ADVISORY APPROVAL OF OUR EXECUTIVE COMPENSATION
Our Board of Directors recognizes that performance-based executive compensation is an important element in driving long-term shareholder
value. Pursuant to Section 14A of the Securities Exchange Act of 1934 (the Exchange Act), we are asking shareholders to approve an advisory resolution on SoCalGas executive compensation as reported in this Information
Statement. This proposal, commonly known as a say-on-pay proposal, gives our shareholders the opportunity to express their views on the compensation of our executive officers named in the executive compensation tables in this Information
Statement (named executive officers).
To be approved, the proposal must receive votes FOR the
proposal constituting a majority of the shares represented and voting at the Annual Shareholders Meeting at which a quorum is present, and the approving majority must also represent more than 25 percent of our outstanding voting stock. If you
ABSTAIN from voting at the meeting, it will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting, but will not be considered a vote cast with
respect to this proposal.
Compensation Discussion and Analysis
As described more fully in the Compensation Discussion and Analysis section of this Information Statement, SoCalGas executive
compensation program is designed to attract, motivate, and retain key employees, including our named executive officers, and promote strong, sustainable, long-term performance. We urge our shareholders to read Executive
CompensationCompensation Discussion and Analysis, which describes in detail how our executive compensation policies and procedures operate and, more specifically, describes our 2016 executive compensation program and decisions. Our Board
of Directors believes that our executive compensation program fulfills these objectives and is reasonable, competitive and aligned with our performance and the performance of our executives.
Resolution
We are asking our shareholders to indicate their support for
the compensation of our named executive officers as described in this Information Statement by voting in favor of the following resolution:
RESOLVED, as an advisory matter, the shareholders of Southern California Gas Company approve the compensation paid to the companys named executive officers as disclosed in this Information Statement
pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
This say-on-pay vote is advisory only and will not be binding on the company.
9
ADVISORY VOTE ON THE FREQUENCY OF ADVISORY
VOTES ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, we are asking shareholders to vote on whether future advisory votes on executive compensation of the nature reflected in the section above should occur
every year, every two years or every three years.
This advisory vote on how often shareholders will vote on our executive
compensation is non-binding on the board. Shareholders will be able to specify one of four choices for this proposal on the ballot at the meeting: ONE YEAR, TWO YEARS, THREE YEARS or ABSTAIN. If you
ABSTAIN from voting at the meeting, it will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting, but will not be considered a vote cast with
respect to the proposal. Shareholders are not voting to approve or disapprove the boards recommendation.
The option of
ONE YEAR, TWO YEARS or THREE YEARS that receives the greatest number of affirmative votes will be considered to be the preferred option of shareholders.
This advisory vote on the frequency of how often shareholders will vote on executive compensation is advisory only and will not be
binding on the company.
10
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
What information is provided in this section of the Information
Statement?
In this Compensation Discussion and Analysis, we:
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Outline our compensation philosophy and discuss how the SoCalGas Board of Directors determines executive pay.
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Describe each element of executive pay, including base salaries, short-term and long-term incentives and executive benefits.
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Who are the Named Executive Officers?
This Compensation Discussion and Analysis focuses on the compensation of our named executive officers:
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Dennis V. Arriola: Former Chairman, President and Chief Executive Officer
1
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Bruce A. Folkmann: Vice President, Chief Financial Officer, Treasurer and Controller
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J. Christopher Baker: Chief Information Officer
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J. Bret Lane: President and Chief Operating Officer
2
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Lee Schavrien: Chief Regulatory Officer
3
|
Messrs. Folkmann, Baker and Schavrien are officers of both SoCalGas and SDG&E. The amounts shown in this Information Statement for these officers reflect their total compensation, the cost of which is
allocated between SoCalGas and SDG&E.
What is our Compensation Philosophy?
Our Board of Directors sets the companys executive pay philosophy.
Our compensation philosophy emphasizes:
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Alignment of pay with short-term and long-term company performance.
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Performance-based incentives aligned with shareholder value creation.
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Balance between short-term and long-term incentives.
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More pay tied to performance at higher levels of responsibility.
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Elements of our executive pay program that exemplify our pay-for-performance philosophy include:
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Approximately 70 percent of our CEOs total target pay is performance-based.
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Performance measures in our short-term and long-term incentive plans are directly linked to the financial performance of SoCalGas, Sempra Energys
California utilities and Sempra Energy and to Sempra Energys relative total shareholder return and earnings per share growth.
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One hundred percent of short-term incentive compensation is performance-based.
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One hundred percent of the CEOs long-term incentive compensation is performance-based and 75 percent of other named executive officers
long-term incentive compensation is performance-based.
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1
|
During 2016, Mr. Arriola served as Chairman, President and Chief Executive Officer from January 1 through September 9, when he resigned as President but
continued as Chairman and Chief Executive Officer through December 31. Mr. Arriola became Executive Vice President, Corporate Strategy and External Affairs of Sempra Energy on January 1, 2017.
|
2
|
Mr. Lane became President on September 10, 2016. He has been Chief Operating Officer since 2014, and became President and Chief Operating Officer on
September 10, 2016.
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3
|
Prior to becoming Chief Regulatory Officer on March 11, 2017, Mr. Schavrien served as Chief Administrative Officer.
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11
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Long-term incentive compensation is primarily delivered through performance-based restricted stock units. The performance measures for the annual
performance-based restricted stock unit awards are based on Sempra Energys relative total shareholder return and earnings per share growth.
|
We believe this compensation philosophy enables us to attract, motivate and retain key executive talent and promote strong, sustainable long-term performance.
Our compensation program goals include:
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Aligning compensation with company performance and shareholders interests.
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Strongly linking executive compensation to both annual and long-term corporate, business unit and individual performance.
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Motivating executives to achieve superior performance.
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Attracting and retaining executives of outstanding ability and proven experience who demonstrate high standards of integrity and ethics.
|
In 2016, SoCalGas employees participated in an annual incentive plan. The primary performance measures
under the annual incentive plan were SoCalGas earnings, SoCalGas operational measures (including safety measures) and Sempra Energy earnings. Sempra Energys relative total return to shareholders and earnings per share growth are the
performance measures in the annual equity awards under Sempra Energys long-term incentive plan.
What compensation governance
measures are in place?
Our compensation practices, which are highlighted below, reflect our pay-for-performance
philosophy and our commitment to sound corporate governance.
What We
Do
:
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We use multiple performance measures in our annual and long-term incentive plans. These performance measures link pay to performance and shareholder
interests. We use SoCalGas and Sempra Energy earnings, Sempra Energys relative total shareholder return and Sempra Energys earnings per share growth as the primary incentive plan financial performance measures. Our annual
performance-based bonus plan also includes performance measures related to employee and public safety, customer service, supplier diversity and strategic operational goals.
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We review external market data when making compensation decisions.
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Our clawback policy provides for the forfeiture, recovery or reimbursement of incentive plan awards as required by law or New York Stock Exchange
rules. In addition, compensation may be recouped if the company determines that the results on which compensation was paid were not actually achieved, or in certain instances of an employees fraudulent or intentional misconduct.
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All officers are subject to stock ownership requirements ranging from three times base pay for SoCalGas CEO to one times base pay for vice
presidents.
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Executive perquisites constitute a small proportion of our executive total rewards program.
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The Sempra Energy 2013 Long-Term Incentive Plan, in which SoCalGas employees participate, includes a double trigger provision for vesting of equity in
connection with a change in control of Sempra Energy. Restricted stock unit awards issued to date under the 2013 Long-Term Incentive Plan provide for continuation following a change in control through the new companys assumption of the awards
or the issuance of replacement awards. Replacement awards must meet certain criteria, which are described in Section 16 of the 2013 Long-Term Incentive Plan. If awards are not assumed or replaced or if an employee is eligible for retirement
(age 55 or older with five or more years of service) as of the date of the change in control, awards would vest upon a change in control.
|
What We
Dont
Do:
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|
Long-term incentive plan grants are made from a Sempra Energy shareholder-approved plan that prohibits stock option repricing and cash buyouts without
shareholder approval.
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Our anti-hedging policy prohibits employees from trading in puts, calls, options or other similar securities related to Sempra Energy common stock.
|
12
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Officers are prohibited from pledging Sempra Energy company stock.
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We do not provide for excise tax gross-ups upon a change in control in our named executive officers agreements, and no named executive officers
received tax gross-ups.
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Change in control cash severance benefits are not provided upon a change in control only (single trigger). Change in control cash severance
benefits are payable only upon a change in control with termination of employment (double trigger).
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None of the named executive officers has an employment contract.
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Sempra Energys long-term incentive plan prohibits share recycling for stock option and stock appreciation right (SAR)
exercises. The plan was amended in December 2015 to prohibit adding back to the plans share authorization any shares surrendered to cover tax withholding or the option/SAR exercise price in connection with the exercise of stock options or SARs
issued after the date of the plan amendment.
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SoCalGas CEO does not participate in decisions regarding his or her own compensation. Our other executive officers also do not determine or
approve their own pay.
|
LABOR MARKET BENCHMARKING
How is external market data used in determining pay?
External pay data is
used to help align executive compensation levels, in total and by component, with the labor market. The SoCalGas Board of Directors views the labor market for our most senior positions as a nationwide, broad cross-section of companies in various
industries.
During this benchmarking process, we:
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Review external market data from the Aon Hewitt Total Compensation Management (TCM) Database covering non-financial Fortune 500 companies
with revenues between $5 billion and $20 billion.
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Review summary statistics of the companies included in the TCM Database (but not company-specific information) with the goal of generally managing
target pay opportunities, in total and by component (base salaries, target annual performance-based bonuses and target long-term incentives) to the median of this summary data. Positioning relative to the median may vary based on factors such as
time in position, performance, and the comparability of market benchmark roles to the scope and structure of our positions. Actual pay levels also will rise above or fall below these standards as a result of actual company and individual
performance.
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Analyze data for utility-specific positions periodically.
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How is internal equity used in determining pay?
Internal equity is
used to determine the compensation for positions that are unique or difficult to benchmark against market data. Internal equity is also considered in establishing compensation for positions considered to be equivalent in responsibilities and
importance.
COMPENSATION COMPONENTS
The primary components of our executive compensation program are:
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Performance-based annual bonuses
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Performance-based long-term equity incentive awards granted by Sempra Energy
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Additional benefits include health and welfare programs, retirement and savings plans, personal benefits and severance pay.
All of our executive officers participate in the same compensation programs. However, market compensation levels used to establish
compensation for the named executive officers may vary substantially based upon the roles and responsibilities of individual officers.
13
Managing Risk in Compensation Plans
SoCalGas manages the risk inherent in incentive compensation plans by balancing short-term and long-term incentives and linking a higher
proportion of total compensation to long-term incentives. Risk is also managed through the incentive plan design and selection of the performance measures.
Our risk management program is further strengthened by our clawback policy, which applies to both short-term and long-term incentive plans, our anti-hedging policy and our executive stock ownership
requirements.
An independent consultant, Exequity, conducted a risk assessment of our incentive compensation programs. Their
findings concluded that our incentive plans do not create risks that are likely to have a material adverse impact on the company. Specific examples of safeguards and risk-mitigating features found in our executive incentive compensation programs are
listed below.
Our long-term incentive awards:
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Use a payout scale that begins at zero for threshold performance. In contrast, many of our peers pay 25 percent or 50 percent for threshold
performance.
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Avoid cliffs in the payout scale to help eliminate the risk of pressure points.
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An example of a cliff is a scale that pays 50 percent for threshold performance and zero for performance below threshold.
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Use a market-based performance measure, Sempra Energys relative total shareholder return, as the performance measure for 80 percent of the grant
date value of our restricted stock unit grants and a performance measure based on Sempra Energys long-term earnings per share growth for the remaining 20 percent.
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Measure Sempra Energys total shareholder return against the Standard & Poors (S&P) 500 Index and
S&P 500 Utilities Index rather than against a peer group selected by the company. Using these indices ensures objectivity in the composition of our peer groups.
|
Our annual bonus plans:
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Use a payout scale that begins at zero for threshold performance. In contrast, many of our peers pay 25 percent or 50 percent for threshold
performance. Our payout scale is linear, ranging from zero at threshold to 200 percent at maximum.
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Use financial performance measures that are based on the earnings reported in our financial statements with certain pre-defined adjustments. These
adjustments are limited and made only after thoughtful consideration by the SoCalGas Board of Directors.
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Incorporate several different performance measures, including both financial and operational measures.
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Provide the SoCalGas Board of Directors with upward and downward discretion over incentive plan payouts.
|
14
Pay Mix
What is Pay Mix?
Pay mix is the relative value of each of the
primary compensation components as a percentage of total target compensation. Figure 1 shows each component of our CEOs total 2016 pay at target company performance.
Figure 1.
Why is pay mix important?
Our pay mix helps to align the interests of
executives with the interests of shareholders. It does this by providing a much greater portion of pay through performance-based annual and long-term incentives rather than through base salary. This means that most pay is variable and will go up or
down in value based on company performance. Over 70 percent of our CEOs target total pay is delivered through performance-based incentives.
Actual pay mix may vary substantially from target pay mix. This may occur as a result of corporate and individual performance, which greatly affects annual bonuses, as well as future Sempra Energy common
stock performance, which significantly impacts the value of stock-based awards.
Figure 2 shows the percent of total pay at
company target performance that comes from each major pay component for each of our named executive officers.
Figure 2.
Note: Based on salary and incentive compensation targets as of December 31, 2016.
15
Our
executive compensation programs emphasize performance-based pay. This includes annual bonuses and equity-based long-term incentive awards. However, base salaries remain a necessary and typical part of compensation for attracting and retaining
outstanding employees at all levels.
Salaries for our executive officers are targeted at the median of those for the
non-financial Fortune 500 companies with revenues between $5 billion and $20 billion. Using national general industry comparisons helps us attract and retain top- quality executive talent from a broad range of backgrounds. The SoCalGas
Board of Directors annually reviews base salaries for executive officers. The board considers the following factors in its review:
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Approximate mid-range of Fortune 500 peer group
salary data
Individual contributions and
performance
Labor market conditions
Company performance
Complexity and importance of roles and
responsibilities
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|
Succession planning
Retention needs
Reporting relationships
Internal equity
Experience
|
Base Salary Adjustments for 2016
Mr. Arriola received a base salary increase of 2.5 percent in January 2016, Mr. Lane received a base salary increase of 5.0 percent in January 2016 with an additional 4.0 percent upon his
promotion to President in September 2016. Mr. Folkmann received an increase of 3.0 percent in January 2016, with an additional 13.8 percent increase in June 2016. Messrs. Baker and Schavrien received base salary increases of 2.0 percent
and 2.5 percent, respectively, in January 2016.
2.
|
Performance-Based Annual Bonuses
|
Performance Guidelines and Bonus Payments
Each year the SoCalGas Board of Directors establishes performance measures for bonus payments under the SoCalGas Executive Incentive Compensation Plan and SoCalGas and SDG&E Shared Services Executive
Incentive Compensation Plan (the Shared Services Plan). Consistent with our pay-for-performance philosophy, the performance measures do not provide for any bonus payment unless the company attains a threshold (minimum) performance level
for the year. Bonus opportunities increase from zero for performance at the threshold level to 200 percent of target for performance at maximum.
Potential bonus opportunities at threshold, target and maximum company performance are expressed as a percentage of each named executive officers base salary. Table 1 illustrates how these
percentages vary with the individual officers position and attainment of goals.
In 2016, bonus opportunities for our
named executive officers were as follows:
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Bonus Potential as of
December 31, 2016 as
a
Percent of Base Salary
|
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Threshold
|
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Target
|
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Maximum
|
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Dennis V. Arriola
|
|
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0
|
%
|
|
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70
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%
|
|
|
140
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%
|
J. Bret Lane
|
|
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0
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%
|
|
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60
|
%
|
|
|
120
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%
|
Bruce A. Folkmann
|
|
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0
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%
|
|
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45
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%
|
|
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90
|
%
|
J. Christopher Baker
|
|
|
0
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%
|
|
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50
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%
|
|
|
100
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%
|
Lee Schavrien
|
|
|
0
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%
|
|
|
50
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%
|
|
|
100
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%
|
Table 1.
None of the named executive officers targets were increased in 2016.
16
What were the 2016 annual bonus performance goals for the named executive officers?
In 2016, Messrs. Arriola and Lane participated in the SoCalGas Executive Incentive Compensation Plan. The performance measures for this
plan were SoCalGas, Sempra Energy California utilities, and Sempra Energy earnings adjusted for annual bonus plan purposes, strategic financial measures and operational measures. The relative weights of these measures as a percentage of the overall
target were 30 percent for utility financial measures, 50 percent for operational measures, and 20 percent for Sempra Energy earnings.
Messrs. Folkmann, Baker and Schavrien participated in the Shared Services Plan because they provide services to both utilities. The performance measures for the Shared Services Plan were based 50 percent
on the SoCalGas performance measures described above and 50 percent on SDG&E performance measures.
How were the 2016 annual bonus plan
earnings goals determined?
The SoCalGas earnings target of $403 million was based on SoCalGas financial plan, with
certain adjustments for incentive plan purposes. Targets for the operational measures were based on safety and other operating, customer service and supplier diversity goals.
SoCalGas earnings, California utilities earnings and Sempra Energy earnings for annual bonus plan purposes may be higher or lower than earnings reported in the companies financial
statements due to certain pre-established adjustments.
Consistent with the approach taken in prior years, at the
beginning of the year, it was determined that the calculation of SoCalGas earnings, California utilities earnings and Sempra Energy earnings for bonus purposes would be adjusted as follows:
|
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Exclude the positive or negative impact of any major changes in accounting rules that were unknown or unanticipated at the beginning of the year.
|
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Exclude certain items that do not have a material adverse impact on Sempra Energys stock price as determined by the Sempra Energy Compensation
Committee. Such items include but are not limited to:
|
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the pro forma earnings impact of any acquisition or divestiture (other than divestitures related to individual renewable assets) to the extent the
earnings impact of such acquisition or divestiture or related transaction and integration cost is not included in the Sempra Energy Incentive Compensation Plan (ICP) earnings target.
|
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gains or losses related to RBS Sempra Commodities, which was sold in 2010 (does not apply to SoCalGas earnings).
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Exclude the variance from plan of the pro forma earnings impact of the Gasoductos de Chihuahua acquisition (PEMEX JV), including but not
limited to the foreign exchange earnings or losses related to the deferred tax liability (does not apply to SoCalGas earnings).
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Exclude the variance from plan of earnings impacts resulting from an unfavorable regulatory decision related to the SDG&E and SoCalGas tax repairs
allowance issue.
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Exclude the variance from plan of earnings impacts related to tax equity financing at Sempra U.S. Gas & Power (does not apply to SoCalGas
earnings).
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Exclude the variance from plan of costs associated with corporate optimization efforts.
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Include 10 percent of any gains or losses from the sale of assets or impairments in connection with a sale to the extent the earnings impact of
such item is not included in the annual bonus plan earnings target.
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Include up to 10 percent of:
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the impact of wildfire litigation (does not apply to SoCalGas earnings).
|
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the impact of any impairment of the San Onofre Nuclear Generating Station (SONGS) or any recoveries from third parties, litigation costs,
or any related earnings effect from purchased replacement power (does not apply to SoCalGas earnings).
|
17
What were the performance results for the 2016 performance-based annual bonus plan?
Overall performance for the SoCalGas Executive Incentive Compensation Plan in which Messrs. Arriola and Lane participated was at 152
percent of target performance. Details of the plan metrics and results are provided below:
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2016 Performance Measures
|
|
Weight
|
|
|
ICP GOALS
|
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|
Actual ICP
Performance
|
|
|
|
|
Minimum
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Target
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|
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Maximum
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|
|
Financial: Earnings Adjusted For Bonus Plan Purposes
4
(Dollars in Millions)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
SoCalGas Earnings
|
|
|
20
|
%
|
|
$
|
385
|
|
|
$
|
403
|
|
|
$
|
420
|
|
|
$
|
413
|
|
Sempra Energy California Utilities Earnings
|
|
|
5
|
%
|
|
$
|
930
|
|
|
$
|
966
|
|
|
$
|
1, 005
|
|
|
$
|
1, 009
|
|
Sempra Energy Earnings
|
|
|
20
|
%
|
|
$
|
1,193
|
|
|
$
|
1,242
|
|
|
$
|
1,314
|
|
|
$
|
1,283
|
|
Strategic Financial Initiatives
|
|
|
5
|
%
|
|
|
1 initiative
|
|
|
|
2 initiatives
|
|
|
|
3 initiatives
|
|
|
|
3 initiatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal: Financial
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safety and Operating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Safety (OSHA Recordable Injury Rate)
|
|
|
6
|
%
|
|
|
3.62
|
|
|
|
|
|
|
|
2.98
|
|
|
|
3.18
|
|
Employee Safety (Lost Time Incident Rate)
|
|
|
3
|
%
|
|
|
1.24
|
|
|
|
|
|
|
|
0.98
|
|
|
|
0.94
|
|
Contractor Safety
|
|
|
1
|
%
|
|
|
2.60
|
|
|
|
|
|
|
|
1.80
|
|
|
|
0.99
|
|
Pipeline Safety Enhancement Program Miles of Phase 1 Pipe
Remediated
|
|
|
6
|
%
|
|
|
20 miles
|
|
|
|
30 miles
|
|
|
|
40 miles
|
|
|
|
40 miles
|
|
Pipeline Safety Enhancement Program Number of Valves
Retrofitted
|
|
|
5
|
%
|
|
|
35 valves
|
|
|
|
45 valves
|
|
|
|
60 valves
|
|
|
|
56 valves
|
|
Distribution System Integrity Main and Service
Replacement
|
|
|
5
|
%
|
|
|
150 miles
|
|
|
|
175 miles
|
|
|
|
200 miles
|
|
|
|
189 miles
|
|
Advanced Meter Module Installations (Cumulative Meter
Installations)
|
|
|
5
|
%
|
|
|
5,380,000
|
|
|
|
5,480,000
|
|
|
|
5,580,000
|
|
|
|
5,796,873
|
|
Storage Integrity Management Program (SIMP) Wells Inspected Under
Program
|
|
|
4
|
%
|
|
|
20
|
|
|
|
25
|
|
|
|
30
|
|
|
|
33
|
|
Customer Insight Study (CIS)
|
|
|
6
|
%
|
|
|
74.8
|
%
|
|
|
77.6
|
%
|
|
|
80.3
|
%
|
|
|
76.9%
|
|
Customer Experience Survey
|
|
|
7
|
%
|
|
|
76.4
|
%
|
|
|
77.2
|
%
|
|
|
78.0
|
%
|
|
|
76.0%
|
|
Supplier Diversity
|
|
|
2
|
%
|
|
|
32
|
%
|
|
|
35
|
%
|
|
|
38
|
%
|
|
|
35%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal: Safety and Operating Goals
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Performance as a Percent of
Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152%
|
|
Table 2.
Overall performance for the Shared Services Plan in which Messrs. Folkmann, Baker, and Schavrien participated was at 164 percent of target performance.
|
|
|
|
|
|
|
|
|
|
|
|
Shared Services
Executive ICP Summary
|
|
Weight
|
|
|
Actual
Performance
as a Percent
of Target
|
|
SoCalGas Executive Incentive Compensation
Plan
|
|
|
50
|
%
|
|
|
152
|
%
|
SDG&E Executive Incentive
Compensation Plan
|
|
|
50
|
%
|
|
|
175
|
%
|
SoCalGas and SDG&E Shared Services Executive Incentive Compensation Plan
|
|
|
100
|
%
|
|
|
164
|
%
|
Table 3.
4
|
Earnings Adjusted for Bonus Plan Purposes is a non-GAAP financial measure (GAAP represents accounting principles generally accepted in the United States of America).
GAAP Earnings for 2016 for SoCalGas, Sempra Energy California Utilities and Sempra Energy were $349 million, $919 million and $1,370 million, respectively. We provide a reconciliation of GAAP Earnings to Earnings Adjusted for Bonus Plan purposes
below.
|
18
What adjustments were applied to GAAP Earnings for Annual Bonus Plan Purposes?
A reconciliation of 2016 GAAP earnings to earnings adjusted for annual bonus plan purposes is provided below:
|
|
|
|
|
|
|
Southern California Gas
Company Earnings
(Dollars in Millions)
|
|
Reconciliation
|
|
Southern California Gas Company GAAP
Earnings
|
|
$
|
349
|
|
Exclude impact of accounting rule change
and other adjustments
|
|
|
(2
|
)
|
Exclude
the variance from plan of regulatory decision related to tax repairs allowance
|
|
|
66
|
|
Southern
California Gas Company Earnings for Annual Bonus Plan Purposes
|
|
$
|
413
|
|
Table 4.
|
|
|
|
|
|
|
Sempra Energy
California Utilities Earnings
(Dollars in Millions)
|
|
Reconciliation
|
|
Sempra Energy California Utilities GAAP
Earnings
|
|
$
|
919
|
|
Exclude impact of accounting rule change
and other adjustments
|
|
|
(13
|
)
|
Exclude
the variance from plan of regulatory decision related to tax repairs allowance
|
|
|
103
|
|
Sempra
Energy California Utilities Earnings for Annual Bonus Plan Purposes
|
|
$
|
1,009
|
|
Table 5.
|
|
|
|
|
|
|
Sempra Energy Earnings
(Dollars in Millions)
|
|
Reconciliation
|
|
Sempra Energy GAAP
Earnings
|
|
$
|
1,370
|
|
Exclude 90 percent of gains and losses
for the sale of assets or write-down of assets in connection with a sale
|
|
|
36
|
|
Exclude
impact of accounting rule change
|
|
|
(34
|
)
|
Exclude certain items related to
acquisitions or divestitures, regulatory decision on tax repairs allowance, and corporate optimization efforts
|
|
|
(89
|
)
|
Sempra
Energy Earnings for Annual Bonus Plan Purposes
|
|
$
|
1,283
|
|
Table 6.
2016 Performance-Based Annual Bonus Payments
As shown above, the overall
annual bonus plan performance result was 152 percent of target for the SoCalGas annual bonus plan and 164 percent of target for the Shared Services plan. Based on this performance and its consideration of the contributions of each named executive
officer, the SoCalGas Board of Directors approved the payment of the annual bonuses shown in Table 7.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonuses
Paid to Named Executive Officers for
2016 Performance
|
|
Base Salary at
Year-End 2016
|
|
|
|
|
|
Bonus
Percentage
1
|
|
|
|
|
|
Bonus
1
|
|
Dennis V. Arriola
|
|
$
|
555,000
|
|
|
|
|
|
|
|
107
|
%
|
|
|
|
|
|
$
|
591,900
|
|
J. Bret Lane
|
|
$
|
450,000
|
|
|
|
|
|
|
|
91
|
%
|
|
|
|
|
|
$
|
411,400
|
|
Bruce A. Folkmann
|
|
$
|
320,000
|
|
|
|
|
|
|
|
74
|
%
|
|
|
|
|
|
$
|
236,000
|
|
J. Christopher Baker
|
|
$
|
368,400
|
|
|
|
|
|
|
|
82
|
%
|
|
|
|
|
|
$
|
301,800
|
|
Lee Schavrien
|
|
$
|
376,900
|
|
|
|
|
|
|
|
82
|
%
|
|
|
|
|
|
$
|
308,800
|
|
Table 7.
1
For display purposes,
the bonus percentage is rounded to the nearest whole percentage, and bonus amounts are rounded up to the nearest $100.
19
3.
|
Long-Term Equity-Based Incentives
|
Long-term equity-based incentives are a large component of each named executive officers total target compensation package. (See Figure 2 for these percentages.) Long-term equity-based
incentives are granted to our executives by the Compensation Committee of the Sempra Energy Board of Directors based on the recommendations of the SoCalGas Board of Directors regarding such awards.
What type of equity is granted?
In accordance with our pay-for-performance philosophy, the 2016 long-term incentive plan awards primarily were in the form of performance-based restricted stock units (100 percent of target grant value
for Mr. Arriola; and 75 percent of target grant value for our other named executive officers). In order to encourage retention, the 2016 award design also included service-based restricted stock units (25 percent of target grant value for our
named executive officers other than Mr. Arriola). The 2016 performance-based and service-based restricted stock units are subject to vesting at the end of three years.
Why is this type of equity used?
This equity award structure was approved
after considering many variables. These included alignment with shareholder interests, retention, plan expense, share usage and market trends.
What are general practices with respect to equity grants?
In making the annual grants:
|
|
|
A dollar value (based on a percentage of base salary) is specified for each named executive officers award.
|
|
|
|
The number of shares underlying the awards granted each year is based on the specified dollar value, as opposed to a fixed number of shares for each
named executive officer. This approach allows maintenance of the pay mix described previously.
|
On the
annual January grant date, we calculated the precise number of shares to be granted to each executive officer for each type of award by dividing the total target grant value of each named executive officers award by the Sempra Energy closing
stock price on that date. These target grant values are presented in Table 6 below.
The award values reported in the Summary
Compensation Table and Grants of Plan-Based Awards Table that follow this Compensation Discussion & Analysis, for the portion of the awards based on earnings per share growth and for the service-based restricted stock units, are based on
the Sempra Energy closing stock price on the grant date. The values reported for the portion of the awards based on Sempra Energy relative total shareholder return are based on a Monte Carlo valuation model, which is used to determine the accounting
cost under the applicable accounting guidance for stock compensation.
Special equity awards also may be granted, including
upon the hiring or promotion of executive officers, to award outstanding performance, or to promote retention, with the approval of the Compensation Committee of the Sempra Energy Board of Directors based on the recommendation of the SoCalGas Board
of Directors regarding such awards. No special equity awards were granted to our named executive officers in 2016.
What were the target
values of the 2016 equity grants?
The target values of the annual awards have generally been between
the median and the 75
th
percentile of market data.
However, the actual amounts realized by equity award recipients will depend on future Sempra Energy stock performance and the degree to which performance measures are achieved. The amounts ultimately received will not necessarily track with the
target grant values.
20
Table 8 illustrates the target grant values of 2016 annual long-term incentive awards as a
percentage of base salary.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Grant Values for 2016
|
|
Performance-
Based RSUs
|
|
|
Service-
Based RSUs
|
|
|
Total
|
|
Dennis V. Arriola
|
|
|
180
|
%
|
|
|
0
|
%
|
|
|
180
|
%
|
J. Bret Lane
|
|
|
120
|
%
|
|
|
40
|
%
|
|
|
160
|
%
|
Bruce A. Folkmann
|
|
|
56
|
%
|
|
|
19
|
%
|
|
|
75
|
%
|
J. Christopher Baker
|
|
|
90
|
%
|
|
|
30
|
%
|
|
|
120
|
%
|
Lee Schavrien
|
|
|
90
|
%
|
|
|
30
|
%
|
|
|
120
|
%
|
Table 8.
Why does the company grant performance-based restricted stock units?
We
seek a direct link to performance in comparison to indices and peers. To achieve this result, we use performance-based restricted stock units based on Sempra Energys relative total shareholder return (80 percent of the grant date award value).
The link between pay and long-term earnings performance is further strengthened by the use of a second performance measure based on Sempra Energys long-term earnings per share growth (20 percent of grant date award value).
Performance-based restricted stock units can also deliver the same economic value with significantly fewer shares than stock options, and
so result in lower dilution.
What were the performance goals for the 2016 performance-based restricted stock units?
The 2016 long-term incentive plan awards included two performance measures Sempra Energys relative total shareholder return
and Sempra Energys earnings per share growth. Eighty percent of the total target award value for performance-based restricted stock units is linked to relative total shareholder return and 20 percent is linked to earnings per share growth.
1.
|
Relative Total Shareholder Return
|
Each performance-based restricted stock unit represents the right to receive between zero and two shares of Sempra Energy common stock based on Sempra Energys three-year cumulative total shareholder
return compared with the S&P 500 Index and the S&P 500 Utilities Index.
If Sempra
Energys performance is at or above the total shareholder return of the market-capitalization-weighted S&P 500 Index, participants will receive a minimum of one share for each restricted stock unit. If Sempra Energys performance
exceeds the 50
th
percentile compared to the
S&P 500 Utilities Index, participants have the opportunity to earn up to two shares for each restricted stock unit. Participants may earn a partial share for performance between the 30
th
and 50
th
percentiles. The payout scale begins at zero for threshold performance. In contrast, many of our peers pay 25 percent
or 50 percent for threshold performance.
|
|
|
|
|
Cumulative Total Shareholder
Return Percentile Rank vs.
S&P 500 Utilities Index
|
|
Sempra Energy Common Stock
Shares
Received for Each
Restricted Stock Unit
1,2
|
90
th
Percentile or Above
|
|
2.0
|
70
th
Percentile
|
|
1.5
|
50
th
Percentile
|
|
1.0
|
40
th
Percentile
|
|
0.5
|
30
th
Percentile or Below
|
|
0.0
|
Table 9.
1
If Sempra Energys
total shareholder return is at or above the total shareholder return of the market-capitalization-weighted S&P 500 Index, participants will receive a minimum of one share for each restricted stock unit.
2
Participants also
receive additional shares for dividend equivalents, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.
Note: If performance falls between the tiers shown in Table 9, the payout is calculated using linear interpolation.
21
These awards also include a modifier based on Sempra Energys absolute total
shareholder return. While relative total shareholder return continues to be the primary performance measure, the inclusion of a modifier strengthens the focus on achieving both strong relative and absolute total shareholder return performance. This
further strengthens alignment with shareholder interests. For instance, the modifier reduces award payouts for high relative performance if absolute total shareholder return is low. In an instance in which both relative and absolute total
shareholder return are high, the modifier may increase award payouts, but cannot cause the total award payout to exceed 200 percent (2.0 shares earned for each restricted stock unit).
The modifier was developed based on the approximate 25
th
and 75
th
percentiles of Sempra Energys historical total shareholder return and historical estimated cost of equity. The
modifier adds 20 percent to the awards payout (as initially calculated based on relative total shareholder return) for absolute total shareholder return performance in the top quartile of the distribution of the historical benchmark data. It
reduces the awards payout by 20 percent for performance in the bottom quartile of the distribution of the historical benchmark data. For the 2016 award, the modifier is triggered if Sempra Energys total shareholder return is at or above
37 percent or if Sempra Energys total shareholder return is at or below -23 percent. If performance falls within the second or third quartiles, the modifier is not triggered and the payout is based solely on the relative total shareholder
return performance result. The modifier cannot cause the total award payout to exceed 200 percent.
2.
|
Earnings Per Share Growth
|
The 2016 long-term incentive plan awards also included a performance-based restricted stock unit award linked to relative earnings per share (EPS) growth.
5
The award measures the compound annual growth rate (CAGR)
of Sempra Energys earnings per share for the three-year period ending on December 31, 2018. The payout scale is based on the December 31, 2015 analyst consensus long-term earnings per share growth estimates for the S&P 500
Utilities Index peer companies. The threshold payout level is based on the 25th percentile of the analyst consensus estimates and the maximum is based on the 90
th
percentile.
|
|
|
|
|
Percentile of Analyst Estimates for
S&P 500 Utilities EPS CAGR
|
|
Sempra Energy Common Stock Shares
Received for
Each Restricted Stock Unit
1
|
90
th
Percentile (7.7 Percent or higher)
|
|
2.0
|
75
th
Percentile (6.9 Percent)
|
|
1.5
|
50
th
Percentile (5.0 Percent)
|
|
1.0
|
25
th
Percentile (3.5 Percent)
|
|
0.0
|
Table 10.
1
Participants also
receive additional shares for dividend equivalents, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.
Note: If performance falls between the tiers shown in Table 10, the payout is calculated using linear interpolation. The payout scale
begins at zero for threshold performance.
For purposes of the long-term incentive award, the calculation of earnings per
share may, at the discretion of the Compensation Committee of the Sempra Energy Board of Directors, include the same potential adjustments described on page 17 under How were the 2016 annual bonus plan earnings goals determined?, as well
as adjustments related to, among other things, other unusual or non-operating items.
5
|
The award is designed to meet the conditions necessary to preserve the deductibility of the award under Section 162(m) of the Internal Revenue Code while providing
flexibility to the Compensation Committee of the Sempra Energy Board of Directors in determining the payout under the award. In order for there to be any payout, Sempra Energy must achieve positive cumulative net income for the performance period.
The Sempra Energy Compensation Committee may then apply negative discretion as described herein.
|
22
What were the results for the 2012 to 2015 and 2013 to 2016 performance-based restricted stock unit award
cycles?
The 2012-2015 award cycle vested on January 4, 2016. Sempra Energys 2012-2015
relative total shareholder return was at the 96
th
percentile of the S&P 500 Utilities Index. As a result, this grant vested at 150 percent of target performance with a payout of 1.5 shares of Sempra Energy common stock plus reinvested dividends for each restricted stock unit. The maximum payout
level for the 2012-2015 award cycle was 150 percent of target.
The 2013-2016 award cycle vested on January 4, 2017.
Sempra Energys 2013-2016 relative total shareholder return was at the 40th percentile of the S&P 500 Utilities Index. As a result, this grant vested at 38 percent of target performance with a payout of 0.384 shares of Sempra Energy
common stock plus reinvested dividends for each restricted stock unit.
Benefit Plans
Our named executive officers also participate in other benefit programs including: (1) health, life insurance and disability plans;
(2) retirement plans; (3) 401(k) savings and deferred compensation plans; and (4) other benefit programs.
1.
|
Health, Life Insurance and Disability Plans
|
Our named executive officers participate in life, disability, medical, dental and vision insurance group plans that are available to virtually all employees. These are common benefits essential to
attracting a high-quality workforce.
Do executives receive any benefits in addition to the basic group plans?
In addition to the basic group plans, Messrs. Baker and Schavrien participate in a life insurance plan providing additional life
insurance death benefits (two times base salary and bonus for active employees and 1.5 times base salary and bonus for retired employees). This plan was closed to new participants in 2012.
All of our named executive officers, except Mr. Folkmann, participate in a long-term disability plan providing additional protection
upon disability (60 percent of base salary and average bonus) and restoring benefits otherwise capped under the companys basic long-term disability plan.
Messrs. Arriola and Lane receive an annual executive benefit program allowance described below under Other Benefit Programs which may be used to cover out-of-pocket costs for health and
welfare benefits, as well as certain other costs.
Our
named executive officers participate in the Sempra Energy Cash Balance Plan and, with the exception of Mr. Folkmann, a Supplemental Executive Retirement Plan. Mr. Folkmann participates in the Cash Balance Restoration Plan, which restores
the benefits that would otherwise be provided under the Cash Balance Plan but for Internal Revenue Service limits applicable to tax-qualified pension plans.
What is the Cash Balance Plan?
The Cash Balance Plan is a tax-qualified
pension plan available to virtually all U.S.-based employees of Sempra Energy and its subsidiaries.
Why does the company offer a
supplemental retirement plan?
Our Board of Directors and the Compensation Committee of the Sempra Energy Board of
Directors believe that retirement, savings and deferred compensation plans, in general, and the Supplemental Executive Retirement Plan in particular, are important elements of an overall compensation package. This package is designed to recruit and
retain executive talent, especially mid-career executives, and to retain longer-term executive participants.
23
How are benefits calculated?
The Sempra Energy Supplemental Executive Retirement Plan, or SERP, provides executive officers with retirement benefits based on the
executives:
|
|
|
actual years of service
|
SERP benefits are reduced by benefits payable under the broad-based Cash Balance Plan.
The Cash Balance Plan, Cash Balance Restoration Plan and the SERP use only base salary and annual incentive bonuses in calculating benefits. The value of long-term incentive awards is not included.
3.
|
401(k) Savings and Deferred Compensation Plans
|
Our named executive officers, together with most other company employees, participate in a broad-based, tax-qualified 401(k) Savings Plan. Officers and other key management employees may also participate
in a deferred compensation plan.
What is the 401(k) Savings Plan?
Employees may contribute a portion of their pay to a tax-qualified 401(k) savings plan. Contributions to the plan may be invested on a
tax-deferred basis.
The company matches one-half of the first 6 percent of the employees contributions. In addition,
employees receive a stretch match equal to one-fifth of the next 5 percent of the employees contributions. The Internal Revenue Code limits the amount of compensation eligible for deferral under tax-qualified plans.
All employee contributions and investment earnings in the 401(k) Savings Plan vest immediately. Employees are eligible to participate in
the plan and receive company matching contributions upon hire. Company matching contributions vest after one year of service.
What is the
deferred compensation plan?
Our executive officers and other key management employees also may defer up to 85 percent of
their base salary and bonus under a nonqualified deferred compensation plan, the Employee and Director Savings Plan. Executive officers also may defer all or a portion of certain performance-based restricted stock unit awards upon vesting.
Participants can direct these deferrals into:
|
|
|
Funds that mirror the investments available under the 401(k) savings plan, including a Sempra Energy phantom stock account.
|
|
|
|
A fund providing interest at the greater of 110 percent of the Moodys Corporate Bond Yield or the Moodys Corporate Bond Yield plus one
percent.
|
Deferrals of performance-based restricted stock unit awards must be directed into the Sempra
Energy phantom stock account.
The Internal Revenue Code places annual limits on the amounts that employees and employers can
defer into a 401(k) savings plan. Because of these limits, the company makes matching contributions for deferred compensation plan participants through the deferred compensation plan. Deferred compensation plan matching contributions mirror the
basic matching contributions made for other employees under the 401(k) savings plan, but do not include the stretch match.
All employee contributions, matching company contributions and investment earnings in the deferred compensation plan vest immediately. Eligibility to receive company matching contributions begins after
one year of service.
6
|
Final average pay is the average base salary for the two consecutive years of highest base salary prior to retirement plus the average of the three highest annual
bonuses during the 10 years prior to retirement.
|
24
4.
|
Other Benefit Programs
|
We provide certain other typical benefits to our executive officers. We review the level and types of these benefits each year. We
believe that these benefits are reasonable and important in attracting and retaining executive talent.
These benefits include
financial planning services and excess personal liability insurance. Messrs. Arriola and Lane receive an annual executive benefit program allowance of $30,000 and $20,000, respectively, which may be used to cover out-of-pocket costs for health
and welfare benefits as well as the cost of financial planning and excess personal liability benefits. Any unused allowance is paid out at year-end.
None of these benefits includes a tax gross-up provision.
SEVERANCE AND CHANGE IN CONTROL
ARRANGEMENTS
Our executive officers have severance pay agreements that include change in control features. The agreements
do not contain excise tax gross-up provisions. Equity awards granted after May 2013 include a double trigger change in control provision. None of our officers has an employment agreement.
Why does the company provide severance agreements?
We believe that
severance agreements, which are a prevalent market practice, are effective in:
|
|
|
attracting executives who are leaving an existing employer;
|
|
|
|
mitigating legal issues upon a separation of employment; and
|
|
|
|
retaining talent during uncertain times.
|
By mitigating the adverse effects of potential job loss, severance agreements reinforce management continuity, objectivity and focus on shareholder value. This is particularly critical in actual or
potential change in control situations. Payments are not required when terminations are for cause.
What benefits do severance agreements
provide?
The severance agreements provide for cash payments and the continuation of certain other benefits for a limited
period when:
|
|
|
the company terminates an executives employment for reasons other than cause, or
|
|
|
|
when the executive resigns for good reason.
|
What does resignation for good reason mean?
A resignation for
good reason may occur if there is an adverse change in scope of duties or in compensation and benefit opportunities and, following a change in control of Sempra Energy, changes in employment location.
These provisions provide safeguards against arbitrary actions that effectively force an executive to resign. In order to receive some of
the benefits in the agreement, the executive must comply with contractual confidentiality, non-solicitation and non-disparagement obligations.
Do the severance agreements for the named executive officers provide for a tax gross-up to offset any taxes incurred by the executive as a result of
the severance payment?
The severance agreements do not contain a tax gross-up provision.
What happens to outstanding equity awards upon a change in control?
Awards granted after May 2013 were granted under the Sempra Energy 2013 Long-Term Incentive Plan, which contains a double trigger change in control provision. Awards do not automatically vest upon a
change in control. Rather, vesting is only accelerated upon a termination of employment that meets certain conditions following a change in control of Sempra Energy, except as described below.
25
Restricted stock unit awards issued to date under the Sempra Energy 2013 Long-Term Incentive
Plan provide for continuation following a change in control of Sempra Energy through the new companys assumption of the awards or the issuance of replacement awards. Replacement awards must meet certain criteria, which are described in
Section 16 of the Sempra Energy 2013 Long-Term Incentive Plan. If awards are not assumed or replaced or are held by an employee who is eligible for retirement (age 55 or older with five or more years of service) as of the date of the
change in control, such awards would vest upon a change in control. See Compensation Tables Severance and Change in Control Benefits below for additional information.
Some outstanding awards were granted under Sempra Energys shareholder-approved 2008 Long-Term Incentive Plan. Under the 2008 plan,
upon a change in control of Sempra Energy, all previously granted stock options vest and become immediately exercisable, and all performance and time restrictions lift for outstanding restricted stock and restricted stock unit awards. See
Compensation Tables Severance and Change in Control Benefits below for additional information.
SHARE OWNERSHIP
REQUIREMENTS
Share ownership requirements for officers further strengthen the link between company executive and
shareholder interests.
The requirements set minimum levels of Sempra Energy share ownership that our officers are required to
achieve and maintain. For officers, the requirements are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Level
|
|
|
|
|
Share
Ownership
Requirements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
3x base salary
|
|
|
|
|
|
|
|
President and Chief Operating Officer
|
|
|
|
|
|
|
2x base salary
|
|
|
|
|
|
|
|
Chief Regulatory Officer, Chief Information Officer
and Vice Presidents
|
|
|
|
|
|
|
1x base salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 11.
For purposes of the requirements, we include shares owned directly or through benefit plans. We also count deferred compensation that executives invest in phantom shares of Sempra Energy common stock, the
vested portion of certain in-the-money stock options and unvested service-based restricted stock units.
We expect officers to
meet these requirements within five years of hire or any officer-level promotion. All of our named executive officers are in compliance with the requirements. Executive officers stock ownership requirements also provide that until such time as
the stock ownership requirements are met, executive officers are expected to retain (and not sell) a number of shares equal to at least 50 percent of the net after-tax shares acquired through equity compensation awards.
ANTI-HEDGING POLICY
The company maintains an anti-hedging policy, which prohibits employees and directors from trading in puts, calls, options or other
future rights to purchase or sell shares of Sempra Energy common stock. Officers and directors are also prohibited from pledging shares of Sempra Energy common stock.
IMPACT OF REGULATORY REQUIREMENTS
Many Internal Revenue Code provisions,
Securities and Exchange Commission regulations and accounting rules affect the design of executive pay. They are taken into consideration to create and maintain plans that are effective and are intended to comply with these requirements.
26
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
The Board of Directors of SoCalGas has reviewed and discussed with management of the company the Compensation Discussion and Analysis
included in this Information Statement and, based upon that review and discussion, authorized that it be so included.
BOARD OF DIRECTORS
Steven D. Davis
J. Bret Lane
Jeffrey W. Martin
Trevor I. Mihalik
G. Joyce Rowland
Patricia K. Wagner
Martha B. Wyrsch
27
COMPENSATION TABLES
Summary Compensation Table
In the table below, we summarize our named
executive officers compensation for the last three years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary
Compensation Table
|
|
Year
|
|
|
Salary
|
|
|
Stock
Awards (C)
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
Change in
Pension
Value
and
Non-
Qualified
Deferred
Compensation
Earnings (D)
|
|
|
All Other
Compen-
sation
(E)
|
|
|
Total
|
|
|
|
|
|
|
|
|
Restricted
stock and
restricted
stock units
|
|
|
Performance-
based annual
cash bonus
|
|
|
Pension
accruals and
above-
market
interest
on
non-
qualified
deferred
compensation
|
|
|
|
|
|
|
|
Dennis V. Arriola (A)
|
|
|
2016
|
|
|
$
|
555,000
|
|
|
$
|
1,077,170
|
|
|
$
|
591,900
|
|
|
$
|
1,314,133
|
|
|
$
|
99,865
|
|
|
$
|
3,638,068
|
|
Former Chairman, President
|
|
|
2015
|
|
|
$
|
541,400
|
|
|
$
|
1,088,527
|
|
|
$
|
645,300
|
|
|
$
|
576,747
|
|
|
$
|
95,198
|
|
|
$
|
2,947,172
|
|
and Chief Executive Officer
|
|
|
2014
|
|
|
$
|
514,575
|
|
|
$
|
874,696
|
|
|
$
|
417,600
|
|
|
$
|
1,470,476
|
|
|
$
|
96,043
|
|
|
$
|
3,373,390
|
|
J. Bret Lane (A)
|
|
|
2016
|
|
|
$
|
437,972
|
|
|
$
|
733,466
|
|
|
$
|
411,400
|
|
|
$
|
1,108,666
|
|
|
$
|
55,049
|
|
|
$
|
2,746,553
|
|
President and Chief
|
|
|
2015
|
|
|
$
|
412,000
|
|
|
$
|
718,817
|
|
|
$
|
431,800
|
|
|
$
|
3,296,274
|
|
|
$
|
49,282
|
|
|
$
|
4,908,173
|
|
Operating Officer
|
|
|
2014
|
|
|
$
|
400,000
|
|
|
$
|
640,544
|
|
|
$
|
297,400
|
|
|
$
|
232,294
|
|
|
$
|
31,839
|
|
|
$
|
1,602,077
|
|
Bruce A. Folkmann
|
|
|
2016
|
|
|
$
|
303,568
|
|
|
$
|
223,779
|
|
|
$
|
236,000
|
|
|
$
|
70,408
|
|
|
$
|
27,852
|
|
|
$
|
861,607
|
|
Vice President, Chief Financial Officer,
|
|
|
2015
|
|
|
$
|
273,000
|
|
|
$
|
222,875
|
|
|
$
|
223,400
|
|
|
$
|
17,926
|
|
|
$
|
26,493
|
|
|
$
|
763,694
|
|
Treasurer and Controller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Christopher Baker
|
|
|
2016
|
|
|
$
|
368,400
|
|
|
$
|
469,230
|
|
|
$
|
301,800
|
|
|
$
|
736,195
|
|
|
$
|
36,279
|
|
|
$
|
1,911,904
|
|
Chief Information Officer
|
|
|
2015
|
|
|
$
|
361,100
|
|
|
$
|
471,569
|
|
|
$
|
319,400
|
|
|
$
|
141,893
|
|
|
$
|
36,840
|
|
|
$
|
1,330,802
|
|
|
|
|
2014
|
|
|
$
|
354,000
|
|
|
$
|
427,326
|
|
|
$
|
265,700
|
|
|
$
|
1,073,852
|
|
|
$
|
36,958
|
|
|
$
|
2,157,836
|
|
Lee Schavrien (B)
|
|
|
2016
|
|
|
$
|
376,900
|
|
|
$
|
480,110
|
|
|
$
|
308,800
|
|
|
$
|
682,601
|
|
|
$
|
36,057
|
|
|
$
|
1,884,468
|
|
Chief Regulatory Officer
|
|
|
2015
|
|
|
$
|
367,700
|
|
|
$
|
650,001
|
|
|
$
|
325,300
|
|
|
$
|
130,047
|
|
|
$
|
37,271
|
|
|
$
|
1,510,319
|
|
|
|
|
2014
|
|
|
$
|
358,700
|
|
|
$
|
431,732
|
|
|
$
|
269,200
|
|
|
$
|
1,148,214
|
|
|
$
|
36,524
|
|
|
$
|
2,244,370
|
|
(A)
|
During 2016, Mr. Arriola served as Chairman, President and Chief Executive Officer from January 1, 2016 through September 9, 2016, when he resigned as
President but continued as Chairman and Chief Executive Officer through December 31, 2016. Mr. Arriola became Executive Vice President, Corporate Strategy and External Affairs of Sempra Energy on January 1, 2017. During 2016,
Mr. Lane was Chief Operating Officer from January 1, 2016 through September 9, 2016, and became President and Chief Operating Officer on September 10, 2016.
|
(B)
|
Mr. Schavrien served as Chief Administrative Officer until March 11, 2017, when he became Chief Regulatory Officer.
|
(C)
|
Grant date fair value of stock awards granted during the year. These amounts reflect our grant date estimate of the aggregate compensation expense that we will
recognize over the service period of the award. They are calculated in accordance with GAAP using the assumptions described in Note 8 of the Notes to Consolidated Financial Statements included in Sempra Energys Annual Report to Shareholders
for the year ended December 31, 2016 (the Annual Report) but disregarding estimates of forfeitures related to service-based vesting conditions.
|
Stock awards consist of performance-based and service-based restricted stock units. For the 2016 performance-based restricted stock units with a performance measure based on Sempra Energys
relative total shareholder return, a Monte Carlo valuation model was used to reflect the probable outcome of performance conditions and calculate grant date fair value. For the 2016 performance-based restricted stock units with a performance measure
based on Sempra Energys earnings per share growth, the maximum values, assuming the highest level of performance conditions were achieved, would be $400,674 for Mr. Arriola; $208,723 for Mr. Lane; $63,362 for Mr. Folkmann;
$134,179 for Mr. Baker; and $136,043 for Mr. Schavrien.
28
The value actually realized by executives from stock awards will depend upon the extent to
which performance and service-based vesting conditions are satisfied and the market value of the shares of Sempra Energy common stock subject to the award.
For additional information regarding equity awards, please see the discussions under Grants of Plan-Based Awards and Outstanding Equity Awards at Year-End.
(D)
|
Represents (i) the aggregate change in the actuarial present value of accumulated benefits under pension plans at year-end over the prior year-end and
(ii) above-market interest (interest in excess of 120 percent of the federal long-term rate) on compensation deferred on a basis that is not tax-qualified. The 2016 amounts are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
Change in
Pension Value and
Above Market Interest
|
|
Change in
Accumulated
Benefits
1
|
|
|
Above-
Market
Interest
|
|
|
Total
|
|
Dennis V. Arriola
|
|
$
|
1,306,009
|
|
|
$
|
8,124
|
|
|
$
|
1,314,133
|
|
J. Bret Lane
|
|
$
|
1,084,856
|
|
|
$
|
23,810
|
|
|
$
|
1,108,666
|
|
Bruce A. Folkmann
|
|
$
|
69,151
|
|
|
$
|
1,257
|
|
|
$
|
70,408
|
|
J. Christopher Baker
|
|
$
|
689,202
|
|
|
$
|
46,993
|
|
|
$
|
736,195
|
|
Lee Schavrien
|
|
$
|
681,611
|
|
|
$
|
990
|
|
|
$
|
682,601
|
|
1
The changes in the
actuarial value of pension benefits are due to the accrual of additional age, service, pay and changes in actuarial assumptions such as mortality and interest rates.
For additional information regarding pension benefits and deferred compensation, please see the discussions under Pension Benefits and Nonqualified Deferred Compensation.
(E)
|
All Other Compensation amounts for 2016 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 All Other Compensation
|
|
Company
401(k) and
Related Plan
Contributions
|
|
|
Insurance
Premiums
|
|
|
Other
|
|
|
Total
|
|
Dennis V. Arriola
|
|
$
|
38,078
|
|
|
$
|
6,787
|
|
|
$
|
55,000
|
|
|
$
|
99,865
|
|
J. Bret Lane
|
|
$
|
27,641
|
|
|
$
|
7,408
|
|
|
$
|
20,000
|
|
|
$
|
55,049
|
|
Bruce A. Folkmann
|
|
$
|
16,262
|
|
|
$
|
1,600
|
|
|
$
|
9,990
|
|
|
$
|
27,852
|
|
J. Christopher Baker
|
|
$
|
21,262
|
|
|
$
|
6,817
|
|
|
$
|
8,200
|
|
|
$
|
36,279
|
|
Lee Schavrien
|
|
$
|
21,053
|
|
|
$
|
8,004
|
|
|
$
|
7,000
|
|
|
$
|
36,057
|
|
Amounts shown in the Other column consist of our contributions to charitable, educational and
other non-profit organizations to match the personal contributions of executive officers on a dollar-for-dollar basis; financial and estate planning services; and a $30,000 executive benefit program allowance for Mr. Arriola and a $20,000
executive benefit program allowance for Mr. Lane. Amounts shown do not include parking at company offices and the occasional personal use by executive officers of company property and services (including club memberships and entertainment
events which would not otherwise be used for the business purposes for which they were obtained) for which we incur no more than nominal incremental cost or for which we are reimbursed by the executive for the incremental cost of personal use.
29
Grants of Plan-Based Awards
Executive officers participate in incentive compensation plans that are designed to encourage high levels of performance on both a short-term and long-term basis. Shorter-term incentives, typically annual
performance-based cash bonuses, are provided under the executive incentive plan. Longer-term incentives, typically Sempra Energy performance-based and service-based restricted stock unit awards, are provided under Sempra Energys 2013 Long-Term
Incentive Plan.
In the table below, we summarize 2016 grants of plan-based awards to each of the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Grants
of
Plan-Based
Awards
|
|
Grant
Date (A)
|
|
|
Authorization
Date (A)
|
|
|
Estimated Possible
Payouts Under
Non-Equity Incentive Plan
Awards
(Performance-Based
Annual Bonus) (B)
|
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards (Number
of Shares)
(C)
|
|
|
All Other
Stock
Awards
(D)
|
|
|
Grant
Date
Fair Value
of
Stock
Awards (E)
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Number of
Shares
|
|
|
Dennis V. Arriola
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units based on TSR
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,580
|
|
|
|
17,160
|
|
|
|
|
|
|
$
|
876,833
|
|
Performance-Based Restricted Stock Units based on EPS
Growth
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,150
|
|
|
|
4,300
|
|
|
|
|
|
|
$
|
200,337
|
|
Annual Bonus
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
388,500
|
|
|
$
|
777,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bret Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units based on TSR
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,460
|
|
|
|
8,920
|
|
|
|
|
|
|
$
|
455,790
|
|
Performance-Based Restricted Stock Units based on EPS
Growth
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,120
|
|
|
|
2,240
|
|
|
|
|
|
|
$
|
104,362
|
|
Service-Based Restricted Stock Units
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,860
|
|
|
$
|
173,315
|
|
Annual Bonus
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
270,000
|
|
|
$
|
540,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Folkmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units based on TSR
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,360
|
|
|
|
2,720
|
|
|
|
|
|
|
$
|
138,985
|
|
Performance-Based Restricted Stock Units based on EPS
Growth
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340
|
|
|
|
680
|
|
|
|
|
|
|
$
|
31,681
|
|
Service-Based Restricted Stock Units
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
570
|
|
|
$
|
53,113
|
|
Annual Bonus
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
144,000
|
|
|
$
|
288,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Christopher Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units based on TSR
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,850
|
|
|
|
5,700
|
|
|
|
|
|
|
$
|
291,256
|
|
Performance-Based Restricted Stock Units based on EPS
Growth
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
720
|
|
|
|
1,440
|
|
|
|
|
|
|
$
|
67,090
|
|
Service-Based Restricted Stock Units
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190
|
|
|
$
|
110,884
|
|
Annual Bonus
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
184,200
|
|
|
$
|
368,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee Schavrien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Restricted Stock Units based on TSR
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,920
|
|
|
|
5,840
|
|
|
|
|
|
|
$
|
298,409
|
|
Performance-Based Restricted Stock Units based on EPS
Growth
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730
|
|
|
|
1,460
|
|
|
|
|
|
|
$
|
68,021
|
|
Service-Based Restricted Stock Units
|
|
|
1/04/16
|
|
|
|
12/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,220
|
|
|
$
|
113,680
|
|
Annual Bonus
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
188,500
|
|
|
$
|
376,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Grant and authorization dates are applicable to equity incentive awards, which consist of performance-based restricted stock units and service-based restricted stock
units. Awards are authorized as part of annual compensation planning that is typically completed in December with salary adjustments becoming effective on January 1 and awards granted on the first trading day of January. The Compensation
Committee of the Sempra Energy Board of Directors approves a dollar value and other terms for the awards to be granted to each executive officer. In accordance with the terms approved by the Compensation Committee of the Sempra Energy Board of
Directors, on the January 4, 2016 grant date, the precise number of shares to be granted to each executive officer was calculated by using the closing price for shares of Sempra Energy common stock on that date. Special equity awards also may
be granted at other times, including upon the hiring or promotion of executive officers, for outstanding performance, or to promote retention.
|
30
(B)
|
Non-equity incentive plan awards consist of annual performance-based bonuses payable under the SoCalGas executive incentive plan or the Shared Services Plan. Amounts
reported in the table represent target and maximum bonuses for 2016 to be paid under performance guidelines established at the beginning of the year by our Board of Directors. The performance guidelines were satisfied at levels resulting in
above-target bonus payouts. These amounts are reported in the Summary Compensation Table as non-equity incentive plan compensation.
|
(C)
|
Equity incentive plan awards consist of Sempra Energy performance-based restricted stock units granted under Sempra Energys 2013 Long-Term Incentive Plan. During
the performance period for the performance-based restricted stock units, dividends paid, or that would have been paid, on the shares subject to the award are reinvested or deemed reinvested to purchase additional shares, at their fair market value,
which become subject to the same forfeiture and performance vesting conditions as the shares to which the dividends relate. Due to the inability to forecast stock prices at which future dividends would be reinvested, the amounts shown in the table
do not include such dividends.
|
If the performance criteria are not satisfied or the executives employment
is terminated during the performance period and the executive has not met the retirement eligibility criteria specified in the award agreements or the termination is for cause, the award is forfeited subject to earlier vesting upon a change in
control of Sempra Energy. For a discussion of the change in control vesting provisions applicable to these awards, see Severance and Change in Control Arrangements.
Shares subject to the performance-based restricted stock units granted in 2016 will vest or be forfeited at the beginning of 2019 based
upon Sempra Energys total return to shareholders and earnings per share growth.
For the
performance-based restricted stock units with a total shareholder return performance measure, the target number of shares will vest if Sempra Energy has achieved a cumulative three-year total return to shareholders that places it among the top 50
percent of the companies in the S&P 500 Utilities Index or if Sempra Energys cumulative total shareholder return meets or exceeds the cumulative total shareholder return of the S&P 500 Index, with additional shares vesting
ratably for performance above the 50
th
percentile of
the S&P 500 Utilities Index to the maximum number (200 percent of the target number) for performance at or above the 90
th
percentile of that index. If Sempra Energys performance does not place Sempra Energy among the top 50 percent of
the companies in the S&P 500 Utilities Index and Sempra Energys cumulative total shareholder return is below the cumulative total shareholder return of the S&P 500 Index, shares will vest for performance above the 30
th
percentile of the S&P 500 Utilities Index declining from
the target number of shares at the 50
th
percentile to
zero at the 30
th
percentile. The number of vesting shares
may be adjusted upward or downward by 20 percent based on Sempra Energys absolute total shareholder return for the period compared to benchmarks based on historical performance. The modifier cannot cause the total award payout to exceed 200
percent of target.
For the performance-based restricted stock units with an earnings per share growth performance measure,
the target number of shares will vest, subject to the discretion of the Compensation Committee of the Sempra Energy Board of Directors, if Sempra Energy has achieved a compound annual growth rate of 5.0 percent with additional shares vesting ratably
for performance above 5.0 percent to the maximum number (200 percent of the target number) for performance at or above 7.7 percent. If Sempra Energys compound annual earnings per share growth rate is less than 5.0 percent, shares will vest for
performance above 3.5 percent declining from the target number of shares at 5.0 percent to zero at 3.5 percent. Such awards will not vest if Sempra Energy does not achieve positive net income for the performance period.
Each executive officer holding performance-based restricted stock units may elect for Sempra Energy to withhold a sufficient number of
vesting units to pay the minimum amount of withholding taxes that becomes payable upon satisfaction of the performance conditions.
(D)
|
Represents service-based restricted stock units that vest at the end of three years, subject to continued employment through the vesting date. During the service
period, dividends paid or that would have been paid on the shares subject to the award are reinvested or deemed reinvested to purchase additional shares, at their fair market value, which become subject to the same forfeiture and vesting conditions
as the shares to which the dividends relate. Due to the inability to forecast stock prices at which future dividends would be reinvested, the amounts shown in the table do not include such dividends.
|
31
Each executive officer holding service-based restricted stock units may elect for Sempra
Energy to withhold a sufficient number of vesting units to pay the minimum amount of withholding taxes that becomes payable upon satisfaction of the service conditions.
If an executives employment is terminated during the service period, the award is forfeited, subject to earlier vesting upon a change in control of Sempra Energy or at the discretion of the
Compensation Committee of the Sempra Energy Board of Directors. For a discussion of the change in control vesting provisions applicable to these awards, see Severance and Change in Control Arrangements.
(E)
|
These amounts reflect our grant date estimate of the aggregate compensation expense that we will recognize over the service period of the award. They are calculated in
accordance with GAAP using the assumptions described in Note 8 of the Notes to Consolidated Financial Statements included in Sempra Energys Annual Report but disregarding estimates of forfeitures related to service-based vesting
conditions. The value actually realized by executives from stock awards will depend upon the extent to which performance- and service-based vesting conditions are satisfied and the market value of the shares of Sempra Energy common stock
subject to the award.
|
32
Outstanding Equity Awards at Year-End
In the table below, we summarize grants of Sempra Energy equity awards that were outstanding at December 31, 2016 for our named
executive officers. The grants consist solely of stock options and restricted stock units under Sempra Energys Long-Term Incentive Plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Equity Awards
at Year-End
|
|
|
|
|
Option Awards (Service-Based Stock Options) (A)
|
|
|
|
|
|
Performance-Based
Restricted Stock Units (B)
|
|
|
|
|
|
Service-Based Restricted
Stock
Units (C)
|
|
|
|
|
|
Number of
Shares
Underlying
Unexercised Options
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
|
|
Number of
Unearned/
Unvested
Shares (D)
|
|
|
Market Value
of Unearned/
Unvested
Shares
|
|
|
|
|
|
Number of
Unearned/
Unvested
Shares (D)
|
|
|
Market
Value of
Unearned/
Unvested
Shares
|
|
|
Grant
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
Dennis V. Arriola
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,196
|
|
|
|
220,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,827
|
|
|
|
183,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,133
|
|
|
|
214,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,866
|
(F)
|
|
|
489,706
|
|
|
|
|
|
|
|
3,295
|
(F)
|
|
$
|
331,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,022
|
|
|
$
|
1,109,294
|
|
|
|
|
|
|
|
3,295
|
|
|
$
|
331,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bret Lane
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
1,900
|
|
|
$
|
191,176
|
|
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,144
|
|
|
|
115,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,554
|
|
|
|
156,416
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935
|
|
|
|
94,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,174
|
|
|
|
118,199
|
|
|
|
|
|
|
|
1,950
|
|
|
|
196,276
|
|
|
|
|
01/02/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,244
|
(F)
|
|
|
225,816
|
|
|
|
|
|
|
|
1,520
|
(F)
|
|
|
152,947
|
|
|
|
|
01/04/10
|
|
|
|
875
|
|
|
|
0
|
|
|
$
|
55.90
|
|
|
|
01/03/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
875
|
|
|
|
0
|
|
|
$
|
55.90
|
(E)
|
|
|
|
|
|
|
|
|
|
|
5,497
|
|
|
$
|
553,193
|
|
|
|
|
|
|
|
6,924
|
|
|
$
|
696,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Folkmann
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
582
|
|
|
$
|
58,586
|
|
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
347
|
|
|
|
34,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
483
|
|
|
|
48,616
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294
|
|
|
|
29,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
603
|
|
|
|
60,726
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366
|
|
|
|
36,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035
|
(F)
|
|
|
104,156
|
|
|
|
|
|
|
|
699
|
(F)
|
|
|
70,333
|
|
|
|
|
01/04/10
|
|
|
|
900
|
|
|
|
0
|
|
|
$
|
55.90
|
|
|
|
01/03/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/09
|
|
|
|
1,100
|
|
|
|
0
|
|
|
$
|
43.75
|
|
|
|
01/01/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/08
|
|
|
|
800
|
|
|
|
0
|
|
|
$
|
61.41
|
|
|
|
01/01/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
|
0
|
|
|
$
|
52.70
|
(E)
|
|
|
|
|
|
|
|
|
|
|
2,042
|
|
|
$
|
205,564
|
|
|
|
|
|
|
|
2,367
|
|
|
$
|
238,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Christopher Baker
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
1,215
|
|
|
$
|
122,312
|
|
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
735
|
|
|
|
74,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,019
|
|
|
|
102,516
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
609
|
|
|
|
61,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,304
|
|
|
|
131,212
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787
|
|
|
|
79,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,366
|
(F)
|
|
|
238,070
|
|
|
|
|
|
|
|
1,608
|
(F)
|
|
|
161,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,497
|
|
|
$
|
452,533
|
|
|
|
|
|
|
|
5,146
|
|
|
$
|
517,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee Schavrien
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
1,246
|
|
|
$
|
125,395
|
|
|
|
|
01/04/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
746
|
|
|
|
75,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,040
|
|
|
|
104,629
|
|
|
|
|
01/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
912
|
|
|
|
91,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,315
|
|
|
|
132,297
|
|
|
|
|
01/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
797
|
|
|
|
80,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,387
|
(F)
|
|
|
240,258
|
|
|
|
|
|
|
|
1,620
|
(F)
|
|
|
162,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,842
|
|
|
$
|
487,272
|
|
|
|
|
|
|
|
5,221
|
|
|
$
|
525,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
(A)
|
Stock options to purchase shares of Sempra Energy common stock become exercisable as to one-quarter of the shares originally subject to the option grant on each of the
first four anniversaries of the grant date, with immediate exercisability upon a change in control of Sempra Energy or various events specified in the executives severance pay agreement. They remain exercisable until they expire 10 years from
the date of grant subject to earlier expiration following termination of employment. If an executives employment is terminated after the executive has attained age 55 and completed five years of continuous service, the executives stock
options expire three years (five years if the executive has attained age 62) after the termination of employment. If an executives employment is terminated by death or disability prior to attaining age 55, the executives stock options
expire 12 months after the termination of employment and are exercisable only as to the number of shares for which they were exercisable at the date of employment termination. If an executives employment is otherwise terminated, the
executives stock options expire 90 days after the termination of employment and are exercisable only as to the number of shares for which they were exercisable at the date of employment termination. For a discussion of the change in
control vesting provisions applicable to these awards, see Severance and Change in Control Arrangements.
|
(B)
|
Performance-based restricted stock units will vest or will be forfeited in whole or in part at the end of a three-year performance period (four years for awards prior
to 2015) based upon Sempra Energys relative total return to shareholders compared to market and peer group indices and Sempra Energys earnings per share growth. Awards may be subject to earlier vesting upon a change in control of Sempra
Energy or various events specified in the award agreement or the executives severance pay agreement. If an executives employment is terminated after the executive has attained age 55 and completed five years of service, and the
termination occurs after one year of the applicable performance period has been completed, the executives award is not forfeited as a result of the termination of employment but continues to be subject to forfeiture based upon the extent to
which the related performance goals have been satisfied at the end of the applicable performance period. All named executive officers except Mr. Folkmann have attained the age of 55 and completed at least five years of service. If an
executives employment is otherwise terminated before the end of the applicable performance period, the executives award is forfeited.
|
We have reported the number and market value of shares subject to the awards (together with reinvested dividends and dividend equivalents) that would have vested at December 31, 2016 had the
applicable performance and service periods ended at that date. As of December 31, 2016, the performance as a percentage of target was: 0 percent for the January 4, 2016, January 2, 2015 and January 2, 2014 awards based on
relative total shareholder return. The earnings per share-based awards granted on January 4, 2016, January 2, 2015 and January 2, 2014 are reported based on target performance, as the Compensation Committee of the Sempra Energy Board
of Directors may exercise downward discretion in determining the performance result. The January 2, 2013 total shareholder return-based award is reported at 39 percent of target. The number of shares that ultimately vest will depend upon the
extent to which the performance measures have been satisfied at the actual end of the applicable performance period, and may be fewer or greater than the number reported in the table. The January 2, 2013 award vested at 38 percent of target
performance on January 4, 2017.
As described above, as of December 31, 2016, Sempra Energys total shareholder
return performance for the January 4, 2016, January 2, 2015 and January 2, 2014 awards was below the threshold performance level required for vesting. The table below provides a hypothetical comparison of the actual
below-threshold performance as of December 31, 2016, to the number of performance-based restricted stock units (together with reinvested dividend equivalents) and value that would have been reported if Sempra Energys total shareholder
return performance as of December 31, 2016 had been at the level required for a payout at 100 percent of target.
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 4, 2016 Award
|
|
|
January 2, 2015 Award
|
|
|
January 2, 2014 Award
|
|
|
Number of
Shares
|
|
|
Market
Value at
12/31/16
|
|
|
Number of
Shares
|
|
|
Market
Value at
12/31/16
|
|
|
Number of
Shares
|
|
|
Market
Value at
12/31/16
|
|
Dennis V. Arriola
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual as of 12/31/16
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Hypothetical at Target
|
|
|
8,763
|
|
|
$
|
881,878
|
|
|
|
7,309
|
|
|
$
|
735,577
|
|
|
|
8,577
|
|
|
$
|
863,181
|
|
J. Bret Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual as of 12/31/16
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Hypothetical at Target
|
|
|
4,555
|
|
|
$
|
458,412
|
|
|
|
3,707
|
|
|
$
|
373,073
|
|
|
|
4,709
|
|
|
$
|
473,882
|
|
Bruce A. Folkmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual as of 12/31/16
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Hypothetical at Target
|
|
|
1,389
|
|
|
$
|
139,785
|
|
|
|
1,145
|
|
|
$
|
115,198
|
|
|
|
1,444
|
|
|
$
|
145,309
|
|
J. Christopher Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual as of 12/31/16
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Hypothetical at Target
|
|
|
2,911
|
|
|
$
|
292,932
|
|
|
|
2,436
|
|
|
$
|
245,192
|
|
|
|
3,136
|
|
|
$
|
315,560
|
|
Lee Schavrien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual as of 12/31/16
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Hypothetical at Target
|
|
|
2,982
|
|
|
$
|
300,126
|
|
|
|
3,614
|
|
|
$
|
363,667
|
|
|
|
3,168
|
|
|
$
|
318,813
|
|
(C)
|
Service-based restricted stock and restricted stock units vest at the end of three years (four years for the January 2, 2014 and January 2, 2013 awards),
subject to continued employment through the vesting date.
|
If an executives employment is terminated
during the service period, the award is forfeited, subject to earlier vesting upon a change in control of Sempra Energy or at the discretion of the Compensation Committee of the Sempra Energy Board of Directors. For a discussion of the change in
control vesting provisions applicable to these awards, see Severance and Change in Control Arrangements.
(D)
|
Includes shares purchased and deemed purchased with reinvested dividends and dividend equivalents that become subject to the same forfeiture conditions as the shares to
which the dividends relate. Does not include reinvested dividends and dividend equivalents with a record date of December 29, 2016 that were paid on January 17, 2017.
|
(E)
|
Weighted average exercise price of all exercisable option shares. The weighted average exercise prices of exercisable option shares are: $55.90 for Mr. Lane and
$52.70 for Mr. Folkmann. Messrs. Arriola, Baker and Schavrien do not have any outstanding options.
|
(F)
|
These units vested on January 4, 2017. The value realized upon the vesting of these shares is set forth in Note C to Option Exercises and Stock Vested.
|
Option Exercises and Stock Vested
In the table below, we summarize the stock options that were exercised and restricted stock and restricted stock units that vested during 2016 for each of our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Option Exercises
and Stock
Vested
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of
Shares
Acquired on
Exercise
|
|
|
Value
Realized on
Exercise
(A)
|
|
|
Number of
Shares
Acquired
on Vesting
|
|
|
Value
Realized on
Vesting (B)(C)
|
|
Dennis V. Arriola
|
|
|
|
|
|
$
|
|
|
|
|
10,105
|
|
|
$
|
1,081,647
|
|
J. Bret
Lane
|
|
|
|
|
|
$
|
|
|
|
|
8,718
|
|
|
$
|
816,115
|
|
Bruce A. Folkmann
|
|
|
900
|
|
|
$
|
46,107
|
|
|
|
4,876
|
|
|
$
|
482,909
|
|
J. Christopher
Baker
|
|
|
|
|
|
$
|
|
|
|
|
12,770
|
|
|
$
|
1,189,721
|
|
Lee
Schavrien
|
|
|
|
|
|
$
|
|
|
|
|
12,770
|
|
|
$
|
1,189,721
|
|
35
(A)
|
Difference between the market value of the Sempra Energy option shares on the exercise date and the option exercise price.
|
(B)
|
Market value of vesting Sempra Energy common stock (including reinvested dividends) at the vesting date. Also includes the dividend equivalent with a record date of
December 28, 2015 that was paid on January 15, 2016.
|
(C)
|
The amounts shown in the table above relate to the 2012 to 2015 performance-based restricted stock unit awards, which vested at 150 percent of target, and the 2012
through 2015 service-based restricted stock units. They also include: for Mr. Arriola, restricted stock units granted to Mr. Arriola on August 6, 2012, of which 8,418 shares relate to performance-based restricted stock units that
vested at 141 percent of target and 1,687 shares relate to service-based units; for Mr. Lane, 955 service-based restricted stock units granted to Mr. Lane on February 21, 2013; and for Mr. Folkmann, restricted stock units granted
to Mr. Folkmann on July 16, 2012, of which 1,205 shares relate to performance-based restricted stock units award that vested at 142 percent of target and 239 shares relate to service-based restricted stock units.
|
The 2013 to 2016 performance-based and service-based restricted stock unit awards vested in January 2017. The performance-based awards
vested at 38 percent of target performance. These awards are not reflected in the table above. The number of units that vested and their market value (including the units and the value of the dividend equivalent with a record date of
December 29, 2016 that was paid on January 17, 2017) were: 8,121 shares and $821,319 for Mr. Arriola; 3,745 shares and $378,783 for Mr. Lane; 1,725 shares and $174,495 for Mr. Folkmann; 3,955 shares and $399,977 for
Mr. Baker; and 3,987 shares and $403,277 for Mr. Schavrien.
Pension Benefits
Executive officers participate, along with most other employees, in the Sempra Energy Cash Balance Plan, a broad-based tax-qualified
retirement plan. Under the plan, a notional account is credited annually for each participant in an amount equal to 7.5 percent of the participants salary and bonus. Account balances earn interest and are fully vested after three years of
service.
In addition to the Cash Balance Plan, Messrs. Arriola, Lane, Baker and Schavrien participate in a Supplemental
Executive Retirement Plan. Under the plan, benefits are calculated using a defined benefit formula based on final average earnings (average base salary for the two consecutive years of highest base salary prior to retirement plus the average of the
three highest annual bonuses during the 10 years prior to retirement), years of service and age at retirement of the executive officer and, for Messrs. Baker and Schavrien, the officers spouse.
Benefits under the defined benefit formula begin to vest after five years of service and attainment of age 55, with full vesting when age
plus years of service total 70 or the executive attains age 60. Benefits for Messrs. Arriola and Lane will not begin vesting in the defined benefit until they have participated in the plan for five years, after which all prior service will be
considered. Benefits for Messrs. Arriola and Lane will begin vesting on August 3, 2017 and June 1, 2020, respectively. Upon normal retirement at age 62, the annual benefit (as a percentage of final average earnings) in the form of a 50
percent joint and survivor annuity is 20 percent after five years of service, 40 percent after 10 years of service, 50 percent after 15 years of service, 60 percent after 20 years of service, 62.5 percent after 30 years of service, and 65 percent
after 40 years of service. Reduced benefits based on age and years of service are provided for retirement as early as age 55 and the completion of five years of service.
Supplemental Executive Retirement Plan participants with at least three years of service who do not meet the minimum vesting criteria under the defined benefit formula (five years of service and
attainment of age 55), and participants in the Cash Balance Restoration Plan, are entitled to a benefit equal to the benefit that would have been received under the tax-qualified Cash Balance Plan but for Internal Revenue Code limitations on pay and
benefits under tax-qualified plans. As a participant in the Cash Balance Restoration Plan, Mr. Folkmann is entitled to this benefit.
Benefits payable under the Supplemental Executive Retirement Plan are reduced by benefits payable under the Cash Balance Plan.
Retiring employees may elect to receive the retirement date present value of their vested accumulated retirement benefits in a single lump sum payment. Alternatively, they may elect an annuity that
provides the actuarial equivalent of the lump sum benefit.
36
In the table below, we summarize the present value of accumulated benefits under the various
retirement plans at December 31, 2016 for our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
At Year-End
|
|
Plan
|
|
Years of
Credited
Service
|
|
|
Present
Value of
Accumulated
Benefit (A)
|
|
Dennis V.
Arriola
|
|
Cash Balance Plan
|
|
|
19
|
|
|
$
|
596,071
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
19
|
|
|
|
5,648,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (B)
|
|
|
|
|
|
$
|
6,244,318
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bret Lane
|
|
Cash Balance Plan
|
|
|
35
|
|
|
$
|
1,254,792
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
35
|
|
|
|
4,626,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (B)
|
|
|
|
|
|
$
|
5,881,098
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
A. Folkmann
|
|
Cash Balance Plan
|
|
|
12
|
|
|
$
|
284,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (C)
|
|
|
|
|
|
$
|
284,518
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Christopher Baker
|
|
Cash Balance Plan
|
|
|
22
|
|
|
$
|
647,795
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
22
|
|
|
|
5,006,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (D)
|
|
|
|
|
|
$
|
5,654,673
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee
Schavrien
|
|
Cash Balance Plan
|
|
|
39
|
|
|
$
|
1,448,179
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
39
|
|
|
|
6,071,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (D)
|
|
|
|
|
|
$
|
7,520,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Based upon the assumptions used for financial reporting purposes set forth in Note 7 of the Notes to Consolidated Financial Statements contained in Sempra Energys
Annual Report to Shareholders, except retirement age has been assumed to be the earliest time at which the executive could retire under each of the plans without any benefit reduction due to age.
|
Amounts shown for the Cash Balance Plan are based on the greater of the amounts payable under the plan or the sum of the present value of
the accumulated benefit payable under a frozen predecessor plan plus future cash balance accruals. The amount shown for the Supplemental Executive Retirement Plan is the present value of the incremental benefit over that provided by the Cash Balance
Plan.
(B)
|
Messrs. Arriola and Lane are not vested in benefits in the Supplemental Executive Retirement Plan under the defined benefit formula. Had they retired at
December 31, 2016, Mr. Arriola would have received a total benefit of $691,601 and Mr. Lane would have received a total benefit of $1,862,896 under the Cash Balance Plan and the Supplemental Executive Retirement Plan cash balance
formula.
|
(C)
|
Mr. Folkmann, who is not a participant in the Supplemental Executive Retirement Plan, is vested in benefits under the Cash Balance Plan and nonqualified Cash
Balance Restoration Plan, which provides benefits which restore amounts that would have been payable under the Cash Balance Plan but for Internal Revenue Service limits on tax-qualified plans. Had his employment terminated on December 31, 2016,
his benefits would have been $329,997.
|
(D)
|
Messrs. Schavrien and Baker, who at December 31, 2016 were age 62 and 57, respectively, are eligible for early retirement benefits under the defined benefit
formula. Had they retired at December 31, 2016 and received their benefits under the plans as a lump sum, Mr. Schavriens early retirement benefit would have been $7,364,083 and Mr. Bakers early retirement benefit
would have been $6,112,438.
|
37
Nonqualified Deferred Compensation
Sempra Energys nonqualified deferred compensation plans permit executives to elect on a year-by-year basis to defer the receipt of
a portion of their annual salary and bonus for payment in installments or in a lump sum at a future date in connection with an executives separation from service or on a fixed in-service distribution date. Executive officers also may defer all
or a portion of certain performance-based restricted stock unit awards upon vesting.
The timing and form of distribution are
selected by the executive at the time of the deferral election, and subsequent changes are limited. In the event of a change in control of Sempra Energy, participant accounts are distributed in a lump sum immediately prior to the date of the change
in control. Deferred amounts are fully vested and earn interest at a rate reset annually to the higher of 110 percent of the Moodys Corporate Bond Yield Average Rate or the Moodys Rate plus one percent (5.51 percent for 2016) or, at the
election of the executive, are deemed invested in investment accounts that mirror the investment accounts available under tax-qualified 401(k) savings plans in which all employees may elect to participate. Deferrals of performance-based restricted
stock unit awards must be directed into the Sempra Energy phantom stock account.
The table below summarizes information
regarding the participation in Sempra Energys nonqualified deferred compensation plans for each of the executive officers named in the Summary Compensation Table. None of our named executive officers received any payments of nonqualified
deferred compensation during the year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Nonqualified
Deferred
Compensation
|
|
Executive
Contributions
in 2016 (A)
|
|
|
Company
Contributions
in 2016 (B)
|
|
|
Aggregate
Earnings
in 2016 (C)
|
|
|
Aggregate
Balance at
12/31/16 (D)
|
|
Dennis V. Arriola
|
|
$
|
553,000
|
|
|
$
|
28,685
|
|
|
$
|
215,777
|
|
|
$
|
2,172,784
|
|
J. Bret Lane
|
|
$
|
43,657
|
|
|
$
|
18,101
|
|
|
$
|
62,987
|
|
|
$
|
1,001,269
|
|
Bruce A. Folkmann
|
|
$
|
31,512
|
|
|
$
|
10,296
|
|
|
$
|
4,426
|
|
|
$
|
84,243
|
|
J. Christopher Baker
|
|
$
|
68,755
|
|
|
$
|
15,412
|
|
|
$
|
164,975
|
|
|
$
|
2,803,432
|
|
Lee Schavrien
|
|
$
|
42,113
|
|
|
$
|
13,106
|
|
|
$
|
62,734
|
|
|
$
|
856,298
|
|
(A)
|
Executive contributions consist of deferrals of salary and bonus that are also reported as compensation in the Summary Compensation Table. Timing differences between
reporting bonus compensation in the Summary Compensation Table (which reports bonus amounts for the year in which they were earned) and related deferral dates (the date on which the bonuses otherwise would have been paid to the executive) may in any
year result in lesser or greater amounts reported as executive contributions in the accompanying table than the amounts that have been included in compensation reported in the Summary Compensation Table. Executive contributions in 2016 that are also
included as 2016 salary compensation reported in the Summary Compensation Table total $230,350 for Mr. Arriola; $43,657 for Mr. Lane; $18,108 for Mr. Folkmann; $36,815 for Mr. Baker; and $22,595 for Mr. Schavrien. Deferrals
of the 2016 bonus that was paid on March 15, 2017 are not included in the table above.
|
(B)
|
Company contributions mirror the amounts that the executive would have received under tax-qualified 401(k) savings plans but for maximum dollar limitations on amounts
that may be deferred under tax-qualified plans, but do not include the stretch match provided under the 401(k) Savings Plan. These contributions are also reported as compensation in the Summary Compensation Table.
|
(C)
|
Earnings are measured as the difference in deferred account balances between the beginning and the end of the year minus executive and company contributions during the
year. Earnings consisting of above-market interest are reported in the Summary Compensation Table. Excluding above-market interest, earnings for 2016 were $207,653 for Mr. Arriola; $39,176 for Mr. Lane; $3,169 for Mr. Folkmann;
$117,982 for Mr. Baker; and $61,744 for Mr. Schavrien. These earnings are not reported in the Summary Compensation Table.
|
(D)
|
Year-end balances consist of executive and company contributions and earnings on contributed amounts. All contributions and all earnings that consist of above-market
interest have been included in the Summary Compensation Table for 2016 or prior years. Such aggregate amounts (other than the 2013 bonus paid in 2014) reported in the Summary Compensation Table for fiscal years 2014, 2015 and 2016 are $1,488,081 for
Mr. Arriola; $213,355 for Mr. Lane; $80,494 for Mr. Folkmann; $673,612 for Mr. Baker; and $155,561 for Mr. Schavrien. Year-end balances do not include the portion of the 2016 bonus deferred in 2017, but do include the 2013
bonus deferred in 2014.
|
38
Severance and Change in Control Benefits
We have a severance pay agreement with each of our named executive officers. Each agreement is for a two-year term and is automatically
extended for an additional year upon each agreements anniversary unless we or the executive elect not to extend the term.
The severance pay agreements provide executives with severance benefits in the event that we were to terminate the executives
employment during the agreements term for reasons other than cause, death or disability, or in the event that the executive were to resign for good reason as defined in the agreement. The nature and amount of the severance benefits
vary somewhat with the executives position, and increased benefits are provided if the executive enters into an agreement with the company to provide consulting services for two years and abide by certain covenants regarding non-solicitation
of employees and information confidentiality. Additional benefits are also provided if the termination of employment or resignation were to occur within two years following a change in control of Sempra Energy.
The definitions of cause and good reason vary somewhat based on whether the termination of employment occurs
before or after a change in control of Sempra Energy. However, cause is generally defined to include a willful and continued failure by the executive to perform his or her duties to the company, and good reason is generally
defined to include adverse changes in the executives responsibilities, compensation and benefit opportunities, and following a change in control certain changes in employment location. A change in control is defined in the
agreements to include events resulting in a change in the effective control of Sempra Energy or a change in the ownership of a substantial portion of Sempra Energys assets.
Outstanding stock option, restricted stock and restricted stock unit agreements for grants dated prior to May 9, 2013 provide that
all stock options would become immediately exercisable and all forfeiture and transfer conditions on restricted stock and restricted stock units would immediately terminate upon a change in control of Sempra Energy, whether or not accompanied or
followed by a termination of the executives employment. For outstanding performance-based restricted stock unit awards granted from January 2013 through May 2013 under the Sempra Energy 2008 Long-Term Incentive Plan, the number of shares
earned would have been based on performance through the date of the change in control. The awards granted under the Sempra Energy 2008 Long-Term Incentive Plan in January 2013 to the named executive officers vested in January 2017.
Awards granted after May 9, 2013 under the Sempra Energy 2013 Long-Term Incentive Plan include a double trigger provision for
vesting of equity in connection with a change in control. Restricted stock unit awards issued to date under the Sempra Energy 2013 Long-Term Incentive Plan provide for continuation following a change in control through the new companys
assumption of the awards or the issuance of replacement awards. Replacement awards must meet certain criteria, which are described in Section 16 of the Sempra Energy 2013 Long-Term Incentive Plan. If awards are not assumed or replaced or if an
employee is eligible for retirement (age 55 or older with five or more years of service) as of the date of the change in control, awards would vest upon a change in control. Such awards vest at the greater of target performance level or the actual
performance level had the performance period ended on the last day of the calendar year immediately preceding the date of the change in control (or, for awards based on relative total shareholder return, had the performance period ended on the date
of the change in control). All named executive officers except Mr. Folkmann have attained the age of 55 and completed at least five years of service. Also, any outstanding awards would immediately vest upon an executives involuntary
termination other than for cause, termination for good reason, death, disability, or retirement during the three-year period following a change in control.
We summarize below the benefits each of our executive officers named in the Summary Compensation Table would have been entitled to receive had we terminated his employment (other than for cause, death or
disability) at December 31, 2016 or had the executive resigned for good reason, and the benefits each executive would have been entitled to receive had such termination or resignation occurred within two years following a change in
control of Sempra Energy. These amounts assume the executive had entered into a two-year (one-year for Mr. Folkmann) consulting, non-solicitation and confidentiality agreement providing for enhanced severance. We also show the benefits that
each executive would have been entitled to receive (accelerated vesting of restricted stock and restricted stock units) had a change in control of Sempra Energy occurred on December 31, 2016, whether or not accompanied or followed by a
termination of the executives employment.
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Change in Control
Benefits
|
|
Termination of Employment
by the Company Without
Cause
or by the Executive
Officer for Good Reason
|
|
|
|
|
Change in
Control
Only
|
|
|
Unrelated to
a Change in
Control
|
|
|
Change in
Control
|
|
|
|
|
(Without
Termination of
Employment)
|
|
Dennis V. Arriola
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payment (A)
|
|
$
|
1,587,700
|
|
|
$
|
2,112,933
|
|
|
|
|
|
|
|
Acceleration of Existing Equity Awards (B)
|
|
|
|
|
|
|
3,921,502
|
|
|
|
|
$
|
3,921,502
|
|
Enhanced Retirement Benefits (C)
|
|
|
|
|
|
|
6,500,106
|
|
|
|
|
|
|
|
Health and Welfare Benefits (D)
|
|
|
24,608
|
|
|
|
49,792
|
|
|
|
|
|
|
|
Financial Planning (E)
|
|
|
37,500
|
|
|
|
50,000
|
|
|
|
|
|
|
|
Outplacement
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,696,808
|
|
|
$
|
12,684,333
|
|
|
|
|
$
|
3,921,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bret Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payment (A)
|
|
$
|
1,166,650
|
|
|
$
|
1,555,533
|
|
|
|
|
|
|
|
Acceleration of Existing Equity Awards (B)
|
|
|
|
|
|
|
2,555,376
|
|
|
|
|
$
|
2,555,376
|
|
Enhanced Retirement Benefits (C)
|
|
|
|
|
|
|
4,743,796
|
|
|
|
|
|
|
|
Health and Welfare Benefits (D)
|
|
|
37,082
|
|
|
|
67,326
|
|
|
|
|
|
|
|
Financial Planning (E)
|
|
|
37,500
|
|
|
|
50,000
|
|
|
|
|
|
|
|
Outplacement
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,291,232
|
|
|
$
|
9,022,031
|
|
|
|
|
$
|
2,555,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Folkmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payment (A)
|
|
$
|
542,067
|
|
|
$
|
948,617
|
|
|
|
|
|
|
|
Acceleration of Existing Equity Awards (B)
|
|
|
|
|
|
|
844,117
|
|
|
|
|
$
|
174,489
|
|
Health and Welfare Benefits (D)
|
|
|
17,365
|
|
|
|
28,019
|
|
|
|
|
|
|
|
Financial Planning (E)
|
|
|
25,000
|
|
|
|
37,500
|
|
|
|
|
|
|
|
Outplacement
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
634,432
|
|
|
$
|
1,908,253
|
|
|
|
|
$
|
174,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Christopher Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payment (A)
|
|
$
|
967,100
|
|
|
$
|
1,289,467
|
|
|
|
|
|
|
|
Acceleration of Existing Equity Awards (B)
|
|
|
|
|
|
|
1,824,135
|
|
|
|
|
$
|
1,824,135
|
|
Enhanced Retirement Benefits (C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits (D)
|
|
|
37,082
|
|
|
|
62,821
|
|
|
|
|
|
|
|
Financial Planning (E)
|
|
|
37,500
|
|
|
|
50,000
|
|
|
|
|
|
|
|
Outplacement
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,091,682
|
|
|
$
|
3,276,423
|
|
|
|
|
$
|
1,824,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee Schavrien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payment (A)
|
|
$
|
985,550
|
|
|
$
|
1,314,067
|
|
|
|
|
|
|
|
Acceleration of Existing Equity Awards (B)
|
|
|
|
|
|
|
1,995,193
|
|
|
|
|
$
|
1,995,193
|
|
Enhanced Retirement Benefits (C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits (D)
|
|
|
24,608
|
|
|
|
48,580
|
|
|
|
|
|
|
|
Financial Planning (E)
|
|
|
37,500
|
|
|
|
50,000
|
|
|
|
|
|
|
|
Outplacement
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,097,658
|
|
|
$
|
3,457,840
|
|
|
|
|
$
|
1,995,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(A)
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Severance payment of one-half times (one times following a change in control) the sum of annual base salary and the average of the last three incentive
bonuses. An additional one-half to one times the sum of annual base salary and the
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average of the last three incentive bonuses is conditioned upon the executives agreement to provide post-termination consulting services and abide by restrictive covenants related to
non-solicitation and confidentiality. Excludes payment of bonus earned in the year of termination.
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(B)
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Fair market value at December 31, 2016 of shares subject to performance-based and service-based restricted stock units for which forfeiture restrictions would
terminate. Includes the value of the 2013 restricted stock unit award that vested on January 4, 2017. The value realized upon vesting of this award is discussed above under Option Exercises and Stock Vested Note C.
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(C)
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For Messrs. Arriola and Lane, the amount shown for termination accompanied by a change in control is the incremental actuarial value assuming that they had each
attained age 62, but reduced for applicable early retirement factors.
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(D)
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Estimated value associated with continuation of health benefits for 18 months (12 months for Mr. Folkmann) for termination unrelated to a change in control and
continuation of health, life, disability and accident benefits for two years (18 months for Mr. Folkmann) for termination accompanied by a change in control.
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(E)
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Estimated value associated with continuation of financial planning services for 18 months (12 months for Mr. Folkmann) for termination unrelated to a change in
control, and two years (18 months for Mr. Folkmann) for termination accompanied by a change in control.
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Executive officers who voluntarily terminate their employment (other than for good reason) or whose employment is terminated
by death or by the company for cause are not entitled to enhanced benefits.
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