UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Securities Exchange Act of 1934
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AMERICAN WATER WORKS COMPANY, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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Safety trust reliabialty American water 2021 PROXY STATEMENT
WE ARE THE LARGEST AND MOST GEOGRAPHICALLY DIVERSE PUBLICLY TRADED WATER AND WASTEWATER UTILITY COMPANY IN THE U.S.
AMERICAN WATER WORKS COMPANY, INC.
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March 30, 2021 |
Dear American Water Shareholder:
I am pleased to again welcome you to American Waters Annual Meeting of Shareholders on Wednesday, May 12, 2021. As we did last year, we will hold the annual meeting virtually, rather than in-person. This decision represents the careful balancing of our desire to meet and communicate directly with our shareholders with the current status of the COVID-19 pandemic and guidance from national, state and local health authorities. Safety is both a value and a strategy at American Water, and while we would prefer to be able to meet each of you in person, our continued use of a virtual meeting will allow our shareholders to safely and securely attend and vote at the annual meeting.
This years proxy statement continues to reflect American Waters transparency and openness with our shareholders. Our proxy statement reflects a continued commitment to provide you with clear and readable proxy materials. We also continued our leadership in integrating environmental, social, and governance (ESG) principles directly into our business. In response to significant shareholder interest, we expanded our disclosures regarding human capital management and diversity. Also, our ESG leadership continues to be recognized through our top rankings in a number of key indices and ESG assessment ratings, which are highlighted in the proxy statement and on the inside back cover.
As part of our commitment to investors and consistent with our support of good corporate governance practices, our Board, along with management, continues to seek constructive and open dialogue with our shareholders that leads to positive outcomes. Our 2020 outreach efforts included holding engagement meetings with more than 300 of our investors throughout the year and supporting our off-season engagement program, now in its seventh consecutive year. This engagement has resulted in significant wins for our shareholders as evidenced by our implementation in 2021 of expanded lobbying expenditure disclosures and related governance, as well as our adoption of a standard form of proxy access bylaw in December 2020. These efforts are also being noted externally. For the second year in a row, the independent Center for Political Accountability ranked American Water among the best in the S&P 500 for its political contribution governance and disclosures. We encourage you to learn more by reading the proxy statement and visiting our Investor Relations website at ir.amwater.com.
It is important that your shares be represented and voted at the annual meeting regardless of how many shares you own, and even if you do not or cannot attend the virtual annual meeting. In that regard, we encourage you to vote your shares in advance of the annual meeting by using one of the methods described in the accompanying materials. Thank you for your support and continued ownership of American Water.
Sincerely,
Karl F. Kurz
Chairman of the Board
AMERICAN WATER WORKS COMPANY, INC.
1 Water Street
Camden, New Jersey 08102-1658
NOTICE OF VIRTUAL 2021 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 2021
www.virtualshareholdermeeting.com/AWK2021
The virtual 2021 Annual Meeting of Shareholders of American Water Works Company, Inc. (the Company) will be held virtually (and not at a physical location) on Wednesday, May 12, 2021, at 10:00 a.m., Eastern time, to consider and take action on the following:
1. | election to the Companys board of directors of the eleven (11) nominees named in the accompanying proxy statement, each to serve until the date of the 2022 Annual Meeting of Shareholders or until his or her successor has been duly elected and qualified; |
2. | approval, on an advisory basis, of the compensation of the Companys named executive officers; |
3. | ratification of the appointment, by the Audit, Finance and Risk Committee of the board of directors, of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for 2021; and |
4. | such other business, if any, as may properly be brought before the meeting or any adjournment or postponement of the meeting. |
In light of the public health and safety concerns associated with the ongoing coronavirus (COVID-19) pandemic, American Water will hold its 2021 annual meeting virtually, rather than at a physical location. You will not be able to attend the annual meeting in person. Please see pages 1 and 2 of the accompanying proxy statement for more information on attending the virtual 2021 annual meeting.
To be admitted to the annual meeting, please access the virtual meeting platform on the Internet at www.virtualshareholdermeeting.com/AWK2021. Shareholders or their legal proxies must log on to the platform by entering the 16-digit control number included on the proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form. Online access to the annual meeting will open approximately 15 minutes prior to the start of the virtual meeting.
In order to attend the virtual annual meeting, it is very important that you retain your proxy card, Notice of Availability, or voting instruction form, and all related materials, including your assigned 16-digit control number, through the date of the meeting.
The Companys board of directors has no knowledge of any other business to be transacted at the virtual annual meeting. Only holders of record of shares of the Companys outstanding common stock as of the close of business on March 17, 2021 are entitled to notice of, and to vote at, the virtual annual meeting.
By Order of the Board of Directors,
Jeffrey M. Taylor
Vice President and Secretary
March 30, 2021
Camden, New Jersey
Your vote is very important, and you have several options on how to vote your shares. Whether or not you plan to attend the virtual 2021 Annual Meeting of Shareholders, you should read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to your proxy card, voting instruction form or instructions on the Notice of Internet Availability of Proxy Materials you received.
This summary highlights information generally contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting your shares. For more complete information regarding the Companys 2020 performance, please review the Companys Annual Report on Form 10-K for the year ended December 31, 2020, which we refer to in this proxy statement as the 2020 Form 10-K.
Annual Meeting Information
Wednesday, May 12, 2021 10:00 a.m., Eastern time
(online access will open at 9:45 a.m., Eastern time)
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The Annual Meeting will be held
virtually only (and not at a
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Record holders as of March 17, 2021 are entitled to notice of, and to vote at, the Annual Meeting |
Summary of Matters to be Voted Upon at the Annual Meeting
The following table summarizes the items that will be brought for a vote of our shareholders at the meeting, along with the Boards voting recommendations and the required vote for approval.
Proposal No. | Description of Proposal |
Required Vote for Approval |
Boards Recommendation | |||||||
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To elect 11 director nominees
For more information, see beginning on page 19. |
For each director, majority of votes cast | FOR Each Nominee |
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To approve, on an advisory basis, the compensation of our named executive officers
For more information, see beginning on page 38. |
Majority of shares present and entitled to vote | FOR |
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To ratify the appointment of our independent registered public accounting firm for 2021
For more information, see beginning on page 76. |
Majority of shares present and entitled to vote | FOR |
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American Water | 2021 Proxy Statement | i |
Our Commitment to Environmental and Social Responsibility
We consider environmental and social responsibility to include: environmental leadership and sustainability; operational excellence; employee engagement, safety, inclusion and diversity; active community engagement; civic and charitable involvement; and transparency. We integrate environmental and social responsibility policies and practices into our daily operations as part of our belief of conducting business responsibly, and that how a company operates is just as important as what a company does. We derive this focus from our core values of safety, trust, environmental leadership, teamwork and high performance. Our vision and values drive our company strategy, which is centered on five themes:
Safety
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Customers
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· | Our number one focus is the safety of our employees and customers.
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· | Our customers are at the center of everything we do, helping us to shape our strategic priorities. | |||||||
· | Safety is both a value and a strategy.
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People
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Operational Excellence
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We seek to maintain an environment that is open, transparent, diverse and inclusive, and where our people feel valued, included and accountable.
We strive to develop each employee to the employees fullest potential.
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· | Our operational excellence strategy helps us to find better and more efficient ways to do business and provide safe, clean and affordable water services for our customers.
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Growth |
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· | We believe that when companies grow, they can invest more in creating stable jobs, training, benefits, infrastructure and their communities.
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· | Our growth benefits all our stakeholders, including our shareholders.
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In September 2019, we issued our fifth biennial Sustainability Report, covering our sustainability performance for calendar years 2017 and 2018. This report was prepared in accordance with the Global Reporting Index, or GRI, Standards: Core Option, as well as standards from the Sustainability Accounting Standards Board and Edison Electric Institute. Our first report was issued in 2011, making us the first large water services company to measure its performance against the Global Reporting Index. During 2020, we completed a goal-setting process resulting in the establishment of two new environmental, social and governance, or ESG, goals and the clarification of our existing energy and emissions goal. Our Sustainability Report and our new and clarified ESG goals can be reviewed on our Investor Relations website at ir.amwater.com.
Our sustainability practices and efforts have been supported by our inclusion in a number of key indices and on various assessment ranking lists. Notable recognitions include:
· | being ranked ninth on the Corporate Knights 2021 Global 100 Most Sustainable Corporations in the World index, which made us the the top-ranked U.S. company and the top-ranked water utility globally, and being ranked 92nd on the Corporate Knights 2021 Clean 200, an index of companies viewed as leading the way to a clean-energy future; |
· | for the fourth year in a row, being named as one of Barrons 100 Most Sustainable Companies, improving to 15th in 2021 from 22nd in 2020, and remaining the highest ranking utility in that index; |
· | inclusion among 380 companies across 50 industries and 44 countries and regions in the 2021 Bloomberg Gender-Equality Index; |
· | being listed for the second consecutive year as a top-scoring company (among approximately 247 businesses) for our inclusive and diverse culture on the Disability Equality Index, a comprehensive disability inclusion assessment tool designed and embraced by both business leaders and disability advocates, and listed among its Best Places to Work for Disability Inclusion; and |
· | earning the 2021 Military Friendly® Gold Employer designation, as well as the 2021 Military Friendly Spouse designation, by VIQTORY, a service-disabled, veteran-owned small business that connects the military community to civilian employment, educational and entrepreneurial opportunities through its G.I. Jobs® and Military Friendly brands. |
ii | American Water | 2021 Proxy Statement |
Highlights of our environmental and social policies and practices include:
Environmental Responsibility
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Social Responsibility
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· Expect to spend between $10.3 billion and $10.5 billion from 2021 to 2025 and between $22 billion and $25 billion from 2021 to 2030 on capital investments in our regulated businesses
· Intend to dedicate approximately eight percent of our total projected capital investment over the next five years to resiliency, with another eight percent allocated to water quality
· Invested $1.8 billion in 2020 and expect to spend an additional $1.6 billion in 2021 on regulated asset infrastructure improvements and replacements
· Clarified our existing energy and emissions goal to reduce greenhouse gas, or GHG, emissions by more than 40 percent by 2025, from a 2007 baseline as an absolute measurement of direct (Scope 1) and indirect (Scope 2) emissions, and GHG emissions reduced through 2019 by approximately 32 percent since our base year of 2007
· Utilized a uniform water resiliency metric, the Utility Resilience Index, or URI, to track enhancements in our ability to prepare for, respond to, remediate and effectively manage incidents impacting our operations
· Continuing to build the Monterey Peninsula Water Supply Project, with the water storage, recycling and reuse segments nearing completion, and using marine life friendly slant wells for the proposed desalination plant
· Conducted over 10 million water quality and turbidity tests in 2020 at our laboratory facilities and plant operations, including continuous online instrumentations
· Scientists, researchers and public health professionals dedicated to research and partnering with water research foundations on water quality and technology-water source monitoring
· Collaboration and partnerships with federal and state agencies to support effective environmental, health and safety and water quality standards and regulations
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· During 2020, we provided over 100,000 hours of safety training to our employees
· As a result of our continued focus on safety, we have made significant progress towards our zero injuries goal, reducing workplace injuries by 67 percent since 2015
· Through 2020, we reduced our Occupational Health and Safety Administration, or OSHA, recordable injury rate to 0.99, approximately 81 percent better than the industry average
· During 2020, approximately 84 percent of our job requisitions had a diverse candidate pool, based on voluntarily self-identified gender, minority, disability or veteran/military status
· For 2020, approximately 59 percent of transfers or promotions filled with individuals voluntarily self-identifying as minority, female, veteran, military spouse, disabled or a member of the LGBTQ+ community
· For 2020, we achieved a customer satisfaction rating in the top quartile among our industry peer group
· During 2020, we established a Chief Inclusion Officer position and function, along with a Director, Inclusion and Diversity position, and organized women and Black/African-American employee business resource groups
· American Waters Inclusion and Diversity Advisory Council, comprised of three executives and 10 cross-functional employees, supports leaders to lead through inclusion
· We sponsored workplace giving campaigns with the United Way and Water For People, with over $6.5 million donated over the past 10 years by our employees
· Over $500,000 was donated in 2020 to COVID-19-related relief and recovery efforts through our corporate giving and the American Water Charitable Foundation
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American Water | 2021 Proxy Statement | iii |
Director Nominees
The following table presents summary information about each of our 11 director nominees, as well as their standing committee memberships and positions as of the date of this proxy statement. The table below also discloses the Boards determination as to the independence of each nominee under the listing standards of the New York Stock Exchange, or the NYSE, relevant rules of the Securities and Exchange Commission, or the SEC, and the Boards categorical standards for director independence. Each director is elected annually.
Name |
Age | Director Since |
Occupation |
Independent? | Standing Committee Memberships/Position | |||||
Jeffrey N. Edwards |
60 | 2018 | Chief Operating Officer, New Vernon Capital | Yes | · Audit, Finance and Risk · Nominating/Corporate Governance | |||||
Martha Clark Goss |
71 | 2003 | Retired Chief Operating Officer and Chief Financial Officer of Amwell Holdings/Hopewell Holdings LLC | Yes | · Audit, Finance and Risk (Chair) · Executive Development and Compensation | |||||
Veronica M. Hagen |
75 | 2016 | Retired Chief Executive Officer of Polymer Group, Inc. (now known as AVINTIV Specialty Materials Inc.) | Yes | · Safety, Environmental, Technology and Operations, or SETO (Chair) · Executive Development and Compensation · Nominating/Corporate Governance | |||||
Kimberly J. Harris |
56 | 2019 | Retired President and Chief Executive Officer of Puget Energy, Inc. and Puget Sound Energy, Inc. | Yes | · Executive Development and Compensation · SETO | |||||
Julia L. Johnson |
58 | 2008 | President of Net Communications, LLC | Yes | · Executive Development and Compensation (Chair) · Nominating/Corporate Governance | |||||
Patricia L. Kampling |
61 | 2019 | Retired Chairman and Chief Executive Officer of Alliant Energy Corporation | Yes | · Audit, Finance and Risk · SETO | |||||
Karl F. Kurz |
59 | 2015 | Private investor and Retired Chief Operating Officer, Anadarko Petroleum Corporation | Yes |
· Non-Executive Chairman of the Board | |||||
Walter J. Lynch |
58 | 2020 | President and Chief Executive Officer of American Water | No | None | |||||
George MacKenzie |
72 | 2003 | Retired Vice Chairman and Chief Financial Officer of Hercules Incorporated | Yes | · Nominating/Corporate Governance (Chair) · Audit, Finance and Risk | |||||
Admiral James G. Stavridis |
66 | 2018 | Operating Executive, The Carlyle Group | Yes | · Nominating/Corporate Governance · SETO | |||||
Lloyd M. Yates |
60 | 2019 | Retired Executive Vice President, Duke Energy and President of Duke Energys Carolinas Region | Yes | · Audit, Finance and Risk · SETO |
iv | American Water | 2021 Proxy Statement |
Director Qualifications, Experience and Diversity
The figure below illustrates some of the key skills, qualifications and diversity that our current directors bring to the Board:
Board of Directors Highlights By the Numbers
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American Water | 2021 Proxy Statement | v |
American Water Corporate Governance and Board Highlights
Below are a number of our corporate governance and Board highlights, including policies implemented and other governance achievements:
vi | American Water | 2021 Proxy Statement |
American Water 2020 Operating Performance Highlights
The charts below provide a summary of some of our key operating performance highlights for 2020:
American Water | 2021 Proxy Statement | vii |
American Water Executive Compensation Highlights
We have summarized below key named executive officer compensation highlights for 2020:
· Compensation program is highly correlated to performance and focused on long-term value creation
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· Executive equity compensation is weighted significantly toward performance stock units | |
· Considerable portion of pay is variable, rather than fixed, and is earned solely based on performance without incentivizing excessive risk-taking |
· Perquisites and other personal benefits to named executive officers are limited principally to executive physicals, Company-paid life insurance benefits and relocation benefits
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· Formal CEO goal-setting and performance assessment process utilized throughout each year |
· Double-trigger change-in-control provision in the 2017 Omnibus Equity Compensation Plan, or the 2017 Omnibus Plan, complements existing provision in Executive Severance Policy
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· Long-term performance plan does not include stock options |
· Compensation Committee was advised by independent compensation consultant throughout 2020
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· Representative, relevant peer group used for total shareholder return, or TSR, performance and compensation benchmarking, and is evaluated annually |
· Shareholders expressed support for our compensation program, with a 97.2 percent average FOR advisory vote on executive compensation since 2011, the first year we offered a say-on-pay proposal
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· Clawback policies in place for cash performance-based awards and equity awards
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· Named executive officers have reasonable severance arrangements
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· Executive stock ownership guidelines and retention requirements support alignment with shareholders interests by encouraging long-term retention of equity ownership
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· Vote, on an advisory basis, on executive compensation conducted annually, and management adopted shareholders recommendation in 2017 to continue this practice
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· Our annual performance plan includes both safety and environmental-related metrics, highlighting our commitment to ESG principles
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· CEO transition compensation decisions in 2020 and 2021 were recommended by the Compensation Committee on advice of its independent compensation consultant, were aligned to our performance and the competitive range of the benchmarking data, and further strengthened the alignment between our CEOs pay and our long-term performance |
viii | American Water | 2021 Proxy Statement |
Matters to be Voted on at the Annual Meeting
The following table describes the items to be brought for a vote of our shareholders at the meeting, the treatment of abstentions and broker non-votes for each matter, and the Boards voting recommendation as to each matter:
Proposal |
Brief Description of Proposal |
Vote Required |
Treatment of |
Treatment of |
Boards | |||||
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Election of 11 director nominees | Each director is elected by a majority of the votes cast FOR election | Not taken into account | Not taken into account | FOR each director nominee | |||||
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Approval, on an advisory basis, of the compensation of our named executive officers | A majority of the shares of common stock present and entitled to vote at the annual meeting must be voted FOR approval | Counted as an AGAINST vote | Not taken into account | FOR | |||||
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Ratification of the appointment of our independent registered public accounting firm for 2021 | A majority of the shares of common stock present and entitled to vote at the annual meeting must be voted FOR approval | Counted as an AGAINST vote | Not applicable, as this is considered to be a routine matter | FOR |
How to Vote Shares Registered in Your Own Name
If you own shares that are registered on our books and records in your own name, you can vote your shares in any of the following ways:
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You can vote via the Internet |
Call toll-free
1-800-690-6903. You also can vote by telephone using the instructions provided on the internet voting site, or, if you received printed proxy materials, by following the instructions provided on your proxy card. |
If we mailed you a printed copy of this proxy statement and a paper proxy card, you can vote by completing, signing and dating the proxy card, and returning it in the provided postage-paid envelope. |
Attend the virtual meeting to vote. See Attending the Virtual Annual Meeting beginning on page 1 of this proxy statement. |
American Water | 2021 Proxy Statement | 3 |
The membership of each of the standing Board committees as of the date of this proxy statement, including the number of committee meetings held during 2020, are set forth in the table below:
Director |
Age | Director Since |
Independent? | Audit, Finance and Risk Committee |
Compensation Committee |
SETO |
Nominating Committee |
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Jeffrey N. Edwards* |
60 | 2018 | ü | ü | ü | |||||||||||||||||||
Martha Clark Goss* |
71 | 2003 | ü | üü | ü | |||||||||||||||||||
Veronica M. Hagen |
75 | 2016 | ü | ü | üü | ü | ||||||||||||||||||
Kimberly J. Harris |
56 | 2019 | ü | ü | ü | |||||||||||||||||||
Julia L. Johnson |
58 | 2008 | ü | üü | ü | |||||||||||||||||||
Patricia L. Kampling* |
61 | 2019 | ü | ü | ü | |||||||||||||||||||
Karl F. Kurz |
59 | 2015 | ü | |||||||||||||||||||||
Walter J. Lynch |
58 | 2020 | × | |||||||||||||||||||||
George MacKenzie* |
72 | 2003 | ü | ü | üü | |||||||||||||||||||
Admiral James G. Stavridis |
66 | 2018 | ü | ü | ü | |||||||||||||||||||
Lloyd M. Yates* |
60 | 2019 | ü | ü | ü | |||||||||||||||||||
Meetings held in 2020 |
6 | 7 | 4 | 6 |
✓ Committee Member | ✓✓ Committee Chair | * Audit Committee Financial Expert |
A description of each of our standing committees as of the date of this proxy statement, together with its primary responsibilities, is provided below.
Audit, Finance and Risk Committee |
· Coordinates oversight of financial planning and reporting
· Discusses with management, at least annually, our policies with respect to risk assessment and risk management, our major financial risk exposures and the steps management has taken to monitor and control these exposures
· Represents and assists the Board in fulfilling its responsibility to oversee: § the quality and integrity of our financial statements; § the adequacy and effectiveness of our system of internal controls; § our compliance with legal and regulatory requirements; § our independent auditors qualifications and independence; § the performance of our internal audit function and that of our independent auditor; § issues regarding accounting principles, including changes in accounting and auditing principles and practices; § our risk assessment and risk management strategy; and § our financial policies and significant financial decisions
· Has sole authority and responsibility to appoint, compensate, retain, terminate and oversee our independent auditor
· Monitors, reviews and evaluates our:
§ financial forecasts, financial condition and anticipated financing requirements; § capital structure, including new issuances, purchases or redemptions of debt and equity securities, and the impact of these on our credit ratings; § capital expenditure plan and strategies; § dividend payment policy; § investment performance of the assets held under our employee benefit plans and related investment guidelines; § cash management plans and strategies; and | |
§ long-term debt issuances and any related guarantees, support obligations or security related to such issuances
· Coordinates oversight of operational risk management with the other committees and the Board
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American Water | 2021 Proxy Statement | 7 |
· Reviews internal controls with respect to information and technology systems, security management systems and cybersecurity that could have a significant impact on our financial statements
· Recommends to the Board actions with respect to our directors and officers liability insurance programs | ||
Executive Development and Compensation Committee |
· Establishes and reviews our overall compensation philosophy
· Reviews and recommends to the Board the compensation and performance of the CEO, as well as goals and objectives relevant to the CEOs compensation
· Approves, after receiving the recommendations of, and consulting with, the CEO, the compensation of Section 16 executive officers other than the CEO
· Reviews and makes recommendations to the Board regarding our equity-based compensation plans, and takes such actions as required by these plans or specifically delegated to the Compensation Committee
· Reviews and approves performance-based cash compensation plans in which the CEO and the CEOs direct reports participate, or which provide more than $100,000 in compensation to any other employee in any calendar year
· Reviews periodically the operations of our executive compensation programs to determine whether they are properly coordinated and implemented and achieving their intended purpose
· Reviews and recommends to the Board contracts and compensatory transactions, including consulting arrangements, employment contracts and severance agreements, with the CEO, COO and CFO, and approves such contracts and transactions with respect to other current or certain former executive officers
· Reviews and monitors employee retirement and other benefit plans, including plan design, features and funding
· In consultation with management, oversees regulatory compliance with respect to compensation matters
· Reviews a compensation-related risk assessment of our compensation policies and practices and makes appropriate recommendations to the Board
· With input from the Board, oversees the process for executive succession planning, other than the CEO
· Reviews and recommends to the Board the form and amount of director and chairman compensation at least every two years
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Safety, Environmental, Technology and Operations Committee |
· Represents and assists the Board in overseeing and reviewing:
§ our employee and public safety policies and practices; § our environmental policies and practices, including water quality and contaminants of emerging concern; § our technology policy, strategy and governance, including physical security and cybersecurity issues; and § operational performance and risk exposure and mitigation strategies not covered by another committee of the Board · Reviews physical security and cybersecurity threat assessments, emerging issues and related initiatives
· Coordinates with the Audit, Finance and Risk Committee on matters related to cybersecurity risk
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Nominating/Corporate Governance Committee |
· Establishes criteria for the selection of new director candidates to serve on the Board
· Identifies qualified director nominees (including new candidates as well as existing directors) and recommends their election to the Board
· Conducts appropriate inquiries into the backgrounds and qualifications of director nominees
· Reviews and makes recommendations on the composition and size of the Board to ensure its membership is sufficiently diverse and independent
· Recommends directors to serve as chairman and members of the Board committees
· Establishes, monitors and recommends the structure and operations of each committee of the Board, including the qualifications and criteria for committee members, and makes recommendations regarding appropriate changes to the committee chairs and members
· Makes recommendations as to the creation or elimination of Board committees
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8 | American Water | 2021 Proxy Statement |
· Oversees the annual evaluation of each director and the Board as a whole
· Develops and recommends to the Board amendments to its Corporate Governance Guidelines, and annually assesses their adequacy
· Considers and makes recommendations on questions of director independence
· Reviews the adequacy of our certificate of incorporation and bylaws
· Oversees our continuing director education program
· Oversees, with input from the Chairman of the Board and the current CEO, the process of CEO succession planning
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On March 19, 2020, the Board designated an Emergency Executive Committee comprised of Messrs. Edwards and Kurz and Mses. Goss and Kampling, with Mr. Kurz as Chair, to provide for Board action in the event of an emergency or other time-sensitive matter, as determined by the Board. The Emergency Executive Committee is authorized to act on behalf of the Board as to any matter, except as to matters that cannot be delegated to a committee under Delaware law. The Board has determined that the COVID-19 pandemic constitutes an emergency as defined under the Emergency Executive Committees charter. During 2020, the Emergency Executive Committee met one time.
Board Review of Related Person Transactions
American Water | 2021 Proxy Statement | 9 |
Compensation Committee Role
SETO Committee Role
American Water | 2021 Proxy Statement | 11 |
Information About Our Executive Officers
The table below presents the name, age, offices held and business experience, as of the date of this proxy statement, for each of our executive officers.
Name |
Age | Office and Experience | ||||
Walter J. Lynch |
58 | President and Chief Executive Officer. Mr. Lynch has over 25 years of experience in both the regulated and market-based water and wastewater industry. Mr. Lynch has served as our President and Chief Executive Officer and a director since April 1, 2020. Mr. Lynch served as our Executive Vice President and Chief Operating Officer from January 2016 to March 31, 2020, and as our President and Chief Operating Officer, Regulated Operations from February 2010 through December 2015. Prior to that, Mr. Lynch served as President of Regulated Operations from July 2008 to February 2010. Mr. Lynch also had previously served as Executive Vice President of our then Eastern Division and as President of our New Jersey and New York subsidiaries, as well as President of our Market-Based Businesses. Mr. Lynch joined the Company in 2001. Mr. Lynch is a member of the Board of Directors of the National Association of Water Companies and serves as a member of its Executive Committee.
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Maureen Duffy |
51 | Senior Vice President, Communications and External Affairs. Ms. Duffy has served as Senior Vice President, Communications and External Affairs since January 1, 2020 and has been an executive officer since June 1, 2020. Prior to that, Ms. Duffy served as Vice President, Corporate Communications and Federal Affairs from May 2017 to December 31, 2019 and Vice President, Corporate Communications and External Affairs from September 2011 to May 2017. From July 2006 to September 2011, Ms. Duffy held various positions of increasing responsibility in our internal and external corporate communications function. From November 1999 to July 2006, she held various positions with our New Jersey subsidiary, including Government Affairs/Media Specialist, Communications Manager and Director of Corporate Communications. Prior to joining American Water, Ms. Duffy reported and produced news for WNJN/WNET-TV.
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16 | American Water | 2021 Proxy Statement |
Name |
Age | Office and Experience | ||||
M. Susan Hardwick |
58 | Executive Vice President and Chief Financial Officer. Ms. Hardwick joined American Water on June 3, 2019 as our Executive Vice PresidentFinance and became Executive Vice President and Chief Financial Officer on July 1, 2019. Ms. Hardwick previously served as the Executive Vice President and Chief Financial Officer of Vectren Corporation, which was sold to CenterPoint Energy, Inc., an electric and natural gas utility, on February 1, 2019. Ms. Hardwick joined Vectren Corporation in January 2000 and served in a variety of positions, including: Vice President, Controller and Assistant Treasurer; Senior Vice President, Finance; Senior Vice President, Chief Financial Officer; and Executive Vice President and Chief Financial Officer. Prior to joining Vectren, Ms. Hardwick was Assistant Corporate Comptroller at Cinergy Corp. She began her career with Arthur Andersen & Co., leaving there as a senior manager to join Cinergy Corp. Ms. Hardwick is a Certified Public Accountant. On August 13, 2020, Ms. Hardwick was elected to the Board of Directors of New Jersey Resources Corporation (NYSE: NJR), a diversified energy services company, where she is currently serving a three-year term expiring in 2024, and since January 1, 2021, serves as a member of its Audit Committee.
| ||||
Melanie M. Kennedy |
47 | Senior Vice President, Chief Human Resources Officer. Ms. Kennedy was appointed as the Companys Senior Vice President, Chief Human Resources Officer, effective December 10, 2020. Previously, Ms. Kennedy had served as the Companys Senior Vice President, Human Resources since March 2017. From August 2014 through February 2017, Ms. Kennedy served as Vice President, Human Resources of the Company, and from August 2012 to August 2014, she served as Director, Human Resources in the Companys Northeast Division. Ms. Kennedy initially joined the Company in 2007, and before that time, she practiced law for nine years.
| ||||
James S. Merante |
46 | Vice President and Treasurer. Mr. Merante was appointed as our Vice President and Treasurer in February 2019. Prior to that, Mr. Merante was Vice President, Internal Audit from February 2018 to February 2019, and served as Divisional Chief Financial Officer for our Mid-Atlantic Division from July 2014 until February 2018. Mr. Merante is licensed as Certified Public Accountant in Pennsylvania.
| ||||
Adam Noble |
55 | Chief Technology and Innovation Officer. Mr. Noble joined American Water effective August 31, 2020 as our Chief Technology and Innovation Officer. Prior to joining us, Mr. Noble served as Senior Vice President and Chief Information Officer of Veritiv Corporation, a North American business-to-business distributor of packaging and facility solutions, since June 2019. Previously, Mr. Noble served as Senior Vice President and Global Chief Information Officer at GAF Materials Corporation, a global manufacturing company, from May 2010 to March 2019, and as its Vice President and Chief Information Officer from May 2006 to April 2010. Mr. Noble has over 30 years of collective experience in the information technology sector.
| ||||
Cheryl Norton |
56 | Executive Vice President and Chief Operating Officer. Ms. Norton has over 30 years of employment with the Company serving in various roles, including operational leadership, environmental stewardship, laboratory management and research. She has served as the Companys Executive Vice President and Chief Operating Officer since March 1, 2021. Prior to that, she served as Senior Vice President, Chief Environmental Officer from March 1, 2020 to March 1, 2021. She was also appointed as the Companys Senior Vice President, Eastern Division and President of its New Jersey subsidiary in March 2019 and continues to serve as New Jersey President. Prior to that, Ms. Norton served as President of the Companys Missouri subsidiary from November 2015 to March 2019, and President of its Kentucky subsidiary from January 2011 until November 2015. In addition, Ms. Norton also serves as a member of the Board of Directors of the Water Research Foundation.
| ||||
Michael A. Sgro |
62 | Executive Vice President and General Counsel. Mr. Sgro has over 25 years of experience in the water and wastewater industry. He has served as the Companys Executive Vice President and General Counsel since January 2016 and as its Secretary from January 2015 to February 17, 2021. He served as the Companys Senior Vice President and General Counsel from February 2015 until January 2016, as its Interim General Counsel from January 2015 until February 2015, and as Vice President, General Counsel and Secretary of the Companys Northeast Division from 2002 to 2015.
|
American Water | 2021 Proxy Statement | 17 |
Name |
Age | Office and Experience | ||||
William Varley |
63 | Chief Growth Officer. Mr. Varley was appointed as the Companys Chief Growth Officer and an executive officer effective June 1, 2020. Following a brief retirement from the Company in April 2019 after approximately 19 years of employment, Mr. Varley served as a consultant to the Companys New York subsidiary for approximately three months beginning in March 2020. Prior to that, Mr. Varley held the Deputy Chief Operating Officer role from April 2018 until April 2019, where he developed and mentored the Companys divisional leads and state presidents and led the customer service organization. Prior to that, from February 2017 to April 2018, Mr. Varley served as Senior Vice President of the Companys Midwest Division. From January 2014 to February 2017, Mr. Varley served as Senior Vice President of the Companys Northeast Division and President of its New Jersey subsidiary. Mr. Varley had also been President of the Companys New York subsidiary, a position he held from 2007 until his transition to the Northeast Division.
| ||||
Melissa K. Wikle |
56 | Vice President and Controller. Ms. Wikle joined American Water in July 2016 as its Vice President and Controller, and assumed the duties of our principal accounting officer in August 2016. Prior to joining us, Ms. Wikle served as Corporate Controller and Chief Accounting Officer of Columbus McKinnon Corporation, a publicly-traded worldwide designer, manufacturer and marketer of material handling products, systems and services, since April 2011. Ms. Wikle is a Certified Public Accountant.
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18 | American Water | 2021 Proxy Statement |
20 | American Water | 2021 Proxy Statement |
American Water | 2021 Proxy Statement | 21 |
We have provided below for each of our 11 director nominees a summary of biographical and committee information as of the date of this proxy statement.
Jeffrey N. Edwards
Independent Director
Age: 60
Director Since: 2018
Committees: Audit, Finance and Risk Nominating |
Other Current Public Company Boards:
· Raymond James Financial, Inc. (NYSE: RJF), a diversified financial services company, since 2014
Past Public Company Boards:
· The NASDAQ Stock Market, Inc., 2004 to 2006
Business Experience:
· Chief Operating Officer, New Vernon Capital, since 2009 · Various senior executive positions over 22 years at Merrill Lynch & Co., including: § Vice Chairman, from 2007 to 2009 § Chief Financial Officer, from 2005 to 2007 § Head of Origination, Americas, from 2004 to 2005 § Head of Global Capital Markets, from 2003 to 2004 § Co-Head of Global Equity, from 2001 to 2003
Other Positions:
· Director, Medusind Solutions India Private Limited and Medusind Solutions, Inc., from 2012 to 2019 · Chairman, Board of Trustees, The Pingry School
Education:
· Bachelor of Science, with Honors, Haverford College · Master in Business Administration, The Harvard Business School
Experience and Qualifications to Serve on the Board:
· Mr. Edwards current executive leadership position with an investment advisory firm demonstrates focus on growth and strategic planning. · Longstanding executive experience with a leading global capital markets and financial services firm provides Mr. Edwards with a substantive understanding of many issues confronting our business, including capital markets needs, strategic planning, growth opportunities and a variety of operational matters. |
22 | American Water | 2021 Proxy Statement |
Martha Clark Goss
Independent Director
Age: 71
Director Since: 2003
Committees: Audit, Finance and Risk (Chair) Compensation |
Other Current Public Company Boards:
· Neuberger Berman Mutual Funds, since 2007 · Allianz Life Insurance Company of New York, since 2005
Past Public Company Boards:
· Dexter Corporation · Claires Stores Inc. · Ocwen Financial Corporation · Foster Wheeler Corporation
Business Experience:
· Chief Operating Officer and Chief Financial Officer of Amwell Holdings/Hopewell Holdings LLC, a holding company and investment vehicle for investments in healthcare related companies, from 2003 until 2014 · Chief Financial Officer of The Capital Markets Company, from 1999 until 2001 · Chief Financial Officer of Booz Allen Hamilton Holding Corporation (formerly Booz-Allen Hamilton Inc.), a consulting firm, from 1995 to 1999 · Various senior executive positions at Prudential Insurance Company, or Prudential, from 1981 until 1995, including President of Prudential Power Funding Associates, the investment arm of Prudential responsible for electric and gas utilities and alternative energy projects, Senior Vice President, Enterprise Risk Management and President, Prudential Asset Management Company, and Treasurer of Prudential · Vice President, The Chase Manhattan Bank, from 1971 to 1976 and from 1978 to 1981
Other Positions:
· Trustee Emerita, Brown University, since 1987 · Trustee and Treasurer, Brown University, from 1987 to 1998 · Member of the Board of the Museum for American Finance, since 2013 · Member and Past President, director and audit committee chair of the Financial Womens Association of New York, from 1987 to 2018 · Member of the Committee of 200, a womens professional organization · Member of the Presidents Advisory Council for the Economics Department, Brown University, since 2018
Education:
· Bachelor of Arts, Brown University · Master in Business Administration, The Harvard Business School
Experience and Qualifications to Serve on the Board:
· Ms. Goss extensive financial, investment, and governance experience provides valuable insights to the Board and its committees. · Experience as President of an investment subsidiary of Prudential, responsible for substantial investments in electric and gas public utilities and alternative energy projects, enables Ms. Goss to share with the Board her considerable knowledge regarding public utilities. · Experience as Senior Vice President, Enterprise Risk Management, at Prudential enables Ms. Goss to provide expertise in risk management. |
American Water | 2021 Proxy Statement | 23 |
Veronica M. Hagen
Independent Director
Age: 75
Director Since: 2016
Committees: SETO (Chair) Compensation Nominating |
Other Current Public Company Boards:
· Newmont Corporation (NYSE: NEM), a producer of gold, since 2005 · Stericycle, Inc. (Nasdaq: SRCL), a multinational business-to-business services provider, since June 2018
Past Public Company Boards:
· Southern Company, from 2008 to 2019 (Lead Independent Director from 2014 to 2016) · Polymer Group, Inc., from 2007 to 2015 · Jacuzzi Brands, Inc., from 2004 to 2007
Business Experience:
· Chief Executive Officer of Polymer Group, Inc. (now known as AVINTIV Specialty Materials Inc.), a global manufacturer of specialty materials, from April 2007 to August 2013 · President and Chief Executive Officer of Sappi Fine Paper North America, a division of a South African-based pulp and paper company, from 2004 to 2007 · Various executive positions with Alcoa, Inc., including as Vice President and Chief Customer Officer and President, Alcoa Engineered Products, from 1998 to 2004
Education:
· Bachelor of Arts, University of Southern California · Bachelor of Science, University of Southern California
Experience and Qualifications to Serve on the Board:
· Ms. Hagen has over 35 years of executive experience in global operational management and commercial business leadership, including serving as the chief executive officer of two successful public companies. · Ms. Hagen has extensive experience and past service as a public company board member. · Ms. Hagen also has significant leadership in the areas of employee engagement, customer service, strategic planning and business growth. |
24 | American Water | 2021 Proxy Statement |
Kimberly J. Harris
Independent Director
Age: 56
Director Since: 2019
Committees: Compensation SETO |
Other Current Public Company Boards:
· U.S. Bancorp (NYSE: USB), a bank holding company, since 2014
Past Public Company Boards:
· Puget Energy, Inc. and Puget Sound Energy, Inc. from March 2011 to January 2020
Business Experience:
· Chief Executive Officer of Puget Energy, Inc. and Puget Sound Energy, Inc., Washington states largest utility, from March 2011 until January 2020. She held various senior executive positions, including: § President of Puget Energy, Inc. and Puget Sound Energy, Inc. from July 2010 to August 2019 § Executive Vice President and Chief Resource Officer from May 2007 until July 2010 § Senior Vice President Regulatory Policy and Energy Efficiency from 2005 to May 2007
Education:
· Bachelor of Arts, San Diego State University · Juris Doctor, Arizona State University
Experience and Qualifications to Serve on the Board:
· Ms. Harris significant background and experience as a chief executive officer provides valuable leadership perspective to our Board. · Ms. Harris focus on safety in her executive leadership role corresponds with our zero incidents and injuries safety program goal. · Ms. Harris leadership role in the day-to-day operations of a regulated utility provides critical oversight and experience relevant to our regulated operations. · Ms. Harris experience in environmental stewardship and customer perspectives focused on the utility industry provides the Board with valuable expertise in these core strategic areas. |
American Water | 2021 Proxy Statement | 25 |
Julia L. Johnson
Independent Director
Age: 58
Director Since: 2008
Committees: Compensation (Chair) Nominating |
Other Current Public Company Boards:
· MasTec, Inc. (NYSE: MTZ), a utility infrastructure contractor, since 2002 · NorthWestern Corporation (Nasdaq: NWE), a transporter and producer of energy, since 2004 · FirstEnergy Corp. (NYSE: FE), a transporter and producer of energy, since 2011
Past Public Company Boards:
· Allegheny Energy, Inc., from 2003 until its merger with FirstEnergy Corp. in 2011
Business Experience:
· President of Net Communications, LLC, a strategy consulting firm specializing in the communications, energy and information technology public policy arenas, since 2001
Other Positions:
· Florida Public Service Commission, from January 1992 until November 1999, including chairwoman from January 1997 to January 1999 · Chair, Floridas Information Service Technology Development Task Force, from November 1999 to July 2001 · Chair, Emerging Issues Policy Forum · Chair, Womens Energy & Innovation Network, Inc. · Member, Foundation for Floridas Future · Officer, Innovative Energy Solutions
Education:
· Bachelor of Science in Business Administration, University of Florida · Juris Doctor, University of Florida College of Law
Experience and Qualifications to Serve on the Board:
· Ms. Johnsons service on a state public service commission with regulatory oversight over Floridas electric, telecommunications and water and wastewater industries, as well as her current leadership of a firm specializing in regulatory analysis and legal strategy, enables her to provide valuable perspectives on regulatory and public policy matters affecting our operations. · Ms. Johnsons current and past public company board experience enables her to share with the Board relevant and experiential insights on a variety of public company matters. |
26 | American Water | 2021 Proxy Statement |
Patricia L. Kampling
Independent Director
Age: 61
Director Since: 2019
Committees: Audit, Finance and Risk SETO |
Other Current Public Company Boards:
· Xcel Energy Inc. (Nasdaq: XEL), a utility holding company based in Minneapolis, Minnesota, since August 2020 · Board of Trustees, Fidelitys Equity and High Income Funds, since May 2020, and Advisory Board Member, from February 2020 to May 2020
Past Public Company Boards:
· Briggs and Stratton Corporation, a producer of gasoline engines for outdoor power equipment, from January 2011 to January 2021 · Alliant Energy Corporation, an investor-owned public utility holding company, from April 2012 to June 2019
Business Experience:
· Chief Executive Officer and Chairman of the Board, Alliant Energy Corporation, from April 2012 to June 2019. Ms. Kampling held various positions with Alliant Energy Corporation including: § President, from February 2012 to December 2017 § President and Chief Operating Officer, from February 2011 to March 2012 § Executive Vice President and Chief Financial Officer, from 2010 to 2011 § Vice President, Chief Financial Officer and Treasurer, from 2009 to 2010 § Vice President of Finance, from 2005 to 2009 · Twenty years at Exelon Corporation, where she began her career as an engineer with Philadelphia Electric Company (PECO) and ultimately served as Treasurer of Commonwealth Edison and as Senior Vice President and Chief Financial Officer of Exelon Enterprises
Other Board Positions:
· American Transmission Company, a privately held electricity transmission and distribution utility company, from June 2011 to June 2019
Education:
· Bachelor of Arts, Economics, and Bachelor of Science, Engineering, Swarthmore College · Master of Business Administration, Finance, University of Chicago Booth School
Experience and Qualifications to Serve on the Board:
· Ms. Kamplings experience in strategic leadership, operations, customer perspective, legal and regulatory, human resources/executive compensation, risk management and environmental and safety matters allows her to contribute significantly to the Boards oversight on these core strategic functions. · Ms. Kamplings advocacy for workforce development, diversity and community vitality provides the Board with valuable insights on our focus on people, social responsibility and operational excellence. |
American Water | 2021 Proxy Statement | 27 |
Karl F. Kurz
Chairman Independent Director
Age: 59
Director Since: 2015 Chairman Since: 2018 |
Other Current Public Company Boards:
· Devon Energy Corporation (NYSE: DVN), a U.S. energy producer, since January 2021
Past Public Company Boards:
· SemGroup Corporation, from 2009 to 2019 · Global Geophysical Services, Inc., from 2011 to 2015 · Western Gas Partners, from 2007 to 2009 · WPX Energy, Inc., from 2014 until its merger of equals with Devon Energy Corporation in January 2021
Business Experience:
· Mr. Kurz is a private investor in the energy industry · Chairman of Siluria Technologies Inc., a private energy technology company, from 2013 to 2018 · Managing Director, Co-Head of Energy, and a Member of the Investment Committee of CCMP Capital Advisors LLC, a leading global private equity firm, from 2009 to 2012 · Various executive and management positions with Anadarko Petroleum Corporation, including most recently Chief Operating Officer, from 2000 to 2009 · Former General Manager, Midstream and Marketing, Vastar Resources, Inc. · Formerly held various management positions at ARCO Oil and Gas Company, in reservoir engineering, production operations, and financial trading · Operating Advisor, Ares Capital Corporation
Education:
· Bachelor of Science, magna cum laude, Petroleum Engineering, Texas A&M University · Advanced Management Program graduate, The Harvard Business School
Experience and Qualifications to Serve on the Board:
· Mr. Kurzs long history of working in the oil and gas industry is invaluable as we continue pursuing potential opportunities and solutions with respect to the national water-energy nexus discussion, smart water grid development and water supply issues. · His experience in finance and capital markets brings additional insights to us and the Board regarding our operations, including with respect to liquidity and capital resources. |
28 | American Water | 2021 Proxy Statement |
Walter J. Lynch
President and Chief Executive Officer and Director
Age: 58
Director Since: 2020 |
Business Experience:
· President and Chief Executive Officer of the Company, since April 1, 2020 · Executive Vice President and Chief Operating Officer of the Company, from January 2016 to March 31, 2020 · President and Chief Operating Officer, Regulated Operations, from February 2010 through December 2015 · President of Regulated Operations, July 2008 to February 2010 · Formerly Executive Vice President, Eastern Division and President of our New Jersey and New York subsidiaries, as well as President of our Market-Based Businesses · Mr. Lynch joined the Company in 2001
Other Positions:
· Member of the Board of Directors and Executive Committee, and former President, National Association of Water Companies
Education:
· Bachelor of Science, General Engineering, U.S. Military Academy at West Point, attaining the rank of Captain before his departure from the U.S. Army in 1990 · Advanced Management Program, University of Pennsylvanias Wharton School of Business · International Institute for Management Development, Lausanne, Switzerland · Post-Graduate Training, Oxford University, England
Experience and Qualifications to Serve on the Board:
· Mr. Lynchs intimate knowledge regarding our business and industry, by virtue of his approximately 25 years of service in the regulated and market-based water and wastewater industry, enables him to provide valuable insights regarding our strategies, operations, finance, administration and personnel matters. · Mr. Lynch has held a variety of operational leadership roles within the Company for both its regulated and market-based businesses, which provides the Board with important perspectives on our operational and strategic functions across the Companys footprint. · Through Mr. Lynchs prior military service with the U.S. Army, he exhibits superior leadership qualities and skills, and his relationships and knowledge of the military also directly support the operations of our Military Services Group. |
American Water | 2021 Proxy Statement | 29 |
George MacKenzie
Independent Director
Age: 72
Director Since: 2003 Former Chairman: 2006 to 2018
Committees: Nominating (Chair) Audit, Finance and Risk |
Other Current Public Company Boards:
· Tractor Supply Company (Nasdaq: TSCO), a U.S. retailer, since May 2007
Past Public Company Boards:
· Safeguard Scientifics, Inc., from February 2003 to June 2018 · C&D Technologies, Inc., from March 1999 to December 2010 · traffic.com, from December 2005 to March 2007 · Central Vermont Public Service Corp., from May 2001 to May 2006 · Hercules Incorporated, Vice Chairman of the Board of Directors, from April 2000 to June 2001
Business Experience:
· Executive Vice President and Chief Financial Officer of P.H. Glatfelter Company, a specialty paper manufacturer, from September 2001 to June 2002 · Various senior management positions, including most recently President, Chemical Specialties and Chief Financial Officer, Hercules Incorporated, a global manufacturer of specialty chemicals, from 1979 to 2001
Other Positions:
· Member, American and the Pennsylvania Institutes of Certified Public Accountants · Member, Financial Executives Institute and Institute of Management Accountants
Education:
· Bachelor of Science, Business-Finance and Economics, University of Delaware · Master of Business Administration, University of Chicago
Experience and Qualifications to Serve on the Board:
· Mr. MacKenzies extensive service on public company boards of directors enables him to provide valuable insights into our corporate governance. · His lengthy experience in operational and financial management enables him to provide useful insights on executive management considerations. · His financial executive experience, coupled with his public accounting background, gives him an intimate knowledge of financial matters. |
30 | American Water | 2021 Proxy Statement |
James G. Stavridis
Independent Director
Age: 66
Director Since: 2018
Committees: Nominating SETO |
Other Current Public Company Boards:
· Neuberger Berman Mutual Funds, since 2015
Business and Military Experience:
· Operating Executive, The Carlyle Group · Chairman, Board of Advisors, McLarty Associates · Dean, Tufts University, Fletcher School of Law and Diplomacy, from 2013 to 2018 · Admiral, U.S. Navy (Ret.), from 2006 to 2013 § Supreme Allied Commander, NATO, and Commander, U.S. European Command, from 2009 to 2013 § Commander, U.S. Southern Command, from 2006 to 2009
Other Director Positions:
· Director, NFP Corp., since 2017 · Director, Michael Baker International, LLC, since 2013 · Director, White Field Capital LLC, since January 2020 · Director, Vigor/MHI Shipyard · Director, The HOW Institute for Society · Director, The Rockefeller Foundation · Director, Onassis Foundation
Education:
· Bachelor of Science, U.S. Naval Academy · Master of Arts and Ph.D., Tufts University, Fletcher School of Law and Diplomacy
Experience and Qualifications to Serve on the Board:
· Admiral Stavridis academic and practical knowledge in cybersecurity, critical infrastructure, innovation and leadership offers skill sets that are critical to the oversight of our regulated and market-based operations. · Admiral Stavridis long-standing service in a wide range of senior commands with the U.S. Navy exhibits superior leadership qualities and skills, and also serves to directly support our Military Services Group market-based business. · Admiral Stavridis has significant experience serving on public and private boards of directors in a wide variety of industries, including insurance brokerage, mutual funds, construction and software. |
American Water | 2021 Proxy Statement | 31 |
Lloyd M. Yates
Independent Director
Age: 60
Director Since: 2019
Committees: Audit, Finance and Risk SETO |
Other Current Public Company Boards:
· NiSource Inc. (NYSE: NI), an energy holding company, since March 2020 · Sonoco Products Company (NYSE: SON), a global diversified packaging company, since October 2019 · Marsh & McLennan Companies, Inc. (NYSE: MMC), since 2011
Business Experience:
· Executive Vice President, Duke Energy Corporation, and President of Duke Energys Carolinas Region, from July 2012 to September 2019 · President and Chief Executive Officer for Progress Energy Carolinas, which was acquired by Duke Energy in July 2012, from July 2007 to July 2012 · Senior Vice President - Energy Delivery, Progress Energy Carolinas, from 2005 to 2007 · Vice President - Transmission, Progress Energy Carolinas, from 2003 to 2005 · Vice President of Fossil Generation of Progress Energys predecessor, Carolina Power & Light, from 1998 to 2003 · Several line operations and management positions over his 16 years with Philadelphia Electric Company (PECO)
Other Positions:
· Director, Big Brothers Big Sisters · Director, Trees Charlotte · Director, Charlotte City Center Partners
Education:
· Bachelor of Science, Mechanical Engineering, University of Pittsburgh · Master of Business Administration, St. Josephs University · Advanced Management Program, University of Pennsylvania Wharton School · Executive Management Program, Harvard Business School
Experience and Qualifications to Serve on the Board:
· Mr. Yates has 35 years of experience in the energy industry, including the areas of energy generation and delivery, which enables him to provide valuable perspectives on regulatory and utility transmission and distribution issues. · Mr. Yates has significant leadership in the areas of customer and energy delivery operations, strategic planning and business growth, which allows him to provide valuable insights as to these matters to our Board. |
32 | American Water | 2021 Proxy Statement |
Type of Relationship (1) |
Description of Relationship (1)(2) | |||
Employee or executive officer of American Water | The director is, or has been within the last three years, an employee of American Water, or an immediate family member of the director is, or has been within the last three years, an executive officer of American Water. However, employment as an interim chief executive officer or other officer will not disqualify a director from being considered independent following that employment. | |||
Relationships with internal or external auditor | Any of the following relationships exist: · the director is a current partner or employee of American Waters internal or external auditor · the director has an immediate family member who is a current partner of the internal or external auditor · the director has an immediate family member who: § is a current employee of the external auditor and § personally works on the Companys audit · the director or an immediate family member of the director was, within the last three years: § a partner or employee of the internal or external auditor and § personally worked on the Companys audit within that time | |||
Compensation Committee interlocks | The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where any of the Companys present executive officers at the same time serves or served on that companys compensation committee. |
American Water | 2021 Proxy Statement | 33 |
Type of Relationship (1) |
Description of Relationship (1)(2) | |||
Receipt of direct compensation from American Water | The director or an immediate family member of the director received, during any 12-month period within the last three years, more than $120,000 in direct compensation from American Water, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
Compensation received by a director for former service as an interim chief executive officer or other executive officer need not be considered in determining independence under this standard.
Compensation received by an immediate family member for service as an employee of American Water (other than as an executive officer) need not be considered in determining independence under this standard. | |||
Receipt of indirect compensation from American Water | The director is a current employee or holder of more than 10 percent of the equity of another company, or an immediate family member of the director is a current executive officer or holder of more than 10 percent of the equity of another company, that has made payments to, or received payments from, American Water or any subsidiary in any of the other companys last three fiscal years, that exceeds the greater of $1 million or two percent of such other companys consolidated gross revenues. | |||
Charitable contributions by American Water | The director is a current executive officer of a charitable organization to which American Water or any subsidiary has made charitable contributions in any of the charitable organizations last three fiscal years that exceed the greater of $1 million or two percent of that charitable organizations consolidated gross revenues. |
(1) | A persons immediate family includes a persons spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone (other than domestic employees) who shares such persons home. |
(2) | The term executive officer is defined to mean the following officers of American Water: President; Chief Financial Officer; Controller; any Vice President in charge of a principal business unit, division or function; and any other officer who performs similar policy-making functions for American Water. The term also includes any other person who performs similar policy-making functions for American Water. An officer of a subsidiary of American Water would be deemed to be an executive officer for purposes of this standard if he or she performs such policy-making functions for American Water. The names, ages and background of American Waters executive officers, as defined above, as of the date of this proxy statement, are included beginning on page 16 of this proxy statement. |
Director Evaluations and Assessments
34 | American Water | 2021 Proxy Statement |
Name |
Fee Earned or Paid in Cash ($) |
Stock Unit Awards ($)(1) |
All Other Compensation ($)(2) |
Total ($) | ||||||||||||||||||||
Jeffrey N. Edwards |
$ | 100,000 | $ | 135,035 | $ | 3,866 | $ | 238,901 | ||||||||||||||||
Martha Clark Goss |
$ | 125,000 | $ | 135,035 | $ | 3,866 | $ | 263,901 | ||||||||||||||||
Veronica M. Hagen |
$ | 120,000 | $ | 135,035 | (4) | $ | 3,866 | $ | 258,901 | |||||||||||||||
Kimberly J. Harris |
$ | 100,000 | $ | 135,035 | $ | 2,447 | $ | 237,482 | ||||||||||||||||
Julia L. Johnson |
$ | 120,000 | $ | 135,035 | $ | 14,463 | $ | 269,498 | ||||||||||||||||
Patricia L. Kampling |
$ | 100,000 | $ | 135,035 | $ | 2,447 | $ | 237,482 | ||||||||||||||||
Karl F. Kurz |
$ | 162,500 | (3) | $ | 197,484 | $ | 5,654 | $ | 365,638 | |||||||||||||||
George MacKenzie |
$ | 120,000 | $ | 135,035 | $ | 3,866 | $ | 258,901 | ||||||||||||||||
James G. Stavridis |
$ | 100,000 | $ | 135,035 | $ | 3,866 | $ | 238,901 | ||||||||||||||||
Lloyd M. Yates |
$ | 100,000 | $ | 135,035 | (4) | $ | 2,447 | $ | 237,482 |
(1) | The amounts shown in this column reflect the grant date fair value of the stock units granted to the directors as part of their annual retainer. The grant date fair value was computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, CompensationStock Compensation, or ASC 718. See Note 11Stock Based Compensation, in the Notes to Consolidated Financial Statements included in the 2020 Form 10-K for the assumptions used in determining grant date fair value. |
(2) | Represents dividend equivalents paid in cash in 2020 at the time of the distribution of shares underlying stock unit awards. |
(3) | Mr. Kurz elected to defer the receipt of his 2020 annual retainer fees. |
(4) | Ms. Hagen and Mr. Yates elected to defer the receipt of shares underlying this stock unit award beyond August 13, 2021. |
The following table shows the aggregate number of stock units held by each person who served as a non-employee director as of December 31, 2020:
Name |
Stock Units (#) |
|||
Jeffrey N. Edwards |
1,159 | |||
Martha Clark Goss |
2,535 | |||
Veronica M. Hagen |
5,437 | |||
Kimberly J. Harris |
1,159 | |||
Julia L. Johnson |
7,802 | |||
Patricia L. Kampling |
1,159 | |||
Karl F. Kurz |
3,100 | |||
George MacKenzie |
1,159 | |||
James G. Stavridis |
1,159 | |||
Lloyd M. Yates |
1,159 |
We did not grant stock options to non-employee directors in 2020 and none of the non-employee directors held any Company stock options as of December 31, 2020.
36 | American Water | 2021 Proxy Statement |
VOTE TO APPROVE, ON AN ADVISORY BASIS, THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Board unanimously recommends a vote FOR the approval, on an advisory basis, of the compensation of our NEOs.
38 | American Water | 2021 Proxy Statement |
The Compensation Committee has reviewed and discussed with our management the Compensation Discussion and Analysis, or CD&A, required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement.
Respectfully submitted,
Julia L. Johnson (Chair)
Martha Clark Goss
Veronica M. Hagen
Kimberly J. Harris
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy
American Water | 2021 Proxy Statement | 39 |
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Our Operating Performance in 2020
Our operating performance in 2020 demonstrated our continued commitment to shareholders and our focus on our five strategic themes in 2020: safety, customers, people, operational excellence and growth. By focusing on keeping our employees safe, delivering outstanding customer service, effectively managing costs, investing capital where needed, maintaining constructive regulatory relationships and growing strategically, we continue to create value for our shareholders. Operating performance highlights for 2020 include the following:
Total Shareholder Return, or TSR |
|
Our TSR for the five years ended December 31, 2020 was 182.4 percent, compared to 103.0 percent for the S&P 500 Index and 78.6 percent for the PHLX Utility Sector Index over that same five-year period
| ||
Annual Dividends |
|
10.1 percent overall five-year compound annual growth rate of annual dividend payments anchored off 2015 dividends paid, and seven years in a row of nearly 10 percent or more annual dividend increases
| ||
Diluted earnings per share, or EPS |
|
14.0 percent increase in 2020 diluted EPS compared to 2019 diluted EPS, primarily due to continued growth in our regulated businesses from infrastructure investment, acquisitions and organic growth, and growth in our Military Services Group, as well as a loss in 2019 on the sale of our former Keystone Clearwater Solutions operations
| ||
Adjusted O&M Efficiency Ratio - Regulated Businesses (1) (2) |
|
Adjusted operation and maintenance, or O&M, efficiency ratio for the regulated businesses during 2020 was 34.3 percent in 2020, compared to 34.5 percent during 2019
| ||
Regulated Businesses Growth |
|
Approximately 37,800 new customers added in 2020 through regulated acquisitions and approximately 14,500 new regulated customers added in 2020 through organic growth
| ||
Market-Based Businesses Growth |
|
0.2 percent increase in operating revenues and a 97.8 percent increase in net income in 2020 compared to 2019 in our market-based businesses, largely resulting from the loss in 2019 on the sale of our former Keystone Clearwater Solutions operations.
| ||
OSHA Recordable Incident Rate, or ORIR |
|
Reduced our ORIR to 0.99 in 2020 from 1.13 in 2019 |
(1) | A non-GAAP financial measure; see Appendix A for a calculation of this ratio, a reconciliation of each component of the ratio to its most directly comparable GAAP measure, and other information. |
(2) | A decrease in our adjusted O&M efficiency ratio from period to period reflected an increase in the operating efficiency of our regulated businesses. |
40 | American Water | 2021 Proxy Statement |
Return to Shareholders
12/31/2015 | 12/30/2016 | 12/29/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | |||||||||||||||||||
American Water Works Company, Inc. |
$ | 100.00 | $ | 123.59 | $ | 159.46 | $ | 161.54 | $ | 222.57 | $ | 282.40 | ||||||||||||
PHLX Utility Sector Index |
$ | 100.00 | $ | 117.40 | $ | 132.45 | $ | 137.11 | $ | 173.87 | $ | 178.61 | ||||||||||||
S&P 500 Index |
$ | 100.00 | $ | 111.95 | $ | 136.38 | $ | 130.39 | $ | 171.44 | $ | 202.96 |
American Water | 2021 Proxy Statement | 41 |
Summary of Executive Compensation Practices
The table below summarizes compensation practices that we do and do not follow:
|
| |
· Considerable portion of pay is variable, rather than fixed, and is earned solely based on performance without incentivizing excessive risk-taking |
· No established single-trigger change in control payment requirements | |
· Equity compensation is weighted significantly toward performance stock units |
· No excise tax gross-ups | |
· Executive stock ownership guidelines and retention requirements encourage equity ownership and retention |
· No repricing of underwater stock options | |
· Compensation Committee oversees annual compensation program risk assessment |
· If executive stock ownership guidelines are not met, sales or transfers of stock, subject to certain exceptions, are prohibited | |
· A representative, relevant peer group is used for TSR performance and compensation benchmarking and is evaluated annually |
· No supplemental executive retirement plans open to new participants | |
· Reasonable and customary severance arrangements are provided to our NEOs |
· No hedging, pledging or short selling common stock by employees, officers and directors | |
· Compensation Committee retained and used an independent consultant throughout 2020 |
· No individual employment or change of control agreements with our current NEOs, other than customary employment offer letters | |
· Double-trigger change in control provision in 2017 Omnibus Plan |
· Prohibition on buying our common stock on margin | |
· Limited and customary perquisites and other personal benefits |
· No distribution of cash dividend equivalents on equity awards unless and until they vest | |
· Cash performance-based awards and equity awards subject to clawback policy |
Highlights of 2020 Compensation Actions
The table below highlights significant compensation actions taken by the Compensation Committee with respect to 2020 regarding our primary elements of executive compensation. For more information on the Compensation Committees use of various benchmarking data, see Compensation Determinations and Pay Competitiveness in 2020.
Compensation Element |
NEO | Action Taken | Rationale | |||||||||
Base Salary |
Mr. Lynch | · | Increased annual base salary to $925,000 as of April 2020 in connection with his promotion to CEO | · | Part of compensation adjustments in connection with Mr. Lynchs succession to the CEO role | |||||||
Ms. Hardwick | · | Increased annual base salary for 2020 by 3.0 percent from 2019 | · | Reflected positive achievements as CFO, and brought her annual base salary closer to the median of the companies in the peer group data for her position |
42 | American Water | 2021 Proxy Statement |
Compensation Element |
NEO | Action Taken | Rationale | |||||||||||||||
|
Mr. Sgro Mr. Warnock |
· | Increased annual base salaries for 2020 by 5.7 percent and 5.9 percent, respectively, from 2019 | |
· |
|
For Mr. Sgro, brought his annual base salary closer to the median of the peer group data for his position | |||||||||||
|
· |
|
Annual base salary was adjusted based on Mr. Warnocks performance during 2019 | |||||||||||||||
Mr. Hauk | · | Increased annual base salary to $375,000 as of March 2020 | · | Set as part of his transition in 2020 to his role as President, Regulated Operations and Military Services Group | ||||||||||||||
Mr. Chin | · | Increased annual base salary for 2020 by 2.0 percent, from 2019 | · | Reflected standard merit adjustment consistent with those provided to other executives | ||||||||||||||
APP |
Mr. Lynch | · | Increased initial APP payout opportunity from 75 percent to 100 percent in April 2020 | · | Part of compensation adjustments in connection with Mr. Lynchs succession to the CEO role and consistent with CEO transitions during the past four years | |||||||||||||
Mr. Warnock | · | Increased APP payout opportunity from 50 percent to 65 percent in December 2019 | · | Became directly responsible for our Homeowner Services Group, or HOS, business unit | ||||||||||||||
LTPP |
Mr. Lynch | · | Increased 2020 award opportunity from 165 percent to 275 percent of base salary | · | Part of compensation adjustments in connection with Mr. Lynchs succession to the CEO role and consistent with CEO transitions during the past four years | |||||||||||||
Ms. Hardwick | · | Increased 2020 award opportunity from 150 percent to 165 percent of base salary | · | Brought total direct compensation within the competitive ranges of the benchmarking data | ||||||||||||||
Mr. Sgro | · | Increased 2020 award opportunity from 125 percent to 135 percent of base salary | · | Maintained total direct compensation within the competitive ranges of the benchmarking data |
American Water | 2021 Proxy Statement | 43 |
2020 American Water Compensation Peer Group | ||||
Alliant Energy Corporation |
Entergy Corporation | OGE Energy Corp. | ||
Ameren Corporation |
Evergy, Inc. | Pinnacle West Capital Corporation | ||
Atmos Energy Corporation |
Eversource Energy | PPL Corporation | ||
CenterPoint Energy, Inc. |
MDU Resources Group, Inc. | UGI Corporation | ||
CMS Energy Corporation |
NiSource Inc. | WEC Energy Group, Inc. |
New or Amended Executive Compensation Arrangements in 2020
American Water | 2021 Proxy Statement | 45 |
Named Executive Officer |
Percentage of Base Salary |
2020 APP Target |
2020 APP Payout Percentage |
2020 APP Award |
||||||||||||
Walter J. Lynch (1) |
100 | % | $ | 813,310 | 118.5 | % | $ | 963,772 | ||||||||
M. Susan Hardwick |
75 | % | $ | 424,875 | 118.5 | % | $ | 503,477 | ||||||||
Michael A. Sgro |
75 | % | $ | 356,838 | 118.5 | % | $ | 422,853 | ||||||||
Loyd A. Warnock (2) |
65 | % | $ | 314,925 | 118.5 | % | $ | 373,186 | ||||||||
Bruce A. Hauk |
50 | % | $ | 182,855 | 119.5 | % | $ | 218,435 | ||||||||
Brian Chin (3) |
50 | % | $ | 156,227 | 118.5 | % | $ | 185,128 |
(1) | Mr. Lynchs APP award was increased in February 2020 to 100% of his base salary effective April 1, 2020 in connection with his succession to the CEO role. |
(2) | Although Mr. Warnock was not eligible to receive a payment under the APP for 2020 due to his retirement on January 2, 2021, we agreed that, if we made APP payments to other employees for 2020, he would be entitled under the terms of his separation agreement to receive an APP-like payment upon satisfaction of identical performance criteria and other conditions as his APP award opportunity, except that his employment could terminate on January 2, 2021. See Executive Compensation2020 Summary Compensation TableEmployment and Separation AgreementsLoyd A. Warnock on page 61 of this proxy statement for more information. |
(3) | Pursuant to the terms of his November 2020 separation agreement, Mr. Chin was entitled to receive a prorated APP award for 2020, payable at the same time as awards to other APP participants. |
American Water | 2021 Proxy Statement | 47 |
Performance Measure |
Percentage Included in Corporate Performance Factor |
Threshold Performance (Weighting) |
Target Performance (Weighting) |
Maximum Performance (Weighting) |
Actual Performance (Percentage |
How We
Calculate |
Why We Use this | |||||||
EPS (1) | 50.0% | $3.60 (0.0%) |
$3.84 (50.0%) |
$3.89 (75.0%) |
$3.91 (75.0%) |
EPS is diluted EPS calculated in accordance with GAAP as reported in the Companys audited consolidated financial statements. | EPS is a key measure of our financial and operational success, and achieving our earnings and strategic goals creates long-term shareholder value and provides greater total return to our shareholders. | |||||||
Customer Satisfaction |
15.0% | Fourth Quartile (0.0%) | Second Quartile (15.0%) |
First Quartile (22.5%) |
Top Half (16.5%) |
A quarterly survey is conducted by a third-party firm of random regulated water and wastewater customers, and the results are aggregated and weighted for each individual state. | Our service quality and ability to satisfy our customers are a focus of state public utility commissions in evaluating rate cases. | |||||||
ORIR (2) | 7.5% | 1.14 (0.0%) |
0.91 (7.5%) |
0.86 (11.25%) |
0.99 (4.6%) |
ORIR is a measure of injuries and illnesses requiring treatment beyond first aid for every 200,000 hours worked. | To continue our momentum toward becoming an industry leader with respect to the safety and well-being of our workforce. | |||||||
DART Injury Rate (2) |
7.5% | 0.78 (0.0%) |
0.62 (7.5%) |
0.59 (11.25%) |
0.63 (11.25%) |
DART injury rate measures the number of OSHA defined recordable injuries that resulted in days away from work, work restrictions, or job duty/position transfers in the calendar year per 100 employees. | DART reflects serious incidents that result in the employee being placed in restricted duty or time away from work. This aligns to both our safety and people strategies as we believe that our employees should return home in the same or better condition than when they arrived to work. | |||||||
Environmental Leadership: Drinking Water Program Compliance |
5.0% | 10x (0.0%) |
20x (5.0%) |
25x (7.5%) |
14x (2.0%) |
This environmental leadership metric is determined by comparing our overall number of drinking water notices of violation as reported in an EPA database, to the national drinking water industry average, and assessing how many times better we perform. | We are committed to protecting the environment and maintaining our history of materially complying with, and in many cases, surpassing, minimum standards required by applicable laws and regulations. |
48 | American Water | 2021 Proxy Statement |
Performance Measure |
Percentage Included in Corporate Performance Factor |
Threshold Performance (Weighting) |
Target Performance (Weighting) |
Maximum Performance (Weighting) |
Actual Performance (Percentage |
How We
Calculate |
Why We Use this | |||||||
Environmental Leadership: Drinking Water Quality |
5.0% | 6x (0.0%) |
10x (5.0%) |
45x (7.5%) |
8x (2.5%) |
This environmental leadership metric is determined by comparing our overall number of drinking water notices of violation for maximum containment load exceedances as reported in an EPA database, to the national drinking water industry average, and assessing how many times better we perform. | We are committed to excellent water quality and maintaining our history of materially complying with, and in many cases, surpassing, minimum standards required by applicable laws and regulations. | |||||||
Operational Efficiency Improvement (3) |
10.0% | 34.5% (0.0%) |
34.2% (10.0%) |
33.9% (15.0%) |
34.3% (6.7%) |
Based on our 2020 adjusted O&M efficiency ratio, which is the ratio of adjusted regulated O&M expenses to adjusted regulated operating revenues, each as set forth on Appendix A, for the year ended December 31, 2020. | We want to focus management on improving the overall cost structure of our regulated businesses and improving our return on equity. |
(1) | No APP awards may be earned if 2020 EPS is less than 90 percent of the target amount. |
(2) | This goal may not be earned in the event of a preventable employee fatality during the year. |
(3) | Adjusted O&M efficiency ratio is a non-GAAP measure. This information is derived from information contained in our audited consolidated financial statements. See Appendix A for the calculation of this ratio, a reconciliation of each of the components used to compute this measure to its most directly comparable GAAP measure, and additional information. |
American Water | 2021 Proxy Statement | 49 |
2020 Long-Term Performance Plan
Named Executive Officer |
LTPP Target Award as a Percentage of a Base Salary |
Aggregate Grant Date Fair Value of LTPP Target Awards |
Aggregate Grant Date Fair Value of RSUs |
Aggregate Grant Date Fair Value of PSUs (TSR) |
Aggregate Grant Date Fair Value of PSUs (EPS) |
|||||||||||||||
Walter J. Lynch |
275 | %(1) | $ | 2,543,912 | $ | 763,160 | $ | 890,339 | $ | 890,413 | ||||||||||
Susan N. Story |
350 | % | $ | 3,499,895 | $ | 1,049,968 | $ | 1,224,965 | $ | 1,224,962 | ||||||||||
M. Susan Hardwick |
165 | %(2) | $ | 907,601 | $ | 272,304 | $ | 317,654 | $ | 317,643 | ||||||||||
Michael A. Sgro |
135 | %(2) | $ | 624,177 | $ | 187,311 | $ | 218,427 | $ | 218,439 | ||||||||||
Loyd A. Warnock |
100 | % | $ | 474,988 | $ | 142,513 | $ | 166,277 | $ | 166,198 | ||||||||||
Bruce A. Hauk |
100 | % | $ | 374,706 | $ | 112,407 | $ | 131,157 | $ | 131,142 | ||||||||||
Brian Chin |
75 | % | $ | 270,302 | $ | 81,069 | $ | 94,630 | $ | 94,603 |
(1) | In December 2019, Mr. Lynchs LTPP award target was initially set at 165 percent of his then base salary in connection with his Chief Operating Officer role, but was increased to 275 percent effective April 1, 2020 in connection with his succession to the CEO role. In February 2021, Mr. Lynchs LTPP award target for 2021 as a percentage of base salary was increased to 400 percent as discussed below in CEO Transition. |
(2) | In December 2020, Ms. Hardwicks and Mr. Sgros LTPP award targets for 2021 as a percentage of base salary were increased to 190 percent and 150 percent, respectively. |
50 | American Water | 2021 Proxy Statement |
The following table presents information regarding the performance measures related to the PSUs granted in 2020.
Performance Measure |
Threshold Performance (Weighting) |
Target Performance (Weighting) |
Maximum Performance (Weighting) |
How We Calculate the Performance Measure |
Why We Use this Performance Measure | |||||
Relative Total Shareholder Return | 25th percentile |
50th percentile |
90th percentile |
Based on American Waters total shareholder return compared to the total shareholder return performance of the companies in the 2020 peer group, during the three-year performance period from January 1, 2020 through December 31, 2022, assuming reinvestment of dividends during the performance period. | To encourage performance that not only increases shareholder value, but increases it to an extent that compares favorably relative to the companies in the 2020 peer group. | |||||
Compounded EPS Growth Rate | 6.0% (0%) |
8.0% (100%) |
10.0% (200%) |
Based on the rate of EPS growth, compounded annually over the three-year period from January 1, 2020 through December 31, 2022, over our 2019 adjusted EPS. | EPS is a key measure of our financial and operational success, and achieving our earnings and strategic goals creates long-term shareholder value and provides greater total return to our shareholders. |
Performance Vesting of PSUs Granted in 2018
In 2018, we granted two equally-weighted types of PSUs to our NEOs: one with a three-year performance measure based on total shareholder return relative to companies in our 2018 peer group, and the other with a three-year performance measure based on the annual rate of compounded adjusted EPS growth. The payouts of the two types of PSUs are summarized in the table below:
Performance Measure |
Threshold Performance (Weighting) |
Target Performance (Weighting) |
Maximum Performance (Weighting) |
Actual Performance |
Percentage of Target Award Earned | |||||
Relative Total Shareholder Return | 25th percentile (25%) |
50th percentile (100%) |
100th percentile (200%) |
100th percentile |
200.00% | |||||
Compounded Adjusted EPS Growth Rate | 6.0% (25%) |
7.84% (100%) |
12.0% (200%) |
8.92% | 137.50% |
The Compensation Committee certified the achievement of the requisite PSU performance measures on January 22, 2021.
Perquisites and Other Benefits
American Water | 2021 Proxy Statement | 51 |
Executive Stock Ownership Guidelines and Stock Retention Requirements
Officer Level |
Multiple of Annual Base Salary | |||
Chief Executive Officer |
6 times | |||
Chief Operating Officer |
3 times | |||
Executive Vice Presidents |
3 times | |||
Senior Vice Presidents |
3 times | |||
President, Homeowner Services Group |
1 time | |||
Vice Presidents and State Utility President Equivalents |
1 time |
Ongoing and Post-Employment Arrangements and Benefit Plans
American Water | 2021 Proxy Statement | 53 |
American Water Savings Plan
Pension Plan and Executive Retirement Plan
Nonqualified Deferred Compensation Plan
54 | American Water | 2021 Proxy Statement |
Executive Severance Policy
Terms of Outstanding Equity Grants
2017 Omnibus Plan Grants Continued Vesting Provisions
American Water | 2021 Proxy Statement | 55 |
Accounting Considerations
American Water | 2021 Proxy Statement | 57 |
2020 Summary Compensation Table
The following table sets forth information regarding the compensation of each of our NEOs for 2020.
Name and Principal Position |
Year | Salary ($) (1) |
Bonus ($) |
Stock Awards ($) (2) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) (3) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (4) |
All Other Compensation ($) (5) |
Total ($) |
|||||||||||||||||||||||||||
Walter J. Lynch President and Chief Executive Officer (6) |
|
2020 |
|
$ |
870,378 |
$ |
|
$ |
2,543,912 |
$ |
|
|
$ |
963,772 |
$ |
1,191,466 |
$ |
106,305 |
$ |
5,675,833 |
||||||||||||||||
|
2019 |
|
$ |
612,053 |
$ |
|
$ |
989,955 |
$ |
|
$ |
560,861 |
$ |
784,169 |
$ |
76,117 |
$ |
3,023,155 |
||||||||||||||||||
|
2018 |
|
$ |
581,448 |
$ |
|
$ |
873,222 |
$ |
|
$ |
419,930 |
$ |
88,951 |
$ |
74,567 |
$ |
2,038,118 |
||||||||||||||||||
Susan N. Story Retired President and Chief Executive Officer (7) |
|
2020 |
|
$ |
323,077 |
$ |
|
$ |
3,499,895 |
$ |
|
$ |
|
$ |
|
$ |
249,350 |
$ |
4,072,322 |
|||||||||||||||||
|
2019 |
|
$ |
988,462 |
$ |
|
$ |
3,325,025 |
$ |
|
$ |
1,334,300 |
$ |
|
$ |
270,668 |
$ |
5,918,455 |
||||||||||||||||||
|
2018 |
|
$ |
944,229 |
$ |
|
$ |
2,837,113 |
$ |
|
$ |
938,600 |
$ |
|
$ |
263,172 |
$ |
4,983,114 |
||||||||||||||||||
M. Susan Hardwick Executive Vice President and Chief Financial Officer (8) |
|
2020 |
|
$ |
584,486 |
$ |
|
$ |
907,601 |
$ |
|
$ |
503,477 |
$ |
|
$ |
101,728 |
$ |
2,097,292 |
|||||||||||||||||
|
2019 |
|
$ |
296,150 |
$ |
120,000 |
$ |
479,169 |
$ |
|
$ |
290,622 |
$ |
|
$ |
151,036 |
$ |
1,336,977 |
||||||||||||||||||
Michael A. Sgro Executive Vice President, General Counsel |
|
2020 |
|
$ |
490,987 |
$ |
|
$ |
624,177 |
$ |
|
$ |
422,853 |
$ |
1,005,918 |
$ |
39,796 |
$ |
2,583,731 |
|||||||||||||||||
|
2019 |
|
$ |
458,974 |
$ |
|
$ |
562,463 |
$ |
|
$ |
420,646 |
$ |
1,614,493 |
$ |
31,616 |
$ |
3,088,192 |
||||||||||||||||||
|
2018 |
|
$ |
434,158 |
$ |
|
$ |
499,746 |
$ |
|
$ |
323,743 |
$ |
487,102 |
$ |
27,010 |
$ |
1,771,759 |
||||||||||||||||||
Loyd A. Warnock Senior Vice President, Chief AdvisorRegulatory and External |
|
2020 |
|
$ |
499,590 |
$ |
|
$ |
474,988 |
$ |
|
$ |
373,186 |
$ |
|
$ |
78,342 |
$ |
1,426,106 |
|||||||||||||||||
|
2019 |
|
$ |
454,093 |
$ |
|
$ |
445,051 |
$ |
|
$ |
277,450 |
$ |
|
$ |
97,122 |
$ |
1,273,716 |
||||||||||||||||||
|
2018 |
|
$ |
431,534 |
$ |
|
$ |
434,575 |
$ |
|
$ |
214,149 |
$ |
|
$ |
85,733 |
$ |
1,165,991 |
||||||||||||||||||
Bruce A. Hauk President, Regulated Operations and Military Services Group (11) |
|
2020 |
|
$ |
377,887 |
$ |
|
$ |
374,706 |
$ |
|
$ |
218,435 |
$ |
9,889 |
$ |
228,382 |
$ |
1,209,299 |
|||||||||||||||||
Brian Chin Former Senior Vice President, Strategic Financial Planning (12) |
|
2020 |
|
$ |
359,854 |
$ |
50,000 |
$ |
270,302 |
$ |
|
$ |
185,128 |
$ |
|
$ |
396,384 |
$ |
1,261,668 |
|||||||||||||||||
(1) | In 2020, the following NEOs deferred a portion of their base salary under the Employee Deferred Compensation Plan: Mr. Lynch$87,038; Ms. Hardwick$28,167; and Mr. Warnock$24,979. |
(2) | The amounts shown in this column reflect the aggregate grant date fair value of PSUs and RSUs granted to the NEOs. The grant date fair value of PSUs and RSUs granted in 2020 is as follows: |
Name |
PSUs | RSUs | ||||||
Walter J. Lynch |
$ | 1,780,752 | $ | 763,160 | ||||
Susan N. Story |
$ | 2,449,927 | $ | 1,049,968 | ||||
M. Susan Hardwick |
$ | 635,297 | $ | 272,304 | ||||
Michael A. Sgro |
$ | 436,866 | $ | 187,311 | ||||
Loyd A. Warnock |
$ | 332,475 | $ | 142,513 | ||||
Bruce A. Hauk |
$ | 262,299 | $ | 112,407 | ||||
Brian Chin |
$ | 189,233 | $ | 81,069 |
With respect to the PSUs, the amounts disclosed in the table above represent the grant date fair value based upon the target outcome of the performance conditions, determined at the grant date in accordance with ASC 718. See Note 11Stock Based Compensation in the Notes to Consolidated Financial Statements in the 2020 Form 10-K for the assumptions that were made in determining grant date fair values of the PSU and RSU awards.
58 | American Water | 2021 Proxy Statement |
The following table shows the fair value of the PSU awards at the grant date, assuming the highest level of performance was achieved:
Grant Date Fair Value | |||||||||||||||
Name |
2020 | 2019 | 2018 | ||||||||||||
Walter J. Lynch |
$ | 3,561,504 | $ | 1,385,906 | $ | 1,234,010 | |||||||||
Susan N. Story |
$ | 4,899,855 | $ | 4,655,064 | $ | 4,009,244 | |||||||||
M. Susan Hardwick |
$ | 1,270,594 | $ | 670,906 | $ | | |||||||||
Michael A. Sgro |
$ | 873,731 | $ | 787,468 | $ | 706,224 | |||||||||
Loyd A. Warnock |
$ | 664,949 | $ | 623,053 | $ | 614,108 | |||||||||
Bruce A. Hauk |
$ | 524,598 | $ | | $ | | |||||||||
Brian Chin |
$ | 378,466 | $ | | $ | |
(3) | The amounts shown in this column constitute payments under the APP with respect to each performance year, which are generally paid in March of the next calendar year, except with respect to Mr. Warnock, who was ineligible to receive an APP payout due to his retirement on January 2, 2021. We agreed under the terms of our separation agreement with Mr. Warnock to make an APP-like payment to Mr. Warnock, subject to the satisfaction of the same performance goals and other terms and conditions, other than continued employment, in his 2020 APP award opportunity. The following NEOs deferred a portion of their APP payment with respect to 2020 under the Employee Deferred Compensation Plan: Mr. Lynch$289,132 and Ms. Hardwick$25,174. |
(4) | The amounts shown in this column reflect the aggregate changes in the actuarial present values of accumulated benefits under our defined benefit pension plans. For further information on these pension plans, see Pension Benefits at December 31, 2020. None of the NEOs received above-market or preferential earnings (as defined by SEC regulation) under the Employee Deferred Compensation Plan. |
(5) | The totals shown in this column for 2020 consist of: |
Name |
Savings Plan Company Match |
Savings Plan Company Defined Contribution Account (a) |
Company Contributions to Employee Deferred Compensation Plan (b) |
Executive Physical |
Dividend Equivalents (c) |
Company- Paid Life Insurance |
Severance Payments |
Relocation Benefits (d) |
Total All Other Compensation |
|||||||||||||||||||||||||||
Walter J. Lynch |
$ | 7,125 | $ | | $ | 14,634 | $ | 3,775 | $ | 80,310 | $ | 461 | $ | | $ | | $ | 106,305 | ||||||||||||||||||
Susan N. Story |
$ | 11,400 | $ | 14,963 | $ | 1,999 | $ | | $ | 220,846 | $ | 142 | $ | | $ | | $ | 249,350 | ||||||||||||||||||
M. Susan Hardwick |
$ | 11,400 | $ | 14,963 | $ | 74,274 | $ | | $ | 630 | $ | 461 | $ | | $ | | $ | 101,728 | ||||||||||||||||||
Michael A. Sgro |
$ | 178 | $ | | $ | | $ | | $ | 39,157 | $ | 461 | $ | | $ | | $ | 39,796 | ||||||||||||||||||
Loyd A. Warnock |
$ | 10,487 | $ | 14,963 | $ | 19,850 | $ | 2,100 | $ | 30,481 | $ | 461 | $ | | $ | | $ | 78,342 | ||||||||||||||||||
Bruce A. Hauk |
$ | 11,231 | $ | 14,963 | $ | 16,344 | $ | | $ | 11,581 | $ | 461 | $ | | $ | 173,802 | $ | 228,382 | ||||||||||||||||||
Brian Chin |
$ | 10,796 | $ | 14,963 | $ | | $ | | $ | 2,491 | $ | 425 | $ | 367,709 | $ | | $ | 396,384 |
(a) | The Defined Contribution Account is an account in the Savings Plan to which American Water contributes 5.25 percent of each eligible employees total cash compensation (which includes annual base salary and APP payouts), subject to Code limits on compensation that may be taken into account. Generally, only employees hired on or after January 1, 2006 are eligible for this contribution. |
(b) | The amounts in this column represent matching contributions with respect to 2020 made by the Company to the NEOs accounts in the Employee Deferred Compensation Plan. These contributions are generally paid in the second quarter of the next calendar year. For further information on this plan, see 2020 Nonqualified Deferred Compensation. |
(c) | Dividend equivalents are paid in cash with respect to PSUs and RSUs at such time, if ever, as the PSUs or RSUs are converted to common stock. Amounts in this column reflect PSU and RSU dividend equivalents that were paid out in 2020. |
(d) | Includes a $41,443 adjustment made under the applicable Company relocation plan to compensate Mr. Hauk for the effect of his relocation payments under the Code and similar applicable state law. |
American Water | 2021 Proxy Statement | 59 |
(6) | Mr. Lynch served as our Executive Vice President and Chief Operating Officer until April 1, 2020, when he became our President and Chief Executive Officer. |
(7) | Ms. Story served as our President and Chief Executive Officer until April 1, 2020 when she retired from the Company. |
(8) | Ms. Hardwick joined the Company as Executive Vice PresidentFinance on June 3, 2019 and has served as our Executive Vice President and Chief Financial Officer since July 1, 2019. |
(9) | Mr. Sgros title was changed to Executive Vice President and General Counsel on February 17, 2021. |
(10) | Mr. Warnock served as our Senior Vice President, External Affairs and Business Development from August 2017 until January 1, 2020. From January 1, 2020 to June 1, 2020, Mr. Warnocks title was Senior Vice President, Chief External Affairs and Corporate Business Development Officer. Mr. Warnock retired on January 2, 2021. |
(11) | Mr. Hauk was previously Senior Vice President, Midwest Division and on March 1, 2020, became President, Regulated Operations and Military Services Group and an executive officer for the first time, and thus no compensation information relating to 2019 or 2018 is included. Mr. Hauk served as our Deputy Chief Operating Officer effective March 1, 2021 until his resignation effective March 12, 2021 and ceased to be an executive officer as of that appointment date. |
(12) | Mr. Chin departed from the Company on November 5, 2020, and was not a NEO prior to 2020; thus, no compensation information relating to 2019 or 2018 is included. |
Comparison of Key Elements of Total Compensation
The following table presents a comparison of the key elements of total compensation for 2020 for each NEO, including the percentage of salary and bonus compared to total compensation. This section uses information contained in the 2020 Summary Compensation Table.
Percentage of Total Compensation | ||||||||||||||||
Name |
Total Salary and Bonus |
Incentive Compensation |
Change in Pension Value |
Other | ||||||||||||
Walter J. Lynch |
15.3 | % | 61.8 | % | 21.0 | % | 1.9 | % | ||||||||
Susan N. Story |
7.9 | % | 86.0 | % | | % | 6.1 | % | ||||||||
M. Susan Hardwick |
27.9 | % | 67.3 | % | | % | 4.8 | % | ||||||||
Michael A. Sgro |
19.0 | % | 40.5 | % | 39.0 | % | 1.5 | % | ||||||||
Loyd A. Warnock |
35.0 | % | 59.5 | % | | % | 5.5 | % | ||||||||
Bruce A. Hauk |
31.3 | % | 49.0 | % | 0.8 | % | 18.9 | % | ||||||||
Brian Chin |
32.5 | % | 36.1 | % | | % | 31.4 | % |
Employment and Separation Agreements
60 | American Water | 2021 Proxy Statement |
American Water | 2021 Proxy Statement | 61 |
2020 Grants of Plan-Based Awards
The following table presents certain information regarding plan-based awards granted to our NEOs during the fiscal year ended December 31, 2020:
Name |
Grant Date |
Approval Date |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) |
Estimated Future Payouts Under Equity Incentive Plan Awards (2) |
All Other Stock Awards: Number of Shares of Stock or Units (#)(3) |
Grant Date Fair Value of Stock Awards ($)(4) |
||||||||||||||||||||||||||||||
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
||||||||||||||||||||||||||||||||
Walter J. Lynch | ||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 813,310 | $ | 1,626,620 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 2,255 | $ | 305,192 | ||||||||||||||||||||||||||
RSU |
4/1/2020 | 2/11/2020 | | | | | | 4,060 | $ | 457,968 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 562 | 2,246 | 4,492 | | $ | 356,013 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 658 | 2,631 | 5,262 | | $ | 356,080 | ||||||||||||||||||||||||||
PSU |
4/1/2020 | 2/11/2020 | | | 777 | 3,106 | 6,212 | | $ | 534,325 | ||||||||||||||||||||||||||
PSU |
4/1/2020 | 2/11/2020 | | | 1,184 | 4,737 | 9,474 | | $ | 534,334 | ||||||||||||||||||||||||||
Susan N. Story |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | | | | | | | | |||||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 7,758 | $ | 1,049,968 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 1,932 | 7,728 | 15,456 | | $ | 1,224,965 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 2,263 | 9,051 | 18,102 | | $ | 1,224,962 | ||||||||||||||||||||||||||
M. Susan Hardwick |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 424,875 | $ | 849,750 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 2,012 | $ | 272,304 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 501 | 2,004 | 4,008 | | $ | 317,654 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 587 | 2,347 | 4,694 | | $ | 317,643 | ||||||||||||||||||||||||||
Michael A. Sgro |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 356,838 | $ | 713,676 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 1,384 | $ | 187,311 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 345 | 1,378 | 2,756 | | $ | 218,427 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 404 | 1,614 | 3,228 | | $ | 218,439 | ||||||||||||||||||||||||||
Loyd A. Warnock |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 314,925 | $ | 629,850 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 1,053 | $ | 142,513 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 262 | 1,049 | 2,098 | | $ | 166,277 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 307 | 1,228 | 2,456 | | $ | 166,198 | ||||||||||||||||||||||||||
Bruce A. Hauk |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 182,855 | $ | 365,710 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 540 | $ | 73,084 | ||||||||||||||||||||||||||
RSU |
3/1/2020 | 2/11/2020 | | | | | | 318 | $ | 39,324 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 135 | 538 | 1,076 | | $ | 85,278 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 158 | 630 | 1,260 | | $ | 85,264 | ||||||||||||||||||||||||||
PSU |
3/1/2020 | 2/11/2020 | | | 74 | 295 | 590 | | $ | 45,878 | ||||||||||||||||||||||||||
PSU |
3/1/2020 | 2/11/2020 | | | 93 | 371 | 742 | | $ | 45,878 | ||||||||||||||||||||||||||
Brian Chin |
||||||||||||||||||||||||||||||||||||
APP |
2/11/2020 | 2/11/2020 | $ | 156,227 | $ | 312,454 | | | | | | |||||||||||||||||||||||||
RSU |
2/11/2020 | 2/11/2020 | | | | | | 599 | $ | 81,069 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 149 | 597 | 1,194 | | $ | 94,630 | ||||||||||||||||||||||||||
PSU |
2/11/2020 | 2/11/2020 | | | 175 | 699 | 1,398 | | $ | 94,603 |
(1) | These columns present target and maximum APP payout opportunities. The actual payments that were made under the APP for 2020 performance are shown in the 2020 Summary Compensation Table. There is no specified minimum award for participants in the APP, and therefore we did not include a column in the table for the threshold amount of such award. For further information on the APP, see Compensation Discussion and Analysis2020 Compensation2020 Annual Performance Plan beginning on page 46 of this proxy statement. |
62 | American Water | 2021 Proxy Statement |
(2) | These columns present threshold, target and maximum payout opportunities under the LTPP with respect to our PSUs. For further information on the LTPP, under which the PSUs were granted, see Compensation Discussion and Analysis2020 Compensation2020 Long-Term Performance Plan beginning on page 50 of this proxy statement. |
(3) | This column reflects grants of RSUs. For further information on the LTPP, under which the RSUs were granted, see Compensation Discussion and Analysis2020 Compensation2020 Long-Term Performance Plan beginning on page 50 of this proxy statement. |
(4) | This column represents the grant date fair values of the PSUs and RSUs, determined in accordance with ASC 718. See footnote (2) to the 2020 Summary Compensation Table for additional information. |
Outstanding Equity Awards at 2020 Fiscal Year-End
The following table presents information regarding equity awards held by our NEOs at December 31, 2020.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name |
Grant Date |
Number of Securities Underlying Unexercised Options: Exercisable (#)(1) |
Number of Securities Underlying Unexercised Options: Unexercisable (#)(1) |
Option Exercise Price ($/sh) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(2) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
Equity |
|||||||||||||||||||||||||||
Walter J. Lynch |
||||||||||||||||||||||||||||||||||||
2/16/2016 | 24,617 | | $ | 65.15 | 12/31/2022 | | $ | | | $ | | |||||||||||||||||||||||||
2/14/2018 | | | | | 1,091 | $ | 167,436 | 15,754 | $ | 2,417,766 | ||||||||||||||||||||||||||
2/14/2019 | | | | | 2,037 | $ | 312,618 | 13,404 | $ | 2,057,112 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 2,255 | $ | 346,075 | 9,754 | $ | 1,496,946 | ||||||||||||||||||||||||||
4/1/2020 | | | | | 4,060 | $ | 623,088 | 15,686 | $ | 2,407,330 | ||||||||||||||||||||||||||
Susan N. Story |
||||||||||||||||||||||||||||||||||||
2/14/2018 | | | | | 3,543 | $ | 543,744 | 51,184 | $ | 7,855,208 | ||||||||||||||||||||||||||
2/14/2019 | | | | | 6,839 | $ | 1,049,581 | 45,022 | $ | 6,909,526 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 7,758 | $ | 1,190,620 | 33,558 | $ | 5,150,146 | ||||||||||||||||||||||||||
M. Susan Hardwick |
||||||||||||||||||||||||||||||||||||
6/3/2019 | | | | | 840 | $ | 128,915 | 4,802 | $ | 736,963 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 2,012 | $ | 308,782 | 8,702 | $ | 1,335,496 | ||||||||||||||||||||||||||
Michael A. Sgro |
||||||||||||||||||||||||||||||||||||
2/14/2018 | | | | | 624 | $ | 95,765 | 9,016 | $ | 1,383,686 | ||||||||||||||||||||||||||
2/14/2019 | | | | | 1,157 | $ | 177,565 | 7,616 | $ | 1,168,828 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 1,384 | $ | 212,402 | 5,984 | $ | 918,364 | ||||||||||||||||||||||||||
Loyd A. Warnock |
||||||||||||||||||||||||||||||||||||
2/14/2018 | | | | | 1,628 | $ | 249,849 | 7,840 | $ | 1,203,205 | ||||||||||||||||||||||||||
2/14/2019 | | | | | 1,373 | $ | 210,714 | 6,026 | $ | 924,810 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 1,053 | $ | 161,604 | 4,554 | $ | 698,902 | ||||||||||||||||||||||||||
Bruce A. Hauk |
||||||||||||||||||||||||||||||||||||
2/16/2016 | 615 | | $ | 65.15 | 12/31/2022 | | | | | |||||||||||||||||||||||||||
2/14/2018 | | | | | 157 | $ | 24,095 | 2,258 | $ | 346,535 | ||||||||||||||||||||||||||
2/14/2019 | | | | | 432 | $ | 66,299 | 2,844 | $ | 436,469 | ||||||||||||||||||||||||||
2/11/2020 | | | | | 540 | $ | 82,874 | 2,336 | $ | 358,506 | ||||||||||||||||||||||||||
3/1/2020 | | | | | 318 | $ | 48,803 | 1,332 | $ | 204,422 | ||||||||||||||||||||||||||
Brian Chin |
||||||||||||||||||||||||||||||||||||
2/14/2018 | | | | | | | 2,766 | $ | 424,498 | |||||||||||||||||||||||||||
2/14/2019 | | | | | | | 1,218 | $ | 186,926 |
American Water | 2021 Proxy Statement | 63 |
(1) | In December 2016, the Compensation Committee approved a change to the LTPP to eliminate the issuance of stock options. The options granted in 2016 vest in equal increments on January 1 of each of the three years next following the year in which the options were granted. |
(2) | This column reflects RSUs that are not subject to performance conditions and will vest in equal increments on January 1 or January 31 of each of the three years following the year in which the RSUs were granted, and subject to continued employment through each vesting date, except that (a) all of Mr. Warnocks RSUs cliff-vested in full on January 1, 2021, and (b) one-third of Mr. Sgros RSUs granted in 2020 vested on January 31, 2021 and the remainder will cliff-vest on January 31, 2022. |
(3) | The market value of the RSUs and PSUs is based on the $153.47 closing price of a share of our common stock on December 31, 2020, as reported by the NYSE. |
(4) | This column reflects PSUs that are subject to performance conditions and time-vest in three equal annual increments on January 1 of each year for the PSUs that were granted in 2018 and on January 31 of each year for the PSUs that were granted in 2019 and 2020, subject to continued employment through each such time-vesting date, except that (a) all of Mr. Warnocks PSUs time-vested in full on January 1, 2021, and (b) one-third of Mr. Sgros PSUs granted in 2020 time-vested on January 31, 2021 and the remainder will time-vest on January 31, 2022. In accordance with applicable SEC regulations, the number of shares disclosed in this column represents the number of shares that would vest if maximum performance is achieved. |
2020 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and vesting of RSUs and PSUs held by our NEOs, each during 2020.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares Acquired on Exercise |
Value Realized on Exercise ($)(1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($)(2) |
||||||||||||
Walter J. Lynch |
8,454 | $ | 814,627 | 15,973 | $ | 2,118,358 | ||||||||||
Susan N. Story |
144,627 | $ | 10,271,205 | 44,483 | $ | 5,895,994 | ||||||||||
M. Susan Hardwick |
| $ | | 420 | $ | 57,204 | ||||||||||
Michael A. Sgro |
| $ | | 7,868 | $ | 1,042,811 | ||||||||||
Loyd A. Warnock |
| $ | | 5,692 | $ | 757,760 | ||||||||||
Bruce A. Hauk |
| $ | | 2,347 | $ | 311,507 | ||||||||||
Brian Chin |
| $ | | 1,003 | $ | 122,528 |
(1) | Based on the difference between the closing price of a share of common stock on the date of exercise and the exercise price of the options. |
(2) | Represents the aggregate market value of the shares realized on vesting, calculated by multiplying the vested number of shares by the closing price of a share of common stock on the date the applicable RSUs or PSUs vested (or on the last trading day prior thereto when the vesting occurs on a non-trading day). |
64 | American Water | 2021 Proxy Statement |
Pension Benefits at December 31, 2020
The following table presents certain information regarding pension benefits for each of our NEOs at December 31, 2020.
Name |
Plan Name | Number of Years of Credited Service (#) |
Present Value of
Accumulated Benefit ($)(1) |
Payments During Last Fiscal Year ($) | ||||||
Walter J. Lynch (2) |
ERP | 16 | $ 3,563,702 | N/A | ||||||
AWWPP | 16 | $ 1,014,613 | N/A | |||||||
Susan N. Story |
N/A (3) | N/A | N/A | N/A | ||||||
M. Susan Hardwick |
N/A (3) | N/A | N/A | N/A | ||||||
Michael A. Sgro (2) |
ERP | 27 | $ 4,591,974 | N/A | ||||||
AWWPP | 27 | $ 2,167,929 | N/A | |||||||
Loyd A. Warnock |
N/A (3) | N/A | N/A | N/A | ||||||
Bruce A. Hauk (4) |
AWWPP | 10 | $ 63,762 | N/A | ||||||
Brian Chin |
N/A (3) | N/A | N/A | N/A |
(1) | Amounts shown reflect the present value of the accumulated benefit as of December 31, 2020. All amounts for the AWWPP and the ERP were determined using the same interest and mortality assumptions as those used for financial reporting purposes. The following assumptions were used to calculate pension values at the following measurement dates: |
· | In 2020, for discounting annuity payments, we used a discount rate of 2.74 percent and mortality table of Pri-2012 projected forward using generational Scale MP-2020, and for calculating lump sums, we used an interest rate of 2.74 percent and the IRS Prescribed Table for Lump Sums for 2021 for payments expected in 2021 and IRS Prescribed Table for 2022 for payments thereafter. |
· | In 2019, for discounting annuity payments, we used a discount rate of 3.44 percent and mortality table of RP2014 projected using Scale MP-2018 generational, and for calculating lump sums, we used an interest rate of 3.44 percent and the IRS Prescribed Table for Lump Sums for 2020 for payments expected in 2020 and IRS Prescribed Table for 2021 for payments thereafter. |
(2) | Messrs. Lynch and Sgro are eligible for a subsidized early retirement benefit payable in the form of an annuity under the provisions of the AWWPP and the ERP. |
(3) | Since Mses. Story and Hardwick and Messrs. Warnock and Chin were hired after January 1, 2006, they are not eligible to participate in the AWWPP or the ERP. |
(4) | Mr. Hauk was previously an active participant in the AWWPP but then left employment at American Water and returned after the AWWPP was closed. Therefore, he has a frozen benefit in the AWWPP and does not participate in the ERP. |
For further information on American Waters defined benefit pension plans, see Description of Pension and Other Retirement Plans below and Potential Payments on Termination or Change in ControlAWWPP and ERP.
Description of Pension and Other Retirement Plans
AWWPP
American Water | 2021 Proxy Statement | 65 |
ERP
66 | American Water | 2021 Proxy Statement |
2020 Nonqualified Deferred Compensation
The following table presents certain information regarding the nonqualified deferred compensation benefits of each of our NEOs for 2020.
Name |
Executive Contributions in Last Fiscal Year ($)(1) |
Registrant Contributions in Last Fiscal Year ($)(2) |
Aggregate Earnings in Last Fiscal Year ($) |
Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) |
Aggregate Balance at Last Fiscal Year-End ($)(3) |
|||||||||||||||
Walter J. Lynch |
$ | 376,170 | $ | 14,634 | $ | 381,013 | $ | (64,812 | ) | $ | 2,482,659 | |||||||||
Susan N. Story |
$ | | $ | 1,999 | $ | 1,071,132 | $ | | $ | 7,486,949 | ||||||||||
M. Susan Hardwick |
$ | 53,340 | $ | 74,274 | $ | 4,008 | $ | | $ | 131,622 | ||||||||||
Michael A. Sgro |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Loyd A. Warnock |
$ | 24,980 | $ | 19,850 | $ | 72,560 | $ | | $ | 446,641 | ||||||||||
Bruce A. Hauk |
$ | | $ | 16,344 | $ | 158 | $ | | $ | 50,453 | ||||||||||
Brian Chin |
$ | | $ | | $ | | $ | | $ | |
(1) | The following amounts in this column are also reported as compensation to the NEOs in the 2020 Summary Compensation Table in the columns indicated: |
Name |
Salary | Non-Equity Incentive Plan Compensation |
||||||
Walter J. Lynch |
$ | 87,038 | $ | 289,132 | ||||
Susan N. Story |
$ | | $ | | ||||
M. Susan Hardwick |
$ | 28,167 | $ | 25,174 | ||||
Michael A. Sgro |
$ | | $ | | ||||
Loyd A. Warnock |
$ | 24,979 | $ | | ||||
Bruce A. Hauk |
$ | | $ | | ||||
Brian Chin |
$ | | $ | |
(2) | The amounts in this column are also reported as compensation to the NEOs in the 2020 Summary Compensation Table in the All Other Compensation column. |
(3) | The following amounts were reported in the Summary Compensation Table in previous years as compensation to the listed NEOs: Mr. Lynch$1,333,636; Ms. Story$4,756,467; and Mr. Warnock$288,471. |
Description of the Employee Deferred Compensation Plan
American Water | 2021 Proxy Statement | 67 |
Potential Payments on Termination or Change in Control
This section describes the plans and arrangements that provide for payments to the NEOs in connection with certain events involving termination of employment, a change in control of American Water or a material change in employment responsibilities.
Executive Severance Policy
Employee Deferred Compensation Plan
68 | American Water | 2021 Proxy Statement |
AWWPP and ERP
Equity Awards
American Water | 2021 Proxy Statement | 69 |
Quantification of Potential Payments on Termination or Change in Control
70 | American Water | 2021 Proxy Statement |
Name |
Benefit | Voluntary Termination |
Early/ Normal Retirement |
Involuntary Termination without Cause |
Voluntary Termination for Good Reason |
Involuntary Termination for Cause |
Involuntary Termination without Cause Following a Change in Control |
Disability | Death | |||||||||||||||||||||||||
Walter J. Lynch |
Cash Severance | $ | | $ | | $ | 2,200,810 | $ | | $ | | $ | 2,200,810 | $ | | $ | | |||||||||||||||||
Outplacement Services |
$ | | $ | | $ | 15,000 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||
Deferred Compensation Benefits |
$ | 2,193,526 | $ | 2,193,526 | $ | 2,193,526 | $ | 2,193,526 | $ | | $ | 2,193,526 | $ | 2,193,526 | $ | 2,193,526 | ||||||||||||||||||
Nonqualified Pension Benefits |
$ | 2,795,916 | $ | 2,795,916 | $ | 2,795,916 | $ | 2,795,916 | $ | 2,795,916 | $ | 2,795,916 | $ | 4,160,589 | $ | 2,675,949 | ||||||||||||||||||
Qualified Pension Benefits |
$ | 872,824 | $ | 872,824 | $ | 872,824 | $ | 872,824 | $ | 872,824 | $ | 872,824 | $ | 1,247,881 | $ | 839,299 | ||||||||||||||||||
Life Insurance and Employee Assistance Program |
$ | | $ | | $ | 713 | $ | | $ | | $ | 713 | $ | | $ | | ||||||||||||||||||
RSUs and PSUs | $ | | $ | 4,411,888 | $ | | $ | | $ | | $ | 5,768,371 | $ | 4,710,364 | $ | 4,710,364 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total | $ | 5,862,266 | $ | 10,274,154 | $ | 8,078,789 | $ | 5,862,266 | $ | 3,668,740 | $ | 13,832,160 | $ | 12,312,360 | $ | 10,419,138 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Name |
Benefit | Early/ Normal Retirement |
||||||||||||||||||||||||||||||||
Susan N. Story | Deferred Compensation Benefits |
$ | 7,486,949 | |||||||||||||||||||||||||||||||
RSUs and PSUs | $ | 13,276,315 | ||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
Total | $ | 20,763,264 | ||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
Name |
Benefit | Voluntary Termination |
Early/ Normal Retirement |
Involuntary Termination without Cause |
Voluntary Termination for Good Reason |
Involuntary Termination for Cause |
Involuntary Termination without Cause Following a Change in Control |
Disability | Death | |||||||||||||||||||||||||
M. Susan Hardwick | Cash Severance | $ | | $ | | $ | 991,375 | $ | | $ | | $ | 991,375 | $ | | $ | | |||||||||||||||||
Outplacement Services |
$ | | $ | | $ | 15,000 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||
Deferred Compensation Benefits |
$ | 32,714 | $ | 32,174 | $ | 32,174 | $ | 32,174 | $ | | $ | 59,876 | $ | 32,174 | $ | 59,876 | ||||||||||||||||||
Life Insurance and Employee Assistance Program |
$ | | $ | | $ | 475 | $ | | $ | | $ | 475 | $ | | $ | | ||||||||||||||||||
RSUs and PSUs | $ | | $ | | $ | | $ | | $ | | $ | 1,500,911 | $ | 127,948 | $ | 127,948 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total | $ | 32,714 | $ | 32,174 | $ | 1,039,024 | $ | 32,174 | $ | | $ | 2,552,637 | $ | 160,122 | $ | 187,824 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Water | 2021 Proxy Statement | 71 |
Name |
Benefit | Voluntary Termination |
Early/ Normal Retirement |
Involuntary Termination without Cause |
Voluntary Termination for Good Reason |
Involuntary Termination for Cause |
Involuntary Termination without Cause Following a Change in Control |
Disability | Death | |||||||||||||||||||||||||
Michael A. Sgro | Cash Severance | $ | | $ | | $ | 832,622 | $ | | $ | | $ | 832,622 | $ | | $ | | |||||||||||||||||
Outplacement Services |
$ | | $ | | $ | 15,000 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||
Nonqualified Pension Benefits |
$ | 4,591,974 | $ | 4,591,974 | $ | 4,591,974 | $ | 4,591,974 | $ | 4,591,974 | $ | 4,591,974 | $ | 4,591,974 | $ | 4,098,971 | ||||||||||||||||||
Qualified Pension Benefits |
$ | 2,167,929 | $ | 2,167,929 | $ | 2,167,929 | $ | 2,167,929 | $ | 2,167,929 | $ | 2,167,929 | $ | 2,243,833 | $ | 2,037,788 | ||||||||||||||||||
Life Insurance and Employee Assistance Program |
$ | | $ | | $ | 475 | $ | | $ | | $ | 475 | $ | | $ | | ||||||||||||||||||
RSUs and PSUs | $ | | $ | | $ | | $ | | $ | | $ | 2,281,163 | $ | 681,818 | $ | 681,818 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total | $ | 6,759,903 | $ | 6,759,903 | $ | 7,608,000 | $ | 6,759,903 | $ | 6,759,903 | $ | 9,874,163 | $ | 7,517,625 | $ | 6,818,577 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Name |
Benefit | Voluntary Termination |
Early/ Normal Retirement |
Involuntary Termination without Cause |
Voluntary Termination for Good Reason |
Involuntary Termination for Cause |
Involuntary Termination without Cause Following a Change in Control |
Disability | Death | |||||||||||||||||||||||||
Loyd A. Warnock | Cash Severance | $ | | $ | | $ | 799,425 | $ | | $ | | $ | 799,425 | $ | | $ | | |||||||||||||||||
Outplacement Services |
$ | | $ | | $ | 15,000 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||
Deferred Compensation Benefits |
$ | 446,640 | $ | 446,640 | $ | 446,640 | $ | 446,640 | $ | | $ | 446,640 | $ | 446,640 | $ | 446,640 | ||||||||||||||||||
Life Insurance and Employee Assistance |
$ | | $ | | $ | 475 | $ | | $ | | $ | 475 | $ | | $ | | ||||||||||||||||||
RSUs and PSUs | $ | | $ | | $ | | $ | | $ | | $ | 2,093,439 | $ | | $ | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total | $ | 446,640 | $ | 446,640 | $ | 1,261,540 | $ | 446,640 | $ | | $ | 3,339,979 | $ | 446,640 | $ | 446,640 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Name |
Benefit | Voluntary Termination |
Early/ Normal Retirement |
Involuntary Termination without Cause |
Voluntary Termination for Good Reason |
Involuntary Termination for Cause |
Involuntary Termination without Cause Following a Change in Control |
Disability | Death | |||||||||||||||||||||||||
Bruce A. Hauk | Cash Severance | $ | | $ | | $ | 557,855 | $ | | $ | | $ | 557,855 | $ | | $ | | |||||||||||||||||
Outplacement Services |
$ | | $ | | $ | 15,000 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||
Deferred Compensation Benefits |
$ | 38,985 | $ | 38,985 | $ | 38,985 | $ | 38,985 | $ | | $ | 38,985 | $ | 38,985 | $ | 38,985 | ||||||||||||||||||
Qualified Pension Benefits |
$ | 60,853 | $ | 60,853 | $ | 60,853 | $ | 60,853 | $ | 60,853 | $ | 60,853 | $ | 113,354 | $ | 31,700 | ||||||||||||||||||
Life Insurance and Employee Assistance Program |
$ | | $ | | $ | 475 | $ | | $ | | $ | 475 | $ | | $ | | ||||||||||||||||||
RSUs and PSUs | $ | | $ | | $ | | $ | | $ | | $ | 916,003 | $ | 195,803 | $ | 195,803 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total | $ | 99,838 | $ | 99,838 | $ | 673,168 | $ | 99,838 | $ | 60,853 | $ | 1,574,171 | $ | 348,142 | $ | 266,488 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72 | American Water | 2021 Proxy Statement |
Name |
Benefit | Involuntary Termination without Cause |
||||||||||||||||||||||||||||||||
Brian Chin | Cash Severance | $ | 523,936 | |||||||||||||||||||||||||||||||
Outplacement Services |
$ | 15,000 | ||||||||||||||||||||||||||||||||
Life Insurance and Employee Assistance Program |
$ | 475 | ||||||||||||||||||||||||||||||||
RSUs and PSUs | $ | 179,391 | ||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
Total | $ | 718,802 | ||||||||||||||||||||||||||||||||
|
|
Policies Prohibiting Hedging, Pledging, Margining and Short Selling
American Water | 2021 Proxy Statement | 73 |
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth the number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, warrants and rights, and the number of securities available for future issuance under equity compensation plans as of December 31, 2020.
[a] | [b] | [c] | ||||||||||||
Plan category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a]) |
|||||||||||
Equity compensation plans approved by security holders |
449,762(1) | $ | 63.18(2) | 8,355,840 | (3) | |||||||||
Equity compensation plans not approved by security holders
|
| | | |||||||||||
Total
|
|
449,762(1)
|
|
$
|
63.18(2)
|
|
|
8,355,840
|
|
(1) | Represents the number of shares of common stock subject to outstanding awards under the 2007 Omnibus Plan and the 2017 Omnibus Plan, including RSU awards and the target number of shares issuable under PSU awards, as of December 31, 2020. |
(2) | Represents the weighted-average exercise price as to options issued under the 2007 Omnibus Plan to purchase in the aggregate 64,272 shares of common stock. Since RSU and PSU awards under the 2007 Omnibus Plan or the 2017 Omnibus Plan do not have an exercise price, the weighted-average exercise price in column (b) does not take these awards into account. |
(3) | As of December 31, 2020, approximately 6.7 million shares were available for issuance under the 2017 Omnibus Plan and approximately 1.7 million shares were issuable under the current American Water Works Company, Inc. and its Designated Subsidiaries 2017 Nonqualified Employee Stock Purchase Plan, or the ESPP. During the purchase period beginning December 1, 2020 and ending February 28, 2021, 23,700 shares available for issuance through the ESPP were subject to purchase, which shares have not been deducted from this amount. |
74 | American Water | 2021 Proxy Statement |
Fees Paid to Independent Registered Public Accounting Firm
The following table presents fees paid to PricewaterhouseCoopers LLP for professional services rendered with respect to 2020 and 2019. All of the services described in the footnotes to the table below were approved in advance by the Audit, Finance and Risk Committee (or its predecessor), in accordance with its policy on the pre-approval of services to be provided by our independent registered public accounting firm.
Fiscal Year 2020 |
Fiscal Year 2019 |
|||||||
Audit Fees (1) |
$ | 4,253,000 | $ | 4,178,000 | ||||
Audit-Related Fees (2) |
| | ||||||
Tax Fees (3) |
195,000 | 195,000 | ||||||
All Other Fees (4) |
10,000 | 8,000 | ||||||
|
|
|
|
|||||
Total |
$ | 4,458,000 | $ | 4,381,000 | ||||
|
|
|
|
(1) | Represents fees for professional services rendered in connection with the Companys annual consolidated financial statements, interim financial statements included in our quarterly reports on Form 10-Q, annual subsidiary audits and services in connection with comfort letters, consents and procedures related to documents filed with the SEC. |
(2) | Represents fees for professional services rendered in connection with the implementation of new accounting standards and attestation services. |
(3) | Represents fees for professional services in connection with the review of the Companys federal and state tax returns and tax advice related to tax compliance, tax planning and tax refund claims. |
(4) | Represents fees for software licensing fees for disclosure checklists and accounting research tools. |
Pre-Approval of Services Provided by Independent Registered Public Accounting Firm
The Board unanimously recommends a vote FOR the ratification of the appointment, by the Audit, Finance and Risk Committee, of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for 2021.
American Water | 2021 Proxy Statement | 77 |
CERTAIN BENEFICIAL OWNERSHIP MATTERS
Security Ownership of Management
Name |
Number of |
Vested Options |
Total |
% of Shares |
||||||||||||
Brian Chin (3) |
2,259 | | 2,259 | * | ||||||||||||
Jeffrey N. Edwards |
3,058 | | 3,058 | * | ||||||||||||
Martha Clark Goss |
29,169 | | 29,169 | * | ||||||||||||
Veronica M. Hagen |
1,565 | | 1,565 | * | ||||||||||||
M. Susan Hardwick |
982 | | 982 | * | ||||||||||||
Kimberly J. Harris |
941 | | 941 | * | ||||||||||||
Bruce A. Hauk (4) |
5,168 | 615 | 5,783 | * | ||||||||||||
Julia L. Johnson |
17,322 | | 17,322 | * | ||||||||||||
Patricia L. Kampling |
941 | | 941 | * | ||||||||||||
Karl F. Kurz |
8,608 | | 8,608 | * | ||||||||||||
Walter J. Lynch |
119,846 | 24,617 | 144,463 | 0.1 | % | |||||||||||
George MacKenzie |
25,338 | | 25,338 | * | ||||||||||||
Michael A. Sgro |
13,630 | | 13,630 | * | ||||||||||||
James G. Stavridis |
3,003 | | 3,003 | * | ||||||||||||
Susan N. Story (5) |
37,020 | | 37,020 | * | ||||||||||||
Loyd A. Warnock (6) |
2,031 | | 2,031 | * | ||||||||||||
Lloyd M. Yates |
4,941 | | 4,941 | * | ||||||||||||
All current directors and executive officers as a group (20 persons) (7) |
272,801 | 38,186 | 310,987 | * |
* | Less than 1% (or, with respect to an NEO, less than 0.1%) |
(1) | Except as may otherwise be indicated, the amounts in the table above do not include the following interests in our common stock, which interests do not confer voting or investment power: |
· | shares of common stock underlying RSU, PSU and stock unit awards, granted under the 2007 Omnibus Plan or the 2017 Omnibus Plan, which have not vested as of March 17, 2021 and will not vest on or before May 16, 2021; and |
78 | American Water | 2021 Proxy Statement |
· | shares of common stock underlying RSU, PSU and stock unit awards granted under the 2007 Omnibus Plan or the 2017 Omnibus Plan, which have vested as of March 17, 2021 or will vest on or before May 16, 2021, but the settlement of the award and the receipt of common stock thereby is deferred to a date that is later than May 16, 2021. |
(2) | For each of our NEOs and our directors, the amounts in this column do not include the following interests in our common stock, which interests do not confer voting or investment power: |
Name |
Number of Unearned RSUs/Stock Units* |
Number of Unearned PSUs |
Total | |||||||||
Brian Chin |
| 609 | 609 | |||||||||
Jeffrey N. Edwards |
1,159 | | 1,159 | |||||||||
Martha Clark Goss |
2,535 | | 2,535 | |||||||||
Veronica M. Hagen |
5,437 | | 5,437 | |||||||||
M. Susan Hardwick |
3,879 | 10,952 | 14,831 | |||||||||
Kimberly J. Harris |
1,159 | | 1,159 | |||||||||
Bruce A. Hauk |
1,484 | 3,256 | 4,740 | |||||||||
Julia L. Johnson |
7,802 | | 7,802 | |||||||||
Patricia L. Kampling |
1,159 | | 1,159 | |||||||||
Karl F. Kurz |
3,100 | | 3,100 | |||||||||
Walter J. Lynch |
12,657 | 34,157 | 46,814 | |||||||||
George MacKenzie |
1,159 | | 1,159 | |||||||||
Michael A. Sgro |
2,827 | 9,429 | 12,256 | |||||||||
James G. Stavridis |
1,159 | | 1,159 | |||||||||
Susan N. Story |
8,592 | 39,290 | 47,882 | |||||||||
Loyd A. Warnock |
| 5,290 | 5,290 | |||||||||
Lloyd M. Yates |
1,159 | | 1,159 | |||||||||
|
|
|
|
|
|
|||||||
Total |
55,267 | 102,983 | 158,250 | |||||||||
|
|
|
|
|
|
* | Unearned RSUs and stock units represent shares underlying RSU or stock unit awards, which shares (i) have not been earned, (ii) have vested but have not been delivered, or (iii) have been deferred, in each case in accordance with footnote (1) above. |
(3) | Mr. Chins employment with American Water ceased as of November 5, 2020. |
(4) | Mr. Hauk was no longer an executive officer as of March 1, 2021 and resigned his employment effective March 12, 2021. |
(5) | Ms. Story retired from American Water effective April 1, 2020. |
(6) | Mr. Warnock retired from American Water effective January 2, 2021. |
(7) | Includes 57,026 shares beneficially owned (including 13,569 shares underlying vested options) by executive officers of the Company not named in the table above. Excludes in the aggregate 131,010 shares underlying unvested RSUs and unearned PSUs, as well as unvested or deferred stock units, held by our directors and current executive officers, as referenced in footnote (1) above. |
American Water | 2021 Proxy Statement | 79 |
Security Ownership of Certain Beneficial Owners
The table below indicates the persons or entities known to us to be the beneficial holders of more than five percent of our common stock, as of December 31, 2020, with percentages determined as of March 17, 2021.
Name and Address of Beneficial Owner |
Number of Shares Beneficially Owned |
% of Shares Outstanding |
||||||
The Vanguard Group (1) 100 Vanguard Boulevard |
||||||||
Malvern, PA 19355 |
21,180,295 | 11.7% | ||||||
BlackRock, Inc. (2) 55 East 52nd Street |
||||||||
New York, NY 10022 |
14,763,098 | 8.1% | ||||||
State Street Corporation (3) |
||||||||
State Street Financial Center |
||||||||
One Lincoln Street |
||||||||
Boston, MA 02111 |
9,391,069 | 5.2% |
(1) | The Vanguard Group (Vanguard), an investment management company, is the beneficial owner of the 21,180,295 shares of common stock listed in the table. Vanguard holds sole power to dispose of or to direct the disposition of 20,270,937 shares, shared power to vote or direct to vote 414,643 shares, and shared power to dispose or to direct the disposition of 909,358 shares. Vanguard reported that it owns these shares through the following subsidiaries: Vanguard Asset Management, Limited; Vanguard Fiduciary Trust Company; Vanguard Global Advisors, LLC; Vanguard Group (Ireland) Limited; Vanguard Investments Australia Ltd; Vanguard Investments Canada Inc.; Vanguard Investments Hong Kong Limited; and Vanguard Investments UK, Limited, none of which beneficially owns five percent or more of the common stock. This disclosure is derived solely from information contained in a Schedule 13G/A, filed by Vanguard with the SEC on February 10, 2021. The information is as of December 31, 2020, and the number of shares beneficially owned by Vanguard may have changed subsequently. |
(2) | BlackRock, Inc. (BlackRock) is the beneficial owner of the 14,763,098 shares of common stock listed in the table. BlackRock is a holding company of subsidiaries that hold the shares, including: BlackRock Life Limited; BlackRock International Limited; BlackRock Advisors, LLC; BlackRock (Netherlands) B.V.; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Japan Co., Ltd.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC; Future Advisor, Inc.; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Luxembourg) S.A.; BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; BlackRock Asset Management North Asia Limited; BlackRock (Singapore) Limited; and BlackRock Fund Managers Ltd, none of which beneficially owns five percent or more of the common stock. BlackRock holds sole voting power with respect to 12,834,144 shares and sole dispositive power with respect to all of the shares listed in the table. This disclosure is derived solely from information contained in a Schedule 13G/A filed by BlackRock with the SEC on January 29, 2021. The information is as of December 31, 2020, and the number of shares beneficially owned by BlackRock may have changed subsequently. |
(3) | State Street Corporation (State Street), an investment advisor, is the beneficial owner of the 9,391,069 shares of common stock listed in the table. State Street is a holding company of direct or indirect subsidiaries that hold the shares, including: SSgA Funds Management, Inc.; State Street Global Advisors Limited (UK); State Street Global Advisors Ltd (Canada); State Street Global Advisors, Australia Limited; State Street Global Advisors (Japan) Co., Ltd; State Street Global Advisors Asia Ltd; State Street Global Advisors Singapore Ltd; State Street Global Advisors GmbH; State Street Global Advisors Ireland Limited; and State Street Global Advisors Trust Company. State Street holds shared power to vote or direct to vote 8,360,517 shares, and shared power to dispose or to direct the disposition of 9,379,162 shares. This disclosure is derived solely from information contained in a Schedule 13G, filed by State Street with the SEC on February 5, 2021. The information is as of December 31, 2020, and the number of shares beneficially owned by State Street may have changed subsequently. |
80 | American Water | 2021 Proxy Statement |
Proxy Access Deadlines
Director Nominations
The Nominating Committee may seek additional information regarding the candidate. The Nominating Committee will consider all potential candidates in the same manner regardless of the source of the recommendation.
Delivering Proxy Materials Through Electronic Means
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 12, 2021
The Notice of 2021 Annual Meeting of Shareholders, 2021 Proxy Statement and 2020 Annual Report are available at http://www.proxyvote.com.
82 | American Water | 2021 Proxy Statement |
Householding of Proxy Materials
Contacting Us or Our Transfer Agent
How to Contact Us: | How to Contact our Transfer Agent: | |
American Water Works Company, Inc. 1 Water Street Camden, New Jersey 08102-1658 Attention: Secretary contacttheboard@amwater.com
|
American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, New York 11219-9821 (888) 556-0423 (toll-free) |
American Water | 2021 Proxy Statement | 83 |
American Water | 2021 Proxy Statement | 85 |
Non-GAAP Financial Information
A. | Reconciliation of (1) total O&M expenses to adjusted O&M expensesregulated businesses (a non-GAAP, unaudited measure) and (2) total operating revenues to adjusted operating revenuesregulated businesses (a non-GAAP, unaudited measure), used to calculate adjusted O&M efficiency ratioregulated businesses (a non-GAAP, unaudited measure): |
For the Years Ended December 31, | ||||||||||||
(dollars in millions) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Total O&M expenses |
$ | 1,622 | $ | 1,544 | $ | 1,479 | ||||||
Less: |
||||||||||||
O&M expenses Market-Based Businesses |
389 | 393 | 362 | |||||||||
O&M expenses Other |
(25) | (31) | (42) | |||||||||
|
|
|
|
|
|
|||||||
Total O&M expenses Regulated Businesses |
1,258 | 1,182 | 1,159 | |||||||||
Less: |
||||||||||||
Regulated purchased water expenses |
149 | 135 | 133 | |||||||||
Allocation of non-O&M expenses |
41 | 31 | 31 | |||||||||
Impact of Freedom Industries litigation settlement activities (i) |
| (4) | (20) | |||||||||
|
|
|
|
|
|
|||||||
Adjusted O&M expenses Regulated Businesses (a) |
$ | 1,068 | $ | 1,020 | $ | 1,015 | ||||||
|
|
|
|
|
|
|||||||
Total operating revenues |
$ | 3,777 | $ | 3,610 | $ | 3,440 | ||||||
Less: |
||||||||||||
Operating revenues Market-Based Businesses |
540 | 539 | 476 | |||||||||
Operating revenues Other |
(18) | (23) | (20) | |||||||||
|
|
|
|
|
|
|||||||
Total operating revenues Regulated Businesses |
3,255 | 3,094 | 2,984 | |||||||||
Less: |
||||||||||||
Regulated purchased water revenues (ii) |
149 | 135 | 133 | |||||||||
Other revenue |
(7) | | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted operating revenues Regulated Businesses (b) |
$ | 3,113 | $ | 2,959 | $ | 2,851 | ||||||
|
|
|
|
|
|
|||||||
Adjusted O&M efficiency ratio Regulated Businesses (a)/(b) |
34.3% | 34.5% | 35.6% |
(i) | Includes the impact of a settlement in 2018 with one of our general liability insurance carriers, and a reduction in the first quarter of 2019 of a liability, each related to the Freedom Industries chemical spill in West Virginia. |
(ii) | The calculation assumes purchased water revenues approximate purchased water expenses in our regulated businesses. |
B. | Other Information Regarding Non-GAAP Financial Measures. |
Our adjusted O&M efficiency ratio is defined as our O&M expenses from our regulated businesses, divided by the pro forma operating revenues from our regulated businesses, where both O&M expenses and pro forma operating revenues were adjusted to eliminate purchased water expense. Additionally, from operation and maintenance expenses, we excluded the allocable portion of non-O&M support services costs, mainly depreciation and general taxes, that are reflected in our regulated businesses segment as O&M expenses, but for consolidated financial reporting purposes, are categorized within other line items in the accompanying Consolidated Statements of Operations.
American Water | 2021 Proxy Statement | A-1 |
In addition to the adjustments discussed above, for period-to-period comparability purposes, we have excluded from O&M expenses the impact of certain Freedom Industries chemical spill settlement activities in 2018 and 2019. We excluded the items discussed above from the calculation as we believe such items are not reflective of managements ability to increase the efficiency of our regulated businesses.
We evaluate our operating performance using this ratio and we believe it is useful to investors because it directly measures improvement in the operating performance and efficiency of our regulated businesses. This information is derived from our consolidated financial information but is not presented in our financial statements prepared in accordance with GAAP. The information supplements and should be read in conjunction with our GAAP disclosures, and should be considered in addition to, and not a substitute for, any GAAP measure. Our adjusted regulated O&M efficiency ratio (i) is not an accounting measure that is based on GAAP; (ii) is not based on a standard, objective industry definition or method of calculation; (iii) may not be comparable to other companies operating measures; and (iv) should not be used in place of the GAAP information provided elsewhere in this proxy statement and the 2020 Form 10-K. Accordingly, this may have significant limitations on its use.
A-2 | American Water | 2021 Proxy Statement |
Demonstrating Leadership Ranked #9 on Corporate Named One of Americas Recognized among the Knights Global 100 Most Top Corporations by the Top 100 Best for Vets Sustainable Companies Womens Business Employers by Military DIVERSITY Enterprise National Council DIVERSITY Times Ranked #15 on Barrons DiversityPlus Magazine Earned 2021 Military 100 Most Sustainable 2020 Best of the Best Friendly® Gold Employer Companies Champions of Diversity & designation SUSTAINABILITY S&P Global Ratings ESG Eastern Minority Earned 2021 Military Evaluation, 87 out of 100, Supplier Development Friendly® Spouse the highest evaluation score Council2020 Employer designation given by S&P in the U.S. and National Corporation the 2nd highest globally SUPPLIER of the Year Award INCLUSION Included in the Bloomberg Gender Equality Index for the 3rd consecutive year
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2021 Proxy Statement, 2020 Annual Report and form of Proxy Card are available at www.proxyvote.com.
In light of the public health and safety concerns associated with the ongoing coronavirus (COVID-19) pandemic, American Water will hold its 2021 Annual Meeting virtually, rather than at a physical location. You will not be able to attend the Annual Meeting in person.
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D40921-P51407
AMERICAN WATER WORKS COMPANY, INC.
Annual Meeting of Shareholders
May 12, 2021 10:00 A.M., Eastern Time
This proxy is solicited by the Board of Directors
The undersigned shareholder of AMERICAN WATER WORKS COMPANY, INC., a Delaware corporation (the Company), hereby appoints Karl F. Kurz and Walter J. Lynch, and each of them individually, attorneys and proxies for the undersigned, each with the power to appoint his substitute, to act with respect to and to vote, all of the shares of Common Stock which the undersigned is entitled to vote, with the powers the undersigned would possess if virtually present at the Companys 2021 Annual Meeting of Shareholders, to be held at 10:00 A.M., Eastern Time, on May 12, 2021 via the virtual meeting website on the Internet at www.virtualshareholdermeeting.com/AWK2021, and any adjournment or postponement thereof (the Annual Meeting), as directed on the reverse side, and with discretionary authority on all other matters properly presented at the Annual Meeting, all as more fully described in the Proxy Statement received by the undersigned shareholder. If no direction is made, the proxy will be voted: (a) FOR the election of the director nominees named on the reverse side, (b) in accordance with the recommendations of the Board of Directors on the other matters referred to on the reverse side, and (c) in the discretion of the proxies upon such other matters that may be properly presented at the Annual Meeting or any adjournment or postponement thereof.
The undersigned shareholder hereby revokes any other proxy heretofore executed by the undersigned for the Annual Meeting and acknowledges receipt of the Notice of the Annual Meeting and the Companys Proxy Statement dated March 30, 2021.
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