UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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

Check the appropriate box:

 

(Name of Registrant as Specified in its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

 

 

 

The 2025 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 14, 2025, at 10:00 a.m., Eastern time, to consider and take action on the following:

 

1.

election of the eight (8) director nominees named in the accompanying proxy statement, each to serve until the date of the 2026 Annual Meeting of Shareholders and until their successor has been duly elected and qualified;

 

2.

approval, on an advisory basis, of the compensation of the Company’s 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 Company’s independent registered public accounting firm for 2025; and

 

4.

such other business, if any, as may properly be brought before the meeting or any adjournment, continuation or postponement of the meeting.

To permit broad access to the meeting by shareholders and employees, the 2025 annual meeting will be held virtually via remote communication, 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 virtually, and submitting your questions prior to and during, the meeting.

To be admitted to the meeting, please access the virtual meeting platform on the Internet at

www.virtualshareholdermeeting.com/AWK2025.

In order to vote or submit questions during the annual meeting, shareholders or their legal proxies must be authenticated. To do so, you must enter the meeting website with the 16-digit control number included on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form. Online access to the meeting will open approximately 15 minutes prior to the start of the virtual meeting.

To vote or submit questions at the meeting, it is very important that you retain your proxy card, Notice of Availability, or voting instruction form, and all related materials, including your 16-digit control number, through the date of the meeting.

The Board of Directors has no knowledge of any other business to be transacted at the meeting. Only holders of record of shares of the Company’s outstanding common stock as of the close of business on March 17, 2025, are entitled to notice of, and to vote at, the meeting.

A list of shareholders of record entitled to vote at the meeting will be available to any shareholder of record for examination beginning 10 days prior to the meeting. Please refer to page 2 of the accompanying proxy statement for more information about accessing the shareholder list before the meeting. The shareholder list will also be available for examination by any authenticated shareholder during the annual meeting on the meeting platform.

By Order of the Board of Directors,

 

 

Jeffrey M. Taylor

Vice President and Secretary

 

Your vote is very important, and you have several convenient options to vote your shares. Whether or not you plan to attend the virtual 2025 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.

American Water is the largest and most geographically diverse, publicly traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. We provide drinking water, wastewater and other related services to approximately 14 million people in 24 states.

The majority of our business is conducted through regulated utilities that provide our water and wastewater services. We also operate other businesses that provide water and wastewater services to the U.S. government on 18 military installations, as well as to municipalities. As of December 31, 2024, we employed approximately 6,700 professionals.

Our strategy spans three core areas of execution for our business: operations, capital and regulatory. Operational execution involves the day-to-day management of our water and wastewater systems that provide safe, clean, reliable and affordable service. We focus on the quality of execution and the need to operate our systems safely, efficiently and in compliance with all environmental requirements, for the benefit of our customers.

Capital execution supports the reliability and affordability aspects of our strategy. For 2025, we plan to invest more than $3.3 billion to replace pipes and pumps, upgrade plants, and otherwise support

the resiliency of our systems, as well as for acquisitions of water and wastewater systems to support growth and provide needed water quality and delivery improvements for new customers. Our capital execution requires extensive attention to planning, risk management and environmental compliance, as well as the timing and cost of our investment activity.

Regulatory execution focuses on our efforts to work with our regulators and policymakers to support the required level of investment, allow us to earn an appropriate and timely return on that investment, and help to keep our water and wastewater services affordable for customers. A substantial portion of our operations are subject to regulation by public utility commissions in the states in which they operate, with the primary goal of promoting the overall public interest by balancing the interests of customers and utility investors.

We undertake the execution of our strategy and daily operations with the commitment to conduct business responsibly, believing that “how” a company operates is just as important as “what” a company does. The foundation of this belief is grounded in our core values, which we refined in 2024 as follows: (1) safety first; (2) trust, dignity and respect; (3) one team; (4) environmental leadership; and (5) high performance.

 

 

We consider sustainability principles, such as environmental leadership and corporate governance, fundamental to our corporate strategy and values. We have developed a cross-functional approach that supports and drives our sustainability strategy, principles and reporting, which includes the direct involvement and participation of our executive leadership team and oversight from the Board.

We focus our sustainability efforts in three primary areas: financial, operational and cultural. We seek to achieve financial sustainability through our disciplined approach to capital investment and regulatory execution, which supports our efforts to grow our business and drive shareholder value while addressing water and wastewater challenges in the United States. Our capital investment program is financed with cash flows from operating activities and through a combination of debt and equity capital issuances structured to maintain a healthy balance sheet over the long term. The Company’s approach to balance sheet management is centered on maintaining investment-grade metrics, substantial liquidity provided by highly-rated financial institutions, and interest rate management on new debt issuances through our hedging program.

Operational sustainability means focusing on our operating performance and the day-to-day management of our water and wastewater systems that provide safe, clean, reliable and affordable service. We focus on the quality of execution and the need to operate our systems safely, efficiently and in compliance with all environmental requirements, for

the benefit of our customers. We believe this approach to operational sustainability is aligned with the values of our regulators and policymakers.

Cultural sustainability is reflected in our commitment to support a high performing workforce, while seeking to attract and retain employees who share our purpose and values and understand the needs of the communities in which we serve. We demonstrate this commitment to our employees through our values. We also believe that investing time, energy and resources in our workforce helps to generate new ideas, continuously improve operations and provide high-quality, reliable service for our customers and communities served.

Our values and actions have achieved various recognitions for demonstrating leadership in several areas related to trust, responsibility, sustainability and support of our communities, customers and employees. Among others, American Water was recognized as one of the Forbes 2025 Most Trusted Companies in America, in addition to being ranked first in the utilities industry category on Forbes’s America’s Best Large Employers List for 2024. Also, American Water has been ranked on Barron’s 100 Most Sustainable U.S. Companies 2024 List and named one of America’s Most JUST companies by JUST Capital and CNBC for its continued commitment to employees, customers, communities and shareholders. Finally, American Water was also included on the America’s Most Responsible Companies 2025 List by Newsweek.

 

We encourage you to help us conserve natural resources and to reduce our annual meeting printing and mailing costs by electing to receive your proxy materials electronically via email. With electronic delivery, you will be notified via email as soon as future proxy materials are available on the Internet and can review and access those materials on any computer, tablet, smart phone or other similar device. You can also continue to vote online or by telephone, whichever is most convenient to you.

Electronic delivery helps eliminate duplicate mailings and reduces the amount of bulky paper documents you receive and maintain in your personal files. Your electronic delivery election will continue each year until you change it. Of course, should you wish to receive

these materials in paper format, you may change your election accordingly.

If you would like to elect to receive electronic delivery of our proxy materials:

 

·

If you hold shares registered in your own name, please contact our transfer agent, Equiniti Trust Company, LLC, or log into your account to enroll. Information on how to contact our transfer agent is provided on page 73 of this proxy statement.

·

If you hold shares in “street name” (through a brokerage firm, trustee, bank, or other financial intermediary or nominee), please follow the instructions provided to you by your broker, trustee, bank or financial intermediary.

 

PROXY STATEMENT SUMMARY			i
THE AMERICAN WATER ANNUAL MEETING			1
Information about this Proxy Statement			1
Date and Time of the Virtual Annual Meeting			1
Attending the Virtual Annual Meeting			1
Shares Entitled to Vote			2
Shareholder List			2
Matters to be Voted on at the Annual Meeting			3
How to Vote Shares Registered in Your Own Name			3
How to Vote Shares Held in Street Name			4
Revoking or Changing a Proxy			4
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE			6
The Board of Directors			6
Board Review of Related Person Transactions			6
Board Committees			7
Board Leadership Structure			9
Board Role in Risk Oversight			10
Board Role in Succession Planning			11
Limitations on Additional Board Service, and Changes in Job Responsibilities			12
Board Refreshment and Director Tenure			12
Shareholder Outreach			13
Governance Policies and Procedures			14
Proxy Access			14
Political Contribution Policy			14
Lobbying Expenditures			15
PROPOSAL 1: ELECTION OF DIRECTORS			16
Explanation of the Proposal			16
Director Criteria, Qualifications and Experience			17
Director Nominees			19
Director Independence			23
Director Evaluations and Assessments			24
Director Compensation			25
Director Compensation Table			26
Non-Employee Director Stock Ownership Requirements			27
Recommendation of the Board			27
PROPOSAL 2: VOTE TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS			28
Background of the Proposal			28
Recommendation of the Board			28

COMPENSATION COMMITTEE REPORT			29
COMPENSATION DISCUSSION AND ANALYSIS			29
Executive Summary			29
Shareholder Advisory Vote			32
Compensation Determinations and Pay Competitiveness in 2024			33
2024 Compensation			34
Executive Stock Ownership Guidelines and Stock Retention Requirements			40
Policies Regarding the Ownership of American Water Securities			40
Ongoing and Post-Employment Arrangements and Benefit Plans			41
Change of Control Provisions in Equity Plans			44
Recovery of Incentive Compensation			44
Tax and Accounting Considerations			44
EXECUTIVE COMPENSATION			46
2024 Summary Compensation Table			46
2024 Grants of Plan-Based Awards			49
Outstanding Equity Awards at 2024 Fiscal Year-End			50
2024 Option Exercises and Stock Vested			52
Pension Benefits at December 31, 2024			52
Description of Pension and Other Retirement Plans			53
2024 Nonqualified Deferred Compensation			54
Description of the Employee Deferred Compensation Plan			54
Potential Payments on Termination or Change of Control			55
Pay Versus Performance			61
CEO Pay Ratio			63
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			64
EQUITY COMPENSATION PLAN INFORMATION			64
AUDIT, FINANCE AND RISK COMMITTEE REPORT			65

 

PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			66
General			66
Fees Paid to Independent Registered Public Accounting Firm			66
Pre-Approval of Services Provided by Independent Registered Public Accounting Firm			67
Recommendation of the Board			67
CERTAIN BENEFICIAL OWNERSHIP MATTERS			68
Security Ownership of Management			68
Security Ownership of Certain Beneficial Owners			69
COMMUNICATIONS, SHAREHOLDER PROPOSALS AND COMPANY INFORMATION			71
Shareholder Communications to the Board			71
Shareholder Proposals, Proxy Access Deadlines and Director Nominations			71

Delivering Proxy Materials Through Electronic Means			72
Householding of Proxy Materials			73
Contacting Us or Our Transfer Agent			73
Where to Find More Information			73
OTHER MATTERS			74
Other Matters to Come Before the Annual Meeting			74
Solicitation of Proxies			74
Status of Information Included in this Proxy Statement			74
Forward-Looking Statements			75
APPENDIX A – NON-GAAP FINANCIAL INFORMATION			A-1

 

Our Board is furnishing this proxy statement in connection with the solicitation of proxies to vote on matters to be submitted at our 2025 Annual Meeting of Shareholders and at any adjournment, continuation or postponement of the meeting. The Notice of Annual Meeting, this proxy statement, the accompanying proxy card and our 2024 Annual Report to Shareholders, or the 2024 Annual Report, were first sent or given on or about March 27, 2025, to shareholders of record as of March 17, 2025, which is referred to as the record date.

Throughout this proxy statement, unless the context otherwise requires:

 

·

references to the “Board” or the “Board of Directors” mean the Board of Directors of American Water Works Company, Inc.

·

references to “common stock” mean the common stock, par value $0.01 per share, of American Water Works Company, Inc.

·

the terms the “meeting,” the “virtual meeting,” the “annual meeting,” or the “2025 Annual Meeting” refer to the virtual 2025 Annual Meeting of Shareholders of American Water Works Company, Inc.

·

references to “we,” “us,” “our,” the “Company” or “American Water” are to American Water Works Company, Inc., without its subsidiaries

·

references to “our NEOs” generally refer to our current named executive officers included in the Summary Compensation Table, while references to “all NEOs” or “all of our NEOs” would include former named executive officers included therein

 

The meeting will be held at 10:00 a.m., Eastern time, on Wednesday, May 14, 2025. The meeting will be held solely in a virtual audio-only format accessible through the virtual meeting website, at www.virtualshareholdermeeting.com/AWK2025.

You will need the 16-digit control number set forth on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form, as applicable, to vote or submit an appropriate question during the virtual annual meeting. Therefore, it is very important that you retain your proxy card, Notice of Availability or voting instruction form, and the related materials, including your assigned 16-digit control number, through the date of the annual meeting.

If you lose or misplace your 16-digit control number, please contact our Investor Relations team, at (856) 566-4005. All members of the public, including shareholders who have lost or misplaced their control number, will be able to access the meeting via the virtual meeting site as a guest; however, guest attendees will not be able to vote their shares on the virtual meeting platform or submit appropriate questions.

An audio webcast will be archived and available for 30 days after the meeting on our Investor Relations website at ir.amwater.com.

 

To permit broad shareholder and employee access to the meeting, we are holding the meeting solely via remote communications, also known as a “virtual meeting,” rather than at a physical location. You will not be able to attend the meeting in person. However, this virtual meeting format will provide shareholders with an opportunity to participate in the meeting as they would at an in-person meeting. Instructions on how to attend and participate in the virtual meeting, as well as how to obtain technical and general support

on the day of the meeting, will be available at www.virtualshareholdermeeting.com/AWK2025.

A shareholder may submit questions via the Internet in advance of the meeting before 11:59 p.m., Eastern time, on Tuesday, May 13, 2025, by accessing www.proxyvote.com, entering the shareholder’s 16-digit control number set forth on the proxy card, Notice of Availability or voting instruction form, as applicable, and following the instructions to submit a question.

 

Shareholders may also submit questions once they have been admitted to the meeting as an authenticated shareholder. To do so, please access the virtual meeting platform at www.virtualshareholdermeeting.com/AWK2025 via the Internet. Shareholders or their legal proxies must enter the 16-digit control number found on the shareholder’s proxy card, voting instruction form or other proxy materials.

To attend the meeting, you will need a computer or a web-enabled phone, tablet or other device, together with appropriate Internet access. To attend the meeting, cast or change your vote, or submit questions, you will also need to authenticate your status as a shareholder with your 16-digit control number. Online access to the meeting will open approximately 15 minutes prior to the start of the meeting to permit you time to access and log into the virtual meeting platform. Your ability to be admitted to the meeting is also subject to potential capacity limits set by the virtual meeting platform provider.

Once admitted to the meeting as an authenticated shareholder, attendees may:

 

·

listen to and participate in the meeting;

·

submit appropriate questions germane to the matters to be voted on at the meeting;

·

submit a vote or change a previously submitted vote; and

·

during the meeting, view a list of shareholders of record as of the record date.

Members of the public, including shareholders who do not have their 16-digit control number, will be able to access the meeting as a guest in listen-only mode by visiting www.virtualshareholdermeeting.com/AWK2025. Shareholders and other persons without a 16-digit control number will not be able to otherwise participate in, vote at, or submit appropriate questions at, the meeting.

We intend to answer at the meeting, as time permits, properly submitted and appropriate questions that are germane to the matters to be voted on at the meeting. However, we reserve the right to exclude any inappropriate question, including any question that management believes to be (i) not pertinent to meeting matters; (ii) duplicative of another question; (iii) derogatory or in bad taste as determined under our rules of conduct for the meeting; (iv) related to pending or threatened litigation or personal grievances; or (v) otherwise excludable under the meeting’s rules of conduct.

No recording or rebroadcasting of the meeting by participants will be permitted.

 

All shareholders of record as of the record date are entitled to vote at the meeting. As of the close of business on the record date, 195,010,945 shares of our common stock were outstanding. Each outstanding share of common stock entitles the holder of record to one vote on each matter submitted to the vote of shareholders at the meeting. Holders of our unvested restricted stock units, or RSUs, and unvested performance stock units, or PSUs, as well as holders of awards as to which the receipt of underlying common stock has been deferred, are not entitled to vote any shares of common stock underlying those awards at the meeting.

Under our Amended and Restated Bylaws, the holders of a majority of the outstanding shares of our common stock at the close of business on the record date must be present at the meeting, either virtually or by proxy, to constitute a quorum and to transact business at the meeting. Abstentions and broker non-votes are included in the determination of shares present at the meeting for quorum purposes. See “—How to Vote Shares Held in Street Name” on page 4 of this proxy statement for more information on “broker non-votes.”

 

If you are a shareholder of record, and you wish to examine the list of shareholders during the 10-day period preceding the annual meeting, please email your full legal name, address and daytime telephone

number and a request to examine the shareholder list, to our Secretary at contacttheboard@amwater.com. You will be contacted by telephone or email to arrange for you to access the list.

 

The internet and telephone voting for shareholders of record will close at 11:59 p.m., Eastern Time, on Tuesday, May 13, 2025.

Your signed proxy card, or the proxy you grant via the Internet or by telephone, will be voted in accordance with your instructions. If you return a signed proxy card or grant a proxy via the Internet or by telephone, but

do not indicate how you wish your shares to be voted, your shares will be voted:

 

·

“FOR” the election of each of the Board’s eight (8) director nominees

·

“FOR” the approval, on an advisory basis, of the compensation of our named executive officers

·

“FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2025

 

In the absence of instructions to the contrary, proxies will be voted in accordance with the judgment and discretion of the person exercising the proxy on any other matter properly presented at the meeting and any adjournment, continuation or postponement thereof.

If you wish to vote your shares virtually at the meeting, you may vote online during the meeting as an authenticated shareholder by logging into the meeting website at www.virtualshareholdermeeting.com/AWK2025, entering your 16-digit control number, and following the on-screen instructions.

If you received more than one proxy card or Notice of Availability, your shares are likely held in more than one account, registered in different names or registered with different addresses. You must separately vote the shares shown on each proxy card or Notice of Availability that you receive in order for all of your shares to be voted at the meeting. For more information regarding the Notice of Availability, please see “Communications, Shareholder Proposals and Company Information—Delivering Proxy Materials Through Electronic Means” on page 72 of this proxy statement.

 

If you hold shares through a brokerage firm, trustee, bank, or other financial intermediary or nominee, which is known as holding shares in “street name,” you will receive a voting instruction form from that broker, trustee, bank or other financial intermediary or nominee, each of which we refer to as an “intermediary.” The form will explain how to direct the voting of your shares through the intermediary, which may include the ability to provide voting instructions via the Internet or by telephone.

If your shares are held in street name and you want to vote on Proposals 1 or 2, you MUST indicate how you wish your shares to be voted. The broker will vote shares held by you in street name in accordance with your voting instructions, as indicated on your signed voting instruction form or by the instructions you provide via the Internet or by telephone. Absent such instructions, NYSE rules prohibit a broker from exercising discretion to cast a vote with respect to your shares. In that case, a proxy submitted by the broker with respect to your shares would indicate that the broker is unable to cast a vote with respect to the matter, which is commonly referred to as a “broker non-vote.”

Under NYSE rules, Proposal 3 is considered a “routine matter,” and thus a broker would be permitted in its

discretion to cast a vote on that proposal as to your shares in the event that you do not provide the broker with voting instructions. Accordingly, if your shares are held in street name, it is important that you provide voting instructions to the intermediary so that your vote will be counted.

If you received more than one voting instruction form or Notice of Availability, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately follow the foregoing voting procedures for each voting instruction form or Notice of Availability that you receive in order for all of your shares to be voted at the meeting.

If you hold shares in street name and wish to vote your shares virtually at the meeting, you may vote online during the meeting as an authenticated shareholder by visiting www.virtualshareholdermeeting.com/AWK2025, entering your 16-digit control number, and following the on-screen instructions. The availability of online voting may depend on your intermediary’s specific voting procedures. Please contact your intermediary for information.

 

If you own shares in your own name (including shares you may hold through American Water Stock Direct, our dividend reinvestment and direct stock purchase plan), you may revoke or change any prior proxy,

regardless of how your proxy was originally submitted, by:

 

·

sending a written statement to that effect to our Secretary, which must be received by us before the meeting;

 

·

submitting a properly signed proxy card dated a later date;

·

submitting a later dated proxy via the Internet or by telephone; or

·

attending the meeting virtually as an authenticated shareholder and voting your shares online during the meeting.

Please see “Communications, Shareholder Proposals and Company Information—Contacting Us or Our Transfer Agent” on page 73 of this proxy statement for more information on providing our Secretary with

written notice and “—Attending the Virtual Annual Meeting” beginning on page 1 of this proxy statement regarding the requirements for attending the virtual meeting.

If you hold shares in street name, you should follow the instructions provided on the voting instruction form you received from the intermediary or contact the intermediary for instructions on how to change or revoke your vote.

 

As of the date of this proxy statement, the Board is comprised of nine members, consisting of eight independent directors and M. Susan Hardwick, our Chief Executive Officer. Ms. Hardwick will be retiring as Chief Executive Officer, effective as of the conclusion of the annual meeting, and she has decided not to stand for re-election as a director at the annual meeting. The Board has designated John C. Griffith, who joined the Company in 2022 and served as our Executive Vice President and Chief Financial Officer prior to serving as our President effective August 1, 2024, to succeed her as Chief Executive Officer as of the conclusion of the annual meeting. Mr. Griffith will continue to serve as the Company’s President. The Board has also nominated Mr. Griffith for election to the Board at the annual meeting.

The Board held seven meetings during 2024. During the period in 2024 for which each incumbent director served as such, each such director attended at least 75 percent of the combined number of Board meetings and meetings of the Board committees on

which such director served. The average attendance during 2024 for all Board members was 98.0 percent.

The Board has adopted an attendance policy, set forth in our Corporate Governance Guidelines, under which attendance, whether in person or by remote communication, is expected at all Board and committee meetings, except for absences previously excused by the Board Chair or the Chair of the Nominating Committee, due to extraordinary circumstances. All members of the Board are expected to attend the annual meeting of shareholders, except for absences due to unavoidable or extenuating circumstances. All of the directors then on the Board virtually attended the 2024 annual meeting of shareholders.

At most regularly scheduled meetings, the Board meets in executive session, without members of management present. Our independent, non-executive Board Chair presides over these sessions.

 

The Board has approved a Related Person Transaction Policy, which serves to identify, review and approve transactions involving related persons. This policy supplements our Code of Ethics by prohibiting transactions with related persons unless specifically exempt or prior written approval is granted as discussed below. Related person transactions are non-exempt transactions, relationships or arrangements in excess of $120,000 in which American Water or any subsidiary was or is to be a participant and a related person had or will have a direct or indirect material interest. For purposes of this policy, a “related person” is:

 

·

an executive officer or director of the Company;

·

a beneficial owner of more than five percent of our common stock; or

·

an immediate family member (as defined by the policy) of any of the foregoing.

Approval of a related person transaction may only be granted in writing in advance by the disinterested members of either the Board or the Audit, Finance and

Risk Committee. Before any related person transaction is approved, the following factors, among others, are to be considered:

 

·

the purpose, and the potential benefits to American Water, of the transaction;

·

the related person’s interest in the transaction;

·

the dollar value of the transaction or the related person’s interest in the transaction without regard to the amount of any profit or loss;

·

whether the transaction is to be undertaken in the ordinary course of business of American Water; and

·

whether the transaction is on terms more favorable to American Water than a transaction with an unrelated third party.

Approval of a related person transaction under the policy will be granted only if it is determined that, under all of the circumstances, the transaction is in the best interests of American Water and only so long as those interests outweigh any negative effects that may arise from permitting the transaction to occur.

 

Each standing committee has a charter that governs its operations and sets forth each such committee’s duties and responsibilities. A copy of each such committee’s charter is available on our Investor Relations website at ir.amwater.com and can also be obtained, free of charge, by sending us a written request. See “Communications, Shareholder Proposals and Company Information—Contacting Us or Our Transfer Agent” on page 73 of this proxy statement.

As needed, each standing committee sets a time to meet in executive session without management present. The ED&CC has its independent compensation consultant present in regular or

executive sessions. The Audit, Finance and Risk Committee meets regularly in separate executive sessions with, among others:

 

·

our Senior Vice President of Internal Audit;

·

our General Counsel and/or our Compliance Officer; and

·

representatives of our independent registered public accounting firm.

Also, each standing committee has the authority to retain outside advisors, including legal counsel or other experts, as it deems appropriate in its sole discretion and to approve the fees and expenses associated with such advisors.

 

Under the terms of its charter, the ED&CC has delegated authority to certain committees comprised of members of management to perform fiduciary, asset administration, and other administrative activities with respect to certain of the Company’s retirement and other benefit plans. Also, as authorized by the terms of the 2017 Omnibus Plan, the ED&CC has delegated authority to the CEO to grant awards under the 2017 Omnibus Plan to Company employees who are not Section 16 officers, subject to an annual maximum number of shares that may be awarded utilizing this delegated authority.

In addition, the Board has designated an Emergency Executive Committee as a non-standing committee of the Board comprised of the Board Chair, as chair, and the chairs of each of the Board’s standing committees, as the other members, 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. During 2024, the Emergency Executive Committee did not meet.

 

Since February 2, 2022, Ms. Hardwick has served as our Chief Executive Officer and as a member of our Board. Mr. Griffith has been appointed to serve as our President and Chief Executive Officer, effective as of the conclusion of the annual meeting, and has been nominated for election to the Board at the annual meeting. Mr. Kurz has served as our Board Chair since May 11, 2018.

In accordance with our Corporate Governance Guidelines, the Board Chair is an independent director. We believe that the oversight function of a board of directors is enhanced when an independent director, serving as board chair, is in a position to set the agenda for, and preside over, meetings of the board of directors. We also believe that our leadership structure enhances the active participation of our independent directors.

 

The Board Chair is responsible for:

 

·

setting the agenda for meetings of the Board, and presiding over Board meetings at which the Board Chair is present;

·

coordinating the work of the Board committees;

·

overseeing the distribution of materials by our Secretary to the members of the Board;

·

serving as the independent director primarily responsible for Board consultations and communications between the Board and shareholders; and

·

performing such other duties as the Board may, from time to time, require to assist it in the fulfillment of its duties.

If the Board Chair ceases to be an independent director, the Board shall select another Board Chair from among the members of the Board who are determined by the Board at that time to be independent directors. The Board Chair is selected and may be removed from that position at any time, by a majority of the members of the Board. There will be no changes to our Board leadership structure if Mr. Griffith is elected to the Board.

 

One of the responsibilities of the Board is the oversight of our risk management activities, which is discharged by the Board as well as through the Audit, Finance and Risk Committee, the ED&CC and the SETO Committee. In discharging this responsibility, the Board and these committees, with the assistance of management, monitor and evaluate our major enterprise risks and oversee and monitor the design and implementation of guidelines and programs to manage these risks.

Our management has overall responsibility for conducting risk assessments and risk management strategy and programs. Our Enterprise Risk

Management Committee, consisting of various Company executives, as well as certain functional and business unit employees and leaders, oversees enterprise risk management activities. The Enterprise Risk Management Committee meets at least four times a year. The Enterprise Risk Management Committee’s areas of focus include competitive, economic, operational (including physical security and cybersecurity), financial (including accounting, internal audit, credit, liquidity and tax), legal, compliance, regulatory, health, safety and environmental, political and reputational risks.

 

The Audit, Finance and Risk Committee is responsible for assisting the Board in overseeing the Company’s accounting and disclosure controls, the design and performance of the internal audit, ethics and compliance functions, and the enterprise risk management process, including risk assessments and risk management strategy. The Audit, Finance and Risk Committee also has direct authority over the Company’s independent registered public accounting firm.

In performing these responsibilities, the Audit, Finance and Risk Committee reviews, at least annually, with management our major financial and operational risk

exposures, including any risk concentrations and risk interrelationships, the magnitude and the likelihood of occurrence of risk, and management’s activities to monitor and control these exposures. This committee also reviews our major financial risks, including credit, liquidity, market and funding risks. The Audit, Finance and Risk Committee coordinates oversight of operational risk management, including with respect to cybersecurity risks, with the SETO Committee. The Audit, Finance and Risk Committee also oversees our insurance risk management policies and programs and makes recommendations to the Board regarding the structure and renewal of our directors’ and officers’ liability insurance program.

 

The ED&CC assesses potential risks related to our compensation policies and practices. Management conducts and presents to the ED&CC for its review an annual risk assessment of our executive compensation, with a particular focus on performance-based compensation. For 2024, this risk assessment was directly supported by our internal enterprise risk management function and our Enterprise Risk Management Committee, and included an in-depth review of the risks associated with our compensation and variable pay programs, employing a risk identification methodology that is used throughout the business. In May 2024, an update of this risk assessment for 2023 was reviewed with the ED&CC. This assessment sought to identify whether features of our compensation policies or practices are reasonably likely to have a material adverse effect on the Company.

The risk assessment conducted by management found that our existing short-term and long-term compensation is coupled with compensation design elements and other controls that discourage decision-making focused solely on compensatory consequences. These design elements and controls include, among other things:

 

·

use of both financial and non-financial metrics that avoids over-emphasis on a single metric;

·

oversight and approval of compensation decisions by the ED&CC and its retention of an independent compensation consultant;

·

centralized data reporting platforms which permit information to be collected, reviewed and verified in compliance with internal policies;

·

transparency as to the design, management and execution of our executive compensation program, including disclosures in our proxy statement and other required SEC filings;

·

significant internal review of financial and operational performance metrics and performance reviews during the year regarding the operation of our business, as well as an audit of our financial statements by our independent registered public accounting firm; and

·

a compensation recovery policy that exceeds the requirements of applicable SEC and NYSE rules.

On the basis of management’s review of our executive compensation programs, management concluded, and advised the ED&CC, that no significant risks have been identified and that it does not believe it is reasonably likely that the compensation policies, practices or programs could have a material adverse effect on American Water. It is currently anticipated that the risk assessment for 2024 will be completed and reviewed with the ED&CC during the second quarter of 2025.

 

The SETO Committee reviews and monitors operational risk exposure and risk mitigation strategies together with the Audit, Finance and Risk Committee and the Board. In performing these responsibilities, the SETO Committee reviews management’s processes for assessing business continuity risks and developing related contingency planning. The SETO Committee also reviews physical

and cybersecurity preparedness and threat assessments, is updated on emerging issues and our related responses and initiatives, and coordinates with the Audit, Finance and Risk Committee and the Board on matters related to cybersecurity risk. The SETO Committee also reviewed and recommended the inclusion of the description of our cybersecurity program in our 2024 Form 10-K.

 

The Corporate Governance Guidelines provide that a primary responsibility of the Board is planning for the succession of our CEO and other executive officers. The goal of our succession planning process is to identify executive talent at the Company and provide for continuity of effective leadership that can fulfill the long-term requirements of our business. The Corporate Governance Guidelines contemplate a collaborative effort between the Board (and certain of its

committees) and the CEO; however, the Board retains full responsibility for the selection of the CEO.

Specifically, the Corporate Governance Guidelines provide that the CEO annually submits to the Board for its review a succession plan for the CEO and other executive officers. The succession plan includes a determination of key competencies and desired experiences for the particular role, an identification

 

and assessment of internal candidates, development plans for internal candidates and, as appropriate, identification of external candidates. The criteria used to assess potential CEO candidates are formulated by the Board based on the Company’s business strategies, and include the candidates’ experience, as well as strategic and leadership qualities. The Board’s deliberation on CEO succession is to include an emergency succession plan that addresses temporary delegation of authority if an unforeseen event such as death or disability occurs that prevents the CEO from continuing to fulfill the role. The Board may review executive development and succession planning more frequently as it deems appropriate.

Consistent with its responsibilities as described in this section, the Board has delegated the day-to-day responsibility for the process of providing a slate of CEO succession candidates for consideration by the Board to the Nominating Committee, with input from the Board Chair and the current CEO. The Board also

has delegated authority to the ED&CC to collaborate with the CEO to ensure that processes are in place for succession planning and development with respect to other executive officers.

As a practical matter, consideration of executive succession planning (especially for the CEO role) occurs throughout the year at Board meetings and involves regular interaction between and among the Board, the Chief Executive Officer, the President, and other members of management, as appropriate.

The succession and transition of (i) Mr. Griffith as our President effective August 1, 2024, and as Chief Executive Officer to be effective May 14, 2025; (ii) David M. Bowler as our Executive Vice President and Chief Financial Officer, effective August 1, 2024; and (iii) Stacy A. Mitchell as our Executive Vice President and General Counsel, effective June 5, 2024, were implemented in accordance with the foregoing process.

 

The Board’s Corporate Governance Guidelines limit the service of Board members as directors of other public companies. Commonly referred to as “overboarding” provisions, the primary purpose of these limitations is to ensure that each director can devote sufficient time to perform their duties as a member of the Board.

Under these provisions, a director may not serve on the board of directors of more than four public companies, including American Water, and a director who is an executive officer of a public company, including American Water, may not serve on the board of directors of more than two public companies, including American Water. A director may not serve on the audit committee of more than two public companies, excluding American Water, without the prior approval of the Nominating Committee.

Also, for any potential service on a for-profit board not prohibited by these limitations, directors are required to advise and obtain the approval of the Nominating

Committee chair (or the Board Chair, in the case of a director who is the Nominating Committee chair) in advance of accepting an invitation to serve on a for-profit board. Prior to approving such service, the Nominating Committee chair will review the proposed relationship for potential conflicts of interest and time demands, considering such facts as the chair deems relevant, including industry or operations of the other company and whether service on a greater number of boards would impair the director’s ability to serve effectively on the Board.

Finally, if a director has a substantial change in professional responsibilities, occupation or business association, the director must notify the Board Chair and the Nominating Committee chair. This notice constitutes an offer to resign from the Board. The Nominating Committee will consider the appropriateness of the director’s continued service on the Board and will make a recommendation to the Board regarding whether it should accept the director’s offer to resign.

 

As represented by the director tenure graphic above and evidenced by our actual Board refreshment over the past few years, we seek to maintain a continual balance of directors with historical and institutional knowledge and experience coupled with new directors who have more recently joined the Board. While we believe that the current and proposed size and composition of the Board are appropriate, the Board continually devotes substantive attention and focus on Board succession planning and activities to meet the Board’s future needs.

Our Corporate Governance Guidelines do not impose term limits on the service of our directors. The Nominating Committee reviews annually each director’s continuation on the Board, which allows each director the opportunity to confirm their desire to continue as a director and provides the Board an opportunity to replace directors who no longer wish to remain on the Board. Also, the Nominating Committee

periodically assesses the quality and efficacy of our Board tenure and refreshment policies, including based on feedback received from our shareholder outreach program (described in more detail below).

Our Corporate Governance Guidelines generally restrict a non-employee director who has reached their 75th birthday prior to the date of our annual meeting of shareholders from being nominated for re-election to the Board. However, the Board may, in special circumstances and where deemed in the best interests of the Company, grant an exception to this policy on an annual basis. The Board must determine to make a special exception prior to each ensuing term of a director for which the special exception will be applicable. There are no director nominees standing for election at the annual meeting who are 75 years of age or older.

 

During 2024, our Investor Relations team, together with key executives and management, engaged with approximately 250 investors. In addition, our Corporate Secretary and Investor Relations teams jointly led a shareholder outreach program focused on corporate governance, executive compensation, sustainability, customer affordability, environmental stewardship, shareholder disclosure and related topics. Through this outreach program, now in its eleventh consecutive year and held both during and after proxy season, shareholders who beneficially owned, in the aggregate, approximately 52 percent of our common stock, as well as leading proxy advisory firms, were contacted. The purpose of this outreach program is to better identify and understand the relevant topics that were most important to our shareholders. Through these sessions, we:

 

·

discussed topics of interest to our shareholders;

·

solicited shareholder viewpoints;

·

conveyed our views on those topics; and

·

gained a better understanding of areas of mutual consensus.

We received overall positive feedback regarding, among other things: our corporate governance

framework, our Board composition, our proxy statement disclosures, our compensation practices, our annual sustainability report, our commitment to sustainability and customer affordability, including political contribution and lobbying governance and related disclosures. Also, shareholders expressed appreciation for our willingness to seek their views, and more importantly, the desire to establish an ongoing dialogue with them. Shareholders also encouraged us to continue to make voluntary disclosures, including by providing summaries of our key initiatives that will help them better understand our policies, procedures and how we run the business. The input and insight gleaned from our shareholder outreach program is shared with management and our Board.

We intend to continue to engage regularly with shareholders and proxy advisory firms to solicit their input, and we give careful consideration to the feedback we receive. We also use this outreach to consider meaningful avenues to respond to appropriate suggestions for further enhancement to our corporate governance standards and practices.

 

Our Code of Ethics applies to our directors, officers and employees and is designed to promote, among other things:

 

·

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest in personal and professional relationships, and deter wrongdoing or even perceptions of wrongdoing;

·

full, fair, accurate, timely and understandable disclosures in periodic reports we are required to file;

·

accountability for adhering to the Code of Ethics; and

·

compliance with applicable governmental laws, rules and regulations.

Our Code of Ethics provides for the prompt internal reporting of violations to an array of appropriate persons and confidential treatment of the reporting person, to the extent possible, during a compliance investigation. We intend to satisfy the disclosure requirements regarding any amendment to, or waiver from, a provision of the Code of Ethics that applies to our principal executive officer, principal financial officer, or principal accounting officer or controller (or persons performing similar functions) by making disclosures concerning such matters available on the Investor Relations page of our website.

We have also adopted an Anti-Corruption & Anti-Bribery Policy that reinforces our commitment to working ethically and maintaining the highest level of integrity when conducting business on behalf of the Company. This policy promotes truthful and transparent conduct in our interactions with our business partners, governmental agencies and government officials. We have a long-standing commitment to compliance with all applicable anti-corruption laws, and bribes, kickbacks, and other similar payments to or from third-parties are prohibited.

Our Corporate Governance Guidelines set out principles by which the Board will operate and execute its responsibilities in accordance with our Restated Certificate of Incorporation, our Amended and Restated Bylaws, the listing standards of the NYSE, and applicable laws.

Current copies of our Code of Ethics, Anti-Corruption & Anti-Bribery Policy and Corporate Governance Guidelines are available on our Investor Relations website at ir.amwater.com and can also be obtained by sending us a written request. See “Communications, Shareholder Proposals and Company Information—Contacting Us or Our Transfer Agent” on page 73 of this proxy statement.

 

Our Amended and Restated Bylaws include a proxy access provision pursuant to which any eligible shareholder, or eligible group of up to 20 shareholders, owning three percent or more of our common stock continuously for a three-year period and through the date of the next annual meeting of shareholders may, subject to certain limitations and

conditions, nominate and include in our proxy materials for that annual meeting of shareholders, a number of director nominees not to exceed the greater of (a) two directors or (b) 20 percent of the directors then serving on the Board (rounded down to the nearest whole number).

 

As a company whose regulated operations can be significantly impacted by public policies, we participate responsibly in the political process and make reasonable political contributions consistent with all applicable laws and reporting requirements. We also hold memberships in a variety of industry, trade and business associations, which enable us to understand the views of others and obtain feedback on our positions.

As part of our commitment to good governance principles and transparency, we maintain a Political Contribution Policy that requires that our political contributions, which we define as direct contributions or expenditures (in cash or in kind) to a political party, a candidate for an elected office or a candidate’s political campaign, or a political action committee, or PAC (subject to the exclusions referenced below), be made only:

 

·

by the American Water Works Company, Inc. Employee Federal PAC, referred to as the Federal PAC; or

 

·

to, or through, a PAC sponsored by or associated with one of our subsidiaries or lines of business, referred to as a Subsidiary PAC.

Political contributions, as defined under this policy, do not include amounts spent in connection with a core business function, such as a water or wastewater system acquisition, defense of a condemnation action filed against us, or other activities that impact or affect the operation of our business, unless made to support a political party, a candidate for an elected office or a political campaign. Also, a payment to a trade association or tax-exempt organization (other than a PAC, a Section 527 organization, or a similar entity) is not a political contribution under this policy, even if any portion of the payment is used for political purposes.

All political contributions by the Company must be approved in advance by our CEO. Political contributions by the Company’s subsidiaries must first be approved by the subsidiary’s or line of business’s president, or similar officer. This pre-approval requirement does not apply to contributions by the Federal PAC or a Subsidiary PAC, which are governed by the PAC’s own charter, policies and procedures. Our Political Contribution Policy does not regulate or apply to our employees’ own political contributions.

Since 2019, we have disclosed annually on our website, within 180 days after the end of the preceding fiscal year, the following information regarding our political contributions:

 

·

the payor, recipient, date and amount of each direct political contribution (as defined under the

Political Contribution Policy) made, and the title of the person approving it;

·

the payor, recipient, date and amount of each political contribution made by the Federal PAC and each Subsidiary PAC; and

·

the payor, recipient and amount of each payment made to a trade association or tax-exempt organization (including Section 501(c)(4) organizations) during the last fiscal year, which, individually or in the aggregate, exceeded $50,000, if the association or organization provided a written statement that some or all of our payments were used for non-deductible political, electioneering or lobbying purposes, as well as the amount reported by the association or organization as attributable to these non-deductible activities.

Our governance and disclosure efforts regarding political contributions continue to be recognized by the Center for Political Accountability’s CPA-Zicklin Index, which for 2024 placed us in the second quartile among all of the S&P 500 companies.

The Nominating Committee reviews and evaluates the efficacy of our Political Contribution Policy at least annually and reviews and recommends to the Board for approval in advance the public disclosures required by the policy. The policy and our political contribution disclosures are available through our Investor Relations website at ir.amwater.com.

 

We value our relationships with government officials and our interactions with them comply with applicable federal, state and local laws, regulations and rules. These rules are often complex and vary from state to state. However, we believe it is an important and necessary part of our mission to provide safe, clean, reliable and affordable water and wastewater services to our customers to engage in the public policy arena. For these reasons, we do, from time to time, engage in lobbying activities, which we define generally as communications with government officials, legislators, regulators, executive branch officials or members of their staff.

We publicly disclose on our website, within 180 days after the end of each fiscal year, the amount of aggregate lobbying expenditures (as defined under applicable state or federal law and to the extent required to be reported to applicable election commissions). This reported amount includes all expenditures made during periods of time required to be reported for the last fiscal or calendar year by the Company or any subsidiary, and it may include expenditures for periods of time other than such year, as well as other exclusions and/or limitations provided for under state or federal election law. Members of senior management report annually to the Board on our lobbying activities to provide oversight for these activities.

 

In accordance with our Restated Certificate of Incorporation and Amended and Restated Bylaws, the number of directors is fixed from time to time by the Board. Kimberly J. Harris resigned from the Board effective March 24, 2025, for personal reasons to focus on her health and recovery from a recent medical issue. The Board and the Company wish Ms. Harris a complete and speedy recovery and thank Ms. Harris for her many years of faithful service to the Board.

There are currently nine directors serving on the Board. Eight persons have been named as director nominees for election at the 2025 Annual Meeting. Ms. Goss will not be standing for re-election at the annual meeting in accordance with the director retirement provisions in our Corporate Governance Guidelines. The Board wishes to thank Ms. Goss for her distinguished and faithful service as a member of our Board since 2003.

In addition, on February 19, 2025, Ms. Hardwick notified the Board of her decision to retire as the Company’s Chief Executive Officer and principal executive officer, effective as of the conclusion of the Company’s 2025 Annual Meeting, and not to stand for re-election to the Board at the 2025 Annual Meeting. The Board wishes to extend its sincere appreciation and thanks to Ms. Hardwick for her six years of outstanding leadership of the Company, and, since February 2022, for her service as a member of the Board.

On the recommendation of the Nominating Committee, the Board has nominated for election to the Board the following persons:

 

·

Jeffrey N. Edwards

·

John C. Griffith

·

Laurie P. Havanec

·

Julia L. Johnson

·

Patricia L. Kampling

·

Karl F. Kurz

·

Michael L. Marberry

·

Stuart M. McGuigan

Each of these nominees, except for Mr. Griffith, is currently a member of the Board. If elected, each nominee would hold office until the date of the 2026 annual meeting of shareholders, and until their successor is elected and qualified, or until their earlier death, resignation or removal. Proxies may not be voted with respect to more than these eight nominees.

Assuming the election of all of the eight director nominees named in this proxy statement, the Board intends to reset the size of the Board to eight immediately following the 2025 annual meeting.

Each director nominee identified in this proxy statement has confirmed that the nominee is willing and able to serve as a director, if elected. Should any of the nominees, prior to the meeting, become unable to serve as a director for any reason, the Board may either reduce the number of directors to be elected or select another nominee recommended by the Nominating Committee. If another nominee is selected, all proxies will be voted for the substitute nominee.

In accordance with our Amended and Restated Bylaws and our Corporate Governance Guidelines, prior to the meeting, each incumbent director nominee will submit a contingent resignation in writing to the Board Chair or the Secretary of American Water. The resignation becomes effective only if the director fails to receive a sufficient number of votes for re-election at the meeting, assuming a quorum is present and the Board accepts the resignation. In an uncontested election of directors, if any incumbent director nominated for re-election does not receive the affirmative vote of at least the majority of the votes cast at any meeting for the election of directors at which a quorum is present, the Nominating Committee will make a recommendation to the Board on whether to accept or reject such tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Nominating Committee’s recommendation, and publicly disclose, by a press release, a filing with the SEC, or other broadly disseminated means of communication, its decision regarding the tendered resignation and the rationale behind the decision of the Board within 90 days from the date of the certification of the election results.

With respect to a tendered resignation, each of the Nominating Committee, in making its recommendation, and the Board, in making its decision, may consider any factors or other information that it considers appropriate and relevant. The director who tenders their resignation will not participate in the recommendation of the Nominating Committee or the decision of the Board with respect to their resignation. If a director’s resignation is not accepted by the Board, such director will continue to

 

serve until the 2026 annual meeting of shareholders and until their successor is duly elected, or their earlier death, resignation or removal. If a director’s

resignation is accepted by the Board, then the Board, in its sole discretion, may fill any resulting vacancy or may decrease the size of the Board.

 

We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will enable the Board to fulfill its responsibilities. In this regard, the Nominating Committee considers candidates based upon their background, skills, experience, age, race, gender and ethnicity. The Board believes in balancing the value that longevity of director service can bring with the value of new ideas and insights that can come through new members. In addition, our Corporate Governance Guidelines provide that directors must be persons of good character and thus must possess all of the following personal characteristics:

 

·

Integrity: Directors must demonstrate high ethical standards and integrity in their personal and professional dealings.

 

·

Accountability: Directors must be willing to be accountable for their decisions as directors.

 

·

Judgment: Directors must possess the ability to provide wise and thoughtful counsel on a broad range of issues.

 

·

Responsibility: Directors must interact with each other in a manner which encourages responsible, open, challenging and informed discussion.

 

·

High Performance Standards: Directors must have a history of achievement which reflects high standards for themselves and others.

 

·

Commitment and Enthusiasm: Directors must be committed to, and enthusiastic about, their performance for American Water as directors, both in absolute terms and relative to their peers.

 

·

Courage: Directors must possess the courage to express views openly, even in the face of opposition.

The Board strives to have members with knowledge, experience and skills in the following core competencies:

 

·

accounting and finance

·

business judgment

·

management

·

crisis response

·

industry knowledge

·

utility regulation

·

leadership, including in other public companies

·

environmental management

·

human capital management

·

strategy/vision

·

technology

In this regard, in evaluating a candidate’s experience and skills, the Nominating Committee will consider qualities such as an understanding of the water industry, utilities, marketing, finance, customer service, utility and environmental regulation, cybersecurity and public policy issues. The Nominating Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. In addition, the Board is committed to having directors who add tangible value to American Water with a diversity of ideas, approaches and experiences and the interpersonal capacity to foster effective communication within the Board and with management.

Annually, the Nominating Committee reviews the profile, engagement and performance of each director to determine whether the director should be renominated for Board service. The Nominating Committee also considers whether, in light of our strategy or trends in our market environment, new skill sets or experiences would benefit us and our shareholders.

The process followed by the Nominating Committee to identify and evaluate candidates includes requests to members of the Board and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates, and interviews of selected candidates by members of the Nominating Committee and other members of the Board. The Nominating Committee may engage a third party to assist in the search for director candidates or to assist in gathering information regarding a director candidate’s background and experience. If the Nominating Committee engages a third party, that committee would approve the fee that American Water pays for these services.

 

When evaluating the recommendations of the Nominating Committee, the Board should take into account all factors it considers appropriate, which may include:

 

·

whether the candidate has exhibited behavior that indicates commitment to the highest ethical standards;

·

whether the candidate has special skills, expertise and background that would complement the attributes of the existing directors, taking into consideration the communities and geographies in which the Company operates;

·

whether the candidate has achieved prominence in their business, governmental or professional activities, and has built a reputation that demonstrates the ability to make the kind of important and sensitive judgments that the Board is called upon to make;

·

whether the candidate will effectively, consistently and appropriately take into account and balance the legitimate interests and concerns of all of our shareholders and our other stakeholders in reaching decisions, rather than advancing the interests of a particular constituency;

·

whether the candidate possesses a willingness to challenge management while working constructively as part of a team in an environment of collegiality and trust; and

·

whether the candidate will be able to devote sufficient time and energy to the performance of their duties as a director.

In addition to our director skills matrix included on page vii of this proxy statement, the following highlights certain of the key skills, qualifications and experiences of our director nominees:

American Water Strategic Priorities

 

·

Customer Experience

·

Customer Growth and Acquisitions

·

Safety

·

Human Capital Management

·

Investors/Financial

·

Regulators/Policymakers

·

Operational Execution

Additional Key Skills

 

·

C-Suite

·

Governance/Risk Management

·

Legal

·

Sustainability

·

Technology and Cybersecurity

 

The NYSE’s listing standards require that:

 

·

a majority of our directors and all of the members of the Nominating Committee satisfy the NYSE’s independence standards applicable to all directors;

·

all of the members of the Audit, Finance and Risk Committee satisfy the NYSE’s independence standards applicable to audit committee members; and

·

all of the members of the ED&CC satisfy the NYSE’s independence standards applicable to compensation committee members.

Applying these standards, the Board has determined that eight of the nine directors currently serving on the Board, consisting of Mses. Goss, Havanec, Johnson and Kampling, and Messrs. Edwards, Kurz, Marberry and McGuigan, qualify as independent. Due to their employment positions with the Company, the Board determined that Ms. Hardwick and Mr. Griffith do not qualify as independent.

The Board also has determined that each of Mses. Goss and Kampling, and Messrs. Edwards and Marberry, satisfies the NYSE’s independence standards for audit committee members, and that each of Mses. Goss, Havanec, Johnson and Kampling, and Mr. McGuigan, satisfies the NYSE’s independence standards for compensation committee members.

For a director to be considered independent under the NYSE listing standards, a director cannot have any of the disqualifying relationships enumerated by those standards. Furthermore, the NYSE listing standards state that a director is not independent unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In making this determination, the Board considers all relevant facts and circumstances when assessing the materiality of any relationship of a director with the Company, not only from the standpoint of the director but also from that of persons or organizations with which the director has an affiliation. Material relationships may include, for example, commercial, industrial, banking, consulting, legal, accounting, charitable, familial and personal relationships (which include, but are not limited to, friendships, mentorships and personal travel).

To assist the Board in considering whether a director has a material relationship with us, the Board has adopted categorical standards of material director relationships. Under these standards, which are based in part on the disqualifying relationships enumerated by the NYSE’s listing standards, a director will not be deemed independent if any of the following relationships exist:

 

Each year, directors complete a series of evaluations to assess the performance of the Board and each of the standing committees. The evaluations elicit responses in key areas of Board operation and function and subjective comments from each director. Each committee member evaluates how well the committees on which the member serves are functioning and provides suggestions for improvement.

Since 2017, the Board utilized a peer review process by which each director was asked to provide feedback

on a number of characteristics of each of the other directors, including background, leadership, preparation, focus on shareholder interests, participation and independence.

In addition, annually, members of our executive leadership team, comprised of senior executives of the Company who regularly interact with the Board and the committees, are solicited to provide their input and perspective on the operation of the Board and how the Board might improve its effectiveness.

 

Finally, our Board Chair also interviews each director individually to obtain their assessment of director performance, Board dynamics and the effectiveness of the Board and its committees, and to discuss the results of the peer review process and their responses to these questions.

A summary of the responses to the questionnaires and the responses received from senior management’s

feedback is reviewed by the Board Chair. The summary and related responses with respect to the Board and each committee is ultimately discussed in executive session in meetings of the Board and each respective committee.

 

We do not pay our directors a separate fee for attendance at Board or committee meetings.

For calendar year 2024, Aon Human Capital Solutions, or Aon, the ED&CC’s independent compensation consultant, reviewed American Water’s non-employee director pay program for market competitiveness. The review determined that the cash and equity compensation paid to our non-employee directors and our Board Chair were positioned at the median of our 2024 peer group (as defined below in “Compensation Discussion and Analysis—Compensation Determinations and Pay Competitiveness in 2024” beginning on page 33 of this proxy statement), and that our Board Chair’s total compensation was positioned at the 75th percentile for non-executive chairpersons among the companies in our 2024 peer group with a non-executive chairperson.

As a result of the review, and based on, among other things, data and analyses provided by Aon, the ED&CC recommended, and the independent members of the Board approved, an increase in the annual director base equity grant from $155,000 to $165,000, which brought the directors’ total direct compensation to just below the 75th percentile of the compensation peer

group. This compensation decision was effective as of May 15, 2024. No changes were made to the cash retainer or to the premiums paid to our non-executive Board Chair or the committee chairs.

Equity compensation for our non-employee directors is paid in the form of stock units under our 2017 Omnibus Plan. The actual number of stock units granted is based on the closing price of our common stock on the date of grant, which is typically the date the director is elected or re-elected to the Board. The stock units vest on the date of grant and the shares underlying the stock units are distributed to the directors as soon as administratively practicable after the date of grant. Previously, the distribution of shares of common stock underlying the stock units granted to non-employee directors was deferred until approximately 15 months after the date of grant; the ED&CC discontinued this practice beginning with the 2024 annual equity grants.

Non-employee directors are reimbursed for expenses incurred in attending Board and committee meetings or other Company-related functions, and reasonable and necessary expenses incurred for attending up to one director continuing education program each year.

 

The following table presents information regarding compensation earned or paid in 2024 as to each person who served as a non-employee member of the Board during that year. Ms. Harris served as a member of the Board until her resignation effective March 24, 2025. Ms. Harris’s resignation was for personal reasons to focus on her health and recovery from a recent medical issue and was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

The table does not include amounts paid for reimbursement of travel expenses related to attending Board and committee meetings or other Company related functions, or any reimbursement of director educational expenses, and does not include compensation earned or paid as to the CEO. See “Executive Compensation” beginning on page 46 of this proxy statement for information relating to the CEO’s compensation.

 

To align the interests of our directors and shareholders, we have a stock ownership policy for non-employee directors under which each such director is required to hold shares equaling five times the director’s annual cash retainer by the fifth

anniversary of the commencement of service as a director. Each of our non-employee directors satisfied the stock ownership requirement as of December 31, 2024, except for Ms. Havanec and Mr. McGuigan, who are currently within their five-year compliance periods.

 

Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires that our shareholders receive the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules. The disclosures related to compensation of our NEOs consist of the Compensation Discussion and Analysis, or CD&A, the 2024 Summary Compensation Table, and the other required executive compensation tables and related narrative disclosures in this proxy statement. In accordance with the advisory vote of our shareholders at our 2023 annual meeting of shareholders, we are providing to our shareholders the opportunity to vote annually to approve, on an advisory basis, the compensation of our NEOs.

Our executive compensation philosophy and programs are designed to create a positive correlation of pay to performance and reward our NEOs for delivering results without incentivizing excessive risk-taking. We seek to attract, motivate and retain high-caliber executives and to align the interests of those executives with the interests of our shareholders in order to build long-term, sustainable value for our shareholders.

 

Accordingly, the Board recommends that our shareholders vote “FOR” the following resolution:

RESOLVED, that the shareholders of American Water Works Company, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative discussion in the Company’s proxy statement for the 2025 annual meeting of shareholders.

While the vote is not binding on us, the ED&CC values the opinions expressed by our shareholders and will carefully consider the outcome of the vote when making future compensation decisions for our NEOs. Unless the Board modifies its policy on the frequency of holding this vote, the advisory vote is currently held every year, and the next vote on the frequency of the advisory vote will occur at the 2029 annual meeting of shareholders.

 

In this CD&A, we address our compensation philosophy and programs, the key decisions of the ED&CC with respect to these programs and the reasons for those decisions, principally with respect to all of our NEOs for 2024, who are:

 

·

M. Susan Hardwick, our Chief Executive Officer

·

John C. Griffith, our President (who also served as Chief Financial Officer during 2024)

·

David M. Bowler, our Executive Vice President and Chief Financial Officer

·

Cheryl Norton, our Executive Vice President and Chief Operating Officer

·

Melanie M. Kennedy, who served as our Executive Vice President, Chief Human Resources Officer until March 1, 2025; effective April 1, 2025, Lori Sutton will serve as our Senior Vice President, Chief Human Resources Officer, and

·

Stacy A. Mitchell, our Executive Vice President and General Counsel

Effective June 5, 2024, Ms. Mitchell was appointed by the Board to serve as the Company’s Executive Vice