DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

 

Filed by the Registrant  ☑

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

CenterPoint Energy, Inc.

(Name of Registrant as Specified In Its Charter)

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

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Table of Contents

 

 

 

LOGO

      Always There.®

CenterPoint Energy, Inc.

Notice of Annual Meeting of Shareholders

to be held on April 22, 2022

and Proxy Statement


Table of Contents

LOGO

 

Always There.®

 

  

 

Welcome to the CenterPoint Energy

Annual Shareholder Meeting

March 11, 2022

Dear Fellow Shareholders:

We are pleased to invite you to attend our annual shareholder meeting to be held on April 22, 2022, at 9:00 a.m. central time in our auditorium located at 1111 Louisiana Street in Houston, Texas.

As explained in the enclosed proxy statement, at this year’s meeting you will be asked to vote (i) for the election of nine directors, (ii) for the ratification of the appointment of CenterPoint Energy’s independent registered public accounting firm, (iii) for the approval, on an advisory basis, of CenterPoint Energy’s executive compensation and (iv) for the adoption of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan, and to consider any other business that may properly come before the meeting.

Your vote is very important to us – participate in the future of CenterPoint Energy and exercise your shareholder right by voting your shares right away.

Only holders of record of CenterPoint Energy common stock at the close of business on February 25, 2022 or their proxy holders, may vote at the meeting. Attendance at the meeting is limited to holders of our common stock or their proxy holders and CenterPoint Energy guests. Only holders of our common stock or their valid proxy holders may address the meeting.

Please review the proxy card for instructions on how you can vote your shares of CenterPoint Energy common stock over the internet, by telephone or by mail. It is important that all holders of CenterPoint Energy common stock, regardless of the number of shares owned, participate in the affairs of the Company. At CenterPoint Energy’s 2021 Annual Shareholder Meeting, approximately 86 percent of the Company’s outstanding shares of common stock was represented in person or by proxy.

Thank you for your continued investment in CenterPoint Energy.

Sincerely,

 

LOGO     LOGO

Martin H. Nesbitt

Independent Chair of the Board

   

David J. Lesar

President and Chief Executive Officer


Table of Contents
   

 

 

 

 

  2022 Proxy Statement  

 

 

 

 

 

Table of Contents

 

Notice of Annual Meeting of Shareholders

  

PROXY STATEMENT

  

Frequently Asked Questions About Voting

     1  

Election of Directors (Item 1)

     4  

Executive Summary

     5  

Nominees for Directors

     5  

Director Nomination Process

     12  

Annual Board Self-Assessment and Director Peer Evaluation

     14  

Director Independence

     14  

Code of Ethics and Ethics and Compliance Code

     15  

Conflicts of Interest and Related-Party Transactions

     15  

Majority Voting in Director Elections

     16  

Board Leadership

     17  

The Board’s Role in Risk Oversight

     17  

Executive Succession Planning and Leadership Development

     19  

Director Attendance

     19  

Board Organization and Committees

     19  

Shareholder Engagement

     22  

Communications with Directors

     23  

Website Availability of Documents

     23  

Compensation of Directors

     23  

Director Compensation Table

     25  

Stock Ownership

     26  

Compensation Discussion and Analysis

     28  

Executive Summary

     28  

Executive Compensation Program Overview

     35  

Design of Executive Compensation Program

     36  

2021 Executive Compensation Program

     39  

Our Executive Compensation Decision-Making Process

     46  

Other Compensation Programs and Practices

     49  

Executive Compensation Tables

     52  

Summary Compensation Table for Fiscal Year 2021

     52  

Grants of Plan-Based Awards for Fiscal Year 2021

     55  

Non-Equity Incentive Plan Awards

     56  

Equity Incentive Plan Awards – Additional Information

     57  

Outstanding Equity Awards at Fiscal Year-End 2021

     58  

Option Exercises and Stock Vested for Fiscal Year 2021

     60  

Pension Benefits

     61  

 

 

     Always There®


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  2022 Proxy Statement  

 

    

Table of Contents (continued)

 

Savings Plan and Savings Restoration Plans

     62  

Deferred Compensation Plans

     63  

Nonqualified Deferred Compensation Table

     64  

Potential Payments upon Change in Control or Termination

     65  

Chief Executive Officer Pay Ratio

     70  

Equity Compensation Plan Information

     72  

Report of the Compensation Committee

     73  

Report of the Audit Committee

     74  

Principal Accounting Firm Fees

     75  

Audit Committee Policies and Procedures for Preapproval of Audit and Non-Audit Services

     75  

Ratification of Appointment of the Independent Registered Public Accounting Firm (Item 2)

     76  

Advisory Vote on Executive Compensation (Item 3)

     77  

Approval of Adoption of CenterPoint Energy, Inc. 2022 Long Term Incentive Plan (Item 4)

     82  

General Information

     88  

Shareholder Proposals for the 2023 Annual Meeting

     88  

Director Nominations for the 2023 Annual Meeting

     88  

Householding of Annual Meeting Materials

     88  

Annual Report to Shareholders

     89  

Appendix

        

CenterPoint Energy, Inc. 2022 Long Term Incentive Plan

     A-1  

Non-GAAP Reconciliation

     B-1  

 

 

CenterPoint Energy


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LOGO

 

Always There.®

 

Notice of Annual Meeting of Shareholders

Dear Shareholders:

You are cordially invited to attend the 2022 annual meeting of shareholders of CenterPoint Energy, Inc. This is your notice for the meeting.

TIME AND DATE

9:00 a.m. Central Time on April 22, 2022.

PLACE

The CenterPoint Energy auditorium at 1111 Louisiana, Houston, Texas.

ITEMS OF BUSINESS

 

   

elect the nine nominees named in the proxy statement as directors to hold office until the 2023 annual meeting;

   

ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022;

   

conduct an advisory vote on executive compensation;

   

approve the adoption of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan; and

   

conduct other business if properly raised.

RECORD DATE

Holders of record of CenterPoint Energy common stock at the close of business on February 25, 2022 are entitled to vote.

PROXY VOTING

Each share of CenterPoint Energy common stock entitles the holder to one vote on each matter to be voted on at the meeting. You may vote either by attending the meeting or by proxy. For specific voting information, please see “Frequently Asked Questions About Voting” beginning on page 1 of the proxy statement that follows. Even if you plan to attend the meeting, please sign, date and return the enclosed proxy card or submit your proxy using the Internet or telephone procedures described on the proxy card.

Sincerely,

 

LOGO

Vincent A. Mercaldi

Corporate Secretary

Dated and first mailed

to shareholders

on or about March 11, 2022

Important Notice Regarding the Availability of Proxy Materials

for the Annual Shareholder Meeting to be Held April 22, 2022

The proxy statement and annual report to shareholders are available at:

https://materials.proxyvote.com/15189t


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  2022 Proxy Statement  

 

 

 

 

 

CENTERPOINT ENERGY, INC.

1111 Louisiana

Houston, Texas 77002

(713) 207-1111

For deliveries by U.S. Postal Service:

P.O. Box 4567

Houston, Texas 77210-4567

Proxy Statement

FREQUENTLY ASKED QUESTIONS ABOUT VOTING

On what am I voting?

 

 

  Item Description    More Information    Board
Recommendation
  

Broker

non-votes

   Abstentions   

Votes required

for approval

Item 1: Election of directors

   Page 4    FOR
each nominee
   Do not count    Do not count    Shares voted for
must exceed shares
voted against

Item 2: Ratification of appointment of the independent registered public accounting firm

   Page 76    FOR    None expected    Do not count    Shares voted for
must exceed shares
voted against

Item 3: Advisory vote on executive compensation

   Page 77    FOR    Do not count    Do not count    Shares voted for
must exceed shares
voted against

Item 4: Approval of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan

   Page 82    FOR    Do not count    Do not count    Shares voted for
must exceed shares
voted against

Who may vote?

 

Holders of our common stock recorded in our stock register at the close of business on February 25, 2022 may vote at the meeting. As of that date, there were 629,432,406 shares of our common stock outstanding.

How many votes do I have?

 

You have one vote for each share of our common stock you owned as of the record date for the meeting.

How do I vote?

 

Your vote is important. You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the meeting. You may always change your vote at the meeting if you are a holder of record or have a proxy from the record holder. Giving us your proxy means that you authorize us to vote your shares of our common stock at the meeting in the manner you indicated on your proxy card. You may also provide your proxy using the Internet or telephone procedures described on the proxy card.

You may vote for or against each director nominee under Item 1 (election of directors) and the proposals under Item 2 (ratification of appointment of the independent registered public accounting firm), Item 3 (advisory vote on executive compensation) and Item 4 (approval of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan), or you may abstain from voting on these items. If you give us your proxy but do not specify how to vote, we will vote your shares of our common stock in accordance with the Board’s recommendations.

 

 

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  2022 Proxy Statement  

 

    

Frequently Asked Questions About Voting (continued)

 

What are the Board’s recommendations?

 

The Board’s recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board and, with respect to the ratification of the appointment of the independent registered public accounting firm, the Audit Committee, recommends a vote as follows:

 

   

FOR the election of the nine nominees named in this proxy statement as directors;

 

   

FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022;

 

   

FOR the approval, on an advisory basis, of the compensation paid to our named executive officers as disclosed in this proxy statement; and

 

   

FOR the approval of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan as disclosed in this proxy statement.

If any other matters properly come before the meeting, we will vote the shares of common stock in accordance with our best judgment and discretion.

What if I change my mind after I have voted?

 

You may revoke your proxy before it is voted by:

 

   

submitting a new proxy card with a later date;

 

   

voting in person at the meeting; or

 

   

giving written notice to Mr. Vincent A. Mercaldi, Corporate Secretary, at CenterPoint Energy’s address shown above.

Will my shares be voted if I do not provide my proxy?

 

It depends on whether you hold your shares of our common stock in your own name or in the name of a bank or brokerage firm. If you hold your shares of our common stock directly in your own name, they will not be voted unless you provide a proxy or vote in person at the meeting.

Brokerage firms generally have the authority to vote their customers’ unvoted shares of common stock on certain “routine” matters as determined by the New York Stock Exchange. If your shares of our common stock are held in the name of a broker, bank or other nominee, such nominee can vote your shares for the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022 if you do not timely provide your proxy because this matter is considered “routine” under the applicable rules. However, no other items are considered “routine” and may not be voted on by your nominee without your instruction.

For all items other than ratification of the appointment of our independent registered public accounting firm, brokers holding shares of our common stock must vote according to specific instructions they receive from the beneficial owners of those shares because the New York Stock Exchange precludes brokers from exercising voting discretion on certain proposals without specific instructions from the beneficial owner as to how to vote. Brokers cannot vote on Item 1 (election of directors), Item 3 (advisory vote on executive compensation) or Item 4 (approval of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan) without instructions from the beneficial owners. If you do not instruct your broker how to vote with respect to Item 1, Item 3 or Item 4, your broker will not vote for you with respect to those items.

Do I need a ticket to attend the meeting?

 

To be admitted to the meeting, you must provide proof of ownership of our common stock and proof of identification. If you plan to attend the meeting and your shares of common stock are held by banks, brokers, stock plans or other holders of record (in “street name”), you will need to provide proof of ownership. Examples of proof of

 

 

2    CenterPoint Energy


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  2022 Proxy Statement  

 

 

 

 

Frequently Asked Questions About Voting (continued)

 

ownership include a recent brokerage statement or letter from your broker or bank. All holders of our common stock will be required to present valid picture identification, such as a driver’s license, before being admitted to the meeting.

What constitutes a quorum?

 

To carry on the business of the meeting, we must have a quorum. This means at least a majority of the shares of our common stock outstanding as of the record date must be represented at the meeting, either by proxy or in person. Shares of our common stock owned by CenterPoint Energy are not voted and do not count for this purpose.

Abstentions and proxies submitted by brokers that do not indicate a vote because they do not have discretionary authority and have not received instructions as to how to vote on a proposal (so-called “broker non-votes”) will be considered as present for quorum purposes.

What vote is required to approve each of the proposals?

 

Under our third amended and restated bylaws (bylaws), directors are elected by a majority of the votes cast at the meeting. Under our bylaws, this means that the number of votes cast “for” a director must exceed the number of votes cast “against” that director. Abstentions and broker non-votes will not affect the outcome of the vote. For additional information on the election of directors, see “Item 1: Election of Directors—Majority Voting in Director Elections.”

Each of the ratification of the appointment of independent registered public accounting firm in Item 2, the approval of the resolution included in Item 3 regarding the advisory vote on executive compensation and the approval of the CenterPoint Energy, Inc. 2022 Long Term Incentive Plan in Item 4 requires the affirmative vote of a majority of the shares of our common stock entitled to vote on the matter and voted for or against the item. Abstentions and broker non-votes (none of which are expected for Item 2) will not affect the outcome of the vote on these items.

Who conducts the proxy solicitation and how much will it cost?

 

CenterPoint Energy is requesting your proxy for the annual shareholder meeting and will pay all the costs of requesting shareholder proxies, including a fee of $15,000 plus expenses to Okapi Partners LLC, 1212 Avenue of the Americas, 24th Floor, New York, New York 10036, who will help us solicit proxies. We can request proxies through the mail, in person, or by telephone, fax or Internet. We can use directors, officers and other employees of CenterPoint Energy to request proxies. Directors, officers and other employees will not receive additional compensation for these services. We will reimburse brokerage firms, nominees, fiduciaries, custodians and other agents for their expenses in distributing proxy material to the beneficial owners of our common stock.

 

 

     Always There®    3


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  2022 Proxy Statement  

 

    

 

ITEM 1: ELECTION OF DIRECTORS

 

Election of Directors Table of Contents

Executive Summary

   5

Nominees for Directors

   5

Director Nomination Process

   12

Annual Board Self-Assessment and Director Peer Evaluation

   14

Director Independence

   14

Code of Ethics and Ethics and Compliance Code

   15

Conflicts of Interest and Related-Party Transactions

   15

Majority Voting in Director Elections

   16

Board Leadership

   17

The Board’s Role in Risk Oversight

   17

Executive Succession Planning and Leadership Development

   19

Director Attendance

   19

Board Organization and Committees

   19

Shareholder Engagement

   22

Communications with Directors

   23

Website Availability of Documents

   23

Compensation of Directors

   23

Director Compensation Table

   25

 

 

4    CenterPoint Energy


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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

Executive Summary

 

Overview. In this section, we introduce the nine nominees for election to our Board of Directors. These nominees bring relevant expertise and skills and represent a diverse mix of professional experience, backgrounds and perspectives appropriate to oversee our Company’s businesses and operations. In addition, we describe our corporate governance practices and policies. Strong corporate governance is a priority for the Company and the Board of Directors, is in the best interests of our shareholders and is critical to the Company’s long-term success. We have implemented corporate governance and business conduct policies and procedures designed to help us operate effectively with accountability, integrity and transparency, some of which are reflected below.

 

LOGO

Nominees for Directors

 

Each of our directors will be elected at this year’s meeting to a one-year term expiring at the annual meeting of shareholders in 2023.

If any nominee becomes unavailable for election, the Board of Directors can name a substitute nominee, and proxies will be voted for the substitute nominee pursuant to discretionary authority. Proxies cannot be voted for a greater number of persons than the number of nominees named below.

Unless otherwise indicated or the context otherwise requires, when we refer to periods prior to September 1, 2002, CenterPoint Energy should be understood to mean or include the public companies that were its predecessors.

 

 

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  2022 Proxy Statement  

 

    

Item 1: Election of Directors (continued)

 

Board Composition Highlights

Our Board of Directors believes that having a diverse mix of directors with complementary qualifications, skills and expertise is essential to effectively discharging its oversight responsibility while advancing the Company’s long-term business strategy. Accordingly, the Board of Directors is focused on striking an appropriate balance between retaining directors with a deep knowledge of the Company and adding new directors with a fresh perspective, among other factors that are set forth below with respect to the nominees for election this year.

 

LOGO

 

 

6    CenterPoint Energy


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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

Our Board of Directors collectively represents the following backgrounds, key skills and competencies:

 

                       Board of Directors Backgrounds, Key Skills and Competencies

 

LOGO

 

 

Regulated Electric / Natural Gas Distribution Utility Experience

  

 

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Public Company Board Service

  

 

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Current or Recent Public Company Senior Executive Officer

  

 

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Legal and Regulatory Experience

  

 

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Strategic Planning / Mergers and Acquisitions Experience

  

 

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Corporate Governance Experience

  

 

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Accounting, Banking and Financial Literacy

  

 

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Risk Management Experience

  

 

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Human Capital Management Experience

  

 

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Business Operations Experience

  

 

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Natural Gas / Oil Midstream Experience

  

 

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Executive Compensation Experience

  

 

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Technology Experience

  

 

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Communications / Crisis Management

  

 

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Construction / Capital Projects

  

 

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Community Relationships / Non-Profit or Charitable Board Service

  

Listed below are the biographies of each director nominee. The biographies include information regarding each individual’s service as a director of the Company, business experience, director positions at public companies held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused the Governance, Environmental and Sustainability Committee and the Board to determine that the person should serve as a director for the Company.

The nine nominees for election at the annual meeting are listed below.

 

 

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  2022 Proxy Statement  

 

    

Item 1: Election of Directors (continued)

 

WENDY MONTOYA CLOONAN

    

Wendy Montoya Cloonan, age 42, has been a director since February 2021. Ms. Cloonan is sole shareholder of The Law Office of Wendy Montoya Cloonan, PLLC, since August 2019, which specializes in the areas of public finance and public law. Before founding her own firm, Ms. Cloonan worked at the Houston Endowment, Inc., a private foundation that partners with other organizations in the non-profit, public and private sectors to improve quality of life for the residents of greater Houston, from February 2015 to July 2019 where she served as Senior Program Officer in Education, Assistant General Counsel and Director of Legal. Prior to joining Houston Endowment, Inc., Ms. Cloonan served as an attorney at Hunton Andrews Kurth LLP (formerly, Andrews Kurth LLP), Schwartz, Page & Harding, L.L.P. and Vinson & Elkins LLP. Ms. Cloonan has served as a commissioner of the Port of Houston Authority since 2019 and on the Board of directors of the Houston Downtown Management District since 2015. She also currently serves on the Boards of the Harris County Hospital District Foundation since 2021, The Young Center since 2020, and ALMAAHH since 2022. She earned a B.A. degree from Yale University, a Master in Public Policy from the John F. Kennedy School of Government at Harvard University, and a J.D. with Honors from The University of Texas School of Law.

 

The Board determined that Ms. Cloonan should be nominated for election as a director due to her project finance experience and legal expertise, as well as her strong ties to the Houston community, including through her role as a commissioner of the Port of Houston Authority and by her significant non-profit involvement.

    

LOGO

 

 

 

Independent Director Nominee

 

Committees:

 

Compensation, Governance, Environmental and Sustainability

 

 

EARL M. CUMMINGS

    

Earl M. Cummings, age 57, has been a director since July 2020. Since 2012, Mr. Cummings has served as Managing Partner of MCM Houston Properties, LLC, a real estate fund that invests in single family residential properties in Houston, Texas. In his role as Managing Partner, he is responsible for overall capital raising, investment, acquisition, and business strategies of the fund and its assets. Mr. Cummings also serves as Chief Executive Officer of The BTS Team, which began as an information technology and staffing firm providing solutions and services across various regions and evolved into a company that also invested financial resources in various industries to create value for shareholders and other stakeholders, and he previously served as its Chief Information Officer and Chairman of its Board. He also served as Chief Executive Officer of BestAssets, Inc., a private company providing real estate portfolio management and related services. Since February 2022, Mr. Cummings also serves on the Board of Directors of Halliburton Company. Active across communities and in non-profit board service, Mr. Cummings has served on the Boards of the University of Houston Board of Visitors, C-STEM Robotics (where he was founding Chairman of the Executive Board for C-STEM), Yellowstone Academy and has also served on the Advisory Boards for KIPP Academy and Texas Southern University School of Business.

 

The Board determined that Mr. Cummings should be nominated for election as a director due to his executive management experience with various enterprises focusing on technology and real estate and his financial and business development expertise.

    

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Independent Director Nominee

 

Committees:

 

Audit, Compensation, Governance, Environmental and Sustainability (Chair)

 

 

 

8    CenterPoint Energy


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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

CHRISTOPHER H. FRANKLIN

    

Christopher H. Franklin, age 57, is a director nominee for the Board of Directors. Since 1992, Mr. Franklin has served in various roles at Essential Utilities, Inc. (f.k.a. AquaAmerica, Inc.), a public company providing regulated utilities, including water, wasterwater and natural gas, to customers in 10 states. Since 2015, Mr. Franklin has served as Chairman, President and Chief Executive Officer of Essential Utilities, Inc. In addition to his current service on the Board of Directors of Essential Utilities, Inc. since 2015, he previously served on the Board of Directors of ITC Holdings from 2011-2016. Mr. Franklin is active in the Pennsylvania community where he serves on a number of nonprofit and higher education boards, including the University of Pennsylvania Board of Trustees and the Franklin Institute of Philadelphia. Mr. Franklin earned his B.S. from West Chester University and his M.B.A. from Villanova University.

 

The Board determined that Mr. Franklin should be nominated for election as a director due to his executive management experience, particularly with public regulated utilities, and his strategic and leadership skills as chief executive officer of a utilities company. The Board also values his service on the board of directors of another public company, and his construction and capital projects experience.

    

LOGO

 

 

 

Independent Director Nominee

 

 

DAVID J. LESAR

    

David J. Lesar, age 68, has been a director since May 2020 and President and Chief Executive Officer of CenterPoint Energy since July 2020. He served as interim Chief Executive Officer of Health Care Service Corporation, the largest privately held health insurer in the United States, from July 2019 through June 1, 2020 and a director from 2018 to July 2020. Prior to joining Health Care Service Corporation, Mr. Lesar served as the Chairman of the Board and Chief Executive Officer of Halliburton Company from 2000 to 2017 and as its Executive Chairman of the Board from June 2017 until December 2018. Mr. Lesar joined Halliburton in 1993 and served in a variety of other roles, including executive vice president of Finance and Administration for Halliburton Energy Services, a Halliburton business unit, Chief Financial Officer of Halliburton from 1995 through May 1997 and President and Chief Operating Officer from May 1997 through August 2000. He has also served on the Board of Directors of several companies, most recently Agrium, Inc. as well as Lyondell Chemical Co., Southern Co., Cordant Technologies and Mirant Corp.

 

The Board determined that Mr. Lesar should be nominated for election as a director due to his extensive public company experience from his tenure as chief executive officer of several companies as well as his energy industry and financial expertise. The Board also values his executive and leadership development skills, and construction and capital projects experience.

    

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Non-Independent Director

Nominee

 

Chief Executive Officer

 

Committees:

 

None

 

 

 

     Always There®    9


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  2022 Proxy Statement  

 

    

Item 1: Election of Directors (continued)

 

RAQUELLE W. LEWIS

    

Raquelle W. Lewis, age 51, has been a director since September 2021. She has served as Director, Southeast Texas Communications and Public Information Offices for the Texas Department of Transportation (TxDOT), a state government organization that constructs and maintains highway, aviation, rail and public transportation systems, since 2017. In this position, Ms. Lewis is responsible for overseeing the communication efforts of TxDOT and serving as TxDOT’s principal liaison to the media, elected officials and the general public in southeast Texas, including Houston. Ms. Lewis also serves as chief spokesperson for TxDOT during severe weather events and other emergencies in Houston and the surrounding areas, including supporting strategic planning and crisis and risk management efforts. Additionally, she is responsible for communications and community outreach, strategy and implementation for various infrastructure projects in southeast Texas. Ms. Lewis joined TxDOT in 2008 and served in various other roles, including as Special Advisor to the TxDOT Executive Director and the Executive Administration. Prior to her service at TxDOT, Ms. Lewis spent 10 years at Parsons Brinkerhoff, Inc., a multinational engineering and design firm that specializes in strategic consulting, planning, engineering, construction management, energy, infrastructure and community planning, serving in various positions, including Supervising Planner/Program Manager. Ms. Lewis has also held various positions, including Director of Information & Technology Transfer, at Texas Southern University Center for Transportation Training & Research. She is also a member of WTS International, National Association for the Advancement of Colored People (NAACP) – Houston Branch and Leadership Women, Inc.

 

The Board determined that Ms. Lewis should be nominated for election as a director due to her experience with private and public infrastructure projects, including her construction and capital projects experience, and extensive background in communications, crisis management and community outreach.

    

LOGO

 

 

 

Independent Director Nominee

 

Committees:

 

Compensation, Governance, Environmental and Sustainability

 

    

 

MARTIN H. NESBITT

    

Martin H. Nesbitt, age 59, has been a director since April 2018 and has been Independent Chair of the Board since July 2021. Since 2013, Mr. Nesbitt has served as Co-Chief Executive Officer of The Vistria Group, LLC, a Chicago-based investment firm focused on the education, healthcare and financial services industries. Prior to co-founding Vistria, Mr. Nesbitt served as Chief Executive Officer of PRG Parking Management (known as The Parking Spot), an owner and operator of off-airport parking facilities, from 1996 to 2012. Prior to The Parking Spot, Mr. Nesbitt also served as officer of the Pritzker Realty Group, L.P. and as Vice President and Investment Manager at LaSalle Partners, with a variety of responsibilities including investment management for regional retail properties. Mr. Nesbitt has served on the Boards of Directors of American Airlines Group, Inc. since 2015 and Chewy, Inc. since 2020. He also previously served on the Board of Directors of Jones Lang LaSalle and Norfolk Southern Corporation. He is a Trustee of Chicago’s Museum of Contemporary Art and serves as Chairman of the Barack Obama Foundation.

 

The Board determined that Mr. Nesbitt should be nominated for election as a director due to his extensive financial, strategic and operational experience as chief executive officer and founder of various companies. The Board also values his expertise in executive leadership and his public company board experience.

    

LOGO

 

 

 

Independent Director Nominee

 

Independent Chair of the Board

 

Committees:

 

None

 

 

 

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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

THEODORE F. POUND

    

Theodore F. Pound, age 67, has been a director since April 2015. Mr. Pound is a private investor and attorney. He served as Vice President, General Counsel and Corporate Secretary of Select Energy Services, LLC, a private company providing water solutions and well-site services to energy producers, from January 2013 to January 2016. He previously served as Vice President, General Counsel and Secretary of Allis-Chalmers Energy, Inc., a publicly traded oilfield services company, from September 2004 to March 2011, when it was acquired by Seawall Limited. Mr. Pound has practiced law in Texas for nearly 40 years, primarily in the areas of mergers and acquisitions, corporate finance, securities, compliance and governance.

 

The Board determined that Mr. Pound should be nominated for election as a director due to his extensive legal, compliance and corporate governance expertise and his nearly 40 years of experience in advising public and private companies.

    

LOGO

 

 

 

Independent Director Nominee

 

Committees:

 

Compensation (Chair), Audit

 

 

PHILLIP R. SMITH

    

Phillip R. Smith, age 70, has been a director since March 2014. Since December 2019, Mr. Smith has been President and Chief Executive Officer of Marathon-Sparta Holdings, Inc., a private company involved in non-healthcare related employee benefits programs and affiliated through common ownership with Torch Energy Advisors, Inc., a private energy company with interests in oil, gas and renewable energy, where he served as President and Chief Executive Officer from January 2013 through December 2019. Prior to joining Torch, Mr. Smith was a partner with KPMG LLP from 2002 to 2012. Since October 2021, Mr. Smith also serves on the Board of Directors of Health Care Service Corporation. Mr. Smith also served on the Board of Directors and as audit committee chair for Oilstone Energy Services, Inc., a position he held from October 2014 to June 2016.

 

The Board determined that Mr. Smith should be nominated for election as a director due to his over 40 years of business, financial and accounting experience, including a 25-year partner career with international accounting firms managing engagements of large and complex multi-national companies with extensive audit committee and board interaction.

    

LOGO

 

 

 

Independent Director Nominee

 

Committees:

 

Audit (Chair), Governance, Environmental and Sustainability

 

 

 

     Always There®    11


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Item 1: Election of Directors (continued)

 

BARRY T. SMITHERMAN

    

Barry T. Smitherman, age 64, has been a director since May 2020. Since January 2017, Mr. Smitherman has served as President and principal attorney of Barry Smitherman, P.C., a law firm specializing in water, electricity and natural gas, and as the managing partner of Smitherman + Associates, L.P., a firm providing consulting services to energy infrastructure-related entities. Mr. Smitherman is also an adjunct professor at The University of Texas School of Law where he teaches courses in Texas energy law. He previously served as a partner in the energy regulatory practice at Vinson & Elkins LLP, an international law firm, from March 2015 to January 2017. He previously served on the Railroad Commission of Texas (RRC), a state agency that oversees the oil, natural gas, coal mining, pipeline and natural gas utility industries in Texas, from July 2011 through January 2015, including as chairman of the RRC from February 2012 to August 2014. Mr. Smitherman also served on the Public Utility Commission of Texas (PUCT), a state agency that regulates the electric, water and landline telecommunications industries in Texas, from April 2004 through July 2011, including as chairman of the PUCT from November 2007 through July 2011. During this time period, Mr. Smitherman served two terms on the U.S. Department of Energy Electricity Advisory Committee, including as chairman of the Transmission Subcommittee, on the Board of Directors of the National Association of Regulatory Utility Commissioners (NARUC), including as chairman of its Gas committee and a member of the Energy Resources and the Environment committee, on the Electric Reliability Council of Texas (ERCOT) Board of Directors and on the regional state committee of the Southwest Power Pool (SPP). Prior to public service, Mr. Smitherman spent 16 years as an investment banker, holding leadership roles with First Boston, J.P. Morgan Securities and Banc One Capital Markets (as Managing Director and National Head of Public Finance). Mr. Smitherman currently serves as Chairman of the Brookwood in Georgetown Board of Directors, a non-profit organization which provides work, housing and artistic opportunities to special needs adults. He received his J.D. from The University of Texas School of Law, his M.P.A. from Harvard University, and his B.B.A. summa cum laude from Texas A&M University.

 

The Board determined that Mr. Smitherman should be nominated for election as a director due to his extensive expertise with public utilities and the regulatory process from his service with federal and state regulatory authorities, including as chairman of both the PUCT and the RRC, as well as his extensive legal experience and financial acumen.

    

LOGO

 

 

 

Independent Director Nominee

 

Committees:

 

Audit, Compensation

 

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      

 

 

The Board of Directors recommends a vote FOR the election of each of the nominees as directors.

Director Nomination Process

 

In assessing the qualifications of candidates for nomination as director in addition to qualifications set forth in our bylaws, the Governance, Environmental and Sustainability Committee and the Board consider the following:

 

 
The nominee’s personal and professional integrity, experience, reputation and skills;
 
The nominee’s ability and willingness to devote the time and effort necessary to be an effective board member;
 
The nominee’s commitment to act in the best interests of CenterPoint Energy and its shareholders;
 
The requirements under the listing standards of the New York Stock Exchange for a majority of independent directors, as well as qualifications applicable to membership on Board committees under the listing standards and various regulations; and
 
The Board’s desire that the directors possess a broad range of business experience, diversity, professional skills, geographic representation and other qualities it considers important in light of our business plan.

 

 

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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

At least annually, the Governance, Environmental and Sustainability Committee reviews the overall composition of the Board, including the skills represented by incumbent directors, and the need for Board refreshment or expansion. The Board evaluates the makeup of its membership in the context of the Board as a whole, with the objective of recommending a group that (i) can effectively work together using its diversity of experience, skills, perspectives and backgrounds to see that the Company is well-managed with a focus on achieving the Company’s long-term business strategy and (ii) represents the interests of the Company and its shareholders. In seeking new director candidates, the Governance, Environmental and Sustainability Committee and the Board consider the skills, expertise and qualities that will be required to effectively oversee management of the business and affairs of the Company. The Governance, Environmental and Sustainability Committee and the Board also consider the diversity of the Board in terms of the geographic, gender, age and ethnic makeup of its members. The Board believes that a diverse membership enhances the Board’s deliberations and promotes inclusiveness.

Suggestions for potential nominees for director can come to the Governance, Environmental and Sustainability Committee from a number of sources, including incumbent directors, officers, executive search firms and others. If an executive search firm is engaged for this purpose, the Governance, Environmental and Sustainability Committee has sole authority with respect to the engagement. The Governance, Environmental and Sustainability Committee will also consider director candidates recommended by shareholders. The extent to which the Governance, Environmental and Sustainability Committee dedicates time and resources to the consideration and evaluation of any potential nominee brought to its attention depends on the information available to the Committee about the qualifications and suitability of the individual, viewed in light of the needs of the Board, and is at the Committee’s discretion. The Governance, Environmental and Sustainability Committee and the Board evaluate the desirability for incumbent directors to continue on the Board following the expiration of their respective terms, taking into account their contributions as Board members, the benefit that results from increasing insight and experience developed over a period of time and the skills needed to achieve the Company’s long-term business strategy.

Additionally, in connection with the Board’s ongoing refreshment process, Ms. Lewis was identified as a director candidate and recommended to the Board by Milton Carroll, our former Executive Chairman. Ms. Lewis was further vetted by a third-party consultant. The Governance, Environmental and Sustainability Committee evaluated and recommended Ms. Lewis’ appointment to the Board. The Board elected Ms. Lewis to the Board effective September 29, 2021. Further, Mr. Franklin was identified as a director candidate and recommended to the Board by Mr. Nesbitt. Mr. Franklin was further vetted by a third-party executive search firm who reviewed a slate of director candidates for the Company. The Governance, Environmental and Sustainability Committee evaluated and recommended Mr. Franklin’s nomination to the Board. The Board approved the nomination of Mr. Franklin.

Our bylaws provide that a shareholder may nominate a director for election if the shareholder sends a notice to our Corporate Secretary, which must be received at our principal executive offices between October 24, 2022 and January 22, 2023. The bylaws require that the notice must contain prescribed information, including, among other things, the name and address of the shareholder, the number of shares owned beneficially by the shareholder, the name and address of each of the persons with whom the shareholder is acting in concert, the number of shares of capital stock beneficially owned by each such person with whom the shareholder is acting in concert, and a description of all arrangements or understandings between the shareholder and each nominee and any other persons with whom the shareholder is acting in concert pursuant to which the nomination or nominations are made, as well as other procedural requirements. The shareholder must also provide the documentation and information about the nominee required by our bylaws, including information about the nominee that would be required to be disclosed in the proxy statement. If any of the foregoing information changes or requires supplementation, the proponent must update the information at the times provided in our bylaws. Except as required under the proxy access provisions of our bylaws, CenterPoint Energy is not required to include any shareholder proposed nominee in the proxy statement. You may obtain a copy of the bylaws describing the requirements for nomination of director candidates by shareholders on our website at https://investors.centerpointenergy.com/governance.

 

 

     Always There®    13


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  2022 Proxy Statement  

 

    

Item 1: Election of Directors (continued)

 

Proxy Access Requirements

In February 2017, we proactively adopted amendments to our bylaws to implement proxy access for our shareholders. These proxy access amendments permit a nominating group of up to 20 shareholders owning three percent or more of our common stock continuously for at least three years to nominate and include in our proxy materials for an annual meeting of shareholders director candidates constituting up to the greater of (i) 20 percent (or if such amount is not a whole number, the closest whole number below 20 percent) of our Board or (ii) two, provided that the shareholder (or group) and each nominee satisfy the requirements specified in our bylaws. An eligible shareholder wishing to nominate a candidate for election to the Board at the 2023 annual meeting of our shareholders, in accordance with the proxy access provisions in our bylaws, must provide such notice no earlier than November 23, 2022 and no later than December 23, 2022. Any such notice and accompanying nomination materials must meet the requirements set forth in our bylaws, which are publicly available at https://investors.centerpointenergy.com/governance.

Annual Board Self-Assessment and Director Peer Evaluation

 

The Board of Directors conducts a self-assessment of its performance and effectiveness as well as that of the three standing committees on an annual basis. The purpose of the self-assessment is to track progress from year to year and to identify ways to enhance the Board’s and its Committees’ effectiveness. Further, the Board of Directors, as part of its self-assessment, evaluates management’s preparation for Board and Committee meetings and the content presented at such meetings. As part of the assessment, each director completes a written questionnaire developed by the Governance, Environmental and Sustainability Committee to provide feedback on the effectiveness of the Board and its Committees.

 

LOGO

Additionally, each director completes an individual evaluation for each of the other directors. The collective ratings and comments of the directors are compiled and presented by Mr. Cummings, the chair of the Governance, Environmental and Sustainability Committee, or by Mr. Nesbitt, with respect to Mr. Cummings’ evaluation, to the Governance, Environmental and Sustainability Committee and the full Board for discussion and action in connection with the director nomination process.

Director Independence

 

The Board of Directors determined that Messrs. Cummings, Franklin, McLean*, Nesbitt, Pound, Smith and Smitherman and Mses. Biddle**, Cloonan, Lewis and Rheney* are independent within the meaning of the listing standards for general independence of the New York Stock Exchange.

Under the listing standards, a majority of our directors must be independent, and the Audit, Compensation, and Governance, Environmental and Sustainability Committees are each required to be composed solely of independent directors. The standards for audit committee and compensation committee membership include additional requirements under rules of the Securities and Exchange Commission. The Board has determined that all of the members of each of its standing committees meet the applicable independence requirements. The listing standards relating to general independence require an affirmative determination by the Board that the director has no material relationship with the listed company and contain a listing of several specific relationships that preclude independence.

As contemplated by New York Stock Exchange rules then in effect, the Board adopted categorical standards in 2004 to assist in making determinations of independence. Under the rules then in effect, relationships falling within the categorical standards were not required to be disclosed or separately discussed in the proxy statement in connection with the Board’s independence determinations.

 

 

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Item 1: Election of Directors (continued)

 

The categorical standards cover two types of relationships. The first type involves relationships of the kind addressed in either:

 

   

the rules of the Securities and Exchange Commission requiring proxy statement disclosure of relationships and transactions; or

 

   

the New York Stock Exchange listing standards specifying relationships that preclude a determination of independence.

For those relationships, the categorical standards are met if the relationship neither requires disclosure nor precludes a determination of independence under either set of rules.

The second type of relationship is one involving charitable contributions by CenterPoint Energy to an organization in which a director is an executive officer. In that situation, the categorical standards are met if the contributions do not exceed the greater of $1 million or 2% of the organization’s gross revenue in any of the last three years.

In making its subjective determination regarding the independence of Messrs. Cummings, Franklin, McLean*, Nesbitt, Pound, Smith and Smitherman and Mses. Biddle**, Cloonan, Lewis and Rheney*, the Board reviewed and discussed additional information provided by the directors and the Company with regard to each director’s business and personal activities as they related to the Company and Company management. The Board considered the transactions in the context of the New York Stock Exchange’s objective listing standards, the categorical standards noted above and the additional standards established for members of audit, compensation and governance, environmental and sustainability committees.

 

*

Mr. McLean and Ms. Rheney served on the Board until the 2021 Annual Meeting.

**

Ms. Biddle will continue to serve on the Board until the 2022 Annual Meeting.

Code of Ethics and Ethics and Compliance Code

 

We have a Code of Ethics for our Chief Executive Officer and Senior Financial Officers, which group consists of our Chief Financial Officer, Chief Accounting Officer, Treasurer and Controller. We will post information regarding any amendments to, or waivers of, the provisions of this code applicable to these officers at the website location referred to below under “Website Availability of Documents.”

We also have an Ethics and Compliance Code applicable to all directors, officers and employees. This code addresses, among other things, issues required to be addressed by a code of business conduct and ethics under New York Stock Exchange listing standards. Any waivers of this code for executive officers or directors may be made only by the Board of Directors or a committee of the Board and must be promptly disclosed to shareholders.

In 2021, no waivers of our Code of Ethics or our Ethics and Compliance Code were granted.

Conflicts of Interest and Related-Party Transactions

 

The Governance, Environmental and Sustainability Committee will address and resolve any issues with respect to related-party transactions and conflicts of interest involving our executive officers, directors or other “related persons” under the applicable disclosure rules of the Securities and Exchange Commission.

Our Ethics and Compliance Code provides that all directors, executive officers and other employees should avoid actual conflicts of interest as well as the appearance of a conflict of interest, and our Code of Ethics for our Chief Executive Officer and Senior Financial Officers similarly obligates the employees covered by that Code of Ethics (our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Controller) to handle actual or apparent conflicts of interest between personal and professional relationships in an ethical manner. Under our Ethics and Compliance Code, prior approval is required for any significant financial interest with suppliers, partners, subcontractors or competitors. Any questionable situation is required to be disclosed to the Legal Department or an employee’s direct manager.

 

 

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  2022 Proxy Statement  

 

    

Item 1: Election of Directors (continued)

 

Pursuant to our Corporate Governance Guidelines, the Governance, Environmental and Sustainability Committee Charter and our Related-Party Transaction Approval Policy, the Board has delegated to the Governance, Environmental and Sustainability Committee the responsibility for reviewing and resolving any issues with respect to related-party transactions and conflicts of interests involving executive officers or directors of the Company or other related persons under the applicable rules of the Securities and Exchange Commission. The Company’s Corporate Governance Guidelines require that (i) each director shall promptly disclose to the Chair of the Board and the Chair of the Governance, Environmental and Sustainability Committee any potential conflicts of interest he or she may have with respect to any matter involving the Company and, if appropriate, recuse himself or herself from any discussions or decisions on any of these matters, and (ii) the Chair of the Board shall promptly advise the Governance, Environmental and Sustainability Committee of any potential conflicts of interest he or she may have with respect to any matter involving the Company and, if appropriate, recuse himself or herself from any discussions or decisions on any of these matters.

The Office of the Corporate Secretary periodically gathers information from directors and executive officers regarding matters involving potential conflicts of interest or related-party transactions and provides that information to the Governance, Environmental and Sustainability Committee for review. Directors and executive officers are also required to inform the Company immediately of any changes in the information provided concerning related-party transactions in which the director or executive officer or other related person was, or is proposed to be, a participant. In accordance with our Related-Party Transaction Approval Policy, the standard applied in approving the transaction is whether the transaction is in the best interests of the Company and its shareholders.

There were no related-party transactions in 2021 that were required to be reported pursuant to the applicable disclosure rules of the Securities and Exchange Commission.

Majority Voting in Director Elections

 

Our bylaws include a majority voting standard in uncontested director elections. This standard applies to the election of directors at this meeting. To be elected, a nominee must receive more votes cast “for” that nominee’s election than votes cast “against” that nominee’s election. In contested elections, the voting standard will be a plurality of votes cast. Under our bylaws, contested elections occur where, as of a date that is 14 days in advance of the date we file our definitive proxy statement with the Securities and Exchange Commission (regardless of whether or not thereafter revised or supplemented), the number of nominees exceeds the number of directors to be elected.

Our Corporate Governance Guidelines include director resignation procedures. In brief, these procedures provide that:

 

 
Incumbent director nominees must submit irrevocable resignations that become effective upon and only in the event that (1) the nominee fails to receive the required vote for election to the Board at the next annual meeting of shareholders at which such nominee faces re-election and (2) the Board accepts such resignation;
 
Each director candidate who is not an incumbent director must agree to submit an irrevocable resignation upon election or appointment as a director;
 
Upon the failure of any nominee to receive the required vote, the Governance, Environmental and Sustainability Committee makes a recommendation to the Board on whether to accept or reject the resignation;
 
The Board takes action with respect to the resignation and publicly discloses its decision and the reasons therefor within 90 days from the date of the certification of the election results; and
 
The resignation, if accepted, will be effective at the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board.

Our bylaws and our Corporate Governance Guidelines can be found on our website at https://investors.centerpointenergy.com/governance.

 

 

16    CenterPoint Energy


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Item 1: Election of Directors (continued)

 

Board Leadership

 

The offices of Chair of the Board and Chief Executive Officer are currently separate and have been separate since the formation of the Company as a new holding company in 2002. The Board believes that the separation of the two roles continues to provide, at present, the best balance of these important responsibilities with the Chair of the Board directing board operations and leading oversight of the Chief Executive Officer and management, and the Chief Executive Officer focusing on developing and implementing the Company’s board-approved strategic vision and managing its day-to-day business. The Board believes that separating the offices of Chair of the Board and Chief Executive Officer, coupled with regular executive sessions with only independent directors present, helps strengthen the Board’s independent oversight of management and provides an opportunity for the Board members to have more direct input to management in shaping the organization and strategy of the Company. A presiding independent director (typically the Independent Chair of the Board) leads the executive sessions. The presiding director provides the independent directors with a key means for communication and collaboration.

Further, in July 2021, in response to extensive shareholder feedback and the evaluation of evolving governance practices, the Company announced the creation and appointment of the Independent Chair of the Board role and the elimination of the Executive Chair position. The Board determined that this transition was necessary for the Company to continue to advance its strategic plan to drive sustainable value for the benefit of all its stakeholders. This transition to the Independent Chair role reaffirms the separation of the Chief Executive Officer and Chair of the Board roles.

The Board’s Role in Risk Oversight

 

CenterPoint Energy is a public utility holding company that, through its subsidiaries, owns and operates electric transmission, distribution and generation facilities and natural gas distribution facilities, provides energy performance contracting and sustainable infrastructure services. Risks are inherent in these businesses and investments, including, among other risks, regulatory and compliance risks, safety and operational risks, financial risks, environmental and climate risks and cybersecurity risks. The Board of Directors has responsibility for and is actively involved in the oversight of risks that could impact the Company. Our Corporate Governance Guidelines specify that the Board has ultimate oversight responsibility for the Company’s system of enterprise risk management.

Management is responsible for developing and implementing the Company’s program of enterprise risk management. A risk oversight committee, which is composed of senior executives from across the Company, monitors and oversees risks facing the Company. The Company’s General Counsel facilitates risk oversight committee meetings. The Committee provides risk assessment and control oversight for certain business activities, among other things. The Company’s enterprise risk management function further supports executive management’s, operational management’s and functional management’s execution of the Company’s strategic business objectives by conducting ongoing risk assessments and assisting with risk mitigation planning.

Throughout the year, the Board participates in reviews with management of the Company’s risk management process, the major risks facing the Company and steps taken to mitigate those risks. Board reviews include the following areas, among others:

 

LOGO

  

Safety

  

LOGO

  

Regulatory and legislative developments

LOGO

   Environmental, social and governance matters   

LOGO

  

Cybersecurity and data privacy

LOGO

   Business strategy and policy, including industry and economic developments   

LOGO

   Human capital management and diversity, equity and inclusion

LOGO

  

Operations and system integrity

  

LOGO

   Annual budget, including capital investment plan

LOGO

  

Litigation and other legal matters

  

LOGO

  

Integration

LOGO

  

Supply chain

  

LOGO

   Net zero and carbon reduction targets and generation transition

 

 

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Item 1: Election of Directors (continued)

 

To help the Board carry out its responsibility for risk oversight, the Board’s standing committees focus on the following specific key areas of risk:

 

Committee   Risk Oversight Responsibilities

Audit   

 

Accounting and financial matters, including compliance with legal and regulatory requirements, and financial reporting and internal controls systems, and review of Company’s enterprise risk management process

 

 

Compensation   

 

Compensation policies and practices, diversity, equity and inclusion initiatives, and succession planning

 

 

Governance,    Environmental          and         Sustainability         

 

  Corporate governance, including Board structure, cybersecurity, environmental matters, including those related to climate change, and sustainability

The Board believes that the administration of its risk oversight function has not affected its leadership structure. In reviewing the Company’s compensation program, the Compensation Committee has made an assessment of whether compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company and has concluded that they do not create such risks as presently constituted.

Environmental, Social and Governance Oversight

As noted in the table above, the Board has charged the Governance, Environmental and Sustainability Committee with oversight responsibility of the Company’s environmental matters as well as assessing its sustainability strategy and initiatives. The Governance, Environmental and Sustainability Committee, the Board or both receive quarterly reports from management on the Company’s environmental and sustainability activities and risks, including risks related to climate change, among others. The Compensation Committee assists the Board in discharging its oversight responsibility for the Company’s human capital management matters, including its diversity, equity and inclusion initiatives, and supplier diversity program, among other programs. Management provides regular updates to the Compensation Committee on human capital management strategy and programs, and the Board is kept apprised of any developments in these areas. Additionally, management periodically provides updates directly to the Board on the Company’s environmental and sustainability activities as well as its diversity, equity and inclusion initiatives.

The Company voluntarily discloses key environmental, social and governance (ESG) matters and metrics in its Corporate Sustainability Report that follows the Global Reporting Initiative (GRI) framework and has been prepared in accordance with GRI Standards: Core Option. The Company has also disclosed information using the Sustainability Accounting Standards Board (SASB) standards for Electric Utilities & Power Generators and the Gas Utilities & Distributors sectors and incorporated both the Edison Electric Institute (EEI) and American Gas Association (AGA) Version 2 Templates into its annual sustainability reporting activities. This Corporate Sustainability Report reaffirmed the Company’s net zero carbon reduction goals and carbon policy, detailed the Company’s diversity, equity and inclusion initiatives, and provided an overview of the Company’s response to COVID-19 and safety and environmental activities, among other key ESG disclosures. The Company’s most recent Corporate Sustainability Report, published in September 2021, is available on its website at www.sustainability.centerpointenergy.com, in addition to the GRI Content Index, SASB Index and EEI and AGA Version 3 Templates. Unless specifically stated herein, documents and information on CenterPoint Energy’s website are not incorporated by reference in this proxy statement.

 

 

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  2022 Proxy Statement  

 

 

 

 

Item 1: Election of Directors (continued)

 

Executive Succession Planning and Leadership Development

 

Effective July 1, 2020, the Board appointed Mr. David J. Lesar to serve as the Company’s President and Chief Executive Officer. In connection with this appointment, the Board, in conjunction with management, is executing on a comprehensive executive succession planning process, which, among other things, is intended to identify and retain senior executive talent and provide development opportunities, as evidenced by certain leadership promotions considered by the Board and announced in 2021. As part of this process, the Company has taken into account feedback from shareholders received during its shareholder engagement program. In their feedback, shareholders emphasized a desire for the Company to ensure a strong pipeline of talent is developed and secured to continue the successful execution of the Company’s long-term strategy.

Director Attendance

 

Last year, the Board met 8 times, and the standing committees met a total of 18 times. Each incumbent director attended more than 75% of the meetings of the Board of Directors and each of the committees on which he or she served.

Directors are expected to attend annual meetings of shareholders. Except for Mr. Carroll, all then-current directors attended the 2021 annual meeting of shareholders.

Board Organization and Committees

 

The Board oversees the management of the Company’s business and affairs. The Board appoints committees to help carry out its duties. Messrs. Lesar and Nesbitt do not serve on any standing committees. The following table sets forth the standing committees of the Board and their members as of the date of this proxy statement, as well as the number of meetings each committee held during 2021:

 

Director  

Audit

Committee

 

Compensation

Committee

 

Governance,
Environmental
and Sustainability

Committee

Leslie D. Biddle

     

Wendy Montoya Cloonan*

     

Earl M. Cummings

      Chair

Raquelle W. Lewis**

     

Theodore F. Pound

    Chair    

Phillip R. Smith

  Chair; Financial Expert    

Barry T. Smitherman

       

Number of Meetings Held in 2021

  8   4   6

 

  *

Ms. Cloonan was elected to the Board of Directors effective February 19, 2021.

  **

Ms. Lewis was elected to the Board of Directors effective September 29, 2021.

 

 

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Item 1: Election of Directors (continued)

 

AUDIT

COMMITTEE

  

 

The primary responsibilities of the Audit Committee are to assist the Board in fulfilling its oversight responsibility for:

 

    the integrity of our financial statements;

    the qualifications, independence and performance of our independent registered public accounting firm;

    the performance of our internal audit function;

    compliance with legal and regulatory requirements and our systems of disclosure controls and internal controls; and

    our enterprise risk management process.

 

The Audit Committee has sole responsibility to appoint and, where appropriate, replace our independent registered public accounting firm and to approve all audit engagement fees and terms. Please refer to “Report of the Audit Committee” for further details.

 

The Board of Directors has determined that Mr. Smith, the Chair of our Audit Committee, is an audit committee financial expert within the meaning of the regulations of the Securities and Exchange Commission.

 
    

COMPENSATION

COMMITTEE

  

 

The primary responsibilities of the Compensation Committee are to:

 

    oversee compensation for our senior executive officers, including salary and short-term and long-term incentive awards;

    administer incentive compensation plans;

    evaluate our Chief Executive Officer’s performance;

    review management succession planning and development;

    review and monitor the Company’s diversity, equity and inclusion practices; and

    select, retain and oversee the Company’s compensation consultant.

 

For information concerning policies and procedures relating to the consideration and determination of executive compensation, including the role of the Compensation Committee and its report concerning Compensation Discussion and Analysis, see “Compensation Discussion and Analysis” and “Report of the Compensation Committee,” respectively.

 
    

 

 

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GOVERNANCE, ENVIRONMENTAL AND SUSTAINABILITY

COMMITTEE

  

The primary responsibilities of the Governance, Environmental and Sustainability Committee are to:

 

    identify, evaluate and recommend, for the approval of the entire Board of Directors, potential nominees for election to the Board;

    recommend membership on standing committees of the Board;

    address and resolve any issues with respect to related-party transactions and conflicts of interest involving our executive officers, directors or other “related persons”;

    review the independence of each Board member and make recommendations to the Board regarding director independence;

    oversee annual evaluations of the Board and its standing committees, including individual director evaluations;

    review any shareholder proposals submitted for inclusion in our proxy statement and make recommendations to the Board regarding the Company’s response;

    review and recommend fee levels and other elements of compensation for non-employee directors;

    evaluate whether to accept a conditional resignation of an incumbent director who does not receive a majority vote in favor of election in an uncontested election;

    periodically review the Company’s programs, practices, initiatives and strategies relating to environmental, including climate change, and sustainability matters and cybersecurity; and

    establish, periodically review and recommend to the Board any changes to our Corporate Governance Guidelines.

 

For information concerning policies and procedures relating to the consideration and determination of compensation of our directors, including the role of the Governance, Environmental and Sustainability Committee, see “Compensation of Directors.”

 

 

Executive Sessions of the Board

Our Corporate Governance Guidelines provide that the members of the Board of Directors who are not officers of CenterPoint Energy will hold regular executive sessions without management participation. If at any time the non-management directors include one or more directors who do not meet the listing standards of the New York Stock Exchange for general independence, the Board must hold an executive session at least once each year including only the non-management directors who are also independent. An executive session of independent directors is currently scheduled in conjunction with each regular meeting of the Board of Directors. Currently, the Independent Chair of the Board (Mr. Nesbitt) presides at these sessions.

 

 

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Item 1: Election of Directors (continued)

 

Shareholder Engagement

 

LOGO

 

The Company believes that good governance practices include maintaining a consistent and transparent dialogue throughout the year with our shareholders, which helps contribute to the Company’s long-term success. Each year, we engage in shareholder outreach through various engagement channels including direct meetings, analyst conferences and road shows, among others, and proactively solicit feedback. We also reach out to the proxy governance teams of certain of our large institutional investors to solicit feedback on a range of topics, including, among other topics, our executive compensation program, including short-term and long-term incentive plan design and executive succession planning, ESG matters, including our corporate governance practices such as board structure, composition and refreshment, environmental and sustainability matters, such as climate change and our carbon emissions reduction goals, human capital management, including our diversity, equity and inclusion initiatives, and proxy statement disclosure.

In response to the outcome of the 2021 advisory vote on the compensation of our named executive officers, commonly known as a “say-on-pay” vote, CenterPoint Energy solicited feedback and perspectives from our shareholders, particularly with respect to our executive compensation program. As part of this process, we contacted shareholders representing 68.3% of our outstanding shares of common stock during 2021, and, while our engagement efforts are ongoing, as of March 1, 2022, shareholders representing 18.8% of our outstanding shares agreed to engage with us. Key members of our executive leadership representing Human Resources, Investor Relations, Environmental and Sustainability, and Corporate Governance participated in our shareholder engagement. For further information on the results of our 2021 “say-on-pay” vote, the shareholder feedback we received and our responses thereto, please refer to “Compensation Discussion and Analysis—Executive Summary—Shareholder Outreach and Say-On-Pay.”

At this year’s meeting, our shareholders will again have the opportunity to cast an advisory vote on the compensation of our named executive officers. This vote provides our shareholders the opportunity to express their views regarding the compensation program for our named executive officers as disclosed in this proxy statement. As an advisory vote, the say-on-pay vote at the meeting will not be binding upon CenterPoint Energy or the Board of Directors. However, the Board of Directors values the opinions expressed by our shareholders, and the Compensation Committee will consider the outcome of the vote when making future compensation decisions for our named executive officers. For additional information, please refer to “Advisory Vote on Executive Compensation (Item 3).”

At our 2017 annual meeting of shareholders, we conducted an advisory vote on the frequency of future shareholder advisory votes on executive compensation, at which the Board of Directors recommended that our shareholders vote in favor of holding annual say-on-pay votes instead of the other options presented. At our 2017 annual meeting of shareholders, the shares of our common stock that voted in favor of one of the three available frequency recommendations (excluding abstentions and broker non-votes) were as follows:

 

2017 Annual Meeting Results on the Frequency of Future Shareholder Advisory Votes on Executive Compensation

Annually

  Every Two Years   Every Three Years

86.8%

  0.5%   12.7%

 

 

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Item 1: Election of Directors (continued)

 

Consistent with the results of both the 2011 and 2017 advisory votes, we will continue to hold future say-on-pay votes annually until we next hold an advisory vote on the frequency of say-on-pay votes in 2023 as required under Securities and Exchange Commission rules.

Communications with Directors

 

Interested parties who wish to make concerns known to the non-management directors may communicate directly with the non-management directors by making a submission in writing to “Board of Directors (independent members)” in care of our Corporate Secretary at the address indicated on the first page of this proxy statement. Aside from this procedure for communications with the non-management directors, the entire Board of Directors will receive communications in writing from shareholders. Any such communications should be addressed to the Board of Directors in care of the Corporate Secretary at the same address.

Website Availability of Documents

 

CenterPoint Energy’s Annual Report on Form 10-K, Corporate Governance Guidelines, the charters of the Audit Committee, Compensation Committee, and Governance, Environmental and Sustainability Committee, the Code of Ethics and the Ethics and Compliance Code can be found on its website at https://investors.centerpointenergy.com/governance. Additionally, CenterPoint Energy’s Corporate Sustainability Report and related disclosure can be found on its website at www.sustainability.centerpointenergy.com. Unless specifically stated herein, documents and information on CenterPoint Energy’s website are not incorporated by reference in this proxy statement.

Compensation of Directors

 

The Governance, Environmental and Sustainability Committee of the Board oversees fee levels and other elements of compensation for CenterPoint Energy’s non-employee directors. The Governance, Environmental and Sustainability Committee evaluates on an annual basis the non-employee director compensation program with a view to approximate CenterPoint Energy’s peer group median and align non-employee director compensation with our shareholders’ interests. This evaluation considers the significant time expended and background, experience and skill levels required to fulfill the duties of a non-employee director. The Governance, Environmental and Sustainability Committee’s independent compensation consultant annually benchmarks and evaluates the competitiveness of CenterPoint Energy’s non-employee directors’ compensation program, including a comparison of the compensation components to that of peer companies. Based on the Governance, Environmental and Sustainability Committee’s recommendations, the Board of Directors then determines the final compensation for all non-employee directors each year.

Directors receive a cash retainer and are eligible to receive annual grants of our common stock under the CenterPoint Energy, Inc. Stock Plan for Outside Directors, as amended. Directors no longer receive meeting fees, and participation in a plan providing split-dollar life insurance coverage has been discontinued for directors commencing service after 2000.

Stock ownership guidelines for non-employee directors were originally adopted in February 2011. Under the current guidelines, each non-employee director is required to own shares of CenterPoint Energy common stock with a value equal to at least five times the director’s regular annual cash retainer. New directors are required to attain the specified level of ownership within five years of joining the Board.

Retainer Fees

Retainers are paid to our non-employee directors on a quarterly basis in arrears. Our non-employee directors receive an annual retainer of $115,000. The Chairs of the Audit, Compensation, and Governance, Environmental and Sustainability Committees each receive a supplemental annual retainer for service as committee chair. In addition to

 

 

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Item 1: Election of Directors (continued)

 

the annual retainer, our Independent Chair of the Board receives a supplemental retainer for his services to the Board. Our current non-employee annual and supplemental retainer fees are as follows:

 

Type of Retainer Fee    Current Retainer Fee    

Annual Cash Retainer for Non-Employee Directors

   $ 115,000  

Annual Standing Committee Chair Supplemental Retainers

        

Audit Committee Chair

   $ 20,000  

Compensation Committee Chair

   $ 20,000  

Governance, Environmental and Sustainability Committee Chair

   $ 15,000  

Annual Independent Chair of the Board Retainer

   $ 500,000  

Fees earned or paid in 2021 are set forth in the Fees Earned or Paid in Cash column of the Director Compensation Table.

Stock Plan for Outside Directors

Each non-employee director serving as of May 1, 2021 was granted an annual stock award under our Stock Plan for Outside Directors in 2021. The cash value of these awards, as of the grant date, is set annually by the Board. The number of shares awarded is then determined by dividing the cash value by the fair market value of the common stock on the grant date. In 2021, for each non-employee director serving as of May 1, 2021, the Board determined a cash value for the stock award, as of the grant date, of $155,000, resulting in a stock award to each non-employee director of 6,347 shares of common stock. The annual stock awards granted under our Stock Plan for Outside Directors are immediately fully vested upon grant.

In addition to the annual grant, our Stock Plan for Outside Directors provides that a non-employee director may receive a one-time, initial grant of shares of common stock upon first commencing service as a director, based on a cash value, as of the date of the grant, set by the Board. Any such awards granted are immediately fully vested. The Board made a one-time initial grant under this provision of the Stock Plan for Outside Directors to Ms. Lewis on September 29, 2021 with a cash value for such award, as of the grant date, of $90,877, resulting in a stock award to Ms. Lewis of 3,619 shares of common stock.

Deferred Compensation Plan

We maintain a deferred compensation plan that permits directors to elect each year to defer all or part of their annual retainer and supplemental annual retainer for committee chairmanship or independent chairmanship. Interest accrues on deferrals at a rate, adjusted annually, equal to the average yield during the year of the Moody’s Long-Term Corporate Bond Index plus two percent. Directors participating in this plan may elect at the time of deferral to receive distributions of their deferred compensation and interest in three ways:

 

 
An early distribution of either 50% or 100% of their deferrals for the year in any year that is at least four years from the year of deferral or, if earlier, the year in which they attain their normal retirement date under the plan (the first day of the month coincident with or next following attainment of age 70);
 
A lump sum distribution payable in the year after the year in which they reach their normal retirement date or leave the Board of Directors, whichever is later; or
 
In 15 annual installments beginning on the first of the month coincident with or next following their normal retirement date or upon leaving the Board of Directors, whichever is later.

The deferred compensation plan is a nonqualified, unfunded plan, and the directors are general, unsecured creditors of CenterPoint Energy with respect to their plan benefits. No fund or other assets of CenterPoint Energy have been set aside or segregated to pay benefits under the plan. Refer to “Rabbi Trust” under “Executive Compensation Tables—Potential Payments upon Change in Control or Termination” for funding of the deferred compensation plan upon a change in control.

 

 

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Item 1: Election of Directors (continued)

 

Other Compensation

As of December 2021, each director may participate in CenterPoint Energy Foundation, Inc.’s Easy Match Program (the Easy Match Program). The Easy Match Program matches dollar-for-dollar contributions made by directors and employees of CenterPoint Energy to qualified charitable contributions up to a certain amount each year. Directors may have their qualifying charitable contributions up to $50,000 per year matched under the Easy Match Program.

Director Compensation Table

 

The table below and the narrative in the footnotes provide compensation amounts for our non-employee directors for 2021, as well as additional material information in connection with such amounts. For summary information on the provision of the plans and programs, refer to the “Compensation of Directors” discussion immediately preceding this table.

 

  Name      Fees Earned
or Paid
in Cash
(1)
($)
       Stock
Awards
(2)
($)
       Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
      

Other
Compensation
(3)

($)

      

Total   

($)

 

Leslie D. Biddle

       113,448          155,000                   50,000          318,448    

Wendy Montoya Cloonan(4)

       98,476          155,000                   27,430          280,906    

Earl M. Cummings

       117,198          155,000                            272,198    

Raquelle W. Lewis(5)

       29,348          90,877                            120,225    

Scott J. McLean(6)

       34,148                                     34,148    

Martin H. Nesbitt(7)

       347,524          155,000                   50,000          552,524    

Theodore F. Pound

       133,448          155,000                            288,448    

Susan O. Rheney(6)

       38,805                                     38,805    

Phillip R. Smith

       133,448          155,000                   2,500          290,948    

Barry T. Smitherman

       113,448          155,000                   22,250          290,698    

 

(1)

Includes annual retainer and committee chair retainers for each director as more fully explained under “—Compensation of Directors—Retainer Fees.”

 

(2)

Reported amounts in the table represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718: Compensation—Stock Compensation (FASB ASC Topic 718). For purposes of the table above, the effects of estimated forfeitures are excluded.

 

    

Each non-employee director then in office as of May 1, 2021 received an annual value-based stock award under our Stock Plan for Outside Directors in 2021. Upon the recommendation of the Governance, Environmental and Sustainability Committee, the Board determined a cash value for each award, as of the grant date, of $155,000, resulting in a stock award of 6,347 shares of common stock for each non-employee director then in office as of May 1, 2021. The grant date fair value of the awards, based on the market price of our common stock on the New York Stock Exchange Composite Tape on that date, was $24.42 per share. With respect to Ms. Lewis, the Board made a one-time initial award under our Stock Plan for Outside Directors on September 29, 2021. Upon the recommendation of the Governance, Environmental and Sustainability Committee, the Board determined a cash value for her award, as of the grant date of September 29, 2021, of $90,877, resulting in a stock award of 3,619 shares of common stock for Ms. Lewis. The grant date fair value of the award, based on the market price of our common stock on the New York Stock Exchange Composite Tape on that date, was $25.11 per share. No stock awards under our Stock Plan for Outside Directors were outstanding at December 31, 2021.

 

(3)

Other Compensation represents matching contributions made under the Easy Match Program. See “—Compensation of Directors—Other Compensation.”

 

(4)

Ms. Cloonan was elected to the Board effective February 19, 2021. The fees earned or paid in cash reflect a partial year of service.

 

(5)

Ms. Lewis was elected to the Board effective September 29, 2021. The fees earned or paid in cash and initial stock award granted under our Stock Plan for Outside Directors reflect a partial year of service.

 

(6)

Mr. McLean and Ms. Rheney served on the Board until the 2021 Annual Meeting.

 

(7)

Mr. Nesbitt was appointed Independent Chair effective July 20, 2021. The fees earned or paid in cash reflect a partial year of service as Independent Chair of the Board.

 

 

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STOCK OWNERSHIP

The following table shows stock ownership of known beneficial owners of more than 5% of CenterPoint Energy’s common stock, each director or nominee for director, the Chief Executive Officer, the Chief Financial Officer, the other executive officers for whom we are providing detailed compensation information under “Executive Compensation Tables” and our current executive officers, directors and director nominees as a group. Information for the executive officers, directors and director nominees is given as of March 1, 2022 except as otherwise indicated. The directors, director nominees and officers, individually and as a group, beneficially own less than 1% of CenterPoint Energy’s outstanding common stock. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (Exchange Act) and, except as otherwise indicated, the respective holders have sole voting and investment powers over such shares.

 

Name(1)    Number of Shares of
CenterPoint Energy
Common Stock
 

The Vanguard Group, Inc.

     72,003,301 (2) 

100 Vanguard Blvd.

  

Malvern, Pennsylvania 19355

  

BlackRock, Inc.

     62,536,246 (3) 

55 East 52nd Street

  

New York, New York 10055

  

Capital International Investors

     48,016,611 (4) 

333 South Hope Street, 55th Floor

  

Los Angeles, CA 90071

  

Leslie D. Biddle

     40,443  

Wendy Montoya Cloonan

     6,347  

Earl M. Cummings

     14,334  

Scott E. Doyle

     62,788 (5) 

Christopher H. Franklin

      

Monica Karuturi

     15,637  

David J. Lesar

     179,030  

Raquelle W. Lewis

     3,619  

Kenneth M. Mercado

     78,551 (5) 

Martin H. Nesbitt

     25,443  

Theodore F. Pound

     38,641  

Phillip R. Smith

     50,775  

Barry T. Smitherman

     25,747  

Jason P. Wells

     27,462  

All current executive officers, directors and director nominees as a group (16 persons)

     565,930 (5)(6) 

 

(1)

Unless otherwise indicated, the address of each beneficial owner is c/o CenterPoint Energy, Inc., 1111 Louisiana Street, Houston, Texas 77002.

 

(2)

This information is as of December 31, 2021 and is based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 9, 2022 by The Vanguard Group, Inc. This represents 11.45% of the outstanding common stock of CenterPoint Energy. The Schedule 13G/A reports no sole voting power for shares of common stock, shared voting power for 1,222,905 shares of common stock, sole dispositive power for 69,226,171 shares of common stock and shared dispositive power for 2,777,130 shares of common stock.

 

(3)

This information is as of December 31, 2021 and is based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 3, 2022 by BlackRock, Inc. This represents 9.9% of the outstanding common stock of CenterPoint Energy. The Schedule 13G/A reports sole voting power for 54,704,304 shares of common stock, no shared voting power for shares of common stock, sole dispositive power for 62,536,246 shares of common stock and no shared dispositive power for shares of common stock.

 

(4)

This information is as of December 31, 2021 and is based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 11, 2022 by Capital International Investors. This represents 7.6% of the outstanding common stock of CenterPoint Energy. The Schedule 13G reports sole voting power for 47,183,492 shares of common stock, no shared voting power for shares of common stock, sole dispositive power for 48,016,611 shares of common stock and no shared dispositive power for shares of common stock.

 

 

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Stock Ownership (continued)

 

(5)

Includes shares of CenterPoint Energy common stock held under CenterPoint Energy’s savings plan, for which the participant has sole voting power (subject to such power being exercised by the plan’s trustee in the same proportion as directed shares in the savings plan are voted in the event the participant does not exercise voting power).

 

(6)

Does not include Mr. Carroll, Mr. McLean, or Ms. Rheney, who departed from the Company during 2021. Does not include Mr. Mercado who, effective January 1, 2022, stepped down from his positions with the Company and its affiliates. Mr. Mercado will remain with the Company through the second quarter of 2022 to support the transition of his responsibilities.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

The following compensation discussion and analysis as well as the information provided under the “Executive Compensation Tables” section contains information regarding measures applicable to performance-based compensation and targets and other achievement levels associated with these measures. CenterPoint Energy cautions investors not to regard this information, to the extent it may relate to future periods or dates, as forecasts, projections or other guidance. The reasons for this caution include the following: The information regarding performance objectives and associated achievement levels was formulated as of earlier dates and does not take into account subsequent developments. The objectives may include adjustments from, or otherwise may not be comparable to, financial and operating measures that are publicly disclosed and may be considered of significance to investors. Some achievement levels, such as those relating to incentives for exceptional performance, may be based on assumptions that differ from actual results.

 

CD&A Table of Contents  

Executive Summary

     28         

Executive Compensation Program Overview

     35         

Design of Executive Compensation Program

     36         

2021 Executive Compensation Program

     39         

Our Executive Compensation Decision-Making Process

     46         

Other Compensation Programs and Practices

     49         

The Compensation Committee of the Board of Directors has developed a compensation program that aligns executive compensation with short-term and long-term performance against financial, operational and strategic goals that are key to delivering long-term value for our shareholders. This Compensation Discussion and Analysis (CD&A) describes our executive compensation program, including the objectives and elements of compensation, as well as recommendations and determinations made by the Compensation Committee regarding the compensation of our named executive officers.

Executive Summary

 

Our named executive officers for 2021 are listed below:

 

LOGO   LOGO   LOGO   LOGO   LOGO
David J. Lesar   Jason P. Wells   Scott E. Doyle   Kenneth M. Mercado   Monica Karuturi

 

President, Chief
Executive Officer &
Director

 

 

Executive Vice
President & Chief
Financial Officer

 

 

Executive Vice
President, Utility Operations

 

 

Former Executive

Vice President,

Electric Utility*

 

 

Executive Vice President
and General Counsel

 

*

Effective January 1, 2022, Mr. Mercado stepped down from his positions with the Company and its affiliated entities. Mr. Mercado will remain with the Company through the second quarter of 2022 to support the transition of his responsibilities.

 

 

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Compensation Discussion and Analysis (continued)

 

Our named executive officers for 2021 also include Milton Carroll, our former Executive Chairman, who exited the Company during 2021 following the elimination of the Executive Chairman position.

In this proxy statement, we refer to David J. Lesar, Jason P. Wells, Scott E. Doyle, Kenneth M. Mercado and Monica Karuturi as our “senior executive officers.” We also describe and discuss the compensation of our Executive Chairman prior to his exit from the Company on July 21, 2021. We refer to our Executive Chairman, prior to his departure, and our senior executive officers collectively as our “named executive officers” in this proxy statement.

Shareholder Engagement and Say-on-Pay Vote

Feedback from our shareholders is a critical part of our Company’s and the Compensation Committee’s approach to designing our executive compensation program. Each year, we engage in shareholder outreach through various engagement channels including direct meetings, analyst conferences and road shows, among others, and proactively solicit feedback. We also reach out to the proxy governance teams of certain of our large institutional investors to solicit feedback on a range of topics, including, among other topics, our executive compensation program, including short-term and long-term incentive plan design, executive succession planning and ESG matters, including our corporate governance practices such as board structure, composition and refreshment, environmental and sustainability matters, such as climate change and our net zero emission goals, human capital management, including our diversity, equity and inclusion initiatives, and proxy statement disclosure.

At the 2021 Annual Meeting of Shareholders, we received 79.9% support on our annual advisory vote on executive compensation, up from 57% support at our 2020 Annual Meeting of Shareholders. Our executive compensation programs have historically received strong shareholder support (averaging over 90% prior to 2020). In providing this increased support in 2021, shareholders noted particular satisfaction with the Company’s efforts to increase the focus of our named executive officers’ compensation on meeting certain utility EPS targets to more directly align their interests with our shareholders and the addition of the diversity and inclusion negative modifier to our named executive officers’ short-term incentive plan.

In response to feedback consistently provided throughout the Company’s engagement efforts, in July 2021, the Board announced the implementation of a new independent leadership and governance structure following the substantial refreshment of the Board. As a result, the independent members of the Board appointed Mr. Martin H. Nesbitt to the newly created position of Independent Chair of the Board and eliminated the position of Executive Chairman. In connection with, and in support of, these transitions, the Compensation Committee approved certain compensation arrangements as described below in the “Transition to New Independent Board Governance Structure” section.

Following these changes, in response to the outcome of the 2021 advisory vote for executive compensation and as part of our commitment to solicit and understand the perspectives of our shareholders we reached out to 28 of our top shareholders, representing 68.3% of our outstanding shares, to request meetings to discuss our executive compensation program and ESG matters. We explicitly sought to discuss and receive feedback on the new governance structure, the compensation arrangements of the former Executive Chairman, Mr. Milton Carroll, and our President and CEO, Mr. David Lesar, and our proposed change to incorporate a carbon reduction goal into our long-term incentive plan. While our engagement efforts are ongoing, as of March 1, 2022, eleven shareholders representing 18.8% of our outstanding shares agreed to engage with us.

From November 2021 to February 2022, key members of our executive leadership team representing Human Resources, Investor Relations, Corporate Governance, and Environmental and Sustainability participated in our shareholder engagement. For each shareholder meeting, we offered to include a member of the Board. We provided an open forum to each shareholder to discuss and comment on any aspects of the Company’s executive compensation program or ESG matters. Overall, we received generally positive and/or constructive feedback from the shareholders who engaged with us regarding the Company’s strategic reset and senior management team, responsiveness to feedback shared through our prior engagement efforts, the new governance structure, our compensation philosophy for our salaries, short-term incentive plan and long-term incentive plan, and our ESG

 

 

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Compensation Discussion and Analysis (continued)

 

practices. The Company, after this engagement with these shareholders, agreed to keep in contact with them, as well as the other shareholders who chose not to engage with the Company, to continue to receive any such feedback they may have on the Company’s executive compensation program and our ESG practices.

 

SHAREHOLDER REPRESENTATION   

 

We reached out to 28 of our top shareholders, representing 68.3% of our outstanding shares, and met with 11 shareholders, representing 18.8% of our outstanding shares.

 

  

MEETING

PARTICIPATION

  

 

Key members of our executive leadership team representing Human Resources, Investor Relations, Corporate Governance, and Environmental and Sustainability participated in our shareholder engagement.

 

  

SHAREHOLDER

FEEDBACK

  

 

The table below summarizes the topics our shareholders asked us to consider, and we shared the shareholder feedback with the Compensation Committee and Board for their consideration as we continue to evaluate our executive compensation program and ESG practices. Upon consideration of their feedback, we implemented certain changes as summarized in the table below.

 

These meetings with our shareholders provided the Compensation Committee and the Board with valuable insights into our shareholders’ perspectives on our compensation program and potential improvements to the program, as described further below. Following the shareholder outreach, with input from its independent compensation consultant and management, the Compensation Committee conducted its annual review of our programs, including performance metrics and targets.

The table below summarizes the executive compensation topics our shareholders asked us to consider and our response.

 

 

WHAT WE HEARD FROM OUR
SHAREHOLDERS

 

 

HOW WE RESPONDED

    
       
Supportive of inclusion of additional ESG measures in incentive plans      

Effective in 2021, we introduced a diversity and inclusion negative modifier into the short-term incentive plan design. This modifier will be expanded in the 2022 short-term incentive plan to include supplier diversity objectives. This modifier is a downward-only modifier and can only reduce the potential payout; it cannot increase the short-term incentive plan awards. The structure of this modifier reflects the Company’s belief that advancement of the Company’s diversity, equity and inclusion objectives is an expectation, not a goal to be rewarded.

 

Beginning in 2022, we introduced a carbon reduction goal as a weighted component of our long-term incentive performance-based awards. This new component measures the progress of our net zero emission and carbon reduction goals and holds leaders accountable for the achievement of these goals.

   
     
Shareholders prefer independent board chair leadership and governance structure      

 

Based on extensive feedback from shareholders and evaluation of evolving governance practices, the Board determined that a significant leadership and governance transition was necessary for the Company to continue to advance its strategic plan to drive sustainable value for the benefit of all its stakeholders. A new governance structure was implemented in July 2021 whereby the Board created a new position of Independent Chair of the Board and eliminated the position of Executive Chairman resulting in Mr. Carroll’s separation from his leadership role and position on the Board. Mr. Martin Nesbitt was appointed to the newly created Independent Chair position.

   

 

 

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WHAT WE HEARD FROM OUR
SHAREHOLDERS

 

 

HOW WE RESPONDED

    
     
Shareholders were supportive of management’s performance and execution of our new strategy      

We have continued to regularly communicate and update shareholders on our successful progress on key initiatives and goals under our new long-term strategic plan. This open dialogue, along with our performance to date, has been well-received by our shareholders.

   
Shareholders, though supportive of the CEO’s leadership, performance and retention, requested additional information regarding the Compensation Committee’s and the Board’s rationale for the retention award granted to the CEO    

The Compensation Committee and Board determined that a retention award granted to Mr. Lesar was appropriate to retain a highly-experienced CEO with a proven successful track record across industries during the implementation of a new independent leadership and governance structure and long-term corporate strategy. The Compensation Committee and Board made this determination following strong support from shareholders for Mr. Lesar and his leadership as well as shareholder feedback that succession planning and leadership stability was a priority. Further, in light of the separation of Mr. Carroll, the Board determined that the retention award was necessary to ensure continuity of leadership and stability by retaining Mr. Lesar. The Retention Incentive Agreement was determined following several meetings, including consultation with outside counsel, and the consideration of market data and past precedent provided by the Compensation Committee’s independent compensation consultant for the Compensation Committee’s and Board’s reference. Further, in response to extensive shareholder feedback in support of Mr. Lesar’s performance, the award encourages the continued leadership by Mr. Lesar for multiple years to provide senior executive management continuity, drive successful execution of the Company’s value-creation strategy and implement a successful executive leadership succession plan. In particular, the Compensation Committee and Board considered Mr. Lesar’s experience in successfully developing strong succession candidates and the need, as expressed by the Company’s shareholders, for the Company to have a long-term succession plan to ensure the ongoing successful execution of the Company’s long-term strategy. The Compensation Committee and Board noted that Mr. Lesar’s outstanding awards were insufficient to retain a sought-after CEO who has proven to be successful in multiple industries and the award further aligned Mr. Lesar’s interest with those of shareholders.

 

We have provided additional details and rationale for the Compensation Committee’s and Board’s decision to approve the retention award in the “Transition to New Independent Board Governance Structure” section.

   
       
Shareholders, though supportive of the implementation of the new governance structure, requested additional information regarding the Compensation Committee’s and the Board’s rationale for the severance arrangement with our former Executive Chairman      

As part of our governance transition, Mr. Carroll’s position as Executive Chairman of the Board was eliminated in July 2021 and as is common market practice when such a position is eliminated, we entered into a Separation Agreement with Mr. Carroll whereby he exited from the Company. The Compensation Committee and Board took this action following numerous requests from shareholders to eliminate the Executive Chair position. The severance arrangement was determined following several Board and committee meetings, including consultation with outside counsel, and the consideration of market data and past precedent provided by the Compensation Committee’s independent compensation consultant for the Compensation Committee’s and Board’s reference. The Compensation Committee and Board determined that the terms of the Separation Agreement with Mr. Carroll were appropriate to have a smooth and successful implementation of the Company’s new independent leadership and governance structure. In addition, the Board received shareholder feedback that succession planning and leadership stability was a priority. In light of this, the Board determined it was necessary to ensure continuity of leadership and stability by entering into the Separation Agreement with Mr. Carroll that would require him to provide transition support while simultaneously entering into a retention agreement with Mr. Lesar. Further, the Separation Agreement reflects the termination of the Executive Chair position to implement best governance practices, and the continued need for Mr. Carroll’s support of a smooth transition given his strong ties to the Houston community and key stakeholders of the Company, as well as his institutional knowledge.

 

We have provided additional details and rationale for the Compensation Committee’s and Board’s decision to enter into the Separation Agreement in the “Transition to New Independent Board Governance Structure” section.

   

 

 

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Compensation Discussion and Analysis (continued)

 

In addition to engaging with our shareholders, we also engaged with representatives from Institutional Shareholder Services and Glass Lewis to gain clarity on matters they highlighted in their reports to investors, including how they evaluated our 2021 proxy disclosure and how they intend to evaluate our 2022 proxy disclosure.

2021 Business Strategy Highlights

We entered 2021 with the goal of transforming CenterPoint Energy into a premium utility company and we are now well on the path to achieving that goal. It was a transformative year in which we unveiled our new long-term strategy, focused on delivering sustainable rates for our customers, sustainable earnings growth for our shareholders, and a sustainable and positive impact on the environment for the communities we serve.

We achieved significant progress on key strategic objectives in 2021, including increasing our utility EPS (as defined below) growth target and delivering on our financial performance, setting a long-term capital plan that we believe will further enhance the safety, reliability and resiliency of our service to customers, executing on our strategic transactions to become a pure play utility, making significant progress towards the transition of our generation assets and announcing our first ever net zero direct emissions goal. We also implemented changes in our Board composition and the structure of our management team, bringing in new perspectives and leveraging their expertise to advance CenterPoint Energy on its path to becoming a premium utility.

 

LOGO

2021 Executive Compensation Highlights

Our 2021 named executive officer compensation reflects the Company’s significant financial, operational and strategic successes during a transformative year. The Compensation Committee considered our named executive officers’ leadership of the Company to advance the Company on its path to becoming a premium utility by launching the Company’s first 10-year capital plan, the successful sale of the Company’s LDC businesses in Arkansas and Oklahoma, ongoing execution of our plan to exit the midstream industry as evidenced by our support of the merger between Enable Midstream Partners, LP and Energy Transfer LP and recognized the Company’s strong performance with its compensation decisions. While we believe our strong performance is supported by our cumulative net income from 2019 to 2021, our shareholder returns over this period did not reflect this performance, as shown in our performance share unit award results addressed below; however, we remain committed to delivering on a strategy that we believe will create additional value for our customers and investors.

 

   

Vesting of the 2019 performance share unit awards is based on the Company’s three-year relative total shareholder return (TSR) performance and three-year cumulative net income. Although the

 

 

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Company exceeded the target for cumulative net income, the overall performance share unit award results were impacted by lower relative TSR during the performance period. In recognition of our below target relative TSR, the Compensation Committee approved the vesting of the 2019 performance share unit awards at 79% of target.

 

   

In assessing the 2021 short-term incentive plan payout, the Compensation Committee considered our achievement of strong utility EPS financial results and achievement of diversity, equity and inclusion goals, such that no downward modification was warranted. However, pursuant to the recommendation of the CEO and other executive team members, the Compensation Committee exercised its discretion to reduce the short-term incentive plan achievement level to be in line with that of the broader CenterPoint Energy management and employee population. In supporting this exercise of negative discretion, the Compensation Committee noted senior management’s desire to encourage improvements in Company performance with regard to certain safety and customer satisfaction metrics.

Compensation actions associated with our 2021 independent governance transition activities are described below.

Transition to New Independent Board Governance Structure

Based on extensive feedback from shareholders and evaluation of evolving governance practices, the independent members of the Board determined that a significant leadership and governance transition was necessary for the Company to continue to advance its strategic plan to drive sustainable value for the benefit of all its stakeholders. A new governance structure was implemented in July 2021 whereby the Board created a new position of Independent Chair of the Board and eliminated the position of Executive Chairman resulting in Mr. Carroll exiting from his leadership role and position on the Board. Mr. Nesbitt was appointed to the newly created Independent Chair position. In connection with, and in support of, these transitions, the Compensation Committee approved certain compensation arrangements as described below. These arrangements represent the cumulation of multiple years of transition at the executive level of the Company. When making these compensation decisions, the Compensation Committee and the independent members of the Board held numerous Board and committee meetings, which included the engagement of outside counsel, and took into account various stakeholder views as part of an informed decision-making process. Additionally, the Compensation Committee’s independent compensation consultant provided the Chair of the Compensation Committee with relevant market data and past precedent for the Compensation Committee’s and Board’s reference. Following the implementation of these decisions, management engaged with shareholders who indicated strong support for the new Board structure and for the continued leadership of the Company by Mr. Lesar. The Board believes these arrangements have supported a smooth transition to this independent governance structure and ongoing execution of our long-term corporate strategy. Additional information regarding the Compensation Committee’s and Board’s rationale in support of each respective compensation arrangement is set forth below.

President and Chief Executive Officer, David Lesar – Retention Awards

On July 20, 2021, upon the approval and recommendation of the Compensation Committee and approval of the Board, the Company entered into a retention incentive agreement with Mr. Lesar (the Retention Incentive Agreement). Under the terms of the Retention Incentive Agreement, Mr. Lesar will receive a total of 1 million shares of common stock of the Company (the Total Stock Award) to be granted in multiple annual awards. In July 2021, 400,000 restricted stock units were awarded to Mr. Lesar that will vest in December 2022. Restricted stock unit awards covering the remaining 600,000 shares will be awarded to Mr. Lesar in February 2022 and February 2023, in each case covering the remainder of the Total Stock Award not previously awarded or such lesser number of restricted stock units as permitted under the annual individual award limitations under the LTIP and vesting in December 2023. These awards will also fully vest upon death, disability, termination without cause, or resignation for good reason, as defined in the award agreements, that occurs prior to the vesting date. In the event any shares under the Total Stock Award remain unawarded, in February 2024, a fully vested stock bonus award of the remaining shares will be granted. The Retention Incentive Agreement also provides Mr. Lesar with a cash award (the Dividend Equivalent Award) consisting of the right to receive the amount of dividends paid on the number of shares subject to each equity-based retention award for the period between July 20, 2021 and the grant date of such award, with the Dividend Equivalent Award to vest and be paid on the same terms as the related equity-based award. In the

 

 

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Compensation Discussion and Analysis (continued)

 

event of death, disability, termination without cause, or resignation for good reason, as defined in the Retention Incentive Agreement, that occurs prior to the full Total Stock Award being awarded, the Company will pay a lump sum cash payment equal to the value of the unawarded equity-based awards, based on the closing trading price of Common Stock on the date of the event’s occurrence and any amounts accrued through the date of the event under the Dividend Equivalent Award. In addition, in the event of termination without cause or resignation for good reason, the Company will pay the expenses for Mr. Lesar to maintain an office and administrative assistant for five years following his termination.

When considering the Retention Incentive Agreement, the Compensation Committee and the independent members of the Board held numerous meetings where they engaged outside counsel, and the Compensation Committee’s independent compensation consultant provided the Chair of the Compensation Committee with relevant market data and past precedent for the Compensation Committee’s and Board’s reference. Further, the Compensation Committee and the independent members of the Board took into consideration various stakeholders’ views, including strong support for Mr. Lesar’s leadership and desire to retain Mr. Lesar to continue to execute on the Company’s corporate strategy towards becoming a premium utility. Following the announcement of the Retention Incentive Agreement and as part of the Company’s engagement efforts, shareholders continued to express their support for Mr. Lesar and the importance that the Company continue to retain Mr. Lesar. The Compensation Committee and the Board approved the Retention Incentive Agreement to retain a highly-experienced CEO with a proven track record across industries during the implementation of a new independent leadership and governance structure and the establishment and commencement of a new long-term corporate strategy. The Compensation Committee and the Board noted the strong performance of Mr. Lesar in leading the Company during a time of transition, first as the chair of the Business Review and Evaluation Committee of the Board, and later as CEO. Mr. Lesar helped set the Company on the path of becoming a premium utility and oversaw the launch of the first 10-year plan for the Company, the divestiture of the Company’s holdings in Enable Midstream Partners, LP and the successful divestiture of certain LDC assets in Oklahoma and Arkansas, all of which has been well-received by shareholders. Mr. Lesar was able to accomplish these transformative steps during the backdrop of the COVID-19 pandemic. Further, the agreement encourages the continued leadership by Mr. Lesar for multiple years to provide executive management continuity, drive successful execution of the Company’s value-creation strategy and implement a successful executive leadership succession plan. In particular, the Compensation Committee and Board considered Mr. Lesar’s experience in successfully developing strong succession candidates and the need, as expressed by the Company’s shareholders, for the Company to have a long-term succession plan to ensure the ongoing successful execution of the Company’s long-term strategy. Given Mr. Lesar’s strong performance and his success in leading companies in different markets, the Compensation Committee and the Board were aware of other companies who were interested in recruiting Mr. Lesar. The Compensation Committee and the Board further noted that Mr. Lesar’s then current outstanding incentive awards were insufficient to incentivize the retention of Mr. Lesar and more strongly align his interests with those of shareholders. Further, in light of the separation of Mr. Carroll, the Board determined that the retention award was necessary to ensure continuity of leadership and stability by retaining Mr. Lesar. Given Mr. Lesar’s strong performance and strong support for Mr. Lesar expressed by the Company’s shareholders, the Compensation Committee and the Board determined that solely time-based awards were necessary to retain Mr. Lesar and noted the vast majority of Mr. Lesar’s annual LTI awards includes performance metrics as is the case for all other senior executives of the Company. For the above reasons, the Compensation Committee and the Board believed the Retention Incentive Agreement was appropriate to retain Mr. Lesar to continue to lead the Company on a successful path towards becoming a premium utility.

Executive Chairman, Milton Carroll – Severance Arrangement

On July 21, 2021, upon the approval and recommendation of the Compensation Committee and approval of the Board, the Company entered into a separation agreement with Mr. Carroll (the Separation Agreement). Under the terms of the Separation Agreement, Mr. Carroll was required to exit the position of Executive Chairman on July 21, 2021 and from his position on the Board by September 30, 2021. Further, Mr. Carroll was required to comply with various restrictive and other covenants, execute a release of claims against the Company and provide transition

 

 

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services, cooperation and other support as may be reasonably requested by the Company. As part of his severance, Mr. Carroll received a cash payment of approximately $28 million and the vesting of his outstanding 2019, 2020 and 2021 equity awards, to be paid based on the actual achievement of applicable performance objectives.

When considering the Separation Agreement, the Compensation Committee and the independent members of the Board held numerous Board and committee meetings where they engaged outside counsel, and the Compensation Committee’s independent compensation consultant provided the Chair of the Compensation Committee with relevant market data and past precedent for the Compensation Committee’s and Board’s reference. Further, the Compensation Committee and the independent members of the Board took into consideration numerous requests from shareholders to eliminate the Executive Chair position to align the Company with current best governance practices. Following the announcement of the Separation Agreement and as part of the Company’s engagement efforts, shareholders continued to express their support for the elimination of the Executive Chair position. The Compensation Committee and Board approved the terms of the Separation Agreement to have a smooth implementation of the new independent leadership and governance structure for the Company and the Board by, among other things, allowing for the management of the timing of the transition. Further, the Separation Agreement ensured availability and cooperation of the outgoing Chair of the Board with transition support to the new independent Chair of the Board, which took into account the continued need for Mr. Carroll’s support of a smooth transition given his strong ties to the Houston community and key stakeholders of the Company as well as his institutional knowledge. In addition, the Board received shareholder feedback that succession planning and leadership stability was a priority. In light of this, the Board determined it was necessary to ensure continuity of leadership and stability by entering into the Separation Agreement with Mr. Carroll that would require him to provide transition support while simultaneously entering into a retention agreement with Mr. Lesar. Further, the severance arrangement reflects that Mr. Carroll’s position was terminated in order to respond to shareholder feedback, ESG considerations and to implement best governance practices for the Company.

Executive Compensation Program Overview

 

Our Compensation Objectives

Our executive compensation program is designed to achieve the objectives as set forth below:     

 

RECRUIT AND RETAIN TALENT   

 

A key objective of our executive compensation program is to enable us to recruit and retain highly qualified executive talent. While the Company’s executive compensation program is market-based, the Compensation Committee considers other factors appropriate or necessary to retain key executives.

 

  
             

PAY FOR

PERFORMANCE

  

 

We have structured our compensation program to motivate our executives to achieve individual and business performance objectives by varying their compensation in accordance with the success of our businesses. Accordingly, while compensation targets will to a large extent reflect the market, actual compensation realized will reflect our attainment of (or failure to attain) specified financial and operational performance objectives.

 

  
             
ALIGN INTERESTS OF EXECUTIVES WITH SHAREHOLDERS   

 

We believe compensation programs can drive our employees’ behavior. We try to design our executive compensation program to align compensation with current and desired corporate performance and shareholder interests by providing a significant portion of total compensation in the form of stock-based incentives and requiring target levels of stock ownership.

 

 

  

 

 

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Compensation Discussion and Analysis (continued)

 

Compensation Program Key Features and Best Practices

The following are key features of our executive compensation program, which we believe are governance best practices and align the interests of management with those of our shareholders.

 

     KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM    
     

Strong Pay for Performance. A substantial portion of the compensation for our named executive officers is at-risk and performance-based, meaning that actual compensation realized in a given year will vary depending on Company financial and stock price performance and individual performance.

 

 
     

No Employment Agreements. We do not maintain executive employment agreements with any of our named executive officers, and our named executive officers are not entitled to guaranteed cash severance payments upon a termination of employment except pursuant to our change in control plan.

 

 
     

Double Trigger” Provisions for Change in Control Plan and Equity Awards. Our change in control plan and equity award agreements include a “double trigger,” whereby the executive is eligible for change in control benefits only if employment is terminated under certain circumstances within a set period before or after a change in control.

 

 
     

No Excise Tax Gross Up Payments. Our change in control plan does not provide for excise tax gross up payments.

 

 
     

Stock Ownership Guidelines. We have established executive stock ownership guidelines applicable to all of our officers to appropriately align the interests of our officers with our shareholders’ interests.

 

 
     

Benchmark to Market. We benchmark each major element of target compensation against the middle of the market (25th – 75th percentiles) because we believe the middle of the market is a generally accepted benchmark of external competitiveness.

 

 
     

Incentive Recoupment Policy. We have implemented a policy for the recoupment of short-term and long-term incentive payments in the event an officer is found to have engaged in any fraud, intentional misconduct or gross negligence that leads to a restatement of all, or a portion of, our financial results.

 

 
     

Anti-Hedging Policy. As part of our insider trading policy, we have a policy prohibiting all of our officers and directors from hedging the risk of stock ownership by purchasing, selling or writing options on CenterPoint Energy securities or engaging in transactions in other third-party derivative securities with respect to CenterPoint Energy stock.

 

 
     

100% Independent Compensation Committee. The Compensation Committee consists entirely of independent directors.

 

 
     

Independent Compensation Consultant. The Compensation Committee retains an independent consultant to provide advice on executive compensation matters.

 

 

Design of Executive Compensation Program

 

Key Compensation Components and Purpose

We strive to provide compensation that is competitive, both in total and in individual components, with the companies we believe are our peers and likely competitors for executive talent.

We also motivate our executives to achieve individual and business performance objectives by varying their compensation in accordance with our overall success. Actual compensation in a given year will vary based on our performance, and to a lesser extent, on qualitative appraisals of individual performance. We expect our senior executive officers to have a higher percentage of their total compensation at risk to align each of our senior executive officers with the short-term and long-term performance objectives of CenterPoint Energy and with the interests of our shareholders.

 

 

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Compensation Discussion and Analysis (continued)

 

The key components of our 2021 compensation programs, including certain changes beginning in 2022, and their purpose in advancing our strategic objectives are outlined below.

 

    ELEMENT   FORM OF AWARD   PERIOD   PURPOSE    

Fixed

  Base Salary    

Cash

  One year  

 Fixed, competitive level of compensation based on scope and complexity of role, individual experience and performance to attract and retain top talent

   
         

At Risk  

 

Short-Term

Incentive

 

Cash

  One year  

 Rewards delivery of near-term objectives aligned with the Company’s long-term business strategy

 Considers individual performance and contributions to Company performance

 Our short-term incentive funding is subject to a utility EPS funding trigger, with funding for our named executive officers based solely on achieving a utility EPS goal

 Potential payout subject to D&I downward only ESG modifier

New: Beginning in 2022, D&I downward modifier will include a supplier diversity metric

 New: Beginning in 2022, our payout range will be 75%, 125% and 200% for threshold, target and max performance, respectively, to incentivize premium utility performance

   
 

Long-Term

Incentives

 

Performance Share

Units (PSUs)

75%

  Three-year cliff vesting, subject to cumulative utility EPS/non-GAAP EPS performance  

 Rewards creation of long-term value through cumulative utility EPS/non-GAAP EPS

 Aligns with shareholder interests

 PSUs represent 75% of total award value with 30% based on utility EPS performance for 2021 and non-GAAP EPS performance for 2022 and 2023, and 45% based on relative TSR performance for PSUs granted in 2021

New: Beginning in 2022, PSUs based on cumulative non-GAAP EPS will represent 35% of total award value and our maximum payout will be 200% of target to align with market

   
  Three-year cliff vesting, subject to relative stock performance  

 Incentivizes Company outperformance relative to peer companies

 Aligns with shareholder interests

 New: Beginning in 2022, PSUs based on relative TSR performance will represent 35% of total award value

New: Beginning in 2022, TSR target and maximum performance will be based on a percentile achievement based on position relative to peer group

   
      Three-year cliff vesting, subject to carbon reduction goals  

 New: Beginning in 2022, PSUs based on carbon reduction goals will account for 5% of the total award

   
 

Restricted Stock

Units (RSUs)

25%

  Three-year cliff vesting, subject to continued employment and positive operating income  

 Promotes retention, facilitates stock ownership and supports succession planning

 Aligns with long-term shareholder interests

 RSUs represent 25% of total award value and will vest only if CenterPoint Energy achieves positive operating income in the last full calendar year of the vesting period

   

 

 

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Compensation Discussion and Analysis (continued)

 

Pay For Performance

The guiding principle of our compensation philosophy is that the interests of executives and shareholders should be aligned and that pay should be based on performance. Our program provides upside and downside potential, depending on actual results, as compared to predetermined measures of success.

A significant portion of our named executive officers’ total direct compensation, which includes base salary in addition to the short-term and long-term incentive components, as applicable, is conditioned upon achieving results that are key to our long-term success and increasing shareholder value. In addition, we may from time to time pay transaction- or project-specific bonuses in recognition of extraordinary efforts by certain individuals, which may include our named executive officers.

The following graphics reflect the components of the target total direct compensation opportunities provided to our named executive officers.

TARGET COMPENSATION MIX AS OF DECEMBER 31, 2021

(consisting of base salary, short-term incentives and long-term incentives*)

 

 

LOGO

*The graphics do not include retention or sign-on awards.

**The graphic represents the average size of each component as a percentage of each named executive officer’s (other than the Chief Executive Officer’s and former Executive Chairman) target total direct compensation opportunities (approved by the Compensation Committee in 2021).

 

 

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2021 Executive Compensation Program

 

2021 Target Compensation Opportunities for Named Executive Officers

The overall objectives and structure of our executive compensation program for our named executive officers remained largely unchanged in 2021 as compared to 2020. In February 2021 the Compensation Committee reviewed the base salary and short-term and long-term incentive targets, as applicable, for each of our named executive officers and determined their respective base salaries and short-term and long-term incentive targets, as applicable, to provide each officer a competitive total direct compensation opportunity as shown below.

 

Name   

2021

Base Salary

    

2021

Short-
term Incentive

Target

(% of Salary)

 

2021

Short-term Target
Opportunity

  

2021

Long-
term Incentive
Target

(% of Salary)

 

2021

Long-term
Target
Opportunity

    

2021

Total Direct
Target
Compensation  

 
David J. Lesar(1)    $ 1,450,000      135%   $1,957,500    560%   $ 8,120,000      $ 11,527,500  
Jason P. Wells    $    670,000        75%   $   502,500    250%   $ 1,675,000      $   2,847,500  
Scott E. Doyle    $    525,000        70%   $   367,500    190%   $    997,500      $   1,890,000  
Kenneth M. Mercado    $    525,000        70%   $   367,500    190%   $    997,500      $   1,890,000  
Monica Karuturi    $    540,000        65%   $   351,000    180%   $    972,000      $   1,863,000  
Milton Carroll(2)    $    870,000        75%   $   652,500    365%   $ 3,175,500      $   4,698,000  

 

(1)

Amounts do not include retention awards for Mr. Lesar. For more information on Mr. Lesar’s retention awards, please see “—Executive Compensation Program Overview—Transition to New Independent Board Governance Structure – President and Chief Executive Officer, David Lesar – Retention Awards.”

 

(2)

Mr. Carroll departed from his role as Executive Chairman on July 21, 2021.

Base Salary

Base salary is the foundation of total compensation. Base salary recognizes the job being performed and the value of that job in the competitive market. Base salary must be sufficient to attract and retain the executive talent necessary for our continued success and provides an element of compensation that is not at risk to avoid fluctuations in compensation that could distract our executives from the performance of their responsibilities. We may from time to time also make certain retention payments to our executive officers. For example, in 2021, Ms. Karuturi received $80,000 as a cash retention bonus.

Adjustments to base salary primarily reflect either changes or responses to changes in market data or increased experience and individual contribution of the employee. The typical date for making these adjustments is on or about April 1 of each year; however, adjustments may occur at other times during the year to recognize new responsibilities or new data regarding the market value of the job being performed.

In February 2021, the Compensation Committee reviewed the base salary for each of our named executive officers and determined their respective base salaries in recognition of the scope of their respective roles and to align their base salaries with market benchmarks.

 

NAME    2021 BASE SALARY

David J. Lesar

  

$1,450,000

(increase of 7% from 2020)

Jason P. Wells

  

$670,000

(increase of 3% from 2020)

Scott E. Doyle

  

$525,000

(increase of 5% from 2020)

Kenneth M. Mercado

   $525,000

Monica Karuturi

   $540,000

Milton Carroll*

  

$870,000

(increase of 6% from 2020)

 

  *

Departed from Executive Chair position with the Company during 2021; see above for further information.

 

 

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Compensation Discussion and Analysis (continued)

 

Short-Term Incentive Plan

Our short-term incentive plan provides an annual cash award that is designed to link each employee’s annual compensation to the achievement of annual performance objectives for CenterPoint Energy as well as to recognize the employee’s performance during the year. The target award for each employee is expressed as a percentage of base salary earned during the year.

The Compensation Committee generally determines each named executive officer’s short-term incentive target based on the competitive market data developed by its compensation consultant and recommendations from the Chief Executive Officer for officers other than himself.

Each year, the Compensation Committee identifies incentive plan metrics that align with our strategy and with the interests of, and our commitments to, our shareholders. The Compensation Committee establishes and approves the specific performance objectives under the short-term incentive plan based on financial and operational factors determined to be critical to achieving our desired business plans and designed to reflect goals and objectives to be accomplished over a 12-month measurement period. After the end of the year, the Compensation Committee compares the actual results to the pre-established performance objectives and certifies the extent to which the objectives are achieved under the plan. For the 2021 year, in response to shareholder feedback, the Compensation Committee established that the short-term incentive plan for our named executive officers would be based on achieving a utility EPS target, with a downward modifier for diversity, equity and inclusion metrics.

The entirety of each individual award is subject to the Compensation Committee’s discretion, consistent with the Company’s philosophy to pay for performance. In determining whether to exercise its discretion, the Compensation Committee may assess an individual executive’s contribution to the achievement of the performance objectives and any special circumstances and may also consider the input of our Chief Executive Officer on the amount to be awarded to each of the other named executive officers.

The short-term incentive plan metrics for the 2021 performance year, along with the description of each metric and its critical linkage to our strategy for value creation, are provided in the table below.

 

   

 

PERFORMANCE
OBJECTIVES

 

 

WEIGHTING

 

 

DESCRIPTION

 

 

STRATEGY ALIGNMENT

   
  Utility EPS   100%   Utility EPS is a non-GAAP metric which includes net income from the Electric and Natural Gas segments, as well as after-tax Corporate and Other operating income and an allocation of corporate overhead based on our utility business segments’ relative earnings contributions. It is also adjusted for certain factors to reflect what we consider to be our fundamental business performance. *   An EPS measure aligns with our commitment to return value to investors through earnings and dividends paid. This measure is focused on utility EPS, which excludes net income from our midstream investments, because we view our utility operations as the principal driver of overall financial performance.  
  Diversity and Inclusion
Negative Modifier
  0%   This modifier is focused on meeting certain diversity, equity and inclusion goals: diversity of applicants, utilization of diverse panels and diversity of workforce. This modifier is a downward-only modifier and can only reduce the potential payout by a combined total of up to 5%; it cannot increase the short-term incentive plan awards.   This diversity and inclusion negative modifier aligns with our commitment to recruit and retain a diverse workforce that is reflective of the communities we serve. The downward modifier highlights our belief that meeting these diversity, equity and inclusion goals is expected.  

* Adjustments are detailed as part of the “Executive Compensation Tables – Non-Equity Incentive Plan Awards” disclosure and a reconciliation can be found in Appendix B.

Establishing Performance Measures and Target Ranges

The Compensation Committee establishes annual performance measures that align with our business strategy and contribute to our long-term shareholder value proposition. The Compensation Committee establishes performance measures and the scaling of the levels necessary to achieve threshold, target and maximum performance, based on

 

 

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strategic priorities for the organization and an assessment of expected business performance during the measurement period. The utility EPS target level is based on achieving 7% growth relative to 2020 actual performance. The diversity and inclusion negative modifier’s targets are based on 2020 and 2021 actual results.

2021 Short-Term Incentive Plan Results

The table below illustrates CenterPoint Energy’s 2021 performance against the pre-established short-term incentive plan measures. In 2021, the senior executive team achieved 150% of target under the utility EPS metric of the short-term incentive plan reflecting the team’s pivotal role in supporting the Company’s strong financial performance. Pursuant to the recommendation of the CEO and other executive team members, the Compensation Committee exercised its discretion to reduce the short-term incentive plan achievement level to be in line with that of the broader CenterPoint Energy management and employee population. In supporting this exercise of negative discretion, the Compensation Committee noted senior management’s desire to encourage improvements in Company performance with regard to certain safety and customer satisfaction metrics.

 

  Performance Objectives   

Threshold

(50%)

    

Target

(100%)

    

Maximum

(150%)

     Actual
Results
    

Actual

Achievement

    Approved
Achievement
 

  Utility EPS

   $ 1.24      $ 1.25      $ 1.26      $ 1.27        150     110

  Diversity and Inclusion Negative Modifier*

    
  Diversity, Equity and Inclusion Performance Objectives      Target        Actual
Achievement
          

  Diversity of Applicants

       >80        91       

  Utilization of Diverse Interview Panels

       >95        99       

  Diversity of Workforce

                

      Placement Diversity Rate (Female)

       >24        30       

      Placement Diversity Rate (Racial/Ethnic Minority)

       >36        46       

 

*

The diversity and inclusion composite acts as a negative modifier of up to 5%. Based on the Company’s achievement with respect to these metrics, the Compensation Committee decided not to exercise the negative modifier for diversity and inclusion. However, the Compensation Committee did exercise negative discretion to reduce the overall short-term incentive achievement level based on other considerations as described in the previous paragraph.

Individual Short-Term Incentive Plan Awards for 2021 Performance

Based on our approved level of achievement of the 2021 performance objectives at 110% and an assessment of each individual’s performance by the Compensation Committee, the 2021 short-term incentive awards for our named executive officers, expressed as a percentage of their individual target awards, were as follows:

 

  Name   

2021 Short-Term Incentive Achievement      

(as a Percentage of Target)

David J. Lesar

   110%

Jason P. Wells

   110%

Scott E. Doyle

   100%

Kenneth M. Mercado

   110%

Monica Karuturi

   110%

Milton Carroll(1)

   100%

 

(1)

Due to his departure as Executive Chairman during the plan year and his satisfaction of the retirement provisions under the short-term incentive plan, Mr. Carroll received a pro rata 2021 short-term incentive award payment at the target level of achievement pursuant to the terms of the short-term incentive plan.

Long-Term Incentive Plan

We provide a long-term incentive plan in which each of our named executive officers and certain other management-level employees participate. Our long-term incentive plan is designed to align the interests of our participants with

 

 

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those of our shareholders and reward participants for sustained improvements in our financial performance and increases in the value of our common stock and dividends over an extended period.

The vesting period for long-term incentive plan awards is three years to incentivize participants to deliver sustainable business results in service of our long-term strategy, reward longer-term Company performance and encourage retention. In accordance with the terms of our long-term incentive plan, our practice is to price annual grants of equity awards at the closing market price for our common stock on the New York Stock Exchange on the grant date, which is the date the Compensation Committee approves the grants.

2021 Long-Term Incentive Plan Design

 

The total long-term incentive opportunity for each executive officer is determined on an annual and individual basis, considering the executive’s position and performance and the long-term compensation provided to similar roles in the peer group. Each year, the Compensation Committee also reviews the allocation of the long-term incentive opportunity between performance share units and restricted stock unit awards. The Compensation Committee approved an allocation between performance share units and restricted stock unit awards of 75% and 25% respectively, for 2021. Prior to 2021, the allocation between performance share units and restricted stock unit awards was 70% and 30%, respectively.

     LOGO

Performance Share Unit (“PSU”) Awards (75% of Award Value)

Our 2021 PSU awards were made in two separate grants, with the payout opportunity for each grant based on a different performance objective. The first is based on total TSR over the three-year performance cycle as compared to that of the other 18 companies included in our peer group. Forty-five percent of long-term compensation is based on the TSR metric. The remaining 30% is based on achieving a specified utility EPS goal in 2021 and non-GAAP EPS goal in 2022 and 2023 over the three-year performance cycle.

If actual achievement for the performance objective under an award does not meet at least the threshold level, the Compensation Committee will not approve a distribution for the award. If a performance objective meets or exceeds the threshold level, the threshold payout for these awards is 33% of target for the total shareholder return performance objective and 50% of target for the applicable EPS performance objective, and the maximum payout opportunity is 200% of target for the total shareholder return performance objective and 150% of target for the applicable EPS performance objective.

 

           
2021
PSU
  Awards  
     

Relative

TSR

45%

 

Percentile

Rank

 

    Payout Scale    

     

Cumulative

Utility EPS/
non-GAAP EPS*
30%

  

Payout

Scale**

Payout
Range
   0% - 180%  
    LOGO  

    

  Measures average
share price
performance over a
three-year
performance
period, relative to
Peer Group***
 

 

2nd position or
higher

 

 

 

Maximum
(200%)

 

    LOGO  

    

  Measures
utility EPS
performance
in 2021 and
non-GAAP EPS
performance
in
2022 and 2023
  

 

Maximum  
(150%)

  Achievement between these two
levels determined utilizing linear
interpolation based on position
    
 

 

25th percentile

 

 

Threshold
(33%)

   Target
(100%)
 

Below 25th
percentile

 

 

 

0%

   Threshold
(50%)

*Utility EPS is a non-GAAP metric which includes net income from the Electric and Natural Gas segments, as well as after tax Corporate and Other operating income and an allocation of corporate overhead based upon the Utility’s relative earnings contribution. Non-GAAP EPS is a non-GAAP metric which includes consolidated net income. Both metrics are adjusted for certain factors to reflect what we consider to be our fundamental business performance

 

 

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**Linear interpolation between award levels

***Results will represent an average of 20 TSR calculation periods, beginning the first 20 of the last 30 trading days preceding the performance period and ending the first 20 of the last 30 trading days of the performance period

Relative TSR (45% of Award Value)

Maximum achievement (200% of target) requires CenterPoint Energy to rank second or higher in our TSR Peer Group, but no shares would vest if the Company ranks below the 25th percentile in that comparison (threshold level). For this performance objective, the number of PSUs granted will vest using linear interpolation between the threshold and maximum achievement levels.

The 18 companies utilized for measuring TSR are the same companies represented in our Peer Group disclosure below. We believe the peer group is a reasonable proxy for the universe of companies engaged in businesses similar to ours and is appropriate for measuring relative TSR.

Cumulative Utility EPS/non-GAAP EPS (30% of Award Value)

The Compensation Committee established a utility EPS target for 2021 and a non-GAAP EPS target for 2022 and 2023 as the other performance objective for long-term incentive awards made in 2021. Utility EPS is a non-GAAP metric which includes net income from the Electric and Natural Gas segments, as well as after tax Corporate and Other operating income and an allocation of corporate overhead based on the Utility’s relative earnings contribution. Non-GAAP EPS is a non-GAAP metric which includes consolidated net income. Both metrics are also adjusted for certain factors to reflect what we consider to be our fundamental business performance. For a detailed description of the calculation of utility EPS, see “Executive Compensation Tables—Non-Equity Incentive Plan Awards” and a reconciliation to the nearest GAAP measure can be found in Appendix B.

Restricted Stock Unit Awards (25% of Award Value)

The restricted stock units (RSUs or stock awards) are intended to retain executive officers and reward them for absolute long-term stock appreciation while providing some value to the recipient even if the stock price declines. In this way, the RSUs help balance against the variable, at-risk nature of the performance share unit awards and promote retention. The RSUs (other than the retention awards granted to Mr. Lesar and any sign-on awards) are subject to CenterPoint Energy achieving positive operating income in the last full calendar year of the vesting period.

2021 Long-Term Incentive Awards for Named Executive Officers

On February 18, 2021, the Compensation Committee authorized awards as shown in the table below. Vesting and payout of the performance unit shares requires continuous service through the performance period and will be determined based on the level of achievement of each performance objective over the three-year cycle of 2021 through 2023. Vesting of stock awards requires continuous service through the vesting date and achievement of positive operating income in the last full calendar year of the vesting period. For additional detail regarding the grants, see “Executive Compensation Tables—Equity Incentive Plan Awards—Long-term Incentive Plan Awards Granted in 2021.”

 

  Description   Lesar(1)     Wells     Doyle     Mercado     Karuturi     Carroll  

  Base Salary

  $ 1,450,000     $ 670,000     $ 525,000     $ 525,000     $ 540,000     $ 870,000  

  Long-term incentive target

    560%       250%       190%       190%       180%       365%  

  Long-term incentive compensation at target

  $ 8,120,000     $ 1,675,000     $ 997,500     $ 997,500     $ 972,000     $ 3,175,500  

  Performance share unit portion (75%)

  $ 6,090,000     $ 1,256,250     $ 748,125     $ 748,125     $ 729,000     $ 2,381,625  

  Stock award portion (25%)

  $ 2,030,000     $ 418,750     $ 249,375     $ 249,375     $ 243,000     $ 793,875  

 

(1)

The amounts shown for Mr. Lesar do not include the retention awards under Mr. Lesar’s Retention Incentive Agreement. For more information regarding Mr. Lesar’s retention awards, please see “—Executive Compensation Program Overview—Transition to New Independent Board Governance Structure—President and Chief Executive Officer, David Lesar—Retention Awards.”

 

 

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Both the performance share units and the stock awards accrue dividend equivalents over the performance cycle or vesting period, respectively, until they are delivered, at the same level as dividends earned by shareholders on shares of our common stock outstanding. Dividend equivalents on the shares which are vested are paid in cash when the shares are delivered. Dividend equivalents are not paid with respect to unearned and unvested shares.

2019 – 2021 PSU Award Vesting

The calculated payout for the 2019 – 2021 PSU awards was 79% of target based on the Company’s three-year relative TSR performance and three-year cumulative net income. Although the Company exceeded the target for cumulative net income, the overall performance share results were impacted by lower relative TSR during the performance period.

 

2019 – 2021

PSU AWARD GOALS

 

AWARD DETERMINATION

($ in millions)

    WEIGHTING     ACHIEVEMENT  

  TSR Performance

   

Threshold (33%)

15th Position

 

 

   
Maximum (200%)
2nd Position

 
    40%      
17th
Position

 
    0%  

  Cumulative Net Income

   

Threshold
(50%)
$1,863


 
   

Target
(100%)
$2,028


 
   

Maximum
(150%)
$2,153


 
   

Exceptional
(200%)
$2,233


 
    30%       $2,209       185%  
            Overall Achievement       79%  

For a detailed description of the calculation of cumulative net income, see “Executive Compensation Tables—Equity Incentive Plan Awards – Additional Information” and a reconciliation can be found in Appendix B.

Actions Taken Regarding 2022 Executive Compensation Program

 

Consistent with our compensation philosophy of targeting the middle of the market (25th – 75th percentiles) of our peers for each major element of compensation, in February 2022, the Compensation Committee considered competitive market data provided by Meridian and made the following adjustments for each of the named executive officers to provide each officer with a more competitive total direct compensation opportunity:

 

  Name    Base Salary   

Short-term Incentive

Target %

   Long-term Incentive
Target %
   David J. Lesar    $1,475,000

(increase of 2%)

   140% of base salary

(increase from 135%)

   575% of base salary

(increase from 560%)

   Jason P. Wells    $695,000

(increase of 4%)

   75% of base salary    250% of base salary
   Scott E. Doyle    $600,000

(increase of 14%)

   75% of base salary
(increase from 70%)
   250% of base salary
(increase from 190%)
   Kenneth M. Mercado(1)    $525,000    70% of base salary    190% of base salary
   Monica Karuturi(2)    $580,000

(increase of 7%)

   70% of base salary

(increase from 65%)

   190% of base salary

(increase from 180%)

 

(1)

Effective January 1, 2022, Mr. Mercado stepped down from his positions with the Company and its affiliated entities. Mr. Mercado will remain with the Company through the second quarter of 2022 to support the transition of his responsibilities.

 

(2)

In February 2022, the Compensation Committee approved a $100,000 cash bonus payment to Ms. Karuturi for the successful completion of the sale of the Company’s Arkansas and Oklahoma LDC businesses.

Short-Term Incentive Plan Design

The Compensation Committee approved the following plan design changes for the 2022 short-term incentive program:

 

   

Established the payout range as 75%, 125% and 200% of threshold, target and max performance, respectively, to incentivize premium utility performance.

 

 

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Adjustments to the underlying metrics of the diversity and inclusion negative modifier, including adding a supplier diversity goal. This new metric is focused on increasing the percentage of diverse supplier spend relative to prior year. The diversity and inclusion negative modifier will continue to be a downward-only modifier and can only reduce the potential payout by a combined total of up to 5%.

 

  Performance Objective    Weighting  

   non-GAAP EPS

     100

  Diversity and Inclusion Negative Modifier*

     0

      Diversity of applicants

  

      Supplier diversity

  

 

  *

The Diversity and Inclusion composite acts as a negative modifier of up to 5% (2.5% for each metric).

Long-Term Incentive Plan Design

The Compensation Committee approved the following plan design changes for the 2022 long-term incentive program:

 

   

Established a maximum payout of 200% of target for the PSUs based on cumulative non-GAAP EPS to align our long-term incentive plan with current market practice.

 

   

PSUs based on cumulative non-GAAP EPS and PSUs based on relative TSR performance will each represent 35% of total award value.

 

   

Established target and maximum performance for PSUs based on relative TSR performance based on a percentile achievement based on position relative to peer group.

 

   

Established new three-year cumulative carbon reduction goals and adjusted the allocation of PSUs such that PSUs based on cumulative non-GAAP EPS and on relative TSR performance will each represent 35% of total award value and PSUs based on the new carbon reduction goals will represent 5% of total award value. The PSUs based on three-year cumulative carbon reduction goals will have a 4% weight for meeting certain Scope 1 and 2 carbon emission reductions and 1% weight for Scope 3 emission reductions. The Compensation Committee established these goals to recognize the importance of the Company’s new net zero emission goals and to track the progress of the Company towards achieving these goals. If performance for the goals meets or exceeds the threshold level, the Compensation Committee may approve a payout of 50% to 200% of the target performance share units awarded. In September 2021, the Company announced new net zero emission goals for both Scope 1 and Scope 2 emissions by 2035 as well as a goal to reduce Scope 3 emissions by 20% to 30% by 2035. Scope 1 emissions are defined as direct source of emissions from a company’s operations. Scope 2 emissions are defined as indirect source of emissions from a company’s energy usage. Scope 3 emissions are defined as indirect source of emissions from a company’s end-users.

 

  Long-Term Incentive Plan Award Allocation    Weighting

  Performance Share Units

   75%

      Cumulative non-GAAP EPS

   35%

      Total Shareholder Return vs. Peer Companies

   35%

      Cumulative Carbon Reduction

     5%

  Restricted Stock Units*

   25%

 

  *

3-year service-based vesting, subject to CenterPoint Energy achieving positive operating income in the last full calendar year of the vesting period.

The Compensation Committee made no other changes to the compensation arrangements for the named executive officers.

 

 

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Compensation Discussion and Analysis (continued)

 

Our Executive Compensation Decision-Making Process

 

The Compensation Committee of the Board of Directors oversees compensation for our named executive officers and other senior executives, including base salary and short-term and long-term incentive awards, as applicable. The Compensation Committee also administers incentive compensation plans, evaluates our Chief Executive Officer’s performance and reviews management succession planning and development. The Board of Directors has determined that the members of the Compensation Committee meet the applicable requirements for independence under the standards of the Securities and Exchange Commission and the New York Stock Exchange discussed under “Director Independence.” The following graphic and narrative depict the Compensation Committee’s decision-making process.

 

LOGO

Role of Compensation Committee

The Compensation Committee reviews each element of compensation annually to confirm or improve alignment with stated compensation objectives. As a result of its review, the Compensation Committee may approve adjustments to base salary, short-term and long-term incentive target compensation levels for the named executive officers to better align compensation with our market-based pay philosophy. In its review, the Compensation Committee also takes into consideration whether any incentive compensation target or performance objective could lead to a decision by an executive to take an inappropriate level of risk for the Company. In establishing individual incentive targets and awards, the Compensation Committee considers the data provided by its consultant, the level and nature of the executive’s responsibility, the executive’s experience and the Compensation Committee’s own qualitative assessment of the executive’s performance. In making these determinations, the Compensation Committee also takes into account our Chief Executive Officer’s performance evaluations of and recommendations regarding his direct reports.

Annually, the Compensation Committee directs its consultant to review the base salary and short-term and long-term incentive levels of our senior or named executive officers, as applicable. To ensure that our compensation programs are market-based, the compensation consultant analyzes and matches the position and responsibilities of each senior executive officer to proxy statement data from a peer group of utility companies and to published compensation surveys covering both the utility industry and general industry. We do not consider geographical differences to be a relevant factor since we recruit on a national basis.

Role of Management

Of our senior executive officers, only our Chief Executive Officer has a role in determining executive compensation policies and programs. Our Chief Executive Officer works with business unit and functional leaders along with our internal compensation staff to provide information to the Compensation Committee to help ensure that all elements of compensation support our business strategy and goals.

Our Chief Executive Officer also periodically reviews and recommends specific Company performance metrics to be used in short-term and long-term incentive plans. Our Chief Executive Officer works with the various business units and functional departments to develop these metrics, which are then presented to the Compensation Committee for its consideration and approval.

 

 

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Our Chief Executive Officer reviews and recommends changes to the peer companies used for compensation purposes using internal analyses of revenue, market capitalization and comparable business mix (e.g., natural gas versus electric; regulated versus unregulated; generation versus transmission and distribution). These recommendations are reviewed by the Compensation Committee’s independent consultant and then presented to the Committee for its consideration and approval.

Within the parameters of the compensation policies established by the Compensation Committee, our Chief Executive Officer also makes preliminary recommendations for base salary adjustments and short-term and long-term incentive levels for the other senior executive officers. Our Chief Executive Officer also recommends payment amounts for the other executive officers’ short-term incentive plan awards. Our Chief Executive Officer bases his recommendations on a variety of factors such as his appraisal of the executive’s job performance and contribution to CenterPoint Energy, improvement in organizational and employee development and accomplishment of strategic priorities. Our Chief Executive Officer does not make any recommendations regarding his own compensation.

Role of Consultant

To assist in carrying out its responsibilities, the Compensation Committee retains a consultant to provide independent advice on executive compensation and to perform specific tasks as requested by the Compensation Committee. The Compensation Committee retained Meridian Compensation Partners, LLC (Meridian) as its independent compensation consultant due in large part to its competitive market intelligence for executive pay and governance in the utilities and energy services industries. The consultant reports directly to the Compensation Committee, which preapproves the scope of work and the fees charged. The Compensation Committee or the Governance, Environmental and Sustainability Committee may direct our compensation consultant to perform additional analyses or research related to compensation issues.

The Compensation Committee reviews and assesses the independence and performance of its compensation consultant in accordance with applicable Securities and Exchange Commission and New York Stock Exchange rules on an annual basis to confirm that the consultant is independent and meets all applicable regulatory requirements. In making this determination, the Compensation Committee reviewed information provided by its compensation consultant including the following factors:

 

   

the provision of other services to CenterPoint Energy by the compensation consultant;

 

   

the amount of fees received from CenterPoint Energy by the compensation consultant as a percentage of total revenue of the compensation consultant;

 

   

the policies and procedures of the compensation consultant that are designed to prevent conflicts of interest;

 

   

any business or personal relationship of the Compensation Committee’s advisor (i.e., the employees of the compensation consultant that work on the CenterPoint Energy team) with a member of the Compensation Committee;

 

   

any stock of CenterPoint Energy owned by the Compensation Committee’s advisor or the advisor’s immediate family members; and

 

   

any business or personal relationship of the Compensation Committee’s advisor or any other employee of the compensation consultant with an executive officer at CenterPoint Energy.

In particular, except for certain services provided to the Governance, Environmental and Sustainability Committee of the type detailed above, with respect to director compensation, the Compensation Committee noted that Meridian provided no other services to CenterPoint Energy.

 

 

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Compensation Discussion and Analysis (continued)

 

Our 2021 Peer Group

In making decisions about executive pay programs and levels, the Compensation Committee references compensation data from our peer group. Selection criteria considered in establishing the peer group include companies within comparable Global Industry Classification Standard sectors, comparable business mix and complexity, companies who list CenterPoint Energy as a peer in their proxies, the peers that the current peer group list as comparable, companies listed in shareholder advisor reports regarding CenterPoint Energy and companies within a reasonable range of CenterPoint Energy relative to 12-month trailing revenue, total assets, enterprise value and current market capitalization. We believe that the use of this group as a reference for evaluating our compensation policies helps align us with our peers and competitors. We also believe this group of companies provides a sufficiently large data set that is generally not subject to wide changes in compensation data.

Our peer group stayed the same from 2020 to 2021. This group of companies was identical to the group of companies used for measuring our relative total shareholder return under our 2021 long-term incentive compensation awards.

For 2021, the peer group for proxy statement data consisted of the following 18 publicly traded utility companies:

 

Alliant Energy Corporation

  

Entergy Corporation

Ameren Corporation

  

Evergy, Inc.

American Electric Power Company, Inc.

  

Eversource Energy

Atmos Energy Corporation

  

NiSource Inc.

Avangrid, Inc.

  

Pinnacle West Capital Corporation

CMS Energy Corporation

  

Public Service Enterprise Group Incorporated

Consolidated Edison, Inc.

  

Sempra Energy

DTE Energy Company

  

WEC Energy Group, Inc.

Edison International

  

Xcel Energy Inc.

This peer group had median revenues and assets comparable to CenterPoint Energy.

 

 

     TOTAL ASSETS   TOTAL REVENUE  
   (in millions, except for percentages)  

  CenterPoint Energy, Inc.

   $36,466   $7,965

  Relative Percentile Rank Position

   39%   50%

Data is presented as of June 30, 2021 and sourced from Standard & Poor’s Capital IQ

Revenue represents trailing twelve months

Review of Tally Sheets

At least annually, the Compensation Committee reviews tally sheets for each of our then-current named executive officers that reflect all components of compensation, including base salary, short-term and long-term incentive compensation, other perquisites, imputed income, death benefits and benefits or payments that would be payable in connection with a change in control or termination of employment. Tally sheets are provided to the Compensation Committee to show how various compensation and benefits amounts are interrelated and how changes in one component of compensation impact other components and to enable Compensation Committee members to quantify amounts payable upon various termination scenarios.

 

 

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Other Compensation Programs and Practices

 

Benefits

We have maintained a defined benefit plan for eligible employees since 1953 to help employees provide for retirement and to retain employees. This plan is closed to all employees hired or rehired on or after January 1, 2020 (or January 1, 2021 with respect to certain union employees). In addition, we maintain a benefit restoration plan as a nonqualified supplemental retirement plan to generally provide for benefits in excess of those available under the retirement plan due to annual limits imposed by the Internal Revenue Code. Changes in base salary and/or short-term incentive compensation affect benefits payable under the retirement plan and the benefit restoration plan. See “Executive Compensation Tables—Pension Benefits” for a description of the retirement plan and benefit restoration plan. The present value of the accumulated benefits under the plans for each senior executive officer is set forth in the Pension Benefits table.

We maintain a savings plan, which includes employer contributions, designed to encourage all employees to help provide for their own retirement and to attract and retain employees. We also have a nonqualified savings restoration plan that provides for employer contributions not available under the savings plan due to Internal Revenue Code limits. Base salary and short-term incentive compensation are included as eligible plan compensation under the provisions of the savings plan and the savings restoration plan. See “Executive Compensation Tables—Savings Plan and Savings Restoration Plans” for further information. Employer contributions to the plans for the senior executive officers are included in the footnote to the All Other Compensation column of the Summary Compensation Table.

Our senior executive officers may defer salary and short-term incentive compensation under our deferred compensation plan. For further information and a description of the plan, see “Executive Compensation Tables—Deferred Compensation Plans.” The above-market portion of the 2021 aggregate earnings is reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table.

We also have an executive life insurance plan providing endorsement split-dollar life insurance in the form of a death benefit for non-employee directors who were elected to the Board prior to January 1, 2001 (Mr. Carroll). The purpose of this plan is to assist the executive’s beneficiaries with the impact of estate taxes on deferred compensation plan distributions. Due to changes in tax laws, we froze entry into this plan effective January 1, 2002. See footnote 6(e) to the Summary Compensation Table for a description of the plan.

We also provide executives with the same health and welfare benefits provided to all other similarly situated employees, and at the same cost charged to all other eligible employees. Executives are also entitled to the same post-retirement health and welfare benefits as those provided to similarly situated retirees.

Termination Benefits

As described later in the section titled “Executive Compensation Tables—Potential Payments upon Change in Control or Termination,” CenterPoint Energy has a change in control plan that is intended to help ensure that our officers, including our senior executive officers, continue to give their full attention to our business needs in the event we were to become the subject of the types of change in control transactions described in the plan. The plan includes a “double trigger,” whereby to be eligible for benefits under the plan, the executive’s employment must be terminated within a set period before or after a change in control. The plan does not provide for any excise tax gross-up payments.

We do not maintain individual employee agreements or a separate non-change-in-control severance plan for executives. The Compensation Committee retains the discretion to evaluate the circumstances of each termination when an executive exits the Company. For a more detailed discussion, refer to “Executive Compensation Tables—Potential Payments upon Change in Control or Termination.”

 

 

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Compensation Discussion and Analysis (continued)

 

Perquisites

We do not consider perquisites to be a material component of our executive compensation. In 2021, certain of our named executive officers received certain perquisites and limited personal benefits that we view as having a sound value to our business.

 

   

Relocation Benefits. Messrs. Lesar and Wells received relocation benefits during 2021 in connection with the requirement that they relocate to Houston for their new roles. Even though the Company purchased the homes from Messrs. Lesar and Wells in 2020, the final sales were not completed until 2021. Expenses incurred in 2021 included loss on sale, commissions, fees, warranty, and insurance.

 

   

Security-related Services. Upon Mr. Lesar’s appointment as President and Chief Executive Officer, the Company obtained a comprehensive security risk assessment conducted by an independent security consultant. As a result of such security consultant’s recommendations, the Company determined that Mr. Lesar should receive certain security-related services during 2021, most notably the use of a car and security driver and for security personnel as accompaniment on business-related travel. The Company believes the provision of these security-related services mitigates risk to the Company by supporting Mr. Lesar’s safety, health and well-being.

 

   

Aircraft Usage. Mr. Lesar occasionally utilized for personal travel purposes the company aircraft maintained for executive business travel. During times when company aircraft was unavailable, the Company contracted with a third-party aircraft charter company to provide executive travel services, which were utilized by Mr. Lesar for personal travel purposes. Use of company aircraft as well as the third-party aircraft charter company for personal trips was intended to minimize executives’ potential exposure to COVID-19 and preserve business continuity during the pandemic as well as for security purposes.

 

   

Financial Planning Services. Our executives are eligible to receive certain financial planning services.

We do not provide tax gross-ups on perquisites, except on certain relocation-related benefits that are generally available to all employees.

Risk Assessment

The Compensation Committee, together with Meridian, conducts a compensation risk assessment, including review of performance metrics, pay mix, pay leverage, checks and balances, external market references and goal setting, and no areas of concern were identified in the assessment. The Compensation Committee considers the results of this assessment in developing and evaluating compensation program design.

Hedging Policy

As part of our Insider Trading Policy, our directors and officers are prohibited, and our non-officer employees are strongly discouraged, from hedging the risk of ownership of our common stock by purchasing, selling or writing options on our common stock or engaging in certain other types of transactions. Prohibited hedging or monetization transactions include a number of possible mechanisms, including the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds.

Recoupment of Awards

The Board has implemented a policy for the recoupment of short-term and long-term incentive payments in the event an officer is found to have engaged in any fraud, intentional misconduct or gross negligence that leads to a restatement of all, or a portion of, our financial results. This policy permits us to pursue recovery of incentive payments if the payment would have been lower based on the restated financial results.

 

 

50    CenterPoint Energy


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Compensation Discussion and Analysis (continued)

 

Executive Stock Ownership Guidelines

We believe that our Executive Stock Ownership Guidelines align the interests of our officers, including our named executive officers, with the interests of shareholders. The guidelines provide that our executives maintain common stock ownership as follows:

 

EXECUTIVE         GUIDELINES FOR OWNERSHIP OF COMMON STOCK
     
Chief Executive Officer    5X       Market value of five times base salary
     
Executive Vice Presidents    3X       Market value of three times base salary
     
Senior Vice Presidents    2X       Market value of two times base salary

In addition to shares of our common stock owned outright, equivalent shares held in our savings plan, unvested stock awards, and shares held in trust are counted towards the guidelines. Unvested performance share unit awards do not count towards the guidelines for our officers. Until the designated ownership level is reached, the officer is expected to retain at least 50% of the after-tax shares delivered through the long-term incentive plan. Certain exclusions apply to the retention expectation, such as estate planning, gifts to charity, education and the purchase of a primary residence. Newly hired or recently promoted officers are given a reasonable period of time to comply with these guidelines. The Compensation Committee reviews our officers’ stock holdings annually to monitor compliance with these guidelines. We have also adopted a policy prohibiting directors and corporate and senior division officers from pledging shares of our common and preferred stock to secure loans, subject to grandfathering of existing arrangements, or otherwise holding shares of our common stock in margin accounts.

Although we do not conduct formal benchmarking studies of ownership guidelines, the ownership guidelines and the administration of the program are reviewed annually by the Compensation Committee with advice from the Compensation Committee’s consultant.

Tax Considerations

Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation in excess of $1 million for any covered employee. Following the enactment of the Tax Cuts and Jobs Act of 2017, beginning with the 2018 calendar year, the covered employees subject to this limitation include any individual who serves as our chief executive officer, chief financial officer or one of our other three most highly compensated executive officers in 2017 or any subsequent calendar year, and, except for certain grandfathered arrangements, there is no longer any exception for qualified performance-based compensation (as there was for taxable years prior to 2018). The Compensation Committee believes that, in establishing the compensation program for our executives, the potential deductibility of the compensation should be only one of a number of relevant factors taken into consideration. The Compensation Committee believes it is important to maintain flexibility in structuring compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of Section 162(m) of the Internal Revenue Code.

Our change in control plan described above for our named executive officers does not provide a gross-up payment to cover any excise tax an executive is determined to owe on an “excess parachute payment.” For additional discussion about our change in control plan, refer to “Executive Compensation Tables—Potential Payments upon Change in Control or Termination.”

Our executive plans and agreements that are subject to Section 409A of the Internal Revenue Code are intended to comply with Section 409A of the Internal Revenue Code.

 

 

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EXECUTIVE COMPENSATION TABLES

The following tables show compensation information for: (i) our Executive Vice President, Utility Operations and former Executive Chairman for the periods ended December 31, 2021, 2020 and 2019; (ii) our President and Chief Executive Officer, and our Executive Vice President and Chief Financial Officer for the periods ended December 31, 2021 and 2020; and (iii) our Former Executive Vice President, Electric Utility, and our Executive Vice President and General Counsel for the period ended December  31, 2021.

Summary Compensation Table for Fiscal Year 2021

 

 

    Name and Principal Position   Year   Salary
($)
  Bonus(1)
($)
  Stock
Awards
(2)
($)
  Option
Awards
(3)
($)
  Non-Equity
Incentive
Plan
Compensation
(4)
($)
  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(5)
($)
  All Other
Compensation
(6)
($)
  Total
($)
 

David J. Lesar

      2021       1,425,000             33,359,999             2,116,125             908,686       37,809,810  
 

President and Chief Executive Officer

      2020       675,000             8,169,996             2,463,750             637,549       11,946,295  
                                   
 

Jason P. Wells

      2021       665,000             1,675,003             548,625             362,752       3,251,380  
 

Executive Vice President and Chief Financial Officer

      2020       169,886             2,625,007             711,800             136,813       3,643,507  
                                   
 

Scott E. Doyle

      2021       518,750             997,503             399,437       34,944       100,381       2,051,015  
 

Executive Vice President, Utility Operations

      2020       487,500             849,989             462,600       113,597       61,067       1,974,753  
      2019       431,250             674,979             350,000       33,646       57,305       1,547,180  
 

Kenneth M. Mercado

                                   
 

Former Executive Vice President, Electric Utility

      2021       525,000             997,503             404,250       (1,703 )       54,702       1,979,752  
                                   
 

Monica Karuturi

                                   
 

Executive Vice President and General Counsel

      2021       527,500       80,000       971,997             377,163       30,437       65,754       2,052,851  
                                   
 

Milton Carroll

      2021       555,582             3,175,497             353,949       95,375       28,078,976       32,259,379  
 

Former Executive Chairman

      2020       805,000       1,381,475       4,165,012                   64,658       6,674       6,422,819  
        2019       747,500             2,469,991                   38,067       6,803       3,262,361  

 

(1)

For 2019, no discretionary bonus payments (discretionary payments above amounts under our short-term incentive plan) were made to our named executive officers. For 2020, amounts for Mr. Carroll include a cash bonus of $500,000 approved by the Compensation Committee in February 2020 in connection with his efforts during CenterPoint Energy’s leadership transition and a cash bonus of $881,475 approved by the Compensation Committee in February 2021 in recognition of his role in the development of CenterPoint Energy’s strategic initiatives and his increased responsibilities, among other key contributions. For 2021, amounts for Ms. Karuturi include a retention cash bonus of $80,000.

 

(2)

Reported amounts for our named executive officers represent the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718 based on the probable achievement level of the underlying performance conditions as of the grant date. For 2021, amounts for Mr. Lesar include the retention awards under Mr. Lesar’s Retention Incentive Agreement, which will provide for a total of 1 million shares of Common stock and will be granted through multiple annual awards beginning July 20, 2021. The retention awards were valued at $25,240,000 as of the date of Retention Incentive Agreement (July 20,2021). Assumptions, where applicable, are the same assumptions disclosed in “Stock Based Incentive Compensation Plans and Employee Benefit Plans” in Note 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021. For purposes of the tables above and below, the effects of estimated forfeitures are excluded. Please also refer to the Grants of Plan-Based Awards for Fiscal Year 2021 table and the accompanying footnotes. For further information related to the vesting of Mr. Carroll’s awards in connection with his departure from the Company, see “Compensation Discussion and Analysis—Executive Summary—Transition to New Independent Board Governance Structure—Executive Chairman, Milton Carroll—Severance Arrangement.”

 

 

52    CenterPoint Energy


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Executive Compensation Tables (continued)

 

The maximum value at the grant date of stock awards for each of our named executive officers assuming the highest level of performance conditions is achieved is as follows:

 

  Name    Year   

Maximum Value of

Stock Awards

($)

Lesar

       2021        38,232,004
       2020        12,934,005

Wells

       2021        2,680,005
       2020        3,762,517

Doyle

       2021        1,596,011
       2020        1,444,981
       2019        1,147,467

Mercado

       2021        1,596,011

Karuturi

       2021        1,555,190

Carroll

       2021        5,080,795
       2020        6,030,521
       2019        4,198,993

 

(3)

CenterPoint Energy has not granted stock options since 2004.

 

(4)

Non-Equity Incentive Plan Compensation represents short-term incentive awards earned with respect to performance in the designated year and paid in the following year. For more information on the 2021 short-term incentive awards, refer to the Grants of Plan-Based Awards for Fiscal Year 2021 table and the accompanying footnotes. Under the terms of our short-term incentive plan, an individual age 55 or older with at least five years of service satisfies certain vesting provisions under the plan. If the individual terminates employment during the plan year, he or she is eligible for a pro rata payment at the target level of achievement. On February 19, 2021, the Compensation Committee determined that Mr. Carroll will be eligible to participate in the short-term incentive plan beginning with the 2021 plan year.

 

(5)

The two components of the 2021 Change in Pension Value and Nonqualified Deferred Compensation Earnings are as follows:

 

  Name   

Change in

Pension Value(a)

($)

 

Above Market Earnings on

Nonqualified Deferred

Compensation(b)

($)

  

Total

($)

Lesar

                   

Wells

                   

Doyle

       19,578       15,366        34,944

Mercado

       (12,377 )       10,674        (1,703 )

Karuturi

       30,437              30,437

Carroll

             95,375        95,375

 

  (a)

The Change in Pension Value is the increase or decrease in the present value of accumulated benefits under our retirement plan and the related benefit restoration plans from December 31, 2020 to December 31, 2021. Benefits are assumed to commence as of the earliest age that an individual could retire without a reduction in benefits. The present value as of December 31, 2021 assumed a discount rate of 2.8% and lump sum conversion interest rate of 2.8% for benefits paid in all future years. The present value as of December 31, 2020 assumed a discount rate of 2.45% and lump sum conversion interest rate of 2.45% for benefits paid in all future years. Refer to the narrative accompanying the Pension Benefits table for a more detailed discussion of the present value calculation.

 

  (b)

Above Market Earnings consist of the amounts that exceed 120% of the applicable federal long-term rate at the time the interest rate was set.

 

 

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Executive Compensation Tables (continued)

 

(6)

The following table sets forth the elements of All Other Compensation for 2021:

 

  Name  

Perquisites

and Other

Personal

Benefits(a)

($)

 

Tax

Reimbursements(b)
($)

 

Contributions

to Vested and

Unvested

Defined

Contribution

Plans

(qualified)(c)

($)

 

Contributions

to Vested and

Unvested

Defined

Contribution

Plans

(nonqualified)(d)

($)

 

Insurance

Premiums(e)
($)

 

Other(f)

($)

 

Charitable
Contributions
(g)

($)

 

Total All

Other

Compensation
($)

Lesar

      508,699             26,100       323,888                   50,000       908,686

Wells

      224,721       6,519       26,100       97,812                   7,600       362,752

Doyle

      19,500             17,400       38,481                   25,000       100,381

Mercado

                  17,400       37,302                         54,702

Karuturi

                  17,400       37,464                   10,890       65,754

Carroll

            1,118                   5,857       28,072,000             28,078,976

 

  (a)

For Messrs. Lesar and Wells, the amount includes relocation expenses incurred during 2021 including loss on sale of the homes, commissions, fees, warranty, and insurance ($254,187 and $204,488, respectively). For Mr. Lesar, this amount includes the incremental cost to the Company attributable to security-related services provided to Mr. Lesar, including the use of a car and security personnel, such as a security driver, to mitigate risk to the Company by supporting Mr. Lesar’s safety, health and well-being. The Company considers costs for security-related services, which were put into place in accordance with the recommendations of an independent security consultant based on a security risk assessment, to be business expenses rather than personal benefits to Mr. Lesar; however, disclosure regulations require certain security expenses to be reported as personal benefits. The incremental cost for the use of the car is based on the annualized cost of the car over its useful life, including annual depreciation, as well as maintenance, insurance and fuel expense. The incremental cost of providing security personnel, including a security driver, includes the actual incremental cost of expenses incurred by such security personnel, but does not include the fixed costs associated with such personnel.

For Mr. Lesar, due, in part, to safety concerns related to COVID-19 as well as security risk considerations identified in the aforementioned security assessment related to Mr. Lesar, this amount includes the incremental cost to the Company for personal travel on aircraft owned by the Company or provided by a third-party aircraft charter company. The incremental cost for personal travel on aircraft owned by the Company includes variable operating costs such as landing, parking, hanger and dead-head costs, crew travel expenses, supplies and catering, fuel costs, and passenger ground transportation, and does not include an allocable share of fixed costs associated with the Company’s ownership of the aircraft. No amounts were included where spouses or family members accompanied the executives on Company aircraft flights because there was no incremental cost to the Company. The incremental cost to the Company for personal travel on aircraft provided by a third-party aircraft charter company includes the amount invoiced to CenterPoint Energy for the hourly rate and operating costs of a particular flight ($132,217 for Mr. Lesar). No amounts were included where spouses or family members accompanied the executives on flights provided by a third-party aircraft charter company because there was no incremental cost to the Company.

Additionally, for Messrs. Lesar, Wells and Doyle, the amount includes financial planning services of $5,000, $15,375 and $15,375, respectively. None of the other named executive officers received perquisites valued in excess of $10,000 during 2021.

 

  (b)

For Mr. Wells, the tax reimbursement amount shown consists of amounts paid to Mr. Wells for taxes incurred in respect of the relocation expenses covered by the Company. For Mr. Carroll, the tax reimbursement amount shown represents the after-tax cost of imputed income that he is required to recognize as a result of coverage under the executive life insurance plan described in footnote (e) below. The tax reimbursement payments are calculated assuming the highest individual income tax rate is applicable. The annual premiums on the executive life insurance policies are payable solely by CenterPoint Energy, and in accordance with the Internal Revenue Code, Mr. Carroll must recognize imputed income based upon the insurer’s one-year level term rates. Mr. Carroll is also provided a tax reimbursement payment for all taxes due on the imputed income associated with the policy value so that coverage is provided at no cost to him.

 

  (c)

These amounts represent CenterPoint Energy’s contributions to the savings plan, which is described under “Savings Plan and Savings Restoration Plans.”

 

  (d)

These amounts represent benefits accrued under the savings restoration plan, which is described under “Savings Plan and Savings Restoration Plans.”

 

  (e)

The insurance premium amounts include annual premiums paid by the Company to provide life insurance coverage and long-term disability coverage for our senior executive officers. Mr. Carroll participated in an executive life insurance plan as a director who was elected to the Board before 2001 and was not an employee of the Company at the time of his initial election. This executive life insurance plan provides endorsement split-dollar life insurance with a death benefit equal to six times the director’s annual retainer, excluding any supplemental retainer, with coverage continuing after the director’s retirement from the Board. Due to limits on the increases in the death benefit under this plan, the death benefit for Mr. Carroll under the plan is $180,000. Upon the death of the insured, the director’s beneficiaries will receive the specified death benefit, and CenterPoint Energy will receive any balance of the insurance proceeds payable in excess of the specified death benefit.

 

  (f)

In connection with Mr. Carroll’s departure from the Executive Chairman position effective July 21, 2021, the Compensation Committee approved a lump-sum cash severance payment to Mr. Carroll.

 

  (g)

These amounts represent CenterPoint Energy Foundation, Inc.’s charitable contributions to non-profit organizations to match personal qualified contributions on a dollar-for-dollar basis up to an annual maximum match of $25,000 ($50,000 for Mr. Lesar).

 

 

54    CenterPoint Energy


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Executive Compensation Tables (continued)

 

Grants of Plan-Based Awards for Fiscal Year 2021

 

The following table presents the non-equity and equity incentive plan-based awards granted during 2021. The grant date fair value of equity awards is based on the probable achievement level of the underlying performance conditions as of the grant date at the closing price on the grant date, which was $21.80 for the February 18, 2021 grants and $25.24 for the July 20, 2021 grants.

 

        Estimated Possible Payouts Under
Non-Equity Incentive Plan
Awards
(1)
  Estimated Future Payouts Under Equity Incentive  Plan
Awards
(2)
  Name   Grant Date   Threshold
($)
  Target
($)
  Maximum
($)
  Threshold:
Number of
Shares
(#)
  Target:
Number of
Shares
(#)
  Maximum:
Number of
Shares
(#)
  All Other Stock
Awards: # of
Shares of
Stock or Units
  Grant Date
Fair Value
of Stock
Awards
($)

David J. Lesar

          961,875       1,923,750       2,885,625                    
      2/18/2021                               93,119       2,029,994  
      7/20/2021                               1,000,000       25,240,000  
      2/18/2021                   55,313       167,615       335,230           3,654,007  
      2/18/2021                   55,872       111,743       167,615           2,435,997  

Jason P. Wells

          249,375       498,750       748,125                    
      2/18/2021                               19,209       418,756  
      2/18/2021                   11,410       34,576       69,152           753,757  
      2/18/2021                   11,525       23,050       34,575           502,490  

Scott E. Doyle

          181,562       363,125       544,687                    
      2/18/2021                               11,439       249,370  
      2/18/2021                   6,795       20,591       41,182           448,884  
      2/18/2021                   6,864       13,727       20,591           299,249  

Kenneth M. Mercado

          183,750       367,500       551,250                    
      2/18/2021                               11,439       249,370  
      2/18/2021                   6,795       20,591       41,182           448,884  
      2/18/2021                   6,864       13,727       20,591           299,249  

Monica Karuturi

          171,438       342,875       514,313                    
      2/18/2021                               11,147       243,005  
      2/18/2021                   6,621       20,064       40,128           437,395  
      2/18/2021                   6,688       13,376       20,064           291,597  

Milton Carroll

          176,974       353,949       530,923                    
      2/18/2021                               36,416       793,869  
      2/18/2021                   21,631       65,549       131,098           1,428,968  
      2/18/2021                   21,850       43,700       65,550           952,660  

There were no other equity awards granted to the named executive officers during the year.

 

(1)

The estimated payouts under non-equity incentive plan awards are based on the terms of our 2021 short-term incentive plan. Based on the goals adopted in 2021, the maximum payout amount (as shown in the Maximum column) is 150% of target for our named executive officers. Actual amounts paid in 2022 for 2021 performance are shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. Any amount awarded by the Compensation Committee to an individual executive officer in excess of the actual performance level of the underlying performance objectives is reflected in the Summary Compensation Table in the Bonus column.

 

(2)

The annual grants of equity incentive plan awards consist of two types of awards for each named executive officer: a restricted stock unit award covering a number of shares listed in the All Other Stock Awards column, and two performance share unit awards, for which threshold, target and maximum numbers of shares are shown in the columns under Estimated Future Payouts Under Equity Incentive Plan Awards. For Mr. Lesar, amounts include the retention awards under Mr. Lesar’s Retention Incentive Agreement, which will provide for a total of 1 million shares of Company stock and will be granted through multiple annual awards beginning July 20, 2021. The retention awards were valued at $25,240,000 as of the date of the Retention Incentive Agreement (July 20, 2021). For more information on Mr. Lesar’s retention awards, please see “Compensation Discussion and Analysis—Executive Compensation Program Overview—Transition to New Independent Board Governance Structure—President and Chief Executive Officer, David Lesar—Retention Awards.” All of the restricted stock unit awards and the performance share unit awards accrue dividend equivalents over the vesting period or performance cycle, respectively, until they are delivered at the same level as dividends earned by shareholders on shares of common stock outstanding. Dividend equivalents on the vested shares will be paid in cash. These awards are granted under our long-term incentive plan. Refer to the footnotes to the Outstanding Equity Awards at Fiscal Year-End 2021 table for the vesting date of each of these awards.

 

 

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Executive Compensation Tables (continued)

 

Non-Equity Incentive Plan Awards

 

For our named executive officers, awards under the short-term incentive plan for 2021 are solely based on achieving a utility EPS goal, subject to a downward-only modifier focused on diversity and inclusion.

“Utility EPS” is a non-GAAP metric meant to reflect what we consider to be our true financial performance in the period being measured. It includes:

 

   

Net income from the Electric and Natural Gas reportable segments, as well as after tax Corporate and Other operating income;

 

   

An allocation of corporate overhead based upon the Company’s Utility segments’ relative earnings contribution.

“Utility EPS” excludes:

 

   

Earnings or losses from the change in value of ZENS and related securities;

 

   

Certain expenses associated with merger integration;

 

   

The make-whole premium associated with the redemption of CenterPoint Energy’s $250 million senior notes due in January 2021;

 

   

Midstream Investments and the allocation of associated corporate overhead;

 

   

Other potential impacts, such as changes in accounting standards, impairments or unusual items, which could have a material impact on GAAP reported results.

For a reconciliation of our utility EPS to the nearest GAAP metric, please see Appendix B hereto.

For 2021, various levels of achievement for “utility EPS” were as follows:

 

    

Threshold
(2020 Actual plus 6%)
$

 

  

Target

$

 

  

Maximum

(2020 Actual plus 8%)
$

 

  

Actual

 

$             %    

 

Utility EPS

   $1.24    $1.25    $1.26    $1.27    150%

The target level above is based on achieving 7% growth relative to 2020 actual performance.

The diversity and inclusion negative modifier is focused on meeting certain diversity, equity and inclusion goals, including diversity of applicants, utilization of diverse panels and diversity of workforce. This modifier is a downward-only modifier and can only reduce the potential payout by a combined total of up to 5%. The diversity and inclusion negative modifier’s targets are based on 2020 and 2021 actual results. For 2021, target and achievement for the diversity and inclusion negative modifier were as follows:

 

 Performance Objectives    Target
(100%)
     Actual
Achievement
        

 Diversity and Inclusion Negative Modifier*

  

Diversity of Applicants

     >80      91     

Utilization of Diverse Interview Panels

     >95      99     

Diversity of Workforce

          

Placement Diversity Rate (Female)

     >24      30     

Placement Diversity Rate (Racial/Ethnic Minority)

     >36      46     

 

*

The diversity and inclusion composite acts as a negative modifier of up to 5%. Based on the Company’s achievement with respect to these metrics, the Compensation Committee decided not to exercise the negative modifier for diversity and inclusion. However, the Compensation Committee did exercise negative discretion to reduce the overall short-term incentive achievement level based on other considerations as described in “Compensation Discussion and Analysis—2021 Executive Compensation Program—2021 Short-Term Incentive Plan Results.”

 

 

56    CenterPoint Energy


Table of Contents
   

 

 

 

 

  2022 Proxy Statement  

 

 

 

 

Executive Compensation Tables (continued)

 

Equity Incentive Plan Awards – Additional Information

 

Three-Year Net Income

For awards granted in February 2019, the performance share unit award vests based on our achievement of a three-year cumulative net income goal. For the three-year performance cycle ending on December 31, 2021, the cumulative net income performance goal reflects net income target from our approved five-year financial plan.

Thirty percent of long-term compensation is based on this metric. If performance for the goal meets or exceeds the threshold level, the Committee may approve a payout of 50% to 200% of the number of the target performance share units awarded. Reported consolidated net income pursuant to GAAP will be adjusted for the following:

 

   

net income from midstream investments business;

 

   

the financial impacts of any changes in accounting standards, the unplanned change in application of accounting standards, and impairments of goodwill;

 

   

any impact to income from the change in the value of the ZENS-related securities and the effects of mergers, acquisitions and divestitures on those securities;

 

   

any mark-to-market accounting entries and net natural gas inventory adjustments not reflected in the plan; and

 

   

significant (>$1 million pre-tax per category) differences between the plan and actual financial impact of the following items: new legislation or regulation (including the effects of the Tax Cuts and Jobs Act of 2017); any named storm; restructuring costs; costs to pursue acquisitions, mergers and divestitures (including the Vectren merger); benefit retirement plan settlement expenses triggered by lump sum distribution; costs associated with the early retirement of long-term debt; adoption of the FASB-issued ASU No. 2017-07 Compensation–Retirement Benefits; gains/losses or expenses required by GAAP for mergers and acquisitions; or other unplanned items that receive written approval from the Chief Executive Officer or Executive Committee.

For a reconciliation of our cumulative net income to the nearest GAAP metric, please see Appendix B hereto.

Additional Information Regarding Our Equity Incentive Plan Awards

The outstanding performance share unit awards and stock awards (other than the retention awards granted to Mr. Lesar and the sign-on awards granted to Messrs. Lesar and Wells) provide that “retirement eligible” participants (age 55 or greater with at least five years of service or, for Mr. Lesar, at least three years of service) who terminate employment will receive a payment under the award, if any, based on the actual achievement of the applicable performance objective at the end of the performance period or vesting period, if applicable, with any such amount pro-rated for the period of their employment during the performance or vesting period, as applicable. Upon termination for cause, no benefits are payable under the award agreements.

Further, for the awards made beginning in February 2018 (other than the retention awards granted to Mr. Lesar and the sign-on awards granted to Messrs. Lesar and Wells), subject to Compensation Committee approval for certain of our officers, including our named executive officers, a “retirement eligible” participant will vest in amounts that would otherwise be forfeited upon retirement (the Enhanced Retirement) due to the proration described above if:

 

   

the award was granted prior to the year of termination of employment;

 

   

the sum of the retirement eligible participant’s service and age is 65 or greater;

 

   

the retirement eligible participant provides reasonable advanced written notice of his or her retirement, as determined by the Compensation Committee (or at least six months’ written notice for the awards made before February 2020); and

 

   

the retirement eligible participant submits a transition plan.

 

 

     Always There®    57


Table of Contents

 

  2022 Proxy Statement  

 

    

Executive Compensation Tables (continued)

 

Any such vesting for our named executive officers will be at the sole discretion of the Compensation Committee. Moreover, the Compensation Committee may elect to approve the Enhanced Retirement eligibility for any named executive officer who does not otherwise meet one or more of the provisions described above if it is determined to be in the best interests of the Company. The Compensation Committee adopted the Enhanced Retirement provisions to reinforce the Company’s overall compensation philosophy by further supporting its strategic workforce planning, increasing employee engagement and encouraging the development of robust succession and transition plans to effect a smooth transition and retirement from the organization and provides an opportunity for executives to become eligible for compensation that was previously awarded and was designated as total compensation, but was partially forfeited upon retirement.

Awards made beginning in February 2018 also include restrictive covenants that are beneficial to the Company by requiring forfeiture of unpaid awards and return of paid awards upon breach of confidentiality, non-solicitation and non-competition obligations. The awards (other than the sign-on awards granted to Messrs. Lesar and Wells) also provide for full vesting upon the participant’s death or termination of employment due to disability (as defined under our long-term disability plan). For performance share units, such vesting is at the target level of achievement. Awards prior to February 2018 provided for pro rata vesting upon the participant’s death or termination of employment due to disability, with such pro rata vesting based on the number of days employed in the performance cycle and the target level of achievement for performance share units and on the number of days employed in the vesting period for stock awards.

Finally, awards made beginning in February 2020 also provide for pro rata vesting upon the “sale of subsidiary,” defined as a change in the ownership of a subsidiary, or a substantial portion of the assets of a subsidiary, of the Company, if the participant is performing services for the subsidiary at the time and ceases employment with the Company upon and in connection with the sale. Such pro rata vesting is based on the number of days employed in the performance cycle and the target level of achievement for performance share units and on the number of days employed in the vesting period for stock awards.

Outstanding Equity Awards at Fiscal Year-End 2021

 

The following table provides information regarding the outstanding equity awards held by our named executive officers as of December 31, 2021. The closing stock price on the New York Stock Exchange on December 31, 2021 was $27.91.

 

     Option Awards    Stock Awards
  Name   

Number

of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

  

Number

of

Securities

Underlying

Unexercised

Options

Unexercisable
(#)

  

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

  

Option

Exercise

Price

($)

  

Option

Expiration

Date

  

Number

of

Shares

or Units

of Stock

That

Have

Not

Vested(1)
(#)

  

Market
Value

of

Shares

or

Units

of

Stock

That

Have

Not

Vested

($)

  

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested(2)

(#)

  

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

($)

Lesar

                                                    1,237,004          34,524,782          1,012,861          28,268,937  

Wells

                                                    71,128          1,985,182          223,339          6,233,391  

Doyle

                                                    27,575          769,618          106,797          2,980,690  

Mercado

                                                    21,409          597,525          95,145          2,655,483  

Karuturi

                                                    19,014          530,681          91,106          2,542,768  

Carroll

                                                    90,408          2,523,287          337,814          9,428,389  

 

 

58    CenterPoint Energy


Table of Contents
   

 

 

 

 

  2022 Proxy Statement  

 

 

 

 

Executive Compensation Tables (continued)

 

(1)

Outstanding stock awards fully vest on the following dates:

 

  Grant Date    Type of Stock
Award
  

Vesting

Date

   Lesar    Wells   

Doyle

  

Mercado

  

Karuturi

  

Carroll

2/19/2019

   Stock Award        2/19/2022                            6,488          2,819          1,243          23,742  

2/19/2020

   Stock Award        2/19/2023                            9,648          7,151          1,911          30,250  

7/1/2020

   Stock Award        7/1/2022          34,596                                               

7/1/2020

   Stock Award        7/1/2023          109,289                                               

7/28/2020

   Stock Award        2/19/2023                                              4,713           

9/28/2020

   Stock Award        9/28/2021                                                    

9/28/2020

   Stock Award        9/28/2022                   26,288                                      

9/28/2020

   Stock Award        9/28/2023                   25,631                                      

2/18/2021

   Stock Award        2/18/2024          93,119          19,209          11,439          11,439          11,147          36,416  

7/20/2021

   Stock Award(a)        12/31/2022          400,000                                               

7/20/2021

   Stock Award(a)        12/31/2023          600,000                                               
            

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total

               1,237,004          71,128          27,575          21,409          19,014          90,408  
            

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a)

Amounts shown reflect the retention awards under Mr. Lesar’s Retention Incentive Agreement. For more information on Mr. Lesar’s retention awards, please see “Compensation Discussion and Analysis—Executive Compensation Program Overview—Transition to New Independent Board Governance Structure—President and Chief Executive Officer, David Lesar—Retention Awards.”

 

(2)

Outstanding performance share unit awards will fully vest on the following dates:

 

  Grant Date    Type of Stock
Award
   Vesting Date   

Lesar

  

Wells

  

Doyle

  

Mercado

  

Karuturi

  

Carroll

2/19/2020

  

Performance Share Units(a)

       12/31/2022                            45,024          33,372          8,920          141,166  

7/1/2020

  

Performance Share Units(a)

       12/31/2022          510,016                                               

7/28/2020

  

Performance Share Units(a)

       12/31/2022                                              21,994           

9/28/2020

  

Performance Share Units(a)

       12/31/2022                   119,612                                      

2/18/2021

  

Performance Share Units(b)

       12/31/2023          502,845          103,727          61,773          61,773          60,192          196,648  
            

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total

               1,012,861          223,339          106,797          95,145          91,106          337,814  
            

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a)

Based on 2020 results, the provided amounts reflect maximum achievement for the total shareholder return and maximum achievement for the three-year cumulative net income awards.

 

  (b)

Based on 2021 results, the provided amounts reflect maximum achievement for the total shareholder return and maximum achievement for the three-year cumulative guidance basis utility EPS awards.

 

 

     Always There®    59


Table of Contents

 

  2022 Proxy Statement  

 

    

Executive Compensation Tables (continued)

 

Option Exercises and Stock Vested for Fiscal Year 2021

 

The following table indicates the number and value of stock options exercised and stock and performance share unit awards vested during 2021.

 

     Option Awards    Stock Awards(1)
  Name   

Number of
Shares

Acquired

on Exercise

(#)

  

Value Realized

on Exercise

($)

  

Number of

Shares

Acquired

on Vesting

(#)

  

Value Realized 

on Vesting 

($) 

Lesar

                     17,298        438,504

Wells

                     26,288        672,477

Doyle

                     16,212        461,341

Mercado

                     13,010        330,602

Karuturi

                     3,695        102,709

Carroll

                     67,829        1,894,952

 

(1)

For each of the named executive officers, the stock awards and performance share unit awards consist of the following:

 

  Name  

Performance Share

Unit Awards

for the

2019-2021

Performance
Cycle
(a)

 

Performance

Awards

Granted

March 1, 2019

That Vested

March 1, 2021

 

Stock Awards

Granted

February 20, 2018

That Vested

February 20, 2021

 

Stock Awards

Granted

July 1, 2020

That Vested

July 1, 2021

 

Stock Awards

Granted

September 28,

2020

That Vested

September 28,
2021

 

Number

of

Shares

(#)

 

Value

Realized

on

Vesting(b)

($)

 

Number

of

Shares

(#)

 

Value

Realized

on

Vesting(c)

($)

 

Number

of

Shares

(#)

 

Value

Realized

on

Vesting(d)

($)

 

Number

of

Shares

(#)

 

Value

Realized

on

Vesting(e)

($)

 

Number

of

Shares

(#)

 

Value

Realized   

on   

Vesting(f)    

($)   

Lesar

                                          17,298       438,504             —  

Wells

                                                      26,288       672,447  

Doyle

      12,003       359,010                   4,209       102,331                         —  

Mercado

        5,216       156,011       5,000       106,663       2,794       67,929                         —  

Karuturi

        2,300       68,793                   1,395       33,916                         —  

Carroll

     
43,923

      1,313,737                   23,906       581,215                         —  

 

  (a)

A participant is vested in the right to receive performance share units under the award agreements as of December 31, 2021 (the end of the performance cycle). However, pursuant to the terms of the awards, the actual number of shares to be awarded to the participant is not known until the Compensation Committee determines the applicable performance levels of the underlying goals within 60 days after the end of the performance cycle. Accordingly, the awards are valued for compensation purposes after the Compensation Committee completes its determination and the procedures to verify the financial information used in determining the applicable performance level achievements have been completed. After completion of this process, the actual transfer of the stock is made to participants.

 

  (b)

Value Realized on Vesting for the performance share unit awards was determined using the closing market price of our common stock ($27.20) on the New York Stock Exchange on February 22, 2022, together with a dividend equivalent amount equal to the dividends accrued during the performance period until they were delivered ($2.71 per share) on our shares of common stock. The number of performance share units vested was determined based on an overall achievement level of 79%.

 

  (c)

Value Realized on Vesting for the performance share unit awards was determined using the closing market price of our common stock ($19.57) on the New York Stock Exchange on March 2, 2021, together with a dividend equivalent amount equal to the dividends accrued during the performance period until they were delivered ($1.7625 per share) on our shares of common stock. The number of performance share units vested was determined based on an overall achievement level of 102.62%.

 

  (d)

Value Realized on Vesting for the stock awards was determined using the closing market price of our common stock ($21.43) on the New York Stock Exchange on February 19, 2021, together with dividend equivalents per share during the vesting period of $2.8825.

 

  (e)

Value Realized on Vesting for the stock awards was determined using the closing market price of our common stock ($24.73) on the New York Stock Exchange on July 1, 2021, together with dividend equivalents per share during the vesting period of $0.62.

 

 

60    CenterPoint Energy


Table of Contents
   

 

 

 

 

  2022 Proxy Statement  

 

 

 

 

Executive Compensation Tables (continued)

 

 

  (f)

Value Realized on Vesting for the stock awards was determined using the closing market price of our common stock ($24.95) on the New York Stock Exchange on September 28, 2021, together with dividend equivalents per share during the vesting period of $0.63.

Pension Benefits

 

Our senior executive officers hired or rehired before January 1, 2020 (Messrs. Doyle and Mercado and Ms. Karuturi) are eligible for pension benefits under a tax-qualified defined benefit pension plan—the CenterPoint Energy Retirement Plan. In addition, our senior executive officers who are eligible to accrue benefits under the CenterPoint Energy Retirement Plan are also eligible to accrue benefits under a benefit restoration plan, which is also a defined benefit plan. Participants are fully vested in both plans after three years of service. For all employees hired on or after January 1, 1999 but prior to January 1, 2009, participants accumulated a retirement benefit based upon a cash balance formula of four percent of base salary and short-term incentive compensation through December 31, 2008. For all employees hired prior to January 1, 1999 (including Messrs. Doyle and Mercado), benefits accrued based on a participant’s years of service, final average pay and covered compensation through December 31, 2008. Beginning January 1, 2009, final average pay formula benefits under the retirement plan were frozen as to any future accruals. The lump sum value of the age-65 annuity for all final average pay formula participants was calculated using an interest conversion rate of 4.52% as of December 31, 2008. This lump sum amount will continue to grow annually with interest, based on the 30-year Treasury rate from the prior November, until commencement of the benefit. The participant’s benefit through December 31, 2008 is the greatest of (i) this lump sum value, (ii) the final average pay benefit and (iii) the cash balance benefit. For periods after December 31, 2008, the retirement benefit is based on a cash balance formula of five percent of base salary and short-term incentive compensation.

Benefits that may not be provided under the retirement plan because of Internal Revenue Code annual limits on benefits and compensation are made in a bookkeeping account under the benefit restoration plan. This excess benefit amount is determined based on the final average pay formula and the cash balance formula under the retirement plan, as applicable. To comply with the requirements under Section 409A of the Internal Revenue Code, we established the CenterPoint Energy Benefit Restoration Plan (CNP Benefit Restoration Plan) for excess benefits that accrued or vested after 2004. This plan is subject to Section 409A. Benefits accrued under this plan are generally paid in a lump sum following the participant’s separation from service. All of our senior executive officers who are eligible for the Retirement Plan also participate in this plan and will generally receive payments in a lump sum form under this plan. Benefit payments for our senior executive officers and other key employees will be delayed for six months to comply with Section 409A of the Internal Revenue Code. The CNP Benefit Restoration Plan does not provide any past service credits or accelerated service benefits.

The table below provides information regarding our senior executive officers’ accumulated benefits under our retirement and benefit restoration plans.

 

  Name    Plan Name   

Number of

Years

Credited

Service

(#)

    

Present Value of

Accumulated

Benefit

($)

    

Payments

during 2020

($)

 

Cash Balance Formula(1)

 

     

Karuturi

   Retirement Plan      7.4        84,725         
  

CNP Benefit Restoration Plan

     7.4        55,560         

Final Average Pay Formula(2)

           

Doyle

   Retirement Plan      26.9        495,376         
   CNP Benefit Restoration Plan      26.9        137,782         

Mercado

   Retirement Plan      33.9        1,229,415         
  

CNP Benefit Restoration Plan

     33.9        165,211         

 

 

     Always There®    61


Table of Contents

 

  2022 Proxy Statement  

 

    

Executive Compensation Tables (continued)

 

(1)

The benefits for Ms. Karuturi are based solely on the cash balance formula under the retirement plan. Interest accrues in the current year at the average annual interest rate for 30-year Treasury Securities as reported daily during the previous November based upon the account balance as of the end of the previous year. The interest rate for the 2021 plan year was 1.62%. In addition, Ms. Karuturi accrued an excess benefit amount under the CNP Benefit Restoration Plan based on the cash balance formula as if the Internal Revenue Code annual benefit and compensation limits did not apply.

 

    

The present value for Ms. Karuturi was calculated based on benefits accrued through December 31, 2021 payable at age 65 (the earliest retirement age where the benefit is not reduced). Account balances are assumed to accumulate interest credits until age 65 at 1.62%. Since this is a cash balance plan, the lump sum payment is equal to the participant’s account balance at retirement. The single life annuity is calculated by dividing the account balance by the present value factor of an immediate single life annuity assuming an interest rate of 2.8% and using the mortality table prescribed by Section 417(e)(3) of the Internal Revenue Code. To calculate the present value of the benefit in the table, mortality assumptions are based on the PRI-2012 Mortality Table projected using Scale MP-2021, and the interest rate for discounting payments back to December 31, 2021 is 2.8%.

 

(2)

Through December 31, 2008, Messrs. Doyle and Mercado accrued benefits based on years of service, final average pay and covered compensation, which we refer to as final average pay (FAP) formulas.

 

    

For Mr. Doyle, final average pay means the highest base salary plus overtime, commissions, and bonuses for the 36 consecutive months out of the 120 consecutive months immediately preceding the earlier of retirement or December 31, 2008. This FAP retirement plan benefit is calculated under the following formula:

1.25% x FAP x Service + [0.65% x (FAP—Social Security Covered Compensation) x Service]

 

    

In this final average pay formula, the maximum service applicable to the portion of the benefit attributable to FAP in excess of Social Security Covered Compensation is 35 years. The benefit is reduced for early retirement if retirement occurs before age 65. Early retirement subsidies are provided for retirement at age 55 or older.

 

    

For Mr. Mercado, final average pay means the highest base salary for the 36 consecutive months out of the 120 consecutive months immediately preceding the earlier of retirement or December 31, 2008. This FAP retirement plan benefit is calculated under the following formula:

1.5% x FAP x Service + [0.44% x (FAP—Social Security Covered Compensation) x Service]

 

    

In this final average pay formula, the maximum service applicable to the portion of the benefit attributable to FAP in excess of Social Security Covered Compensation is 35 years. The benefit is reduced for early retirement if retirement occurs before age 60. Early retirement subsidies are provided for retirement at age 55 or older.

 

    

Beginning in 2009, Messrs. Doyle and Mercado accrued a benefit under the benefit restoration plan based on the cash balance formula as if the Internal Revenue Code compensation limits did not apply.

 

    

The present values for Messrs. Doyle and Mercado were calculated based on benefits accrued through December 31, 2021 assuming retirement at the earliest reduced age. The calculation assumes the participant is 45% likely to commence the benefit in the form of a single life annuity and 55% likely to elect a lump sum distribution. The single life annuity is the normal form of benefit under the plan. Mortality assumptions for discounting annuities are based on the PRI-2012 Mortality Table projected using Scale MP-2021 and an interest rate of 2.8%. The lump sum distribution for benefits accrued through December 31, 2008 is calculated as the greater of the cash balance amount and the present value of the accrued benefit commencing at age 65 assuming an interest rate of 2.80% and using the mortality table prescribed by Section 417(e)(3) of the Internal Revenue Code. The interest rate for discounting payments back to December 31, 2021 was 2.8%. These assumptions, where applicable, are the same assumptions disclosed in “Stock Based Incentive Compensation Plans and Employee Benefit Plans” in Note 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021.

Savings Plan and Savings Restoration Plans

 

Under our savings plan, our senior executive officers may contribute up to 50% of their