2018 Guide to Effective Proxies

2.5 Checklists | 103 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES CALIFORNIA RESOURCES CORPORATION CAPITAL ONE FINANCIAL CORPORATION CENTERPOINT ENERGY, INC. CIENA CORPORATION 2018 PROXY STATEMENT ProxyStatementSummary CALIFORNIA RESOURCES CORPORATION 5 The Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways: We pay for performance . We are stockholder-aligned . We provide market-competitive compensation . We have stock ownership requirements . We have a clawback policy . We seek independent advice. A significantportionof the compensationofour namedexecutiveofficers isdirectly linked to the Company’sperformance,bywayofa compensation structure that includesperformance- basedannualand long-term incentiveawards. Annualand long-term incentiveawards arebased onperformancemeasures thatarealignedwith the creationof value forour stockholders.Amajorityof theoutstanding long-term incentiveawards forour namedexecutiveofficersare stock-based. Our change in controlarrangements fornamed executiveofficers require both theoccurrenceofa change in controleventand terminationof employmentbeforeapplicable vestingofawards occurs. Ourcompensationprogram iscompetitivewithinour industryand recognizesevolvinggovernance practices,whichallowsus toattractand retainkey talent. We maintain stock ownership guidelines which require our named executive officers and directors to have meaningful stock ownership in the Company. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee. We have “double trigger” change in control provisions. WHAT WE DO WHAT WE DON’T DO Wedonothave individualemployment agreements. We do not allow hedging or pledging. We do not allow the repricing of stock options. We do not offer enhanced retirement benefits. Wedonotencourageexcessive riskor inappropriate risk taking throughour incentive programs. Wedonothaveemploymentagreementswithanyof ournamedexecutiveofficers. Ourequity incentiveplanprohibits the repricingor backdatingof stockoptions. Our InsiderTradingPolicyprohibits certain transactions involvingour stock, includinghedging andpledging. Ournonqualifieddefined compensationplan provides restorative,butnotenhanced, retirement benefits forexecutives. Ourplansdonotmotivateexecutives toengage in activities that createexcessiveor inappropriate risk for theCompany. SECTIONIV-COMPENSATIONDISCUSSIONANDANALYSIS Attract, retain and motivate top executive talent To attract, retain and motivate exceptional leaders, we believe that compensation opportunities at Capital One must be competitive with the marketplace for talent. The Committee and the independent directors strive to preserve a competitive pay mix and total target compensation values in the executive compensation program, as wellas providecompetitive total rewards basedon our selectedpeer group. Align our executives’ interests with those of our stockholders The Committee and the independent directors are committed to designing incentive compensation programs that reward individual and Company performance and that are aligned with the creation of stockholder value over the long term. Because named executive officer compensation is primarily delivered through deferred, equity-based vehicles that vest over multiple time horizons, the named executive officers have a significant stake in the success of the Company. In addition, we have established specific stock ownership policies that the named executiveofficers must meet andstock retention provisionsapplicableto certain equityawards. Important Aspects of Our Executive Compensation Programs Highlights of Our 2017 Compensation Programs The Committee believes that our named executive officer compensation programs balance risk and financial results, reward named executive officers for their achievements, promote our overallcompensationobjectivesand encourage appropriate, but not excessive, risk-taking. The table below contains highlights of our 2017 compensationprogram: What We Do What We Don’t Do ✓ We provide primarily long-term, equity-based compensation toourNEOs ✘ Wedonotprovide excisetaxgross-up payments ✓ We provide our CEO with compensation consisting entirely of equityawards and deferredpayouts ✘ We donotreprice stockoptions ✓ We pay our NEOs equity-based awards based on Companyandindividualperformance ✘ We donotguarantee incentiveawards ✓ We apply risk balancing so as not to jeopardize the safetyandsoundnessofCapitalOne ✘ We do not provide compensation or awards to our NEOs on terms and conditions that are more favorable than compensation and awards granted to otherexecutiveofficers ✓ We apply performance thresholds to NEO grants to determinetheamountofequitydeliveredatvesting ✘ We do not permit our NEOs to engage in short sales, hedging transactions, or speculative trading in derivativesofoursecurities ✓ Wereduceperformanceshareawardvaluesatvesting if the Company does not achieve positive Adjusted ROA (for awards granted in 2017) or positive AdjustedROTCE(forawardsgrantedin2018) ✘ We do not permit our NEOs to place their Company securities in a margin account or to pledge their Companysecuritiesascollateralforaloan ✓ We have clawback provisions in our award agreementstoensureaccountability ✘ Generally,wedonotutilize employmentagreements , and none of our current NEOs have employment agreements ✓ We require both a change of control event and a termination before we accelerate the vesting of equity awards( doubletrigger ) ✘ Wedonotpaya cashsalary toourCEO ✓ We have an independent compensation consultant advisingtheCompensationCommittee ✓ We use a mix of relative and absolute performance metricsinourincentiveawards 46 CAPITALONEFINANCIALCORPORATION 2018PROXYSTATEMENT Executive Compensation Best Practices TheCommittee’sfiscal2017compensationdecision-makingreflectsthefollowingcoregovernanceprinciplesandpractices thatweemploytoalignexecutivecompensationwithstockholderinterests.Alsolistedbelowarecertaincompensationpractices thatwedonotemploybecausewebelievetheywouldnotserveourstockholders’long-terminterests. WHATWEDO Ensureindependenceinestablishingour executivecompensationprogram. Executivecompensationisreviewedand establishedannuallybytheCommittee,which consistssolelyofindependentdirectors.The Committeereliesuponinputfroma compensationconsultantwhoisretaineddirectly bytheCommittee,whoseindependenceis assessedannually,andwhodoesnotperform additionalconsultingorotherservicesforCiena oritsmanagement. Aligncompensationwithstockholder interests. Wemaintaincompensationplansandprograms thataretransparent,easilyunderstoodandmeet fiduciarycommitmentstostockholders. Maintainstockownershiprequirements. OurNEOsaresubjecttostockownership requirementstoaligntheinterestsofour leadershipwiththoseofourstockholders.In December2017,theCommitteesubstantially increasedtheminimumownershiprequirements andaddedanewstockholdingrequirementuntil thoseminimumlevelsareachieved. Userigorousperformancegoals. Weuseobjectiveperformance-basedgoalsin ourcashandequityincentiveplansthatare rigorous,directlyalignedwiththefinancialand operationalobjectivesestablishedinour strategicplanandourannualoperatingplan approvedbytheBoard,anddesignedto motivateexecutiveperformance. Alignpaywithperformance. Asignificantportionofthepotential compensationofourNEOsisnotguaranteedbut islinkedtotheachievementofshort-termor long-termcorporateandfinancialperformance goals.Weincorporateupsidepotentialinour cashandequityincentiveplansforoutstanding performanceanddownsideriskfor underperformance. Maintainacompensationrecovery (“clawback”)policy. Wemaintainacompensationrecoupmentpolicy thatappliestoourequityincentiveplanawards, cashincentiveplanawards,salesincentiveplan compensationandseverancebenefitplan payments. Assessrisksrelatingtoourexecutive compensationprogram. TheCommitteeannuallyconductsarisk assessmenttodeterminewhetheranyofour executiveorothercompensationprograms createrisksthatarereasonablylikelytohavea materialadverseeffectonCiena. Provideonlyalimitedsetofexecutive perquisites. OurNEOsareeligibleforthesamebenefitsas salariedemployeesandreceiveonlylimited perquisites,generallyconsistingofannual physicalexaminationsaswellastaxpreparation andfinancialplanningservices,bothofwhichare madeavailabletoothersenioremployees. WHATWEDON’TDO Offerincometaxgross-ups. Wedonotprovideexecutiveofficerswithincome gross-upsforanycompensationelementsor personalbenefits,exceptforcertainlimited expensesrelatedtorelocation. Permit“singletrigger”changeincontrol benefits. Wedonotprovideforthepaymentofseverance benefitsbasedsolelyonachangeincontrolof ourcompany.Rather,ourchangeincontrol severanceagreementsare“doubletrigger” arrangementsthatrequireaterminationor constructiveterminationofemploymentdirectly priortoorfollowingachangeincontrolofCiena beforeseverancebenefitsaretriggered. Provideexcisetaxgross-ups. Wedonotprovideexcisetaxgross-upsfor benefitsunderourchangeincontrolseverance agreements. Allowforhedgingorpledgingofcompany securities. Ourinsidertradingpolicygenerallyprohibitsour NEOsanddirectorsfrompledgingCienastockor engaginginshortsalesofCienastockandother similartransactionsthatcouldbeusedtohedge oroffsetanydecreaseinthevalueofCiena securities. 2018ProxyStatement 34 2018ProxyStatement CompensationDiscussionandAnalysis(continued) AlignInterestsofNamedExecutiveOfficerswithShareholders The following are key features of our executive compensation program, which we believe align the interests of managementwiththoseofourshareholders. WhatWeDo WhatWeDon’tDo ✓ AtRiskCompensation. Webelievethatasubstantial portionofthecompensationforournamedexecutive officersshouldbe“atrisk,”meaningthatthenamed executiveofficerswillreceiveacertainpercentageof theirtotalcompensationonlytotheextent CenterPointEnergyandtheexecutiveaccomplish goalsestablishedbytheCompensationCommittee. ✘ EmploymentAgreements. Wedonotmaintain executiveemploymentagreementswithanyofour namedexecutiveofficers,andournamedexecutive officersarenotentitledtoguaranteedseverance paymentsuponaterminationofemploymentexcept pursuanttoourchangeincontrolplan,which containsa“doubletrigger”term. ✓ StockOwnershipGuidelines. Wehaveestablished executivestockownershipguidelinesapplicableto allofourofficers,includingourExecutiveChairman, toappropriatelyaligntheinterestsofourofficers withourshareholders’interests. ✘ ExciseTaxGrossUpPayments. Ourchangeincontrol plandoesnotprovideforexcisetaxgrossup payments. ✓ RecoupmentofPayments. Weimplementedapolicy fortherecoupmentofshort-termandlong-term incentivepaymentsintheeventanofficerisfound tohaveengagedinanyfraud,intentional misconductorgrossnegligencethatleadstoa restatementofall,oraportionof,ourfinancial results.Thispolicypermitsustopursuerecoveryof incentivepaymentsifthepaymentwouldhavebeen lowerbasedontherestatedfinancialresults. ✘ HedgingofCenterPointEnergyStock. Aspartofour insidertradingpolicy,wehaveapolicyprohibiting allofourofficersanddirectorsfromhedgingtherisk ofstockownershipbypurchasing,sellingorwriting optionsonCenterPointEnergysecuritiesor engagingintransactionsinotherthird-party derivativesecuritieswithrespecttoCenterPoint Energystock. ✓ “DoubleTrigger”ProvisionsforEquityAwards. Our changeincontrolplanincludesa“doubletrigger,” wherebytheexecutiveiseligibleforbenefitsonlyif employmentisterminatedwithinasetperiod beforeorafterachangeincontrol.The CompensationCommitteehasalsoamendedthe formawardagreementsunderourlong-term incentiveplantoincludesimilar“doubletrigger” changeincontrolprovisionsbeginningwithawards madeinFebruary2018.Forfurtherdiscussion,refer to“ExecutiveCompensationTables—Potential PaymentsuponChangeinControlorTermination.” ✘ SignificantPerquisites. Perquisitesarenota principalelementofourexecutivecompensation program,andwehavenothistoricallypaidlarge perquisites.Beginningin2018,ourseniorexecutive officerswillhaveaccesstofinancialplanningandan annualphysicalexaminconnectionwiththeir participationinourmedicalplan. ✓ ProFormaTallySheets. Weprepareandreviewwith themembersoftheCompensationCommitteepro formatallysheetsasofDecember31foreachofour namedexecutiveofficerstoshowhowvarious compensationandbenefitamountsareinterrelated andtohelptheCompensationCommitteebetter understandtheimpactofitscompensation decisionsbeforetheyarefinalized. ✘ NoGuaranteedBonusesorStockOptionsforSenior Executives. Aspartofourpayforperformance philosophytoaligncompensationwithindividual andcompanyperformance,wedonotguarantee bonuspaymentstoourseniorexecutiveofficers. Further,wehavenotgrantedstockoptionssince 2004. 24 CenterPointEnergy