based on reducing carbon emissions. The measurement date for the vesting of these awards is December 31, 2018.

 

(8)  Represents RSUs granted in 2016, and credited dividend equivalents, vesting on December 31, 2018.

 

(9)  Represents performance shares granted in 2017, and credited dividend equivalents, based on a relative TSR for the performance period January 1, 2017 to December 31, 2019. The measurement date for the vesting of these awards is December 31, 2019.

 

(10)  Represents performance shares granted in 2017, and credited dividend equivalents, based on reducing carbon emissions. The measurement date for the vesting of these awards is December 31, 2019.

 

(11)  Represents RSUs granted in 2017, and credited dividend equivalents, vesting on December 31, 2019.

 

(12)  Represents retention-based restricted stock units granted February 20, 2013, and credited dividend equivalents. One-third of the restricted stock units vested on February 20, 2016, and the remaining two-thirds vested on February 20, 2018.

 

(13)  Long-term incentive grant values reflected in this table will be prorated to reflect Mr. McDaniel’s retirement in the second quarter of 2018.

 

44  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

Option Exercises and Stock Vested Table

The following table discloses on a grant-by-grant basis the stock or similar awards that vested in 2017. Pursuant to the Stock Ownership Policy, each executive is required to hold the net shares acquired until the stock ownership requirements is met. Fractional share amounts have been rounded to the nearest whole share.

 

       Stock Awards(1)  
  Name     

Number of

Shares Acquired

on Vesting

(#)(2)

      

Value Realized

on Vesting

($)(2)

 

Ben Fowke

       15,538 (3)         679,165 (4)
       165,188 (5)         7,380,605 (6)
       99,112 (7)         4,428,303 (6) 
         33,038 (8)         1,476,151 (6) 

Robert Frenzel

       15,533 (5)         694,010 (6)
       9,391 (7)         419,592 (6)
         3,131 (8)         139,911 (6) 

Kent Larson

       5,018 (3)         219,333 (4)
       32,120 (5)         1,435,126 (6)
       19,272 (7)         861,075 (6)
         6,424 (8)         287,025 (6)

Marvin McDaniel, Jr.

       4,916 (3)         214,868 (4)
       32,120 (5)         1,435,126 (6)
       19,272 (7)         861,075 (6)
         6,424 (8)         287,025 (6)

Scott Wilensky

       3,502 (3)         153,087 (4)
       26,001 (5)         1,161,726 (6)
       15,602 (7)         697,075 (6)
         5,201 (8)         232,375 (6)

 

(1)  The Company has not granted stock options since 2001, and there are no outstanding options. As such, the columns relating to option exercises have been omitted.

 

(2)  Amounts reflected include performance share awards and RSUs that had performance periods that ended on December 31, 2017. The GCN certified the achievement of the applicable performance measures on February 20, 2018.

 

(3)  Reflects vesting of restricted stock elected in lieu of cash compensation under the AIP plus associated stock acquired with reinvested dividends.

 

(4)  Value is based on the closing market price of our common stock on February 28, 2017, or $43.71, the date prior to the restriction lapse date.

 

(5)  Reflects vesting of performance shares granted January 2, 2015, as applicable, and associated dividend equivalent performance shares based on achievement of TSR relative to our peer group for the performance period January 1, 2015 to December 31, 2017. The number of performance shares includes credited dividend equivalents associated with the January 20, 2018 dividend as the record date for these dividend equivalents, December 28, 2017, was prior to settlement. Upon settlement, each officer received 50 percent of the performance share award in shares of our common stock with the remaining 50 percent paid as cash, subject to plan limits, unless otherwise elected to be deferred under the Deferred Compensation Plan.

 

(6)  Value is based on the closing market price of our common stock on February 16, 2018, or $44.68, the preceding trading date prior to the GCN certification.

 

(7)  Reflects vesting of performance shares granted January 2, 2015, as applicable, and associated dividend equivalent units based on achievement of defined reduction of carbon dioxide emissions. The number of performance shares includes credited dividend equivalents associated with the January 20, 2018 dividend as the record date for these dividend equivalents, December 28, 2017, was prior to settlement. Upon settlement, each officer received 100 percent of the performance share award in shares of our common stock, unless otherwise elected to be deferred under the Deferred Compensation Plan.

 

(8)  Reflects vesting of service-based restricted stock units granted January 2, 2015, as applicable, and associated dividend equivalent units based on active employment at the time of vesting. The number of units includes credited dividend equivalents associated with the January 20, 2018 dividend as the record date for these dividend equivalents, December 28, 2017, was prior to settlement. Upon settlement, each officer received 100 percent of the RSUs in shares of common stock.

 

2018 Xcel Energy Proxy Statement  |  45

 


Table of Contents

 

    Executive Compensation Tables

 

    

 

Pension Benefits

We maintain two defined benefit plans in which the NEOs participate, and one additional defined benefit plan in which one NEO participated in 2017.

 

  The Xcel Energy Pension Plan (referred to as the “Pension Plan”) provides funded, tax-qualified benefits that are subject to compensation and benefit limits under the Internal Revenue Code.

 

  The Xcel Energy Inc. Nonqualified Pension Plan (referred to as the “Nonqualified Pension Plan”) provides unfunded, nonqualified benefits for compensation that is above the required limits of the Xcel Energy Pension Plan.

 

  The Xcel Energy Inc. Supplemental Executive Retirement Plan (referred to as the “SERP”) provides unfunded, nonqualified benefits that are offset by benefits under the Xcel Energy Pension Plan and the Nonqualified Pension Plan. Participation in the SERP is closed to new participants.

 

  Name    Plan Name     

Number of

Years

Credited

Service

(#)

    

Present

Value of

Accumulated

Benefit

($)(1)

    

Payments

    During Last    

Fiscal Year

($)

  Ben Fowke

   Pension Plan      21            2,489,470     
   Nonqualified Pension Plan      21            4,456,102     
     SERP      21          15,907,145     

  Robert Frenzel

   Pension Plan      2          23,454 (2)     
     Nonqualified Pension Plan      2          42,982 (2)     

  Kent Larson

   Pension Plan      36            2,450,401     
     Nonqualified Pension Plan      36            1,476,548     

  Marvin McDaniel, Jr.

   Pension Plan      30            2,451,372     
     Nonqualified Pension Plan      30              835,541     

  Scott Wilensky

   Pension Plan      19            2,079,911     
     Nonqualified Pension Plan      19              

 

(1)  During fiscal year 2017, the Board of Directors adopted an amendment to the Xcel Energy Pension Plan which transferred some of the Company’s obligations from the Nonqualified Pension Plan to the Xcel Energy Pension Plan. The Company incurred no additional liability and participants receive no additional current value under the Xcel Energy pension plans as a result of the amendment. Both the Company and the participants receive various tax benefits as a result of the amendment.

 

(2)  Mr. Frenzel became a participant after completion of one full year of service. The value represents the amount he would earn assuming he remains employed at Xcel Energy and becomes vested under the applicable pension plans.

Present Value of Accumulated Benefits

The Present Value of Accumulated Benefit is the present value of the annual pension benefit earned as of December 31, 2017 that would be payable under each plan for the NEOs beginning at normal retirement age, or the earliest time at which the NEO may retire without a benefit reduction. Certain assumptions regarding interest rates and mortality were used to determine the present value of the benefit. Those assumptions are consistent with those used in Note 9, Benefit Plans and Other Postretirement Benefits, to Xcel Energy’s Consolidated Financial Statement, included as part of Xcel Energy’s 2017 Annual Report on Form 10-K, including use of updated discount rate assumptions. Specifically, the discount rate for qualified pension benefits was changed from 4.11 percent for 2016 to 3.60 percent for 2017. Nonqualified pension benefits and SERP discount rates were changed from 3.99 percent for 2016 to 3.49 percent for 2017.

Normal retirement age for this purpose is defined by the various plans in which the NEOs participate. The Present Value of Accumulated Benefit is determined for each plan assuming benefits commence at the age described below:

 

    Xcel Energy Pension Plan. Benefits are calculated assuming the normal retirement age is 65.

 

    Nonqualified Pension Plan. Benefits are calculated assuming normal retirement age is 65.

 

    SERP. Benefits are calculated assuming the normal retirement age is 62.

The following narrative provides detailed information about the retirement benefits available to the NEOs.

 

46  |  2018 Xcel Energy Proxy Statement


Table of Contents
   

 

Executive Compensation Tables    

 

 

Xcel Energy Pension Plan

The NEOs participate in either the Pension Equity or the Cash Balance formula under the Xcel Energy Pension Plan:

Pension Equity Benefit Formula

There are three general benefit components payable under the Pension Equity benefit: the basic benefit, the retirement spending account and the social security supplement.

The basic Pension Equity benefit is determined as follows:

 

    Monthly benefit, payable as a single life annuity at the participant’s normal retirement age, which is the actuarial equivalent of the participant’s Pension Equity Plan (“PEP”) balance. The PEP balance is equal to 10 percent of the participant’s highest average pay (expressed on a monthly basis) times years of credited service times twelve (12).

 

    Highest average pay is equal to the highest average monthly rate of base pay plus annual incentive pay during any 48 consecutive months of covered employment. Base pay is regular, straight-time earnings, including employee contributions to the 401(k) Savings Plan, the Flexible Benefits Plan and, effective January 1, 2002, the Deferred Compensation Plan. Messrs. Fowke, Larson and McDaniel are eligible for retirement under the Xcel Energy Pension Plan at the benefit level described here.

If a participant terminates employment before age 65 but after completing three years of vesting service, the benefit is calculated as described above but based on service and highest average pay at termination.

Retirement Spending Account

The Retirement Spending Account annual benefit is available for PEP participants, and is expressed as a monthly benefit, payable as a single life annuity that is the actuarial equivalent of the Retirement Spending Account balance. The Retirement Spending Account balance is the accumulated value at retirement of the initial account balance, annual credits, and annual interest credits.

 

    Initial account balance equal to $1,400 times all years of service as of December 31, 2002, for former New Century Energy participants and December 31, 1998 for former Northern States Power Company participants. For all other participants, the initial account balance is zero.

 

    Annual credits equal to $1,400.

 

    Interest credits based on one-year treasury constant maturities plus 1 percent from the prior November.

Effective for plan years beginning after December 31, 2017, the Company eliminated future Retirement Spending Account credits for all eligible non-bargaining unit participants, including the NEOs.

Social Security Supplement

The Social Security Supplement is a supplement available for PEP participants who satisfy one of the early retirement eligibility conditions below that is paid from the participant’s retirement date to their Social Security normal retirement age. The monthly supplement is equal to $50 times the number of years of service (limited to 20 years). Participants are eligible for the Social Security Supplement if they satisfy one or more of the early retirement eligibility conditions as of December 31, 2022: (1) age 57 with 20 years of vesting service, (2) age 55 and the sum of age and credited service is greater than or equal to 90, (3) age 65 with one year of service, or (4) 40 years of credited service.

Effective for plan years beginning after December 31, 2017, the Company eliminated the Social Security Supplement benefit for all non-bargaining employees including NEOs, except those who meet retirement eligibility or are within 5 years of retirement eligibility on December 31, 2017.

Cash Balance Formula

The Cash Balance formula benefit is determined as follows:

 

    Monthly benefit, payable as a single life annuity at the participant’s normal retirement age, which is the actuarial equivalent of the participant’s Cash Balance account balance. The Cash Balance account balance is equal to an annual pay credit of 5 percent of base salary and annual incentive pay plus an annual interest credit.

 

    Annual interest credits are based on 30-year rate for U.S. Treasuries from the prior November.

Benefits provided under the Xcel Energy Pension Plan are based on compensation up to the compensation limit under Section 401(a)(17) of the Internal Revenue Code ($270,000 in 2017). In addition, benefits provided under the Xcel Energy Pension Plan may not exceed a benefit limit under Section 415(b) of the Internal Revenue Code ($215,000 payable as a single life annuity beginning at normal retirement age in 2017).

Benefits are payable under the normal form of benefit (a qualified joint and 50% survivor annuity for a married participant) or one of the optional forms of payment elected by the participant, including a lump sum. Benefits under the Xcel Energy Pension Plan are funded and payable from the assets held in an irrevocable tax-exempt trust.

 

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Nonqualified Pension Plan

The Nonqualified Pension Plan replaces the benefit that would have been payable through the Xcel Energy Pension Plan if not for the limits imposed by Internal Revenue Code sections 401(a)(17) and 415(b). All active participants must receive their Nonqualified Pension Plan benefit as a lump sum.

Generally, a participant’s years of credited service are based on their years of employment with the Company and its predecessors. However, in certain cases, credit for service prior to participation in the plan may be granted. The years of credited service listed above for the Nonqualified Pension Plan for all of our NEOs are based only on their period of service while employed by the Company and its predecessors.

The Nonqualified Pension Plan is unfunded and maintained as a book reserve account. No funds are set aside in a trust or otherwise; participants in the Nonqualified Pension Plan are general creditors of the Company with respect to the payment of their Nonqualified Pension Plan benefits. The executive officer’s accrued benefit under the Nonqualified Pension Plan cannot be sold, transferred or otherwise anticipated before it becomes payable under the terms of the plan, other than through a qualified domestic relations order.

Supplemental Executive Retirement Plan

In 2008, the Board closed the SERP to additional participants. The SERP provides a target percentage of final average compensation based on years of service, offset by the benefits received from the Xcel Energy Pension Plan and the Nonqualified Pension Plan. Final average compensation for the SERP is defined as the average of the highest three calendar years of compensation during the five calendar years period immediately preceding the calendar year in which the participant retires or terminates employment. Compensation is defined as the participant’s base pay plus any annual incentive earned for that year, regardless of whether such annual incentive is paid in that year or in the next year under our regular annual incentive plans.

The SERP benefit, defined as a 20-year certain annuity, accrues ratably over 20 years and, when fully accrued, is equal to (a) 55 percent of final average compensation minus (b) any other qualified or nonqualified benefits. The Retirement Spending Account and Social Security Supplement are not included in the offset. The SERP benefit is payable as a single lump-sum amount equal to the actuarial equivalent present value of the 20-year certain annuity. Benefits generally are payable at age 62, or as early as age 55, but would be reduced 5 percent for each year that the benefit commencement date precedes age 62.

Generally, a participant’s years of credited service are based on their years of employment with the Company and its predecessors. However, in certain cases, credit for service prior to participation in the plan may be granted. The years of credited service listed above for the SERP for the NEO is based only on his period of service while employed by the Company and its predecessors.

The Company established an irrevocable granter trust to hold assets from which to fund benefit payments under the SERP when they become due. The executive’s accrued benefit under the SERP cannot be sold, transferred or otherwise anticipated before it becomes payable under the terms of the plan, other than through a qualified domestic relations order. The SERP is a discretionary plan and the NEO who participates in the SERP was selected for participation by recommendation and approval of the GCN.

 

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Executive Compensation Tables    

 

 

Nonqualified Deferred Compensation

The following table shows the amounts deferred by the NEOs and our matching contributions during 2017.

 

  Name   

Executive

Contributions

in 2017

($)(1)

  

Registrant

Contributions

in 2017

($)(2)

  

Aggregate

Earnings

in 2017

($)

  

Aggregate

Withdrawals/

Distributions

($)

  

Aggregate

    Balance at    

Dec. 31,

2017

($)(3)

  Ben Fowke        87,500        41,000        917,548               5,103,009
  Robert Frenzel        37,500        16,000        2,778               56,278
  Kent Larson        758,853        14,000        354,568               3,250,132
  Marvin McDaniel, Jr.        28,750        14,000        474,510               2,911,149
  Scott Wilensky        923,140        7,800        13,427               1,061,324

 

(1)  Deferrals into the deferred compensation plan were made from compensation earned in 2017 and are reported in the column titled “Salary” in the Summary Compensation Table on page 41 for 2017, with the exception of annual incentive and long-term incentive amounts earned in 2017 but paid out and deferred in 2017. These amounts are as follows:

 

  Name   

Base Salary

($)

  

Annual Incentive

Payout

($)

  

Long-term

    Incentive Payout    

($)

  Ben Fowke

       87,500              

  Robert Frenzel

       37,500              

  Kent Larson

       86,250               672,603

  Marvin McDaniel, Jr.

       28,750              

  Scott Wilensky

       15,600               907,540

 

(2)  Amounts shown reflect our matching contributions (above applicable Internal Revenue Code limits) into our deferred compensation plan during 2017, and are included in “All Other Compensation” in the Summary Compensation Table. These amounts are described in footnote 6 to the Summary Compensation Table on page 41.

 

(3)  Of the amounts shown, the following were included in the column titled “Salary” in the Summary Compensation Table for 2015 and 2016: Mr. Fowke: $168,000; Mr. Larson: $192,500; Mr. McDaniel: $55,000; and Mr. Wilensky: $25,250.

Deferred Compensation Plan

On an annual basis, eligible executives and key employees may elect to defer up to 75 percent of base salary, up to 100 percent of the annual incentive payable in the following calendar year, and beginning in 2013, up to 100 percent of vested long-term incentive awards of performance shares and certain RSUs into the Deferred Compensation Plan. For 2017, the Company matched 50 percent of base pay deferrals (up to 8 percent deferred), netting to a maximum 4 percent, for eligible matching contributions for eligible executives whose matching contributions into the Company’s 401(k) Savings Plan are restricted by Internal Revenue Code imposed limits. The Company matching contributions are credited to investment fund(s) selected by each NEO. We may also make discretionary contributions to accounts of certain participants but did not do so for any NEO in 2017.

We have irrevocable trusts established to provide a secure source of funds to assist in meeting our deferred compensation obligations. We may make contributions to the trusts from time-to-time in amounts determined sufficient to pay benefits when due to participants under this Plan. Notwithstanding the trusts, this Plan is nonqualified and amounts on deposit in the trust are subject to the claims of the Company’s general creditors.

Investment Funds

The investment fund options under the Deferred Compensation Plan consist of those options available to all employees under the 401(k) Savings Plan, including the Xcel Energy Stock Fund, except that the Vanguard brokerage account option is not available under the Deferred Compensation Plan. As under the 401(k) Savings Plan, participants may change their assumed investment funds on a daily basis. Deferred amounts from certain long-term incentive awards must remain invested in the Xcel Energy Stock Fund for a minimum of six months.

Distribution Options

For the Deferred Compensation Plan, the executive’s account is payable on the earlier of a specific year or the executive’s separation of service or death and will be paid in a lump sum or in ten annual installments as elected by the executive or, if no election is made, in a lump sum.

 

  If a specific year is elected, and is earlier than separation of service, a lump sum distribution will be made around January 31st of the elected year.

 

  Distributions based on separation of service will be made (or will begin) around the next January 31st or July 31st that first follows the sixth-month anniversary of the executive’s separation of service.

 

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  In the event of the executive’s death, payment to the executive’s beneficiary will be made in a lump sum unless the executive was already receiving installment payments. In that case, the installment payments will continue to be paid to the executive’s beneficiary.

 

  The executive can receive a distribution in the event of an extreme financial hardship that cannot be satisfied by any other means.

Potential Payments upon Termination or Change in Control

We provide severance benefits to our NEOs under the Xcel Energy Senior Executive Severance and Change in Control Policy (as amended, the “Severance Policy”). As discussed above, the Severance Policy provides a market-competitive severance benefit and manages potential risks and changes in the event the Company were to undergo a change in control. Each of our current NEOs is a participant in the Severance Policy. Additional participants may be named by the Board or the GCN from time to time.

Under the Severance Policy, a participant whose employment is terminated will receive severance benefits unless:

 

    The employer terminated the participant for cause, which for this purpose includes termination for (i) the willful and continued failure of a participant to perform substantially his or her duties, after a written demand for substantial performance, or (ii) the willful engagement by a participant in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company;

 

    Termination was because of the participant’s death, disability or retirement;

 

    The participant’s division, subsidiary or business unit was sold and the buyer agreed to continue the participant’s employment with specified protections for the participant; or

 

    The participant terminated voluntarily.

The severance benefits under the Severance Policy include the following payments:

 

    A lump sum cash payment equal to the participant’s annual base salary and target annual incentive award;

 

    Prorated target annual incentive compensation for the year of termination paid in a lump sum;

 

    A lump sum cash payment of $30,000 for outplacement services;

 

    A lump sum cash payment equal to the value of the additional amounts that would have been credited to or paid on behalf of the participant under pension and retirement savings plans if the participant had remained employed for one additional year; and

 

    Continued medical, dental and life insurance benefits for one additional year.

If the participant is terminated (including a voluntary termination following a diminution in salary, benefits or responsibilities) within two years following a change in control, the participant will receive benefits under the Severance Policy similar to the severance benefits described above, except as follows:

 

    The cash payment of the participant’s annual base salary and target annual incentive award will be increased by a severance multiplier of three times, depending upon the participant’s tier;

 

    The cash payment for the value of additional retirement savings and pension credits will be for three years, depending upon the participant’s tier; and

 

    Medical, dental and life insurance benefits will be continued for three years, depending upon the participant’s tier.

In addition, a subset of the participants entitled to enhanced benefits upon a change in control will be entitled to receive an additional cash payment to make the participant whole for any excise tax on excess parachute payments that he or she may incur, with certain limitations specified in the Severance Policy. This section of the Severance Policy was modified in October 2011 to eliminate the gross-up feature for new participants in the policy and for current participants whose benefit levels change after such date.

For these purposes, a change of control generally means (i) any acquisition of 20 percent or more of either our common stock or combined voting power (subject to limited exceptions for acquisitions directly from us, acquisitions by us or one of our employee benefit plans, or acquisitions pursuant to specified business combinations in which (a) our shareholders will own more than 60 percent of the shares of the resulting corporation, (b) no one person will own 20 percent or more of the shares of the resulting corporation, and (c) a majority of the board of the resulting corporation will be our incumbent directors), (ii) directors of the Company as of the date of the Severance Policy and those directors who have been elected subsequently and whose nomination was approved by such directors fail to constitute a majority of the Board, (iii) a merger, share exchange or sale of all or substantially all of the assets of the Company (each, a “business combination”) (except those business combinations that satisfy clauses (a), (b) and (c) above), or (iv) shareholder approval of a complete liquidation or dissolution of the Company.

In addition, pursuant to the terms of our incentive compensation plans, upon a change in control, all unvested shares of restricted stock and unvested RSUs and Retention Units will vest immediately, and all performance shares will vest and be paid out immediately in cash as if the applicable performance goals had been obtained at target levels.

 

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The amounts payable in cash for each of the NEOs relating to the performance shares and RSUs are included in the “Equity compensation” row of the “Termination upon Change in Control” column in the table of Aggregate Termination Payments below. Additionally, restrictions would lapse on the following shares of restricted stock: Ben Fowke, 22,469 shares with a value of $1,080,975; Robert Frenzel, 7,747 shares with a value of $372,720; Kent Larson, 2,297 shares with a value of $110,525; and Marvin McDaniel, Jr., 2,193 shares with a value of $105,497.

To receive the benefits under the Severance Policy, the participant must also sign an agreement releasing all claims against the employer and its affiliates and agreeing not to compete with the employer and its affiliates and not to solicit their employees and customers for one year.

Disability Benefits

All disability benefits for NEOs and all of our active employees are provided through an insured arrangement with a third party administrator/insurer. Each of the NEOs is eligible for a disability benefit in the event of a total and permanent disability. This disability benefit is generally available to all employees of the Company.

For participants in the long-term disability benefit, the monthly disability benefit payable is equal to 60 percent of the participant’s basic monthly earnings, limited to a maximum $25,000 monthly benefit. This monthly benefit would be payable until normal retirement age, or for those participants becoming disabled after age 63, for a specific period of time.

Retirement Benefits

Upon retirement, the executive officers will be entitled to receive the retirement benefits described above under the caption “Pension Benefits” on pages 46 to 48 and the nonqualified deferred compensation described under the caption “Nonqualified Deferred Compensation” on pages 49 to 50.

Outstanding Equity Compensation Awards

As discussed above, pursuant to the terms of our incentive compensation plans, in the event there is a change in control, all stock-based awards, such as restricted stock and retention units, will vest immediately and any awards that may be settled in cash or stock, such as performance shares, and RSUs, will vest and be paid out immediately in cash as if the applicable performance goals had been obtained at target levels.

The treatment of other unvested stock-based awards and awards that may be settled in cash or stock in situations other than a change in control, is as follows:

 

Award   Audience   Voluntary
Termination
  Involuntary
Termination
With Cause
  Involuntary
Termination
Without Cause
  Retirement   Death or
Disability
Performance Shares
(Long-Term Plan)
 

 

For NEOs who do not meet age and service requirements

 

  Forfeited   Forfeited   Forfeited  

 

Forfeited

 

  Restrictions lapse
 

 

For NEOs who are at least age 55 with 10 years of continuous service

 

  Prorated until date of separation     Prorated until date of separation  

Prorated until date of retirement, with actual payment dependent upon the achievement

of performance goals

 

 
Restricted Stock
Units (RSUs)
(Long-Term Plan)
 

 

For NEOs who do not meet age and service requirements

 

  Forfeited   Forfeited   Forfeited   Forfeited   Restrictions lapse
 

 

For NEOs who are at least age 55 with 10 years of continuous service

 

  Prorated until date of separation     Prorated until date of separation   Prorated until date of retirement  
Retention Units
(Long-Term Plan)
  2013 award   Forfeited   Forfeited  

 

Forfeited;
at Board’s discretion,
units may vest
pro-rata based on completed service

 

  Forfeited   Vest pro-rata
based on
completed service

Restricted Stock (AIP)

 

  All awards   Forfeited   Forfeited   Forfeited   Forfeited   Restrictions lapse

 

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    Executive Compensation Tables

 

    

 

Aggregate Termination Payments

This section explains those payments and benefits that are accelerated in various termination-of-employment scenarios.

For purposes of preparing this table, we have assumed that (i) the NEOs were terminated on December 31, 2017, and (ii) that the price of our common stock was $48.11 (the closing price on December 29, 2017).

 

Name   

Termination

upon Change

in Control(1)

($)

   

Voluntary

Termination/

Retirement

($)

   

Involuntary

Termination

with Cause

($)

    

Involuntary

Termination

without Cause

($)

   

Death

($)

 
Ben Fowke            

Severance payments

     7,391,214                    2,812,500        

Retirement/Pension(2)

                               

Benefits(3)

     228,346                    96,115        

Equity compensation

     22,598,547 (4)      8,134,872 (5)             8,134,872 (5)      22,419,330 (5) 

Conditional tax gross-up

     (6)                          

Total

     30,218,107       8,134,872              11,043,487       22,419,330  
Robert Frenzel            

Severance payments

     3,281,250                    1,093,750        

Retirement/Pension(2)

     197,482       9,485       9,485        78,154       9,485  

Benefits(3)

     167,726                    75,909        

Equity compensation

     3,412,242 (4)                         3,412,242 (5) 

Total

     7,058,700       9,485       9,485        1,247,813       3,421,727  
Kent Larson            

Severance payments

     3,018,750                    1,006,250        

Retirement/Pension(2)

     666,281       310,962       310,962        452,681       310,962  

Benefits(3)

     159,694                    73,231        

Equity compensation

     3,377,930 (4)      1,673,287 (5)             1,673,287 (5)      3,377,930 (5) 

Total

     7,222,655       1,984,249       310,962        3,205,449       3,688,892  
Marvin McDaniel, Jr.(7)            

Severance payments

     3,018,750                    1,006,250        

Retirement/Pension(2)

     588,928       215,092       215,092        378,985       215,092  

Benefits(3)

     145,390                    68,463        

Equity compensation

     3,372,902 (4)      1,673,287 (5)             1,673,287 (5)      3,372,902 (5) 

Conditional tax gross-up

     1,743,739 (6)                          

Total

     8,869,709       1,888,379       215,092        3,126,985       3,587,994  
Scott Wilensky            

Severance payments

     2,574,000                    858,000        

Retirement/Pension(2)

     272,618       37,553       37,553        157,348       37,553  

Benefits(3)

     140,840                    66,947        

Equity compensation

     2,367,743 (4)      1,204,803 (5)             1,204,803 (5)      2,367,743 (5) 

Total

     5,355,201       1,242,356       37,553        2,287,098       2,405,296  

 

(1)  Amounts in this column relate to amounts payable if a change in control, as defined in the Severance Policy, occurs and the executive officer is terminated within two years of such event.

 

(2)  Represents the actuarial present value of pension benefits that would be received upon a specified termination event over and above those included in the Pension Benefits Table on page 46, which the executive officers also would be entitled to receive, except upon death, in which case the SERP benefit, for the CEO, would be reduced by 50 percent. The amounts shown in the Pension Benefits Table are based on prescribed assumptions for age at payment, interest rate and mortality. In the event of immediate termination of employment, benefits would be calculated using actual assumptions set forth in the pension plan documents, which differ from the prescribed assumptions used for purposes of calculating the actuarial present value of accumulated benefits for the Pension Benefits Table. In addition, the retirement benefits payable subsequent to specific events (for example, a change in control) will be modified as described above. The retirement amounts shown in this section represent the increase, if any, in the present value of pension benefits due to the difference in assumptions for age at payment, interest rates and mortality. These amounts also reflect the increase due to changes in benefit level required for the specific termination event identified in the table.

 

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(3)  Included in the amounts reported under “Benefits” for all NEOs is $30,000 for outplacement services. Amounts also include the dollar value of continued medical, dental and life insurance benefits for three additional years in the event of a termination upon change in control or one additional year in the event of an involuntary termination without cause as set forth below. For these purposes we have assumed that health care costs will increase at the rate of 6.75 percent per year.

 

    

Ben

        Fowke        

($)

 

Robert

        Frenzel        

($)

 

Kent

        Larson        

($)

 

Marvin

        McDaniel, Jr.        

($)

 

Scott

        Wilensky        

($)

3 Years

      48,346       62,726       60,694       46,390       60,440

1 Year

      16,115       20,909       20,231       15,463       20,147

 

   Amounts in this row also include the dollar value of the additional matching contributions to the qualified and nonqualified savings plans for three additional years in the event of a termination upon change in control or one additional year in the event of an Involuntary Termination without Cause as set forth below:

 

    

Ben

        Fowke        

($)

 

Robert

        Frenzel        

($)

 

Kent

        Larson        

($)

 

Marvin

        McDaniel, Jr.        

($)

 

Scott

        Wilensky        

($)

3 Years

      150,000       75,000       69,000       69,000       50,400

1 Year

      50,000       25,000       23,000       23,000       16,800

 

(4)  Represents the value of the RSUs and Retention Units and dollar value of all performance shares that will vest and be paid out immediately in cash as if the applicable performance goals had been obtained at target levels. This amount includes the value of restricted stock for which restrictions would lapse, which values are set forth on pages 50 to 51.

 

(5)  Represents the value of the RSUs and Retention Units and dollar value of all performance shares that will vest and be paid out in cash, shares or a combination thereof as if the applicable performance goals had been obtained at target levels. This amount includes the value of restricted stock for which restrictions would lapse, which values are set forth on pages 50 to 51.

 

(6)  For participants under the Severance Policy prior to October 2011 (Mr. Fowke and Mr. McDaniel), the policy provides for an additional cash payment to make the participant whole for excise tax on excess parachute payments, other than amounts associated with accelerated equity vesting (a “gross-up payment”). However, the policy also provides that if a reduction in the parachute payment results in a net after-tax benefit to the participant, then the policy operates to make such a reduction and no gross-up payment will be made to the participant. Mr. Fowke’s severance and gross-up values were reduced under these provisions.

 

(7) Mr. McDaniel will retire in the second quarter of 2018.

This section does not cover all amounts the NEOs will receive following termination as they are also entitled to receive:

 

  their vested balances under pension and deferred compensation plans, as disclosed previously, under all employment termination scenarios;

 

  the payments of long-term incentive awards, as described in the table on page 52;

 

  annual incentive awards at target, in the event of a change in control, or at actual performance levels for all events other than termination with cause, as disclosed in the Grants of Plan-Based Awards Table on page 43.

 

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    Executive Compensation Tables

 

    

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Plan Category   

Number of Securities to

be Issued Upon Exercise

of Outstanding Options,

Warrants and Rights

  

Weighted-Average

Exercise Price of

Outstanding Options,

Warrants and Rights

  

Number of Securities

Remaining Available for

Future Issuance Under

Equity Compensation

Plans (Excluding

 Securities Reflected in the 

First Column)

Equity compensation plans approved by security holders(1)

       3,211,692        n/a        5,762,843

Equity compensation plans not approved by security holders

       n/a        n/a             (2)

 

 

(1)     Plan Category    

 

   

 

   

 

   

 

   

 

   

 

   

 

  

Number of Securities to

be Issued Upon Exercise

of Outstanding Options,

Warrants and Rights

 

Weighted-Average

Exercise Price of

Outstanding Options,

Warrants and Rights

  

Number of Securities

Remaining Available for

Future Issuance Under

Equity Compensation

Plans (Excluding

 Securities Reflected in the 

First Column)

 

Xcel Energy Inc. 2015 Omnibus Incentive Plan

                                                                             2,618,564 (3)       n/a        5,762,843 (4)
  SEP                                                                              593,128       n/a        (5)

 

(2) The Xcel Energy Director Stock Equivalent Program for Non-Employee Directors (the “SEP”), as amended and restated, was first approved by shareholders at our 2004 annual meeting. For awards made prior to this shareholder approval, the number of shares of the Company’s common stock to be used for distribution under this SEP are purchased on the open market.

 

(3)  Includes performance shares, RSUs, stock equivalent units and associated reinvested dividend equivalents. For performance shares and certain RSUs and associated dividend equivalent units, the actual number of securities to be paid out depends upon the level of achievement of the applicable performance goal. Awards may be paid out in cash, stock or a combination thereof. Amounts reflected in this table assume payout in shares at 200 percent for performance shares and 120 percent for certain RSUs. Performance shares and a portion of the award for certain RSUs are subject to forfeiture if the threshold performance level is not achieved.

 

(4)  Awards can take the form of stock options, stock appreciation rights, restricted stock, bonus stock, performance units, performance shares, RSUs or stock equivalent units.

 

(5)  The Xcel Energy SEP, as amended and restated, first approved by shareholders in 2004, was replaced by the 2015 Omnibus Incentive Plan, approved by shareholders at the 2015 annual meeting. The 1,359,400 shares that remain available under the Xcel Energy SEP will only be used to settle outstanding awards previously granted, which will continue to earn additional dividend equivalents. No additional awards will be made under the Xcel Energy SEP.

CEO Pay Ratio

For 2017, the annual total compensation for the CEO was $12,676,399, as reflected in the Summary Compensation Table on page 41 and our Company’s median employee annual total compensation was $105,907. This comparison results in a CEO Pay Ratio of 120:1.

This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934, and as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

As permitted under SEC guidance, to determine our median employee, we used a definition that was based on actual W2 taxable income for the 2017 calendar year for those who were employed on November 1, 2017. Taxable income was selected because it is inclusive of all forms of compensation paid to an employee such as overtime and allowances per union contracts, and we believe it is an appropriate representation of pay. We selected an individual at the median of our employee population and then determined that individual’s total compensation as shown above.

 

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Director Compensation    

 

 

Director Compensation

The GCN has authority to develop and recommend compensation policies and programs for directors. The committee retained Meridian as its independent compensation consultant to advise when setting director compensation to ensure it is market based, aligned with shareholder interests and consistent with our compensation principles. As part of its review in 2017 and based on market information presented by Meridian, the GCN recommended, and the Board determined to maintain current compensation levels. Additional information regarding Meridian is included on page 14.

Only non-employee directors are compensated for their Board service. In 2017, the annual pay was:

 

    Annual Retainer: $95,000

 

    Lead Independent Director: $30,000

 

    Finance Committee Chair: $12,500

 

    ONES Committee Chair: $15,000

 

    GCN Chair: $20,000

 

    Audit Committee Chair: $15,000

 

    Audit Committee Members (including Chair): $10,000

Directors receive 25 percent of the applicable annual pay each quarter (pro-rated for partial service during the quarter). Directors may elect to defer all or a portion of their cash retainer into stock equivalent units (see “Stock Equivalent Program” on page 56). We do not offer retirement benefits to our directors.

Annual Equity Grant

Directors elected at the 2017 annual shareholders meeting each received a grant of 3,070 stock equivalent units representing approximately $140,000 in value, on the first business day following the 2017 annual shareholders meeting. Common stock equivalents are payable upon the director’s death, disability or termination of service. Terms of the stock equivalent units are discussed below under “Stock Equivalent Program.”

The amount of compensation each independent director received in 2017, including deferred amounts, is shown in the table below.

Director Compensation Table

 

Name   

Fees Earned

or Paid in

Cash

($)(1)

    

Stock

Awards

($)(2)

  

Total

($)

Gail K. Boudreaux(3)

                272,000        272,000

Richard K. Davis

       115,000          140,000        255,000

Richard T. O’Brien

                277,176        277,176

David K. Owens(4)

       34,076          102,795        136,871

Christopher J. Policinski

                290,000        290,000

James T. Prokopanko

       98,791          140,000        238,791

A. Patricia Sampson

       105,000          140,000        245,000

James J. Sheppard

       95,000          140,000        235,000

David A. Westerlund

                261,451        261,451

Kim Williams

                281,000        281,000

Timothy V. Wolf

       104,478          140,000        244,478

Daniel Yohannes

       85,639          147,232        232,871

 

(1)  Represents cash payments of annual retainer and additional retainers for service as Lead Independent Director, committee Chairs or Audit Committee members, including deferred amounts.

 

(2)  Amounts in this column represent the aggregate grant date fair value of the deferred stock equivalent units granted to directors in 2017 as computed in accordance with FASB ASC Topic 718 Compensation — Stock Compensation, which value is equal to the closing price of our common stock, as reported on Nasdaq, on the trading date preceding the applicable grant date. Directors receive stock equivalent units for their annual equity grant and if they elect to defer their cash retainers into stock equivalent units. Stock equivalent units are only payable as a distribution of whole shares of our common stock upon a director’s termination of service, disability or death. The stock equivalent units fluctuate in value as the value of our common stock fluctuates. As of fiscal year ended December 31, 2017, the number of stock equivalent units owned by directors were as follows: Ms. Boudreaux: 49,473 units; Mr. Davis: 62,692 units; Mr. O’Brien: 43,936 units; Mr. Owens: 2,104 units; Mr. Policinski: 76,680 units; Mr. Prokopanko: 11,011 units; Ms. Sampson: 135,063 units; Mr. Sheppard: 37,936 units; Mr. Westerlund: 110,355 units; Ms. Williams: 78,541 units; Mr. Wolf: 58,365 units; and Mr. Yohannes: 3,285 units. For updated information on holdings of stock equivalent units as of March 20, 2018, see the Beneficial Ownership of Certain Shareholders table on page 25.

 

(3) Ms. Boudreaux resigned effective December 31, 2017.

 

(4) Mr. Owens was elected as a director effective August 22, 2017.

 

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    Director Compensation

 

    

 

Director Stock Ownership Guidelines

Independent directors are subject to stock ownership guidelines, which establish a target level ownership of Xcel Energy common stock or common stock equivalents of seven times their annual cash retainer. Directors are expected to meet this guideline within five years of being elected to the Board. All directors whose stock ownership target date was on or before December 31, 2017 have met the guideline.

Stock Equivalent Program

Our director compensation plan aligns director and shareholder interests, and our SEP is designed to further that principle. Each stock equivalent unit has a value equal to one share of our common stock. Stock equivalent units cannot be voted by a director and are only payable as a distribution of whole shares of our common stock upon a director’s termination of service, disability or death. The stock equivalent units fluctuate in value with the value of our common stock. Additional stock equivalent units are accumulated upon the payment of, and at the same value as, dividends declared on our common stock. Directors can elect to receive payouts from the SEP either in January of the year following their separation from service or within 90 days of such event.

Directors are able to defer compensation into stock equivalent units under our SEP until after retirement from the Board or separation from service as a director. Directors who elect to defer cash compensation into stock equivalent units receive a premium of 20 percent of the compensation that was deferred. The number of stock equivalent units for each independent director that have accumulated during their tenure of board service is listed in the Beneficial Ownership of Certain Shareholders table on page 25.

 

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Proposal No. 3    

 

 

Proposal No. 3

Ratification of the Appointment of Deloitte & Touche LLP as Xcel

Energy Inc.’s Independent Registered Public Accounting Firm for 2018

The Audit Committee retains Deloitte & Touche LLP (“D&T”) as our independent registered public accounting firm to audit the accounts of the Company for the fiscal year ending December 31, 2018. D&T was originally selected as the independent registered public accounting firm effective March 27, 2002.

The Audit Committee negotiates the fees associated with the D&T engagement and participates in the selection of the lead engagement partner. The engagement partner is rotated periodically.

While the Audit Committee is responsible for the appointment, compensation, retention and oversight of the Company’s principal independent accountants, the Audit Committee and Board request that shareholders ratify the appointment of D&T as our independent registered public accounting firm as a matter of policy. While the Audit Committee is not required to take any action as a result of the outcome of this vote, it may investigate the reasons and consider whether to retain D&T or appoint another auditor, should shareholders reject the proposal. In addition, even if the appointment is ratified by shareholders, the Audit Committee in its discretion may appoint a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.

Representatives of D&T will be present at the annual meeting and will have an opportunity to make a statement. Such representatives will be available to respond to questions from shareholders at the annual meeting.

Vote Required

Ratification of the appointment of D&T as our 2018 independent registered public accounting firm requires the affirmative vote of the holders of a majority of the total voting power present in person or by proxy and entitled to vote at the annual meeting. Proxies solicited by the Board will be voted “FOR” the ratification of the appointment, unless a different vote is specified.

 

  

  

Your Board, upon recommendation of the Audit Committee,

recommends a vote “FOR” the ratification of the appointment

of Deloitte & Touche LLP as our independent registered public

accounting firm.

 

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    Report of the Audit Committee

 

    

 

Report of the Audit Committee

The Audit Committee assists the Board in its oversight of the Company’s financial reporting process. The Board, in its business judgment, has determined that all members of the Audit Committee are “independent,” as required by the listing standards of the Nasdaq. The Audit Committee operates pursuant to its charter, which it reviews at least annually.

The charter delineates the roles and responsibilities of management and the independent public accounting firm as follows:

 

    Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

 

    Our independent auditors, D&T, are responsible for auditing the Company’s consolidated financial statements and expressing an opinion as to whether they are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.

To perform its oversight function, the Audit Committee has:

 

    Reviewed and discussed the audited financial statements with management and our independent auditors. This review included a discussion of the quality — not just the acceptability — of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

 

    Discussed with our independent auditors the matters required to be discussed by applicable Public Company Accounting Oversight Board standards.

 

    Received the written disclosures and the letter from our independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed the independence of D&T with them.

 

    Reviewed and pre-approved the services provided by our independent auditors other than their audit services and considered whether the provision of such other services by our independent auditors is compatible with maintaining their independence.

 

    At least annually, discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits for the year 2017. The Audit Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

Based on the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the committee referred to in the charter, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2017, to be filed with the SEC. The Audit Committee has appointed D&T as the Company’s independent auditors for 2018. Shareholder ratification of this appointment is included as Proposal No. 3 in these proxy materials.

Audit Committee

Richard T. O’Brien, Chair

A. Patricia Sampson

David A. Westerlund

Kim Williams

Daniel Yohannes

 

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Independent Registered Public Accounting Firm    

 

 

Independent Registered Public Accounting Firm

D&T has audited the Company’s consolidated financial statements since 2002. Audit services provided by D&T in 2017 included: the audits of consolidated financial statements and management’s assessment of internal control over financial reporting of the Company; reviews of interim consolidated financial information; and consultation on matters related to accounting and financial reporting. Representatives of D&T will be present at the annual meeting and will have the opportunity to make a statement. Such representatives will be available to respond to questions from shareholders at the annual meeting.

Audit and Non-Audit Fees

The following table presents fees for professional services performed by D&T, the member firms of Deloitte Touche Tohmatsu and their respective affiliates for the annual audit of the Company’s and its subsidiaries’ annual financial statements for 2017 and 2016, the review of the Company’s and its subsidiaries’ interim consolidated financial statement for each quarter in 2017 and 2016, and for audit-related, tax and other services performed in 2017 and 2016 (in thousands).

 

      2017              2016          

Audit Fees(1)

   $ 4,836               $ 4,831           

Audit-Related Fees(2)

     715      &nbs