2018 Guide to Effective Proxies

2.5 Checklists | 109 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES UNUM GROUP VERIZON COMMUNICATIONS, INC. XCEL ENERGY Key Corporate Governance and Executive Compensation Practices ExecutiveCompensationPractices BoardPractices Apayforperformancephilosophy AlldirectorsotherthantheCEOareindependent, includingtheBoardChairman Annualsay-on-payvotes AllBoardCommitteesfullyindependent Programsthatmitigateunduerisktakingin compensation CommitmenttodiversityattheBoardleveland withintheenterprise IndependentcompensationconsultanttotheHuman CapitalCommittee Highmeetingattendancebydirectors(average attendanceof98%in2017) Eliminationofgoldenparachuteexcisetaxgross-ups Limitsonoutsideboardandauditcommitteeservice Minimalperquisites NoNEOshaveemploymentagreements GovernancePractices Double-triggerprovisionsforseverance Annualelectionofdirectors Restrictivecovenantsinourlong-termincentivegrant agreements Majorityvoterequirementfordirectors(in uncontestedelections) Clawbackprovisions Proxyaccessbylaws Abalanceofshort-andlong-termincentives Shareholderrighttocallspecialmeetings Robuststockownershipandretentionrequirements Annual,proactiveshareholderengagement Relevantpeergroupsforbenchmarking compensation Anti-pledgingandanti-hedgingpoliciesapplicableto executivesanddirectors Robustindividualperformanceassessmentsof executivesanddirectors AnnualBoard,committee,andindividualdirector evaluations Regularexecutivesessionsofindependentdirectors Nopoisonpill Inaddition,atthe2018AnnualMeeting,theBoardisrequestingthatshareholdersapproveanamendedand restatedcertificateofincorporation.Therequestedamendmentstoourcertificateofincorporationincludethe eliminationofsupermajorityvotingrequirementsthatcurrentlyrequiretheaffirmativevoteofatleast80%of outstandingsharestoremoveadirector,amendourbylaws,approvecertainbusinesscombinations,oramend thesupermajorityvotingrequirementsofthecertificateofincorporation.Forfurtherinformation,pleaserefer toVotingItem4onpage98. PROXYSUMMARY 2018PROXYSTATEMENT 11 CompensationDiscussionandAnalysis | Bestpracticesinexecutivecompensationandgovernance Bestpracticesinexecutivecompensationandgovernance Ourcompensationprogramreflectsourcommitmenttoindustry-leadingstandardsforcompensationdesignand governance.TheHumanResourcesCommitteeregularlyreviewsbestpracticesinexecutivecompensationandgovernance andrevisesourpoliciesandpracticeswhenappropriate.Thefollowingtablehighlightssomefeaturesofourcompensation programthatdemonstratetherigorofourpolicies. Compensationpractice Verizonpolicy Moreinformationonpage Payforperformance Approximately90%ofnamedexecutiveofficers’totalcompensationopportunity isvariable,incentive-basedpay. 32 Robuststockownership guidelines WehavestockownershipguidelinesfortheCEOof7xbasesalary;forother namedexecutiveofficersof4xbasesalary;andforDirectorsof3xthecash componentoftheannualBoardretainer. 43 Shareholderoutreach Ouroutreachprogramgivesinstitutionalshareholdersaregularopportunityto expresstheirviewsaboutourexecutivecompensationprogramandpolicies. ShareholderinputiscarefullyconsideredbytheCommittee. 29 Clawbackpolicy Ourclawbackpolicygivesustherighttocancelor“clawback”incentive compensationfromanyseniorexecutivewhohasengagedinwillfulmisconduct thatresultsinsignificantreputationalorfinancialharmtoVerizon . 43 Anti-hedgingpolicy Ouranti-hedgingpolicyprohibitsDirectorsandexecutiveswhoreceiveequity- basedincentiveawardsfromenteringintotransactionsdesignedtohedgeor offsetanydecreaseinthemarketvalueofVerizonstockthattheyown. 43 Singlepeergroupfor benchmarkingcompensation andmeasuringlong-term performance Topromoteconsistencyandtransparency,thesamepeergroup(RelatedDow Peers)isusedtobenchmarkexecutives’totalcompensationopportunityandto evaluatelong-termperformance. 29 Annualcompensation riskassessment Weperformariskassessmentofourcompensationprogrameveryyear. 18 Independent compensation consultant AnindependentcompensationconsultantreviewsandadvisestheCommitteeon executivecompensation.TheconsultantcannotdoanyworkfortheCompany whileitisengagedbytheCommittee. 28 Double-triggerchangeincontrol Intheeventofachangeincontrol,ourLong-TermIncentivePlanrequiresan involuntaryterminationforacceleratedvestingofawards. 43 Annualshareholder say-on-pay Wevalueourshareholders’inputonourexecutivecompensationprogram,soour Boardseeksanon-bindingadvisoryvotefromshareholderseveryyearto approvetheexecutivecompensationdisclosedinourCD&Aandcompensation tables. 59 Taxgross-ups Wedonotprovidetaxgross-upstoourexecutiveofficers. 41 Dividendsonunearned performanceawards WedonotpaydividendsonunearnedPerformanceStockUnits(PSUs)or RestrictedStockUnits(RSUs). 36 Employmentcontracts Noneofournamedexecutiveofficershasanemploymentcontract. 42 Guaranteedbenefits Beginningin2006,wefrozeourdefinedbenefitpensionand supplementalbenefits. 42 Verizon 2018ProxyStatement | 27 CompensationDiscussionandAnalysis Executive Compensation Practices OurcompensationpracticesforNEOsareoutlinedbelow.Thesepracticesreflectourcompensationphilosophyandhelpensuresound corporategovernancepractices. What We Do • PayforperformancewithasubstantialpercentageofeachNEO’stotaldirectcompensationbeing variable,atriskandalignedwithperformance-basedmetrics • Conductanannual“say-on-pay”advisoryvote • Useanappropriatepeergroupwhenestablishingcompensation • Reviewtallysheetswhenmakingexecutivecompensationdecisions • Balanceshort-andlong-termincentiveperformancegoalstoreflectoperatingandstrategic objectives • Strongemphasisonlong-termequitycompensation • Alignexecutivecompensationwithshareholderreturnsthroughlong-termincentives • Includecapsonindividualpayoutsinincentiveplan • Subjectequitygrantstonon-solicitationcovenants • SetsignificantstockownershipguidelinesforNEOs,otherexecutivesandnon-employeedirectors • Requiresharestobehelduntilstockholdingownershipachieved • Mitigateunduerisk-takingincompensationprograms • Includerecoupmentprovisionsinourannualandlong-termincentiveprograms • MaintainanindependentGCN • Retainanindependentcompensationconsultant What We Don’t Do • Provideemploymentcontracts • Permitexecutivestohedgetheircompanystock • Providetaxgross-upsfornewexecutiveofficerparticipantsintheSeniorExecutiveSeverancePolicy • Providetaxgross-upsonexecutiveperquisitesexceptforcircumstancesregardingrelocation • Provideunusualorexcessiveperquisites • SupplementservicecredittonewlyhiredofficersunderanyoftheCompany’squalifiedor nonqualifiedretirementplans Impact of 2017 Say on Pay Vote Eachyear,XcelEnergyprovidesshareholderswitha non-binding“say-on-pay”voteonitsexecutivecompensation programs. TheGCNevaluatedresultsofthesay-on-payvote,andinlight ofthebroadshareholdersupportofourexecutivecompensation programs,theGCNdecidedtomaintainthecoredesignofour compensationprograms.TheGCNwillcontinuetoconsiderthe outcomeoffuturesay-on-payvotes,inadditiontovariousother factors,whenmakingfuturecompensationdecisions. 96% 96%ofthevotescastwereinfavorofourexecutive compensationprogramsandpolicies 30 | 2018 XcelEnergyProxyStatement