2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 440 ARAMARK AT&T, INC. AVISTA THE BOEING COMPANY TheCompensationCommitteeestablishestheseperformancetargetsconsistentwiththeCompany’slong-term expectationsforthebusiness,whichinclude: • Mid-to-highsingle-digitgrowthinadjustedoperatingincomeoradjustedEBIT; • Organicoradjustedsalesgrowthofthreepercenttofivepercent;and • Lowdoubledigitpercentagegrowthofadjustedearningspershare. FortheCompensationCommitteetoawardeachoftheNEOshisorherannualcashincentivebasedonperformance undertheManagementBonusPlan,theCompanywouldneedto(1)achieveoneormoreofthefinancialobjectives identifiedaboveatleastatathresholdleveland/or(2)theindividualwouldhavetoachievehisorherfunctionalor businessobjectives.Further,theCompensationCommitteemayusenegativediscretiontofurtherreducetheannual cashincentivesearnedundertheSeniorExecutiveBonusPlantolevelsbelowwhattheManagementBonusPlan payoutswouldprovide.AnypayoutundertheSeniorExecutiveBonusPlancannotexceedapre-established percentageofadjustedEBIT,setinadvanceforeachexecutive. See“CompanyPerformanceDataRelevanttoCompensationActions”and“NarrativeDisclosuretoSummary CompensationTableandGrantsofPlan-BasedAwardsTable”formoreinformationontheoperationofourannual cashincentiveprograms. Allofournamedexecutiveofficersweregrantedannualcashincentiveawardsforfiscal2018undertheSenior ExecutiveBonusPlan.“See“PersonalPerformanceAssessmentandSpecificCompensationActionsfortheNamed Executives”belowformoreinformationonfiscal2017awardsandpaymentsandfiscal2018awards. Long Term Incentives ForourNEOs,longtermincentivesgenerallyconsistofperformancerestrictedstockorPSUs,restrictedstockunits, andstockoptions. Infiscal2017,ourNEOsreceivedgrantsofequityawards,40%ofwhichwereintheformofperformancerestricted stock,40%intheformoftime-vestingstockoptionsand20%intheformoftime-vestingrestrictedstockunits (“RSUs”).Approximately9%oftheawardsgrantedtoMr.Foss(basedongrantdatefairvalue)wasalsosubjecttoa relativetotalshareholderreturnperformancecondition.EachNEOalsoholdsunvestedequityawardsgrantedin prioryears,whichvestoveraperiodofthreeorfouryearsfromthedateofgrant(insomecircumstances,subjectto performancevestingconditions). Time-VestingStockOptionsandRSUs. Thetime-vestingstockoptionsandRSUsgrantedinfiscal2017willvest ratablyoveraperiodoffouryears,subjecttotheNEOs’continuedemploymentwithusthroughsuchperiod. PerformanceStock. Sincefiscal2014,wehavegrantedperformancerestrictedstockorPSUsasacomponentofour compensationprogram.Theperformancerestrictedstockgrantedinfiscal2017willvestattheendoffiscal2019, subjecttotheCompanyachievingthethresholdlevelofperformanceofacumulativeadjustedEPStargetforthe 2017-2019fiscalyears.Subjecttocontinuedemploymentthroughsuchdate,between50%ofthetargetnumberof awards(forachievementofthresholdperformance)and200%ofthetargetnumberofawards(forachievementof maximumperformanceorgreater)areeligibletovest. ThefollowingtableshowstheperformanceperiodforouroutstandingperformancestockorPSUsasoftheendof fiscal2017andthegrantsmadeinearlyfiscal2018,thegrantdate,thepotentialpaymentdateandtheperformance measuresandpotentialpayoutforeachcycle. PercentageOf TotalEquity Awards Performance Period GrantDate Payment Date (IfEarned) Performance Measures PotentialPayout 40% Fiscal2015 November2014 November2015, 2016,2017 AdjustedEPS 50%(Threshold)–200%(Maximum) 40% Fiscal2018 November2015 November2018 AdjustedEPS 50%(Threshold)–200%(Maximum) 40% Fiscal 2017-2019 November2016 November2019 AdjustedEPS 50%(Threshold)–200%(Maximum) 50% Fiscal 2018-2020 November2017 November 2020 AdjustedEPS (50%)ROIC (50%) 50%(Threshold)–200%(Maximum) 33 CompensationDiscussionandAnalysis ROICPerformanceMetric (2015-2017PerformancePeriod) Weighted AverageCost ofCapital Performance Range For 100% Payout 8.00% 6.75% 7.50% ACTUAL PERFORMANCE 7.75% 6.00% Performance adjustmentsused inROIC calculationperpre-established award terms: ReportedNet IncomePlus 1.M&ATransactionCosts 10.5 B $ InterestExpense 67.2 B $ 2.AssetAbandonments and Impairments (Gains)/Losses 2.3B $ AdjustedNet IncomePlus InterestExpense 3.NaturalDisasters 0.4B $ 4.PensionRemeasurement (Gains)/Losses 0.3B $ 5.Changes inAccounting Principle (2.9) B $ 57.4B $ 6.TaxReform (20 .3)B $ TSR Payout Table and Actual Performance Attainment – 2015-2017 Performance Period At the beginning of the performance period, the Committee established the following table for determining payout of the performance shares tied to the TSR metric. Our actual performance attainment is also shown: AT&TReturnvs.S&P100 Index Payout%* IfAT&T is top company 200% Level1 (82-99.99%) 150% Level2 (63-81.99%) 125% Level3 (44-62.99%) 100% Level4 (25-43.99%) 50% Level5 (<25%) 0% Our3-yearTSR of35.15% ranksus at the54th percentileof the S&P100 Index *Payouts are capped at90%of the target award if absoluteAT&T 3-yearTSR isnegative, regardlessof relativeperformance. TSRPerformanceMetric (2015-2017PerformancePeriod) As a result of the performance attainment achieved for the TSR performance metric, the Committee directed that 100% of the related performance shares be distributed. | 64 | www.att.com COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Principal Components of Named Executive Officer Compensation BaseSalary (10%ofCEO’s targetcompensation) Salary levelsbased on skills, experience, anddemonstratedperformance Target levelsof incentive compensationbasedonpercentage ofbase salary Annual Incentive (18%ofCEO’s targetcompensation) 100%performance-based Ensures that significantportion of annual compensation is at risk Performancemetricsdesigned todrive sustainablegrowth Long-Term Incentive (72%ofCEO’s targetcompensation) Designed todrive sustainedbusinessperformance, encourage retention, and align executives’ interestswith shareholders’ long-term interests Performance awards (50%) arepayable in stock or cash to the extentCompany performance targets aremet Performance-based restricted stock units (25%),orPBRSUs, are earnedbased on total shareholder return, or TSR, relative topeer companies Restricted stock units (25%) vest after three years Total Target Compensation C a s h S t o c k S t o c k o r C a s h Performance Measures Driving 2017 Compensation 2017 Revenue 2017 Free Cash Flow* 2017 Core Earnings Per Share* $93.4B Target of $91.5B $10.9B Target of $8.4B $9.92 Target of $9.20 Annual Incentive Payout of 187%, as adjusted based on individual performance 2015-2017 Economic Profit* 2015-2017 Total Shareholder Return Ranking Among Peers $14.6B 109% of Target Performance Award Payout #1 of 22 Maximum Payout under PBRSUs * AsadjustedbytheCompensationCommitteetobetterreflectcoreoperatingperformance(seepages29and30). FreecashflowandcoreEPSaredefinedonpage26;economicprofitisdefinedonpage30. 2018Proxy Statement 23 COMPENSATIONDISCUSSIONANDANALYSIS(“CD&A”) ThefollowingchartshowstheCashIncentivePlanperformancegoalsforeachperformancemetric,theweightingofeach metric,andthe2017actualresultsofeachmetric. Metric Weighting Threshold Target Exceeds Actual 2017 Results EarningsComponents ConsolidatedEPS* 60% $ 2.05 $ 2.15 $ 2.25 $ 2.12 Met81.8% Payoutcanvary0%-167%basedonperformancelevel. UtilityOperationsComponents CostPerCustomer* 20% $396.07 $393.76 $385.25 $382.20 Met150% TheOperatingandMaintenance(O&M)costisdirectlyrelatedtomaintainingreliable,cost-effectiveservicelevels. Payoutscanvary0%-150%basedonperformancelevel. CustomerSatisfactionRating 8% NA 90% NA 94% Met100% ThisratingisderivedfromaVoiceoftheCustomersurveyconductedeachquarterbyanindependentagency.The surveyisusedtotracksatisfactionlevelsofcustomersthathavehadrecentcontactwithourcallcenterorservice center.Thisisahitormisstargetandthepayoutiseither100%or0%basedonachievementofobjective. ReliabilityIndex 8% NA 1.00 NA 0.97 NotMet Thismeasureisderivedfromthecombinationofthreeindicesthattrackaveragerestorationtimeforsustained outages,averagenumberofsustainedoutagespercustomer,andpercentofcustomersexperiencingmorethanthree sustainedoutagesduringtheyear.Thisisahitormisstargetandthepayoutiseither100%or0%basedon achievementofobjective. ResponseTime 4% NA <55 NA 40 Met100% ThismeasureshowquicklytheCompanyrespondstodispatchednaturalgasemergencycalls.Thisisahitormiss targetandthepayoutiseither100%or0%basedonachievementofobjective. Footnote: * Payoutlevelsareinterpolatedonastraight-linebasisforresultsbetweenthethresholdperformancelevelandthe maximumlevel. TheCompensationCommitteesetstargetgoalsfortheseperformancemetricsthatarerigorous,butreasonablyachievablewith strongmanagementperformance.Maximumperformancelevelsweredesignedtobedifficulttoachievegivenhistorical performanceandtheCompany’sforecastedresultsatthetimetheperformancemetricswereapproved.Overthelasttenyears, theactualperformanceresultsofthePlanshaveaveraged101%oftargetandrangedfromalowof41%oftargettoahighof 150%oftargetasshowninthechartbelow. ActualResultsas% ofTarget 160% 140% 120% 100% 80% 60% 40% 20% Target Actual% ofTarget 71% 103% 111% 90% 125% 41% 150% 88% 136% 91% 101% 0% 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 Average Avista 35