TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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South Jersey Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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TABLE OF CONTENTS
GENERAL INFORMATION
Information about the Annual Meeting and Voting
This statement is furnished on behalf of SJIs Board of Directors to solicit proxies for use at its 2019 Annual Meeting of Shareholders. The meeting is scheduled for Friday, April 26, 2019, at 9:00 a.m. at Hard Rock Hotel & Casino, Brighton Ballroom, 1000 Boardwalk, Atlantic City, New Jersey. The approximate date proxy materials will
be made available to shareholders is March 15, 2019. Copies of the proxy statement, proxy card and 2018 Annual Report are available on our website at www.sjindustries.com under the heading Investors.
The Company bears the cost of this solicitation, which is primarily made by mail. However, the Corporate Secretary or company employees may solicit proxies by phone, fax, e-mail or in person, but they will not be separately compensated for these services. The Company may also use a proxy-soliciting firm at a cost not
expected to exceed $15,000, plus expenses, to distribute to brokerage houses and other custodians, nominees, and fiduciaries additional copies of the proxy materials and 2018 Annual Report for beneficial owners of our stock.
Only shareholders of record at the close of business on February 25, 2019 may vote at the meeting. On that date, the Company had 92,333,123 shares of Common Stock outstanding.
Shareholders are entitled to one vote per share on each matter to be acted upon.
Quorum and Vote Required meeting’s
A quorum is necessary to conduct the business. This means holders of at least a majority of the outstanding shares of Common Stock must be present at the meeting, either by proxy or in person. Shareholders elect Directors by a majority vote of all votes cast at the meeting. The other actions proposed herein require the affirmative vote of a majority of the votes cast at the meeting. The vote required to approve any other matter that may be properly brought before the Annual Meeting will be determined in accordance with the New Jersey Business Corporation Act.
Abstentions and broker non-votes will be treated as present to determine a quorum but will not be deemed to be cast and, therefore, will not affect the outcome of any of the shareholder questions. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
Voting of Proxies and Revocation
Properly signed proxies received by the Company will be voted at the meeting. If a proxy contains a specific instruction about any matter to be acted on, the shares represented by the proxy will be voted according to those instructions. If you sign and return your proxy but do not indicate how to vote for a particular matter, your shares will be voted as the Board of Directors recommends. A shareholder who returns a proxy may revoke it at any time before it is voted by submitting a later-dated proxy or by voting by ballot at
the meeting. If you attend the meeting and wish to revoke your proxy, you must notify the meetings secretary in writing prior to the proxy voting. If any other matters or motions properly come before the meeting, including any matters dealing with the conduct of the meeting, the persons named in the accompanying proxy card intend to vote the proxy according to their judgment. The Board of Directors is not aware of any such matters other than those described in this proxy statement.
Householding of Annual Meeting Materials
Certain banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of householding proxy statements and annual reports. This means that only one copy of this proxy statement and the Companys 2018 Annual Report may have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report for other shareholders in your household, either now or in the future, please contact your bank, broker, broker-dealer or other similar organization serving as your nominee.
Upon written or oral request to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, the Company will promptly provide separate copies of the 2018 Annual Report and/or this proxy statement. Shareholders sharing an address who are receiving multiple copies of this proxy statement and/or the 2018 Annual Report and who wish to receive a single copy of these materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
South Jersey Industries, Inc. - 2019 Proxy Statement |
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PROPOSALS TO BE VOTED ON
PROPOSAL 1 DIRECTOR ELECTIONS
At the Annual Meeting, 10 directors are to be elected to the Board of Directors to hold office for a one-year term. The Board nominated the following persons: Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Sheila Hartnett-Devlin, Walter M. Higgins III, Sunita Holzer, Michael J. Renna, Joseph M. Rigby and Frank L. Sims. We do not anticipate that, if elected, any of the nominees will be unable to serve. If any should be unable to accept the nomination or election, the persons designated as proxies on the proxy card may vote for a substitute nominee selected by the Board of Directors.
In accordance with its Charter, the Governance Committee reviewed the education, experience, judgment, diversity and other applicable and relevant skills of each nominee and determined that
each nominee possesses skills and characteristics that support the Companys strategic vision. The Governance Committee determined that the key areas of expertise include: corporate governance; cybersecurity/IT; enterprise leadership; financial (including accounting, finance, and “financial experts” as defined by the SEC); governmental and regulatory; human resources; public/shareholder relations; risk assessment/management; strategy formation/execution; and technical/industry. The Governance Committee concluded that the nominees possess expertise and experience in these areas, and the Board approved the slate of nominees. Based on their expertise and experience, the Governance Committee determined the following directors should be elected for the 2019 - 2020 term:
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Sarah M. Barpoulis
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Thomas A. Bracken
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Age:
54
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Age:
71
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Director since:
2012
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Director since:
2004
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Owner of Interim Energy Solutions, LLC,
Potomac, MD
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President, New Jersey Chamber of Commerce,
Trenton, NJ
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Keith S. Campbell
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Victor A. Fortkiewicz
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Age:
64
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Age:
67
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Director since:
2000
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Director since:
2010
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Chairman of the Board, Mannington Mills, Inc.,
Salem, NJ
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Of Counsel, Cullen and Dykman, LLP,
New York, NY
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Sheila Hartnett-Devlin, CFA
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Walter M. Higgins III
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Age:
60
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Age:
74
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Director since:
1999
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Director since:
2008
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Retired, Senior Vice President, American Century
Investments, New York, NY
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Chairman, (non-executive) of South Jersey Industries, Folsom, NJ
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Sunita Holzer
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Michael J. Renna
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Age:
57
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Age:
51
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Director since:
2011
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Director since:
2014
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Executive Vice President, Chief Human Resource
Officer, Realogy Holdings Corp., Madison, NJ
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President and CEO, South Jersey
Industries, Folsom, NJ
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Joseph M. Rigby
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Frank L. Sims
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Age:
62
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Age:
68
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Director since:
2016
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Director since:
2012
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Retired, Chairman, President and CEO of Pepco
Holdings, Inc., Washington, D.C.
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Chairman of the Board, Atlanta Pension Fund, Atlanta, GA
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TABLE OF CONTENTS
SECURITY OWNERSHIP
Directors and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of February 25, 2019, of: (a) each current director and nominee for director; (b) our principal executive officer, principal financial officer, the three other
most highly compensated executive officers during 2018 collectively, the Named Executive Officers (NEOs); and (c) all of the directors and executive officers as a group.
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Number of Shares
of Common Stock (1)
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Percent of Class
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Sarah M. Barpoulis
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24,873
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(2
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Thomas A. Bracken
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61,101
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(2
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Keith S. Campbell
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54,148
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(2
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*
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Stephen H. Clark
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35,405
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*
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Victor A. Fortkiewicz
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33,645
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(2
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Sheila Hartnett-Devlin
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22,458
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(2
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Cielo Hernandez
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0
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(3
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Walter M. Higgins III
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42,520
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(2
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Sunita Holzer
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29,482
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(2
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Kenneth Lynch
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11,664
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Kathleen A. McEndy
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15,021
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Melissa J. Orsen
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0
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Michael J. Renna
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87,595
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Joseph M. Rigby
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11,770
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(2
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David Robbins, Jr.
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34,364
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Frank L. Sims
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82,658
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(2
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All directors, nominees for director and executive officers as a group (16 persons)
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546,704
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* Less than 1%.
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Based on information furnished by the Company’s directors and executive officers. Unless otherwise indicated, each person has sole voting and dispositive power with respect to the Common Stock shown as owned by him or her.
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Includes shares awarded to each director under a Restricted Stock Program for directors.
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Ms. Hernandez was appointed as our Chief Financial Officer on January 14, 2019.
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Stock Ownership Requirements
The Board of Directors believes significant ownership of Company Common Stock better aligns the interests of management with those of the Company’s shareholders. Therefore, in 2001, the Board of Directors enacted the stock requirements listed below for officers which were effective through 2014 and were increased effective 2015 as outlined below and on page
38:
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The CEO stock ownership guideline is 5 times the CEO’s annual base salary.
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All other executive officers are required to own shares of Company Common Stock with a market value equal to 2 times their annual salary. As of December 31, 2018, all NEOs are in compliance with the ownership guidelines.
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Other officers are required to own shares of Company Common Stock with a market value equal to their annual base salary;
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Shares owned outright will be combined with vested restricted shares awarded under the Stock-Based Compensation Plan and vested shares beneficially owned through any employee benefit plan for purposes of determining compliance with the stock ownership requirement for officers. Current officers will have a
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period of six years from the original date of adoption and newly elected or promoted officers will have a period of six years following their election or promotion to a new position to meet these minimum stock ownership requirements; and
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Members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, or within six years of an increase in the share ownership guidelines, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual cash retainer for board service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements.
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A stock holding period was introduced in 2015 that requires all officers of the Company to retain at least 50 percent of vested and/or earned shares, net of taxes, until their new stock ownership guideline has been met.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, requires the Companys directors and executive officers to file reports with the SEC relating to their ownership of, and transactions in, the Companys Common Stock. Based on our records and other information, the Company believes that all Section 16(a) filing requirements were met for the year ended December 31, 2018, except for a late filing by each of Ms. McEndy, Ms. Orsen and
Messrs. Renna, Clark, Robbins and Lynch who inadvertently filed a late Form 4 on March 5, 2019 reporting the grant of Restricted Stock Units that occurred on March 1, 2018; and for a late filing by each of Ms. McEndy and Mr. Robbins who inadvertently filed a later Form 4 on March 5, 2019 reporting the grant of Restricted Stock Units that occurred on June 7, 2018.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information, as of February 25, 2019, as to each person known to the Company, based on filings with the SEC, who beneficially owns 5 percent or more of the
Companys Common Stock. Based on filings made with the SEC, each shareholder named below has sole voting and investment power with respect to such shares.
Name and Address of Beneficial Owner
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Shares Beneficially Owned
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Percent of Class
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BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
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12,765,638
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14.9%
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The Vanguard Group
100 Vanguard Blvd
Malvern, PA 19355
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9,293,313
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10.86%
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CORPORATE GOVERNANCE
The Board of Directors
Leadership Structure
Effective May 1, 2015, the Board of Directors decided to separate the Chairman and CEO roles, with Mr. Renna assuming the role of President and CEO, and Walter M. Higgins III, becoming the non-executive Chairman of SJIs Board of Directors.
In the role, Mr. Higgins:
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Provides leadership to the Board
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Chairs meetings of the Board of Directors
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Establishes procedures to govern the Board’s work
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Ensures the Board’s full discharge of its duties
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Schedules meetings of the full Board and works with the committee chairmen, CEO and Corporate Secretary for the schedule of meetings for committees
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Organizes and presents the agenda for regular or special Board meetings based on input from Directors, CEO and Corporate Secretary
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Ensures proper flow of information to the Board, reviewing adequacy and timing of documentary materials in support of management’s proposals
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Ensures adequate lead time for effective study and discussion of business under consideration
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Helps the Board fulfill the goals it sets by assigning specific tasks to members of the Board
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Identifies guidelines for the conduct of the Directors, and ensures that each Director is making a significant contribution
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Acts as liaison between the Board and CEO
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Works with the Governance Committee and CEO, and ensures proper committee structure, including assignments and committee chairmen
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Sets and monitors the ethical tone of the Board of Directors
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Manages conflicts which may arise with respect to the Board
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Monitors how the Board functions and works together effectively
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Carries out other duties as requested by the CEO and Board as a whole, depending on need and circumstances
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Serves as a resource to the CEO, Corporate Secretary and other Board members on corporate governance procedure and policies
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Independence of Directors
The Board adopted Corporate Governance Guidelines that require the Board to be composed of a majority of Directors who are Independent Directors as defined by the rules of the New York Stock Exchange. No Director will be considered Independent unless the Board of Directors affirmatively determines that the Director has no material relationship with the Company. When making Independence determinations, the Board considers all relevant facts and circumstances, as well as any other facts and considerations specified by the New York Stock Exchange, by law or by any rule or regulation of any other regulatory body or self-regulatory body applicable to the Company. As part of its Corporate Governance Guidelines, the Board established a policy that Board members may not serve on more than four other boards
of publicly traded companies. SJIs Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading Investors.
For 2018, the Board determined that Directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, Rigby, and Sims, constituting all of the non-employee Directors, meet the New York Stock Exchange standards and our own standards noted above for independence and are, therefore, considered to be Independent Directors. Accordingly, all but one of the Companys Directors was considered to be Independent. Mr. Renna is not considered independent by virtue of his employment with the Company.
Mr. Campbell is Chairman of Mannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid, another Company subsidiary operates a cogeneration facility that provides electricity to Mannington Mills, Inc. Mr. Fortkiewicz is Of Counsel at Cullen and Dykman, LLP which provides legal representation to SJI
subsidiary, Elizabethtown Gas Company. This is an arms length long standing relationship that existed prior to our acquisition of Elizabethtown Gas Company in July 2018. Mr. Fortkiewicz is not a partner, officer or employee of Cullen and Dykman LLP and he does not provide legal services on any matters relating to Elizabethtown Gas Company.
The Company has adopted codes of conduct for all employees, Officers and Directors, which include the codes of ethics for our principal executive officer and principal financial officer within the meaning of the SEC regulations adopted pursuant to the Sarbanes-Oxley Act of 2002. Additionally, the Company established a hotline and website for employees to anonymously report suspected violations.
Copies of the codes of ethics are available on the Companys website at www.sjindustries.com under Investors > Corporate Governance. Copies of our codes of conduct are also available at no cost to any shareholder who requests them in writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037, Attention: Corporate Secretary.
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TABLE OF CONTENTS
Communication with Directors
You may communicate with the Chairman of the Board and chairmen of the Audit, Compensation, Corporate Responsibility Governance, Risk and Strategy & Finance Committees by sending an e-mail to chairmanoftheboard@sjindustries.com, auditchair@sjindustries.com, compchair@sjindustries.com, govchair@sjindustries.com, corpresp@sjindustries.com, StratandFinChair@sjindustries.com or riskchair@sjindustries.com respectively, or you may communicate with our outside
Independent Directors as a group by sending an e-mail to sjidirectors@sjindustries.com. The Charters and scope of responsibility for each of the Companys committees are located on the Companys website at www.sjindustries.com. You may also address any correspondence to the Chairman of the Board, chairmen of the committees or to the Independent Directors at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037
Corporate Governance Materials
Shareholders can see the Companys Corporate Governance Guidelines and Profile, Charters of the Audit Committee, Compensation Committee, Corporate Responsibility Committee, Executive Committee, Governance Committee, Risk Committee, and Strategy & Finance Committee, and Codes of Ethics on the Companys website at www.sjindustries.com under Investors >
Corporate Governance. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders without charge upon request to the Corporate Secretary at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Governance Committee is responsible for implementing the Board Evaluation Process on an annual basis. The Governance Committee engages an independent, third-party facilitator and uses surveys and interviews to ensure robust feedback that can be used to enhance Board processes. The goal of the process is to gather input regarding Board composition and processes, and compliance with corporate governance best practices. Covered areas include essential aspects of Board leadership and effectiveness,
contribution of individual directors, overall group dynamics, and whether the experience and skillsets of the members are well aligned with SJIs current and future strategic needs. In 2018, the process included the evaluation of the Board and its committees. In addition to the Directors, the Executive Officers participated in the process. The Governance Committee is responsible for implementing the recommendations generated from the evaluation results.
Meetings of the Board of Directors and its Committees
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The Board of Directors met
14 times in 2018.
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Each Director attended 75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she served.
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It is the Board’s policy that the Independent Directors meet in Executive Session at every in-person meeting of the Board or its Committees.
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During 2018, the Independent Directors met twelve times at SJI Board meetings.
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Topics of these sessions included CEO and Officer Performance and Compensation, Succession Planning, Director Tenure, Retirement Age, Strategy and Discussions of Corporate Governance. Director Higgins, Chairman of the Board, chaired the meetings of the Independent Directors.
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Audit
Committee
The Boards Audit Committee, which met eight times during 2018, was comprised of five Independent Directors: Sarah M. Barpoulis, Chairman Sheila Hartnett-Devlin; Joseph M. Rigby; and Frank L. Sims. Walter M. Higgins III is an ex-officio member of the Committee. The Board determined that no member of the Audit Committee has a material relationship that would jeopardize such members ability to exercise independent judgment. The Board of Directors designated each member of the Audit Committee as an audit committee financial expert as defined by applicable Securities and Exchange Commission rules and regulations. The Audit Committee: (1) annually engages and evaluates an independent registered public accounting firm for appointment, subject to Board and shareholder approval, as auditors of the Company and has the authority to unilaterally retain, compensate and terminate the Companys independent registered public accounting firm; (2) reviews with the independent registered public accounting firm the scope and results of each annual audit; (3) reviews with the independent registered public accounting firm, the Companys internal auditors and management, the quality and adequacy of the Companys internal controls and the internal audit functions organization, responsibilities, budget, and staffing; and (4)
considers the possible effect on the objectivity and independence of the independent registered public accounting firm of any non-audit services to be rendered to the Company. The Audit Committee members meet in Executive Session with Internal Audit and the independent accounting firm at each in-person meeting.
The Audit Committee is also responsible for reviewing the Companys major financial risk exposures and the steps Management has taken to monitor and control these exposures and reviewing the guidelines and policies that govern the process by which risk assessment and management is undertaken by the Board and Management.
The Audit Committee established policies and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services.
The Committee Charter is available on our website at www.sjindustries.com, under the heading Investors. You may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
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The Boards Compensation Committee, which met seven times during 2018, was comprised of five Independent Directors in 2018: Sunita Holzer, Chairman; Sarah M. Barpoulis; Keith S. Campbell; and Joseph M. Rigby. Walter M. Higgins III is an ex-officio member of the Committee. Each member of the Compensation Committee met the enhanced independence standards under NYSE rules for committee membership. The Compensation Committee carries out the responsibilities delegated by the Board relating to the review and determination of executive
compensation as well as the structure and performance of significant, long-term employee defined benefits and defined contribution plans.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an Officer or employee of the Company, or any of its subsidiaries or affiliates. During the last fiscal year, none of the Companys
Executive Officers served on a compensation committee or as a Director for any other publicly traded company.
Corporate Responsibility Committee
The Boards Corporate Responsibility Committee, which met four times during 2018, was comprised of five Independent Directors: Victor A. Fortkiewicz, Chairman; Thomas A. Bracken; Keith S. Campbell; and Sunita Holzer. Walter M. Higgins III is an ex-officio member of the Committee. The Committee provides oversight, monitoring and guidance of matters related to safety, corporate and social citizenship, public and legal policy, work force initiatives, corporate culture, environmental stewardship and compliance, political and regulatory activities, sustainability, employee work life, and economic and social vitality in the communities and markets in which the Company operates.
The Committee also oversees the production of the Companys annual Corporate Sustainability Report, which conveys how the Company links the business with sustainable practices. The 2018 report is available on our website at www.sjindustries.com or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
At each Corporate Responsibility Committee meeting, management presents an update of the Companys Environmental, Social and
Governance (ESG) activities. The Company has an internal ESG management Committee that reports to the Board Corporate Responsibility Committee at least quarterly. The ESG Committee, established in 2018, is responsible for the development and implementation of the Companys key ESG, sustainability and social responsibility strategies, initiatives and policies. This includes oversight of SJIs commitment to safety, environmental, health, human rights, employee relations, governance and community support strategies. The Committee assists the Board in its oversight, monitoring and guidance of SJIs key environmental, sustainability, and corporate and social citizenship areas. Annually, the Board approves the ESG Committee members which include management from key areas of the Company such as human resources, procurement, communications, safety, and environment.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Boards Governance Committee, which met seven times during 2018, was comprised of five Independent Directors: Thomas A. Bracken, Chairman; Victor A. Fortkiewicz; Sheila Hartnett-Devlin; and Frank L. Sims. Walter M. Higgins III is an ex-officio member of the Committee. Each Committee member satisfies the New York Stock Exchanges independence requirements. Among its functions, the Governance Committee: (1) maintains a list of prospective candidates for Director, including those recommended by shareholders; (2) reviews the qualifications of candidates for Director (to review minimum qualifications for Director candidates, please see the Companys Corporate Guidelines available on our website at www.sjindustries.com under the heading Investors. These guidelines include consideration of education, experience, judgment, diversity and other applicable and relevant skills as determined by an assessment of the Boards needs when an opening exists); (3) makes recommendations to the Board of Directors to fill vacancies and for nominees for election to be voted on by the shareholders; and (4) is responsible for monitoring the implementation of the Companys Corporate Governance Policy.
The Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics required of Board
members in the context of the current Board make-up and the Companys strategic forecast. This assessment includes issues of industry experience, education, general business and leadership experience, judgment, diversity, age, and other applicable and relevant skills as determined by an assessment of the Boards needs. The diversity assessment includes a review of Board composition with regard to race, gender, age and geography.
The Governance Committee will consider nominees for the Board of Directors recommended by shareholders and submitted in compliance with the Companys bylaws, in writing, to the Corporate Secretary of the Company. Any shareholder wishing to propose a nominee should submit a recommendation in writing to the Companys Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, indicating the nominees qualifications and other relevant biographical information and providing confirmation of the nominees consent to serve as a Director.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Boards Executive Committee is comprised of the Chairman of the Board, the CEO and the Chairs of the Audit, Compensation, Governance and Risk Committees. The current members are: Walter M. Higgins III, Chairman; Michael J. Renna; Sarah M.
Barpoulis; Thomas A. Bracken; Sunita Holzer; and Frank L. Sims. The Executive Committee acts as directed by or on behalf of the Board of Directors during intervals between the meetings of the Board of Directors in the event a quorum of the Board is not
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available and, if at the discretion of the Chairman of the Board, immediate action is needed. The Committee also: reviews and investigates other matters as directed by the Board of Directors; reviews and recommends to the Board the organizational structure of the Company; reviews and recommends to the Board the Officers of the Company and its direct subsidiaries; reviews and recommends to the Board the composition and leadership of the Management Risk and Trust committees; monitors and/or implements the review or investigation of matters related to or
involving the Companys Officers; and takes action on such matters delegated to the Committee by the Board.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
The Risk Committee met four times in 2018. The committee was comprised of five Independent directors: Frank L. Sims, Chairman; Keith S. Campbell; Victor A. Fortkiewicz; and Sunita Holzer. Walter M. Higgins III is an ex-officio member of the Committee. The purpose of the Risk Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risks inherent in the business of SJI and the control processes with respect to such risks.
The Risk Committee monitors major strategic risks and the potential impact on the execution of the Companys strategic plans, and oversees and reviews the Companys risk assessment process, and risk management strategy and programs. The committee also analyzes the guidelines and policies that management uses to assess and manage exposure to risk and analyzes major financial risk exposures and the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Companys risk appetite.
At each Risk Committee meeting, management presents an update of the Companys risk management activities. The Company has two internal Risk Committees that report to the Board Risk Committee at least quarterly. The SJI Risk Management Committee
(RMC), established 1998, is responsible for overseeing the energy transactions and the related risks for all of the SJI companies. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and business operations.
The RMC establishes a general framework for measuring and monitoring business risks related to both financial and physical energy transactions, approves all methodologies used in risk measurement, ensures that objective and independent controls are in place, and presents reports to the Risk Committee reflecting risk management activity.
A South Jersey Gas Company RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and gas supply. This RMC meets at least quarterly.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
Strategy & Finance Committee
The Strategy & Finance Committee met seven times in 2018.The committee was comprised of five Independent directors: Joseph M. Rigby, Chairman; Sarah M. Barpoulis; Thomas A. Bracken; and Sheila Hartnett-Devlin. Walter M. Higgins III is an ex-officio member of the Committee. The purpose of the Strategy & Finance Committee is to assist the Board of Directors in fulfilling its oversight of the Companys strategic, financial and financing plans.
The Strategy & Finance Committee provides input and support to Management in the development of the Companys long-term strategic, operating, capital and financing plans.
The Committees Charter is available on our website at www.sjindustries.com under the heading Investors or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
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Fees Paid to the Independent Registered Public Accounting Firm
As part of its duties, the Audit Committee also considered whether the provision of services other than the audit services by the independent registered public accountants to the Company is compatible with maintaining the accountants independence. In accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte & Touche LLP. The Audit Committee discussed these services with the independent registered public accounting firm and Company management to determine that they are permitted under the rules and regulations
concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
The fees for all services provided by the independent registered public accounting firm to the Company during 2018 and 2017are as follows:
FY 2018
|
FY 2017
|
Audit Fees (a)
|
|
|
|
$
|
3,713,000
|
|
Audit Fees (a)
|
|
|
|
$
|
2,270,100
|
|
Audit-Related Fees (b)
|
|
|
|
|
—
|
|
Audit-Related Fees (b)
|
|
|
|
|
—
|
|
Tax Fees (c)
|
|
|
|
|
525,415
|
|
Tax Fees (c)
|
|
|
|
|
242,000
|
|
All Other Fees
|
|
|
|
|
—
|
|
All Other Fees
|
|
|
|
|
—
|
|
Total
|
|
|
|
$
|
4,238,415
|
|
Total
|
|
|
|
$
|
2,512,100
|
|
|
(a)
|
Fees for audit services billed or expected to be billed relating to fiscal 2018 and 2017 include audits of the Company’s annual financial statements, evaluation and reporting on the effectiveness of the Company’s internal controls over financial reporting, reviews of the Company’s quarterly financial statements, comfort letters, consents and other services related to Securities and Exchange Commission matters.
|
|
(b)
|
SJI did not incur any fees for audit-related services during fiscal 2018 and 2017.
|
|
(c)
|
Fees for tax services provided during fiscal 2018 and 2017 consisted of tax compliance and compliance-related research. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and Federal, state and local income tax return assistance.
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EXECUTIVE OFFICERS
Compensation Committee Report
We have reviewed the following Compensation Discussion and Analysis with management. Based on our review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys proxy statement, Form 10-K and Annual Report for the year ended December 31, 2018.
COMPENSATION COMMITTEE
Sunita Holzer, Chair
Walter M. Higgins III, Ex Officio Member
Sarah M. Barpoulis
Keith S. Campbell
Joseph M. Rigby
Compensation Discussion & Analysis
Introduction
This Compensation Discussion and Analysis (CD&A) explains the executive compensation program for the following executive officers, who are referred to as the Named Executive Officers (NEOs):
|
•
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Michael J. Renna – President and Chief Executive Officer
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|
•
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Stephen H. Clark – Former Executive Vice President, SJI and President and Chief Operating Officer of South Jersey Energy Solutions and SJI Midstream and former Chief Financial Officer
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|
•
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David Robbins Jr. – Senior Vice President and President of SJI Utilities
|
|
•
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Kathleen A. McEndy – Senior Vice President and Chief Administrative Officer
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•
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Kenneth A. Lynch – Senior Vice President and Chief Accounting and Risk Officer and former Principal Financial Officer
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|
•
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Melissa J. Orsen – Senior Vice President and General Counsel
|
Mr. Clark, Executive Vice President, SJI was named President and Chief Operating Officer of South Jersey Energy Solutions and SJI Midstream and resigned his role as Chief Financial Officer effective August 17, 2018. Mr. Lynch assumed the responsibilities of the principal financial officer from August 17, 2018 to January 14, 2019. Cielo Hernandez was hired as Senior Vice President and Chief Financial Officer effective January 14, 2019. Due to applicable SEC reporting rules, Ms. Hernandez is not classified as a NEO for the 2018 fiscal year. Mr. Clark accepted the Early Retirement Incentive Program (ERIP) offered by the Company and retired effective February 28, 2019. Further details are provided under Change in Control Agreements and Other Potential Post-Employment Payment.
Executive Summar
y
Fiscal 2018 Business Highlights
Key business and operational highlights for 2018 are as follows:
Growing regulated focus.
In July 2018, SJI acquired the assets of Elizabethtown Gas and Elkton Gas from a subsidiary of Southern Company Gas, furthering the company’s commitment to growing earnings from regulated assets and investments. As a result of the acquisition, SJI‘s total utility customer base increased to more than 691,000 customers across New Jersey and Maryland.
Infrastructure Modernization.
The current phase of the South Jersey Gas Storm Hardening and Reliability program was approved in May and authorizes investment of $100.3 million from 2018-2021 for four projects to enhance the safety, redundancy and resiliency of the distribution system along our coastal communities. Investment also continued under the second phase of our South Jersey Gas Accelerated Infrastructure Replacement Program (AIRP), which authorized the investment of $302.5 million from 2016-2021 for infrastructure replacement and upgrades. Additionally, in October, Elizabethtown Gas filed a proposal for a five-year, $518.0 million Infrastructure Investment Program with the New Jersey Board of Public Utilities.
Business Transformation Initiatives.
In June 2018, SJI entered into an agreement to sell its portfolio of solar energy projects, and in November 2018, the company completed the sale of its retail gas assets. SJI also brought three new fuel supply management contracts on-line in 2018, further reflecting the refined strategic focus and business transformation efforts that will support long term growth from high-quality, repeatable earnings.
Growth from Core Non-Regulated Operations.
Our wholesale natural gas business, South Jersey Resources Group, benefited from extreme cold weather in early January and an overall colder-than-average winter, delivering record Economic Earnings of $35.0 million, compared to $15.8 million in 2017. Additionally, after bringing three new fuel supply management contracts on-line during 2018, this business ended the year with nine contracts being served and an additional two contracts executed and pending service.
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Compensation Discussion & Analysis
Progress Towards Our Goals:
SJI continues to focus on driving shareholder value through investments in expanding and modernizing our utility infrastructure. In collaboration with our regulators, we remain focused on delivering safe, reliable, affordable natural gas service to our customers. The company has also prioritized investments in long-term contracted energy infrastructure that will help make the
region more affordable for families and competitive for businesses. Additionally, we continue to leverage our industry expertise to provide essential services to utilities, power generators and industrial customers through wholesale marketing, fuel management and consulting services.
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•
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SJI GAAP income from continuing operations totaled $17.9 million in 2018 compared with a loss of $3.4 million in 2017.
|
|
•
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SJI Economic Earnings totaled $116.2 million in 2018*, compared with $98.1 million in 2017. Strong performance by our utilities, as well as in our asset optimization and fuel supply management business drove strong results, helping to offset the impacts associated with the acquisitions of Elizabethtown Gas and Elkton Gas that were completed in 2018.
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|
•
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Economic Earnings Per Share totaled $1.38 in 2018* compared with $1.23 in the prior year.
|
|
•
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2018 Return on Equity was 8.52%
|
|
•
|
SJI Utilities, the business segment formed to house our three utilities, contributed $88.8 million to Economic Earnings, a 22% increase from utility operations in the prior year. South Jersey Gas contributed $82.9 million to earnings through infrastructure investments and customer growth. Newly acquired utilities Elizabethtown Gas and Elkton Gas contributed $5.8 million and $0.7 million, respectively.
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|
•
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Our commodity marketing and fuel management businesses within South Jersey Energy Group, contributed $42.6 million to Economic Earnings in 2018, double 2017 performance. Consistent with our strategy, in 2018 we brought three fuel
|
management contracts on-line, and ended the year with 10 operating contracts. We also divested our retail gas business during the fourth quarter due to extremely thin margins available in the retail market.
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•
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Our energy production business, housed within South Jersey Energy Services, produced a 2018 Economic Earnings loss of $0.6 million as compared to a loss of $2.7 million for the prior year. Results reflected the agreement to sell our existing solar portfolio, which was partially offset by our development of a solar project that we sold to a third party.
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|
•
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SJI Midstream, contributed $3.1 million to Economic Earnings in 2018, a 32.6% decrease from 2017. The reduction in 2018 stemmed from the benefits of Allowance for Funds During Construction (AFUDC) associated with our investment. These benefits were lower than prior year as a result of the modified Penn East capital structure that resulted from a FERC order in 2018.
|
*Annex A includes a reconciliation of our income from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data). Income from continuing operations and earnings per share from continuing operations are the most directly comparable measures reported under accounting principles generally accepted in the United States (GAAP).
Fiscal 2018 Compensation Highlights and Key Decisions
Consistent with prior years, the Compensation Committee (the Committee) made compensation decisions for the NEOs based on SJIs executive compensation principles, as described further in a following section. The Committee uses the peer group 50th percentile as a reference point when assessing NEO target compensation levels but does not target a specific percentile.
Based on the Committees review of the executive compensation program in late 2017, we determined that for FYE 2017, NEO target total pay positioning vs. market varied by individual from below the 25th percentile to slightly above market median. Overall, compensation decisions made for fiscal 2018 brought target total pay positioning for our CEO slightly above the 25th percentile of our peers, while target total pay positioning for our other NEOs varied by individual from 25th percentile to slightly above median of our peers. Ms. Orsen joined the Company in 2018, and her 2018 target total pay positioning was significantly below the 25th percentile.
The executive compensation program for fiscal 2018 was consistent with the 2017 program other than a few minor changes, given that the program continues to align with the Companys short-term and long-term business objectives. Changes were intended to comply with new tax laws and help improve the alignment of company performance with executive pay. The Committee made the following changes to the program design for fiscal 2018:
|
•
|
Changed the performance metric for the Annual Incentive Plan from core earnings to economic earnings, as these measures were identical for the 2018 fiscal year.
|
|
•
|
Removed the performance condition on the time-based restricted stock unit awards, which had been intended to satisfy the conditions for tax-deductibility under Section 162(m) of the Code, as a result of the changes to Section 162(m) under the Tax Cuts and Jobs Act.
|
The compensation program for the NEOs during fiscal 2018 consisted of the following pay elements:
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Compensation Discussion & Analysis
NEO Target Total Compensation
Factoring in market positioning as one input, in addition to consideration of other relevant factors such as an individuals performance and potential, the breadth, scope and complexity of the role, internal equity and succession planning and retention objectives, the Committee approved compensation increases for
Mr. Renna and all other NEOs except Ms. Orsen who joined the Company in 2018, as further described below. For further details on NEO target compensation in 2018, refer to the section in this CD&A entitled Detailed Discussion and Analysis.
CEO Compensation Decisions and Target Compensation
At the beginning of 2018, Mr. Renna, in his role as President and Chief Executive Officer, received an increase in his base salary from $700,000 to $750,000 and an annual LTI increase as a percentage of salary from 200% to 225% effective January 1, 2018. For FYE 2017, Mr. Rennas compensation was below the 25th percentile of the peers. These changes were intended to enhance the alignment
of his pay with performance, and increase his alignment with stockholder interests, as well as recognize his individual performance and relative target total pay positioning vs. market. These increases brought his 2018 target total pay positioning slightly above the 25th percentile of our peers.
All Other NEOs Compensation Decisions and Target Compensation
The Committee approved compensation increases for all other NEOs except Ms. Orsen who joined the Company in 2018 in the way of salary adjustments. Mr. Clark, Ms. McEndy, and Mr. Lynch received salary increases of approximately 3%, with these changes intended to recognize each NEOs individual
performance in his or her role. Mr. Robbins received a larger salary increase of 13.2%, which was intended to bring his target total compensation closer to the peer median and reflect additional responsibilities.
Total Compensation Mix
While the Committee has not set a specific formula for the mix of pay elements, the Committee is oriented around placing greater weighting on at-risk compensation elements over fixed pay for all the NEOs.
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Compensation Discussion & Analysis
Pay for Performance
Actual compensation received in Fiscal 2018 reflects the Companys performance:
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•
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The portion of the AIP for Fiscal 2018 based on SJI economic earnings was earned at 150% of target due to achieving maximum performance.
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|
•
|
In the cases of all NEOs except for Ms. Orsen, the Committee applied negative discretion to their total AIP payout after
|
considering overall Company performance in 2018, including the Companys stock price performance.
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•
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PBRSU awards for the performance period ended fiscal 2018 paid out 69.3% of target.
|
Compensation Practices
The Company and the Compensation Committee regularly monitor best practices and emerging trends in executive compensation and determine what enhancements should be made to strengthen the compensation program. Below is a list of the compensation practices that are (or, where noteworthy, are not) incorporated into the current executive compensation program, which are aligned with stockholders interests.
Things We Do
|
Things We Don’t Do
|
✔
|
Majority of LTI awards are performance-based
|
✘
|
Excise tax gross ups
|
✔
|
Multiple financial and stock-based metrics in incentive plans
|
✘
|
Repricing or exchange of equity awards without shareholder approval
|
✔
|
Use of absolute and relative performance measurement in incentive plans
|
✘
|
Employment agreements
|
✔
|
Caps on incentive awards
|
✘
|
Permit hedging or pledging of Company stock
|
✔
|
Change-in-control double-trigger for equity award vesting and severance benefits
|
✘
|
No tax gross ups for perquisites
|
✔
|
Clawback policy applying to all incentive awards
|
|
|
✔
|
Limited number of perquisites
|
|
|
✔
|
Independent compensation consultant
|
|
|
Shareholder Say-on-Pay Vote and Company Response
At the Companys Annual Meeting of Shareholders held in May 2018, shareholders were presented with a vote to approve, on an advisory basis, the compensation paid to the NEOs as disclosed in the Compensation Discussion and Analysis section of the proxy statement relating to that meeting (referred to as a say-on-pay proposal). Ninety-eight percent of the votes cast on the say-on-pay proposal voted in favor of the proposal, which was the same as in
2017, indicating continued strong shareholder support of the executive compensation program. Consistent with the Companys commitment to stockholders interests and SJIs pay-for-performance approach, the Compensation Committee continued to examine the compensation program and make changes where warranted.
Detailed Discussion & Analysis
Executive Compensation Principles
The Companys executive compensation program applies to all Company Officers, including NEOs and is designed to aid in achieving the Companys strategic plan while increasing shareholder value. Executive compensation program decisions were made based on the following principles:
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•
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Directly and measurably link the executive compensation program to business and individual performance with a substantial portion of the compensation designed to create incentives for superior performance and meaningful consequences for below target performance and no payout below threshold performance;
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•
|
Set total compensation to be competitive with peer companies to attract, retain and motivate high performing business leaders;
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•
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Align the interests of NEOs with shareholders so that compensation levels are commensurate with relative shareholder returns and financial performance;
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•
|
Balance short-term and long-term financial and strategic objectives and reward NEOs for the businesses for which they are responsible and for overall Company performance, as appropriate;
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•
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Use independent compensation consultants who report directly to the Committee; and
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|
•
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Use the peer group 50th percentile as a reference point when assessing compensation levels.
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Compensation Discussion & Analysis
2018 Compensation Components
The Companys executive compensation structure consists of base salary, AIP and LTI. The AIP is directly linked to achieving predefined short-term and long-term performance goals, and LTI is directly
linked to achieving predefined long-term performance goals and/or stock price performance. Descriptions of each component of the compensation program for the NEOs are set forth below:
Pay Element
|
Description
|
Rationale
|
Salary
|
Fixed cash opportunity.
|
Provides compensation for role, level of responsibility and experience. Forms basis for other pay elements.
|
Annual Incentive Plan (AIP)
|
Annual cash compensation with variable payout based on achievement of pre-determined corporate/business unit economic earnings goals and individual balanced scorecard objectives (other strategic non-earnings goals) for the fiscal year
|
Drives and incents annual performance across key financial and individual performance measures.
|
Long-Term Incentives (LTI)
|
LTI is granted 70% in performance-based restricted stock units (PBRSUs), based on 3-year Total Shareholder Return (TSR) vs. peers and 3-year economic earnings growth, and 30% in time-based restricted stock units (TBRSUs).
|
PBRSU portion of awards, representing significant majority of total LTI opportunity requires achievement of threshold level of performance for any payout. Drives long-term financial performance, shareholder value and executive retention.
|
Benefits and Perquisites
|
Health and welfare benefits provided consistent with those generally provided to all employees. In addition, NEOs are also eligible for certain additional retirement and insurance-related benefits and limited perquisites (i.e., company automobile and executive physicals). See
Other Benefits and
Perquisites
section for more detail.
|
Supports attraction and retention objectives and helps ensure the overall competitiveness of the compensation program vs. the market.
|
Pursuant to SEC regulations, the Summary Compensation Table on page
40
shows total compensation for our NEOs, including the change in pension value and nonqualified compensation earnings. The number shown for Mr. Renna in the Change in Pension Value and Nonqualified Compensation Earnings column for 2017 is reflective of his entering the SERP upon turning 50 in 2017. As a result, this number reflects the accumulation of his SERP benefit earned based on all his service from his original hire date (20 years). For 2018 and going forward, the number shown in the Change in
Pension Value and Nonqualified Compensation Earnings Column each year will reflect only one year of service. We believe that Mr. Rennas year-over-year change in pension value is not representative of the compensation he received in 2017. Therefore, we included a separate column in the Summary Compensation Table that reflects total compensation minus the change in pension value and nonqualified compensation earnings for Mr. Renna and the other NEOs, as we believe this number is more representative of actual compensation.
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Compensation Discussion & Analysis
Specific 2018 pay decisions for each pay element were as follows:
The Compensation Committee determines base salaries for the NEOs each year taking into account multiple factors including, but not limited to individuals performance and potential, breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, as well as market positioning. The Committee also considers the analyses provided by our independent compensation consultants who reaffirmed that for FYE 2017, target total pay positioning was slightly below the 25th percentile of the peer group for our CEO and varied from below the 25th percentile to slightly above market median for our other NEOs.
At the beginning of 2018, the Compensation Committee approved a salary increase for Mr. Renna of 7.1% effective January 1, 2018 intended to recognize him for his individual performance in his role as President and CEO, as well as his relative target total pay positioning vs. market. The Committee also approved salary increases for Mr. Clark, Ms. McEndy, and
Mr. Lynch of approximately 3% intended to recognize each NEOs individual performance in his or her role, as well as a larger salary increase of 13.2% for Mr. Robbins, which was intended to bring his target total compensation closer to median and reflect additional responsibilities. The approved salary increases were effective on January 1, 2018.
In the case of NEOs other than the CEO, the Committee also took into consideration the recommendations of the CEO. Following the salary increases, as well as an increase to the CEOs LTI opportunity, as described in a following section, the CEOs target total pay positioning was slightly above the 25th percentile of the peers. The other NEOs target total pay positioning varied by individual from 25th percentile to slightly above median, except for Ms. Orsen who joined the Company in 2018 and whose 2018 target total pay positioning was significantly below 25th percentile.
Named Executive Officer
|
Annual
Base Salary
at FYE 2017
$Value
|
Annual
Base Salary Effective
1/1/2018
$Value
|
Percent
Increase From
2017
|
Michael J. Renna
|
|
700,000
|
|
|
750,000
|
|
7.1%
|
Stephen H. Clark
|
|
410,000
|
|
|
422,300
|
|
3.0%
|
David Robbins Jr.
|
|
340,000
|
|
|
385,000
|
|
13.2%
|
Kathleen A. McEndy
|
|
360,000
|
|
|
371,000
|
|
3.1%
|
Kenneth A. Lynch
|
|
300,000
|
|
|
309,000
|
|
3.0%
|
Melissa J. Orsen
|
|
NA
|
|
|
290,000
|
|
NA
|
Annual Incentive Plan
Each NEO had a pre-established AIP opportunity for 2018. The Committee determines target AIP opportunities each year taking into account multiple factors including, but not limited to individuals performance and potential, breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, as well as market positioning. For 2018, the Committee did not
make any changes to the NEOs target AIP opportunities except as reflected by salary increases. Actual AIP awards can range from 0 to 150 percent of each NEOs target AIP opportunity based on the achievement of the performance metrics discussed below. The 2018 target AIP award opportunity for each Named Executive is set forth below:
Target AIP Awards for the NEOs
|
2017 Target AIP Awards
|
2018 Target AIP Awards
|
Named Executive Officer
|
% of Salary
|
$ Value
|
% of Salary
|
$ Value
|
Michael J. Renna
|
|
100
|
%
|
|
700,000
|
|
|
100
|
%
|
|
750,000
|
|
Stephen H. Clark
|
|
70
|
%
|
|
287,000
|
|
|
70
|
%
|
|
295,610
|
|
David Robbins Jr.
|
|
70
|
%
|
|
238,000
|
|
|
70
|
%
|
|
269,500
|
|
Kathleen A. McEndy
|
|
60
|
%
|
|
216,000
|
|
|
60
|
%
|
|
222,600
|
|
Kenneth A. Lynch
|
|
60
|
%
|
|
180,000
|
|
|
60
|
%
|
|
185,400
|
|
Melissa J. Orsen
|
|
NA
|
|
|
NA
|
|
|
60
|
%
|
|
174,000
|
|
30
|
| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
The AIP drives and rewards short-term performance. The performance metrics used for the NEOs for 2018 were based on various metrics, including SJI economic earnings, South Jersey Gas (SJG) economic earnings, South Jersey Energy Solutions (SJES) economic earnings and individual balanced scorecard objectives (other strategic non-earnings goals by individual). For 2018, the financial performance metric for the AIP was changed from core earnings to economic earnings, as core earnings (defined
as economic earnings less investment tax credits and adjusted for non-operational events) will be equivalent to economic earnings starting in 2018. Performance and resulting payouts for each metric were assessed independently. Specific metrics and weightings vary by individual based on role and responsibility. Specifically, the NEOs weightings were determined based on the areas of the business for which each NEO is responsible, as set forth below:
|
Economic Earnings
|
Named Executive Officer
|
SJI
|
South Jersey Gas
(SJG)
|
South Jersey Energy
Solutions (SJES)
|
Balanced
Scorecard
|
Michael J. Renna
|
|
75
|
%
|
|
|
|
|
|
|
|
25
|
%
|
Stephen H. Clark*
|
|
42
|
%
|
|
|
|
|
8
|
%
|
|
50
|
%
|
David Robbins Jr.
|
|
25
|
%
|
|
25
|
%
|
|
|
|
|
50
|
%
|
Kathleen A. McEndy
|
|
50
|
%
|
|
|
|
|
|
|
|
50
|
%
|
Kenneth A. Lynch
|
|
50
|
%
|
|
|
|
|
|
|
|
50
|
%
|
Melissa J. Orsen
|
|
50
|
%
|
|
|
|
|
|
|
|
50
|
%
|
|
*
|
Mr. Clark’s 2018 AIP award was prorated based on his transition from CFO to President and COO of South Jersey Energy Solutions and SJI Midstream in August 2018.
|
2018 Economic Earnings Pay/Performance Scales and Actual Results
The annual incentive goals and payout scales are set at the beginning of the fiscal year, based on expected levels of performance for that coming year. No payment is made to our Named Executive Officers for the economic earnings component of the annual incentive plan unless threshold performance is met. For 2018, economic earnings goals were set excluding the projected impact of the Elizabethtown/Elkton acquisitions. The threshold economic earnings performance level for SJI and SJG in 2018 was set above actual economic earnings in 2017. Therefore, economic earnings performance significantly above prior year actual performance was required for any payout for our SJI and SJG economic earnings components. The threshold economic earnings performance level for SJES in 2018 was set just below actual SJES economic earnings in 2017. For 2018, the calculation of financial
results at the end of the performance period excluded both the dilutive and accretive impact of the Elizabethtown/Elkton acquisitions.
We used $126.0 million as SJI economic earnings when determining 2018 AIP payouts against the SJI economic earnings goals. This differs from the SJI economic earnings of $116.2 million reported to investors due to adjustments made to exclude the impact of the Elizabethtown/Elkton acquisitions.
For SJI economic earnings, the goals and payout scales, and actual results for 2018 were as follows. Actual performance and the payouts are determined based on straight line interpolation between the levels set forth below:
|
SJI Economic Earnings Pay/Performance Scale
|
Performance Level
|
SJI Economic Earnings $
Value ($M)
|
Payout as a
% of Target
|
Maximum
|
≥ 126.0
|
150%
|
Target
|
|
120.5
|
|
100%
|
Threshold
|
|
110.0
|
|
50%
|
Below Threshold
|
|
<110.0
|
|
0%
|
Actual Performance
|
|
126.0
|
|
150%
|
SJI economic earnings of $126.0 million reflects adjustments to exclude both the dilutive and accretive impact of the Elizabethtown/Elkton acquisitions.
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
31
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
The standard target LTI opportunity consists of 70% PBRSU grants (with 50% based on 3-year relative total shareholder return (TSR) and 50% based on 3-year economic earnings growth) and 30% TBRSU grants as set forth below.
Details with respect to the number of shares, stock prices on the date of grant and grant date values for the NEOs 2018 LTI grants are provided in the Grants of Plan-Based Awards and Outstanding Equity Awards tables.
2018 PBRSU Award
PBRSU awards are earned based on the following performance measures:
|
•
|
50% based on the Company’s 3-year TSR vs. peer group performance
|
|
•
|
50% based on 3-year compound annual economic earnings growth
|
TSR directly ties to shareholder return and economic earnings growth is a financial measure that links awards to longer-term operating performance and financial goals. The relative TSR goals are set at levels consistent with market practice for similar relative TSR based long-term performance awards and reflect rigorous performance hurdles.
The economic earnings goals are set at levels that require long-term growth for any payouts to be received for these
components. For the 2018 awards, the economic earnings goals included projected earnings from the Elizabethtown/Elkton acquisitions. When calculating financial results at the end of the performance period, SJI will include both the dilutive and accretive impact of the acquisitions.
The PBRSU goals and payout scales are set at the beginning of the three-year performance period. The Committee has developed a schedule to determine the actual amount of the LTI awards earned, evaluated for each measure separately, as shown below. Specific performance and the resulting payout will be interpolated between the levels indicated below. PBRSUs can be earned from 50% of target shares granted if threshold performance is met and up to 200% of target shares granted if maximum performance is met. No shares are earned for performance below threshold performance level and any performance over the maximum will result in a 200% payout.
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| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
For economic earnings growth, the goals and payout scales, and actual results for 2018 were as follows:
Performance Level
|
SJI Economic Earnings CAGR
|
Payout as a %
of Target
|
Maximum
|
|
≥15.0
|
%
|
200%
|
Target
|
|
9.0
|
%
|
100%
|
Threshold
|
|
3.0
|
%
|
50%
|
Below Threshold
|
|
<3.0
|
%
|
0%
|
Actual Performance – Economic Earnings CAGR
|
|
5.5
|
%
|
70.8%
|
For the three-year performance cycle ended December 31,2018 (Fiscal 2016 PBRSU award), the total weighted payout based on the performance above is 69.3% of target. The NEOs received
payouts of the Fiscal 2016 PBRSUs as set forth below. Actual payouts shown below do not include accrued dividends on vested shares. Ms. Orsen was not with the Company in 2016 and did not receive a 2016 PBRSU award.
Named Executive Officer
|
2016 PBRSUs:
Number of Shares Granted at Target
|
2016 PBRSUs:
Number of Shares: Actual Payout
|
Michael J. Renna
|
|
30,610
|
|
|
21,213
|
|
Stephen H. Clark
|
|
9,740
|
|
|
6,750
|
|
David Robbins Jr.
|
|
8,036
|
|
|
5,569
|
|
Kathleen A. McEndy
|
|
8,348
|
|
|
5,785
|
|
Kenneth A. Lynch
|
|
6,830
|
|
|
4,733
|
|
Benefits and Perquisites
Each of the NEOs is eligible for other employee benefit plans generally available to all employees (e.g., qualified pension plan, deferred compensation plan, major medical and health insurance,
disability insurance, 401(k) Plan) on the same terms as all other employees. In addition to those benefits, NEOs are eligible for the following benefits:
Non-Qualified Supplemental Retirement Plan (the SERP)
|
•
|
Employees who became officers prior to April 30, 2016 are also covered by a supplemental retirement plan (the SERP) upon attaining age 50. Compensation under the SERP is considered as
|
base salary plus annual incentives. See Pension Benefits Table section for further detail. In 2016, the plan was closed to new participants.
Non-Qualified Defined Contribution Retirement Plan (the DCRP)
|
•
|
Beginning May 1, 2016, newly appointed Officers may participate in the DCRP. Each year, officers in the DCRP may receive an Employer Credit which is a company contribution that is a percentage of annual cash compensation ranging from 8%-12% of annual cash compensation (base salary and AIP payout) based on the age of the NEO. For 2018, the pre-set
|
annual performance metric hurdle for the annual Employer Credit was removed as a result of the changes to Section 162(m) under the Tax Cuts and Jobs Act. DCRP account balances are not vested until age 50. Plan participants that terminate (voluntarily or involuntarily) prior to age 50 forfeit their entire account balance.
Supplemental Saving Plan Contributions
|
•
|
The Internal Revenue Code limits the contributions that may be made by, or on behalf of, an individual under defined contribution plans such as the Company’s 401(k) Plan. NEOs are reimbursed
|
the amount of Company contributions that may not be made because of this limitation. Amounts paid pursuant to this policy are included in the Summary Compensation Table.
|
•
|
NEOs are eligible for short-term disability benefits equal to 100% of the NEO’s base salary for a certain period of time depending on years of service. Long-term disability (LTD) begins upon the expiration of temporary disability benefits and is generally paid at a rate of 60% of the NEO’s base salary up to a monthly
|
maximum benefit of $10,000. Due to limitations in the group LTD benefits, in 2017, a supplemental LTD plan was implemented to cover up to 60% of salary and cash bonus up to a monthly maximum benefit of $25,000.
|
•
|
NEOs are provided with both group life insurance and 24- Hour Accident Protection coverage. The insurance premiums for these benefits are paid by the Company and the NEO is responsible
|
for resultant federal, state or local income taxes. Amounts paid pursuant to this policy are included in the Summary Compensation Table.
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| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Supplemental Survivor’s Benefit
|
•
|
Upon the death of any NEO while employed by the Company, his/her surviving beneficiary shall receive a lump sum payment of $1,000 to be paid as soon as practical following the NEOs’ death. The surviving beneficiary will receive a lump sum death benefit based upon years of service with the Company in the
|
amounts of six months base salary for 10-15 service years; nine months base salary for 15-25 service years; and 12 months base salary for 25+ service years. Such payment is offset by proceeds from the NEOs retirement plans in the year of death.
Other Benefits and Perquisites
|
•
|
NEOs are provided an automobile to be used for business and at the NEO’s discretion, for commuting and other non-business purposes. Each NEO is responsible for any federal and/or state income taxes that result from non-business usage.
|
|
•
|
The Company provides NEOs with an annual physical examination at the Company’s expense.
|
Approach for Developing the Executive Compensation Program
Role of the Compensation Committee
SJIs executive compensation program is administered by the Committee. The Committee members meet the New York Stock Exchanges independence standards. In determining the independence of members of the Compensation Committee, the Board considers all factors specifically relevant to determining whether the director has a relationship to the Company that is material to that directors ability to be independent from management in connection with the duties of a Compensation Committee member, including: (i) the source of the directors compensation, including any consulting, advisory or other compensation fees; and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of the employee compensation and benefit programs for the NEOs.
The Committee annually evaluates the CEOs performance. Taking performance into consideration, along with recommendations from the compensation consultant (discussed below), the Committee then establishes and approves and recommends to the Board for
approval compensation levels for the CEO, including annual base salary and AIP and long-term stock incentive awards. The Committee also reviews recommendations from the CEO regarding the CEOs evaluation of, and pay recommendations for, the other NEOs. The Committee evaluates and approves the recommendations, as appropriate. All performance goals for the NEOs AIP awards are established at the beginning of each year for use in the performance evaluation process. The Committee reviews direct compensation (base salary, AIP and long-term incentives) annually. The Committee meets regularly in executive sessions without members of management present to evaluate the executive compensation program and reports regularly to the Board of Directors on its actions and recommendations.
The Committee reviews indirect compensation (non-qualified retirement plan and other benefits and change in control agreements) on a 3-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of the independent compensation and benefits consultant.
Role of Independent Consultants
To assist the Committee in its evaluation of the executive compensation program for 2018, the Committee retained an independent compensation consultant, ClearBridge Compensation Group, LLC (ClearBridge). ClearBridges role as independent advisor to the Committee includes:
|
•
|
Providing research, analyses and design expertise in developing compensation programs for executives and incentive programs for eligible employees
|
|
•
|
Reviewing management recommendations to ensure alignment with business and compensation objectives
|
|
•
|
Keeping the Committee apprised of regulatory developments and market trends related to executive compensation practices
|
|
•
|
Attending Committee meetings to provide information and recommendations regarding the executive compensation program while being available to participate in executive sessions and communicate with the Committee between meetings, as appropriate
|
During 2018, in connection with its review of SJIs executive benefit programs, the Committee also retained an independent benefits consultant, Pinnacle Financial Group (Pinnacle). Pinnacle examined all components of the executive benefits program and provided an analysis of how the benefits compare with peers and the broad market.
The Committee reviewed its engagement with ClearBridge and Pinnacle and believes there are no conflicts of interest between these firms and the Committee. In reaching this conclusion, the Committee considered the factors regarding compensation advisor independence set forth in applicable SEC and NYSE rules.
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
37
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Role of the Compensation Peer Group
Along with reviewing the executive compensation program, the Committee reviews and determines the appropriate peer group companies for benchmarking purposes. Consistent with the goal of providing competitive compensation, the executive compensation programs are compared to those programs in place at identified
peer companies. For 2018, the Committee, in consultation with its independent consultant, ClearBridge, selected a peer group that was comprised of 13 similarly sized gas and other utility companies with comparable revenue and market capitalization. The peer group consists of the following companies:
Avista Corp.
|
Black Hills Corporation
|
National Fuel Gas Co.
|
New Jersey Resources Corp.
|
Northwest Natural Gas Co.
|
NorthWestern Corp.
|
ONE Gas, Inc.
|
PNM Resources, Inc.
|
Portland General Electric Co.
|
Southwest Gas Corp.
|
Spire, Inc.
|
Vectren Corp.
|
WGL Holdings, Inc.
|
|
|
This peer group was consistent with the peer group used in 2017, with the following exceptions: National Fuel Gas, Inc., PNM Resources, Inc., and Portland General Electric Co. were added given their size and business relevance, Piedmont Natural Gas Co. was removed following its acquisition by Duke Energy, and Questar Corp. was removed following its acquisition by Dominion Resources. For fiscal 2019, the peer group was further revised to add Atmos Energy Corp. given its size and business relevance.
The Company used the above peer group for purposes of benchmarking salary, AIP, LTI, and total direct compensation (TDC). The Committee relied on the peer group for all formal benchmarking. The Committee believes that the peer group data
and industry compensation studies give the Committee an independent and accurate view of the market value of each position on a comparative basis. While the Company does not target any particular percentile at which to align pay, the Committee uses the peer group 50th percentile (median) as a reference point when assessing compensation levels. The purpose of referencing the 50th percentile is to inform the Company of the relevant competitive market when making pay decisions and enable the Company to attract and retain qualified executives while at the same time protecting shareholder interests. Although the 50th percentile is used as a reference point, actual levels of pay depend on a variety of factors such as experience and individual and Company performance.
Severance/Change in Control Agreements
SJI has not entered into separate employment agreements with any employee, including any of the NEOs. Instead, the Company has an Officer Severance Plan to provide certain benefits to Company Officers, including the NEOs, upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control. The Company has also adopted separate Change in Control (CIC) agreements which provide the Companys executive officers, including the NEOs, with certain severance benefits upon a qualifying termination following a change in control. Further details regarding the severance and change in control benefits are provided under the Change in Control Agreements and Other Potential Post-Employment Payments section.
Equity award agreements provide for double trigger vesting upon a change in control. Further, under the 2015 Omnibus Equity Compensation Plan, in the event of a termination by the Company without Cause, or if the employee terminates employment for Good Reason, in either case within 12 months following a change in control, outstanding awards will become fully vested as of the date of such termination. However, if the vesting of any such award is based on performance, the applicable Award Agreement specifies how the award will become vested. See the Change in Control Agreements and Other Potential Post-Employment Payments section for further details.
Stock Ownership Guidelines and Holding Requirements
The Company has stock ownership guidelines in place for NEOs to reinforce alignment with shareholders.
CEO stock ownership guideline is 5 times the CEOs annual base salary. All other NEOs are required to own shares of Company common stock with a market value equal to a minimum of 2 times their annual base salary. NEOs have six years to achieve their
ownership guidelines. As of December 31, 2018, all NEOs are in compliance with the ownership guidelines.
Additionally, a stock holding period was introduced in 2015 that requires all of the NEOs to retain at least 50 percent of vested and/ or earned shares, net of taxes, until their new stock ownership guideline has been met.
The Company has a clawback policy that applies to all annual incentive awards and long-term equity awards held by officers including our NEOs. The policy allows for the recoupment of incentive compensation in the event of a material negative financial
restatement due to fraud, negligence, or intentional misconduct. For 2019, the policy was amended to also allow for recoupment of incentives in the event of a material violation of the Companys Code of Ethics or any other material Company policy.
Anti-Hedging and Anti-Pledging Policies
The Company has anti-hedging and anti-pledging policies that prohibit the Officers from engaging in any hedging or monetization transactions with respect to the Companys securities.
Other Compensation-Related Matters
Accounting for Share-Based Compensation
Share-based compensation including restricted stock, restricted stock units and performance share awards are accounted for in
accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC Topic 718), Compensation – Stock Compensation.
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|
| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Impact of Tax Treatment on Compensation
Section 162(m) of the Internal Revenue Code limits the deduction allowable for compensation paid to certain NEOs over $1 million. The Tax Cuts and Jobs Act, enacted in December 2017, eliminated the 162(m) exemption for qualified performance-based compensation for tax years beginning in 2018, unless such compensation qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. While the Company generally
attempts to preserve the federal income tax deductibility of compensation paid, to the extent consistent with its business goals, the Committee weighs the benefits of full deductibility with the other objectives of the executive compensation program and reserves the right to pay the Companys employees, including NEOs, amounts which may or may not be deductible under Section 162(m) or other provisions of the Internal Revenue Code.
The Committee reviews its compensation programs in order to help mitigate the effects of excessive risk-taking. Through a combination of incentive compensation that has a short and long-term focus, the Company tries to establish an appropriate balance between achieving short-term and long-term goals. In addition, the Committee utilizes multiple metrics to help ensure that there is not undue focus on any particular financial result to the detriment of other aspects of the business. Payout schedules related to the metrics are measured after the completion of the appropriate time horizon to help ensure a full assessment of the metric. Finally, in formulating and reviewing the executive compensation policies, the Committee considers whether the policys design encourages excessive risk-taking and attaches specific measurable objectives to the extent possible.
During 2018, the Company, consisting of a team from the Human Resources and Risk Management departments, conducted a comprehensive assessment of the compensation programs administered by the Company and each of its subsidiaries. These evaluations focused on potential risks inherent in the compensation programs. Having reviewed the extensive risk assessment conducted by the Company, the Committee determined that the compensation programs are not reasonably likely to have a material adverse effect upon the Company and do not encourage unnecessary or excessive risk.
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
39
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
|
(1)
|
Represents grants of time-based restricted stock units.
|
|
(2)
|
Market value of Company common stock at December 31, 2018 was $27.80 and was used to calculate market value.
|
|
(3)
|
Represents grants of performance-based restricted stock units at target performance. Actual awards could range from 50 percent to 200 percent of target performance, with 0 percent payout for below threshold performance.
|
|
(4)
|
These awards consist of performance-based restricted stock units that would vest in March 2021 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied.
|
|
(5)
|
These awards consist of time-based restricted stock units. The awards will vest in three installments in March 2019, January 2020 and January 2021.
|
|
(6)
|
These awards consist of performance-based restricted stock units that would vest in March 2020 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied
|
|
(7)
|
These awards consist of time-based restricted stock units with a 1-year performance condition. The performance criteria has been satisfied, and the awards will vest in three equal installments with the first portion having vested in March 2018, and the remaining portions to vest in January 2019 and January 2020.
|
|
(8)
|
These awards consist of performance-based restricted stock units that would vest in March 2019 if the performance criteria are satisfied. The number of shares is shown at target assuming the performance criteria are satisfied.
|
|
(9)
|
These awards consist of time-based restricted stock units with a 1-year performance condition. The performance criteria has been satisfied, and the awards will vest in three equal installments with the first two portions having vested in March 2017 and January 2018, and the remaining portion to vest in January 2019.
|
|
(10)
|
These awards consist of time-based restricted stock units. The awards will vest in three equal installments with the first portion having vested in June 2018 and the two remaining portions to vest in June 2019 and June 2020.
|
Stock Vesting - 2018
The following table sets forth certain information concerning the vesting of restricted stock for the Companys Named Executive Officers during the year ended December 31, 2018. No options are outstanding, and none were exercised by the NEOs during the year ended December 31, 2018. The number of shares acquired on vesting shown below includes accrued dividends on vested shares.
Stock Vested – 2018 Stock Awards
Name
|
Number of
Shares Acquired on
Vesting (#) (1)
|
Value Realized
on Vesting ($) (2)
|
Michael J. Renna
|
|
15,949
|
|
|
457,876
|
|
Stephen H. Clark
|
|
4,839
|
|
|
139,201
|
|
David Robbins
|
|
4,160
|
|
|
120,644
|
|
Kathleen A. McEndy
|
|
4,523
|
|
|
131,348
|
|
Kenneth A. Lynch
|
|
2,851
|
|
|
82,371
|
|
Melissa J. Orsen
|
|
0
|
|
|
0
|
|
|
(1)
|
This column represents the portion of the time-based restricted stock unit awards granted in 2015 that vested on January 1, 2018, the portion of the time-based restricted stock unit awards granted in 2016 that vested on January 1, 2018, the portion of the time-based restricted stock units granted in 2017 that vested on March 1, 2018, and the performance-based restricted stock unit awards granted in 2015 that vested on March 1, 2018 based on performance from 2015 to 2017. This column also includes the portion of the 2018 one-time recognition awards granted to Mr. Robbins and Ms. McEndy, that vested on June 7, 2018.
|
|
(2)
|
The dollar value is calculated by multiplying the number of shares that vested by the market value of the Company’s common stock on the respective vesting date. The closing prices on the vesting dates of January 1, 2018, March 1, 2018, and June 7, 2018 were $31.23, $26.32, and $30.50, respectively.
|
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
43
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Nonqualified Deferred Compensation Table
The following table sets forth certain information regarding the Companys Restricted Stock Deferral Plan and Non-Qualified Deferred Compensation Plan. The Restricted Stock Deferral Plan permits the deferral of fully vested restricted stock units earned by the Companys NEOs pursuant to previously issued performance-based, restricted stock unit grants. The Company does not make contributions to the plan, and all earnings referenced in the table represent dividends paid on outstanding shares of common stock.
Beginning July 2017, the company implemented a Non-Qualified Deferred Compensation Plan which offers NEOs and other highly compensated employees the ability to defer pretax base compensation and AIP awards in excess of the maximum benefits that may be provided under the Saving Plan as a result of limits imposed by the Code. Generally, NEOs may elect to defer up to 75 percent of salary and up to 100 percent of AIP. Deferral elections are made annually by eligible participants in respect to compensation to be earned for the following year.
Name
|
Plan Name
|
Executive
Contribution
in Last FY($)
|
Registrant
Contributions
in Last FY ($)
|
Aggregate
Earnings in
Last FY ($)
|
Aggregate
Withdrawals
Distribution ($)
|
Aggregate
Balance in
Last FYE
($)
|
Michael J. Renna
|
Restricted Stock Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen H. Clark
|
Restricted Stock Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Robbins
|
Restricted Stock Deferral Plan
|
|
36,613
|
(1)
|
|
|
|
|
3,707
|
(2)
|
|
|
|
|
103,012
|
(3)
|
|
Non-Qualified Deferred Compensation plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen A. McEndy
(4)
|
Restricted Stock Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation plan
|
|
150,255
|
(4)
|
|
|
|
|
1,673
|
(5)
|
|
|
|
|
278,828
|
(6)
|
Kenneth A. Lynch
|
Restricted Stock Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melissa J. Orsen
|
Restricted Stock Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts for the Restricted Stock Deferral plan represent the market value of vested shares of previously restricted stock deferred by the NEOs calculated by multiplying the number of shares of deferred stock by the market value of the Company’s common stock as of December 31, 2018, which was $27.80
|
|
(2)
|
The amounts for the Restricted Stock Deferral plan represent dividends paid on the deferred common stock. These amounts are not reported in the Summary Compensation Table as they represent dividends earned on the deferred common stock, which dividends are payable on all outstanding shares of the Company’s common stock.
|
|
(3)
|
The amounts for the Restricted Stock Deferral represent the market value of vested shares of previously restricted stock deferred by the NEO. The Company has, in previous years, disclosed the issuance of the restricted shares as compensation in the Summary Compensation Table for such year.
|
|
(4)
|
The entire amount reported in this column is included within the amount reported in the 2018 Summary Compensation Table under Non-Equity Incentive Plan Compensation column for Ms. McEndy.
|
|
(5)
|
The amount reported in this column represents interest earned on the executive contributions and are not reported in the 2018 Summary Compensation Table.
|
|
(6)
|
Ms. McEndy received an AIP award of $253,800 in fiscal year 2017, which was included in the amount disclosed in the 2017 Summary Compensation Table under Non-Equity Incentive Plan Compensation column in last year’s proxy statement. Ms. McEndy deferred $126,900 of such fiscal year 2017 AIP award, which was half of the total 2017 AIP award, and such amount was omitted from the Nonqualified Deferred Compensation Table in last year’s proxy statement but is now included in the Aggregate Balance in Last FYE column above for the Non-Qualified Deferred Compensation plan.
|
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
45
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TABLE OF CONTENTS
Compensation Discussion & Analysis
Change in Control Agreements and Other Potential Post-Employment Payments
All Named Executive Officers are party to a Change in Control Agreement (CIC Agreement) that provides for severance benefits upon a qualifying termination following a change in control. A summary of the CIC Agreement terms are set below:
|
•
|
Severance is payable upon an involuntary termination without cause by the Company or resignation for good reason by the NEO within 1 year following a change in control. No severance is payable under the CIC agreement upon an involuntary termination without a change in control;
|
|
•
|
Severance equals two times (three times for the CEO) base salary and average annual incentive award for the three fiscal years immediately preceding the date of termination, along with the reimbursement of COBRA coverage costs for the applicable two-or three-year period, less the employee contribution rate;
|
|
•
|
NEOs are also entitled to receive a pro-rated annual incentive payment at target for the fiscal year in which the termination occurs; and
|
|
•
|
Accelerated vesting of all time-based equity awards and vesting of performance-based equity awards only to the extent provided in the award agreement evidencing the performance-based award.
|
|
•
|
In addition to the CIC Agreements, all Named Executive Officers participate in the South Jersey Industries, Inc. Officer Severance Plan effective January 1, 2013 (the Officer Severance Plan) that provides for the following benefits upon an involuntary termination without cause by the Company or resignation for good reason by the NEO, absent a change in control:
|
|
•
|
A lump sum cash payment equal to one times annual base salary;
|
|
•
|
A monthly reimbursement of the COBRA premium cost for the NEOs and their dependents (where applicable) for 12 months, less the required employee contribution rate, provided that the NEOs are eligible for and timely elect COBRA continuation coverage; and
|
|
•
|
Accelerated vesting of all time-based equity awards while performance-based awards vest only to the extent provided in the award agreement evidencing the performance-based awards.
|
46
|
| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Below is an estimate of the amounts payable to each NEO assuming various termination of employment scenarios on December 31, 2018.
Termination
As of Fiscal Year End 2018
Executive Benefits
and Payments Upon
Termination
|
Retirement ($)
|
Termination
by the
Company
for Cause ($)
|
Termination by the NEO
for Good Reason or by the
Company without Cause
following a CIC ($)
|
Termination by the NEO for
Good Reason or by the
Company without Cause
without a CIC ($)
|
Michael J. Renna
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
0
|
|
|
0
|
|
|
4,520,536
|
|
|
781,368
|
|
Equity Compensation
|
|
0
|
|
|
0
|
|
|
3,514,393
|
|
|
803,253
|
|
Total Compensation
|
|
0
|
|
|
0
|
|
|
8,034,929
|
|
|
1,584,622
|
|
Stephen H. Clark
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
662,921
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Equity Compensation
|
|
295,840
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Total Compensation
|
|
958,761
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
David Robbins Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
0
|
|
|
0
|
|
|
1,467,053
|
|
|
416,368
|
|
Equity Compensation
|
|
474,073
|
|
|
0
|
|
|
878,925
|
|
|
219,231
|
|
Total Compensation
|
|
474,073
|
|
|
0
|
|
|
2,345,978
|
|
|
635,599
|
|
Kathleen A. McEndy
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
0
|
|
|
0
|
|
|
1,411,694
|
|
|
397,747
|
|
Equity Compensation
|
|
250,895
|
|
|
0
|
|
|
801,557
|
|
|
196,240
|
|
Total Compensation
|
|
250,895
|
|
|
0
|
|
|
2,213,252
|
|
|
593,987
|
|
Kenneth A. Lynch
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
0
|
|
|
0
|
|
|
1,142,837
|
|
|
340,368
|
|
Equity Compensation
|
|
0
|
|
|
0
|
|
|
640,151
|
|
|
139,334
|
|
Total Compensation
|
|
0
|
|
|
0
|
|
|
1,782,987
|
|
|
479,702
|
|
Melissa J. Orsen
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
0
|
|
|
0
|
|
|
754,000
|
|
|
290,000
|
|
Equity Compensation
|
|
0
|
|
|
0
|
|
|
219,425
|
|
|
65,830
|
|
Total Compensation
|
|
0
|
|
|
0
|
|
|
973,425
|
|
|
355,830
|
|
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
47
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
Below is a description of the additional assumptions that were used in determining the payments in the tables above upon termination as
of December 31, 2018:
Retirement
NEOs are entitled to pro-rated vesting of PBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRSU awards upon retirement, based on the applicable 3-year vesting period and achievement of the performance condition for 2016/2017. The amounts for Mr. Robbins represent the pro-rated value of outstanding shares from the 2016, 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2016, 2017 and 2018 TBRSU awards. The 2016 PBRSU awards have been included based on actual performance. The amounts for Ms. McEndy represent the pro-rated value of outstanding shares from the 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2017 and 2018 TBRSU awards, per the award agreement. The amounts for Mr. Robbins and Ms. McEndy also include the pro-rated value of the 2018 one-time recognition awards.
|
*
|
Mr. Clark accepted the Early Retirement Incentive Program (ERIP) offered by the Company and retired from the position of Executive Vice President, SJI and President and Chief Operating Officer of South Jersey Energy Solutions and SJI
|
Midstream effective February 28, 2019. Under the ERIP, Mr. Clark received a severance payment of 1x base salary, an enhanced SERP benefit as described in the Pension Benefits Table, and an enhanced Retiree Medical benefit.
In connection with his retirement, Mr. Clark was also entitled to (i) a pro-rated payout of his 2019 Annual Incentive Plan award based on actual performance (shown above based on target performance), (ii) his company car, phone, and computer, with an aggregate fair market value of $28,696, and (iii) a pro-rated payout of all outstanding shares of restricted stock, based on his service during the applicable performance period and the actual performance achieved. Assuming a pro-rated payout at target level for the 2017 and 2018 outstanding PBRS awards, a pro-rated payout for the 2017 and 2018 TBRS awards, and using the market value of the Companys common stock as of February 28, 2019 of $28.95, the value of the outstanding restricted stock awards would be $295,840. Mr. Clark is also entitled to certain pension benefits as described under the Pension Benefits Table.
A change in control generally means any of the following:
|
•
|
consummation of a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not own 50 percent or more of the shares of the surviving corporation;
|
|
•
|
sale or other disposition of substantially all of the assets of the Company;
|
|
•
|
election to the Board of Directors of SJI a new majority different from the current slate, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or
|
|
•
|
the acquisition by any person(s) of 30 percent or more of the stock of SJI having general voting rights in the election of directors
|
Section 280G Modified Cutback
Termination Following a Change in Control (Good Reason or
Without Cause)
– The CIC Agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that the payments will be
limited to the greater of (i) the dollar amount which can be paid to the NEO without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments.
Retirement
– NEOs are entitled to pro-rated vesting of PBRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of TBRSU awards upon retirement, based on the applicable 3-year vesting period (and achievement of the performance condition for 2016 and 2017 awards). The amounts for Mr. Robbins represent the pro-rated value of outstanding shares from the 2016, 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2016, 2017 and 2018 TBRSU awards. The 2016 PBRSU awards have been included based on actual performance. The amounts for Ms. McEndy represent the pro-rated value of outstanding shares from the 2017 and 2018 PBRSU awards based on target level performance, and the pro-rated value of the 2017 and 2018 TBRSU awards, per the award agreement. The amounts for Mr. Robbins and Ms. McEndy also include the pro-rated value of the 2018 one-time recognition awards.
Change in Contro
l – Upon a qualifying termination following a change in control, the award agreements currently provide that all
unvested PBRSU awards that are outstanding vest and pay at target level performance. TBRSU awards that are outstanding will fully vest. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the NEO, each following a change in control. The amounts disclosed represent the value of outstanding 2016, 2017 and 2018 PBRSU awards based on target level of performance and the value of 2016, 2017 and 2018 TBRSU awards, as well as the value of the 2018 one-time recognition awards.
Termination Without a Change in Contro
l – Under the Officer Severance Plan, upon an NEOs qualifying termination, TBRSU awards that are outstanding will fully vest. PBRSU awards that are outstanding are forfeited, in accordance with the terms of the award agreements. A qualifying termination includes an involuntary termination without cause for the Company or a resignation for good reason by the NEO, absent a change in control.
Stock Price
– Assumed to be $27.80 based on the market value of the Companys common stock as of December 31, 2018.
48
|
| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Compensation Discussion & Analysis
The ratio of our CEOs compensation to our median employees compensation was calculated as required by the SEC pursuant to Item 402(u) of Regulation S-K. The SEC rules allow companies to omit the employees of a newly-acquired entity from their pay ratio calculation for the fiscal year in which the acquisition occurs. As a result, when calculating our 2018 pay ratio, we excluded 355 employees added in 2018 as part of our acquisition of Elizabethtown Gas/Elkton Gas. We used the same median employee as identified in our calculation of the 2017 pay ratio, as we determined there was no other significant change in our employee population. As disclosed last year, we determined our median employee based on 2017 W-2 gross earnings for all individuals who were employed by the Company as of December 31, 2017, excluding our CEO. This included all full-time and
part-time employees of the Company aside from the CEO. Compensation was annualized for employees hired or on leaves of absence during the year. Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee.
We calculated the median employees total 2018 compensation in the same way as calculated for our NEOs in the Summary Compensation Table included in this Proxy Statement. Calculated in this manner, our median employee compensation was $93,202. Our CEOs total 2018 compensation, as set forth in the Summary Compensation Table was $4,664,594. Therefore, our CEO to median employee pay ratio was 50 to 1.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2018 relating to equity compensation plans of the Company pursuant to which grants of restricted stock, restricted stock units, options or other rights to acquire shares may be made from time to time.
Plan Category
|
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(#)
|
(b)
Weighted average exercise
price of outstanding options,
warrants and rights
($) (1)
|
(c)
Number of securities remaining
available for future issuance
under equity compensation
plans excluding securities
reflected in column (a)
(#)
|
Equity compensation plans approved by security holders (2)
|
|
422,683
|
|
|
—
|
|
|
1,882,310
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
Total 2015 Omnibus Equity
Compensation Plan
|
|
422,683
|
|
|
—
|
|
|
1,882,310
|
|
|
(1)
|
Only restricted stock units have been issued. The restricted stock units are issuable for no additional consideration, and therefore, the shares are not included in the calculation of weighted average exercise price.
|
|
(2)
|
These plans include those used to make awards of performance-based and time-based restricted stock units to the Company’s Officers and restricted stock to the Directors under the 2015 Omnibus Equity Compensation Plan.
|
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
49
|
TABLE OF CONTENTS
FINANCIAL
2018 Annual Report and Financial Information
A copy of the Companys 2018 Annual Report accompanies this proxy statement. The 2018 Annual Report is not proxy-soliciting material or a communication by which any solicitation is made.
Upon written request of any person who on the record date for the Annual Meeting was a record owner of the Common Stock, or who represents in good faith that he or she was on that date a beneficial
owner of such stock and is entitled to vote at the Annual Meeting, the Company will send to that person, without charge, a copy of its 2018 Annual Report. Requests for this report should be directed to Edythe Nipper, Corporate Secretary, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
By Order of the Board of Directors,
Corporate Secretary
March 15, 2019
50
|
| South Jersey Industries, Inc. - 2019 Proxy Statement
|
TABLE OF CONTENTS
Annex A – Non-GAAP Measures
Reconciliation of Non-GAAP Measures (Unaudited)
Economic Earnings and Economic Earnings per share
We define Economic Earnings as: Income from continuing operations, (i) less the change in unrealized gains and plus the change in unrealized losses on all derivative transactions; (ii) less realized gains and plus realized losses on all commodity derivative transactions attributed to expected purchases of gas in storage to match the recognition of these gains and losses with the recognition of the related cost of the gas in storage in the period of withdrawal; (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing.
Economic Earnings is a significant performance metric used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of derivative instruments on the related transactions, contractual arrangements and other events that management believes make period to period comparisons of SJI's operations difficult or potentially confusing.
The following table presents a reconciliation of our income from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data):
|
2018
|
2017
|
2016
|
Income (Loss) from Continuing Operations
|
$
|
17,903
|
|
$
|
(3,404
|
)
|
$
|
119,061
|
|
Minus/Plus:
|
|
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains) Losses on Derivatives
|
|
(35,846
|
)
|
|
14,226
|
|
|
(27,550
|
)
|
Realized Losses on Inventory Injection Hedges
|
|
—
|
|
|
332
|
|
|
683
|
|
Loss on Property, Plant and Equipment (A)
|
|
105,280
|
|
|
91,299
|
|
|
—
|
|
Net Losses from Legal Proceedings (B)
|
|
5,910
|
|
|
56,075
|
|
|
—
|
|
Acquisition/Sale Costs (C)
|
|
34,674
|
|
|
19,564
|
|
|
—
|
|
Customer Credits (D)
|
|
15,333
|
|
|
—
|
|
|
—
|
|
ERIP and OPEB (E)
|
|
6,733
|
|
|
—
|
|
|
—
|
|
Other (F)
|
|
—
|
|
|
2,227
|
|
|
(165
|
)
|
Income Taxes (G)
|
|
(33,753
|
)
|
|
(70,834
|
)
|
|
10,813
|
|
Additional Tax Adjustments (H)
|
|
—
|
|
|
(11,420
|
)
|
|
—
|
|
Economic Earnings
|
$
|
116,234
|
|
$
|
98,065
|
|
$
|
102,842
|
|
Earnings (Loss) per Share from Continuing Operations
|
$
|
0.21
|
|
$
|
(0.04
|
)
|
$
|
1.56
|
|
Minus/Plus:
|
|
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains) Losses on Derivatives
|
|
(0.42
|
)
|
|
0.18
|
|
|
(0.36
|
)
|
Realized Losses on Inventory Injection Hedges
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Loss on Property, Plant and Equipment (A)
|
|
1.24
|
|
|
1.14
|
|
|
—
|
|
Net Losses from Legal Proceedings (B)
|
|
0.07
|
|
|
0.70
|
|
|
—
|
|
Acquisition/Sale Costs (C)
|
|
0.41
|
|
|
0.25
|
|
|
—
|
|
Customer Credits (D)
|
|
0.18
|
|
|
—
|
|
|
—
|
|
ERIP and OPEB (E)
|
|
0.08
|
|
|
—
|
|
|
—
|
|
Other (F)
|
|
—
|
|
|
0.03
|
|
|
—
|
|
Income Taxes (G)
|
|
(0.39
|
)
|
|
(0.89
|
)
|
|
0.13
|
|
Additional Tax Adjustments (H)
|
|
—
|
|
|
(0.14
|
)
|
|
—
|
|
Economic Earnings per Share
|
$
|
1.38
|
|
$
|
1.23
|
|
$
|
1.34
|
|
|
(A)
|
Represents impairment charges taken in 2018 on solar generating facilities (which was primarily driven by the purchase price in the agreement to sell solar assets being less than the carrying amount of the assets) along with Landfill Gas to Energy (LFGTE) assets (which was primarily driven by the remaining carrying value of these assets no longer being recoverable. Also represents impairment charges taken in 2017 on solar generating facilities, LFGTE long-lived assets, LFGTE assets customer relationships, and goodwill.
|
|
(B)
|
Represents net losses from three separate legal proceedings: (a) charges in 2017 and 2018, including interest, legal fees and the realized difference in the market value of the commodity (including financial hedges) resulting from a ruling in a legal proceeding related to a pricing dispute between SJI and a gas supplier that began in October 2014; (b) a charge in 2017, including legal fees, resulting from a settlement with a counterparty over a dispute related to a three-year capacity management contract; and (c) a gain taken in 2017 resulting from a favorable FERC decision, including interest, over a tariff rate dispute with a counterparty, whereby SJI contended that the counterparty was overcharging for storage demand charges over a ten-year period.
|
South Jersey Industries, Inc. - 2019 Proxy Statement |
|
51
|
TABLE OF CONTENTS
Please note the meeting location!
Directions to Hard Rock Hotel & Casino Atlantic City
for the Annual Meeting of Shareholders
Hard Rock Hotel & Casino Atlantic City, Brighton Ballroom,
1000 Boardwalk, Atlantic City, New Jersey
8:15 a.m. - doors will open to shareholders for continental breakfast
9:00 a.m. - meeting begins
10:00 a.m. - meeting adjourns
Admission to the Meeting:
Attendance at the Annual Meeting will be limited to shareholders as of the record date, their authorized representatives and
guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the record date.
If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the 2019 Annual Shareholders Meeting may be used by South Jersey Industries. By attending the 2019 Annual Shareholders Meeting, you will be agreeing to South Jersey Industries use of those photographs and waive any claim or rights with respect to those photographs and their use.
Directions to Hard Rock Hotel & Casino Atlantic City
From Philadelphia
Cross the Benjamin Franklin Bridge or Walt Whitman Bridge and follow the North-South Freeway (Route 42) to the Atlantic City Expressway. At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to Virginia Avenue. Turn right onto Virgina Avenue to Hard Rock Hotel & Casino Atlantic City.
From New York
Take the New Jersey Turnpike to the Garden State Parkway (Exit 11). Proceed south on the Parkway to Exit 38 (Atlantic City Expressway). Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to Virginia Avenue. Turn right onto Virginia Avenue to Hard Rock Hotel & Casino Atlantic City.
From Baltimore/Washington D.C.
Take I-95 North across the Delaware Memorial Bridge and follow Route 40 East to the Atlantic City Expressway. Take Atlantic City Expressway (East). At the base of the Atlantic City Expressway, turn left onto Arctic Avenue. Continue to Virginia Avenue. Turn right onto Virginia Avenue to Hard Rock Hotel & Casino Atlantic City.