Progress Energy 2008 Annual Report Download - page 164

PROXY STATEMENT
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with the Company’s goals. The 2009 PSSP includes a three-year performance period, and performance shares
accrue quarterly dividend equivalents, which are reinvested in additional shares. Shares vest on January 1
following the end of a three-year performance period and are paid out in Company common stock.
The modifications to the 2009 PSSP use two equally weighted performance measures: relative
total shareholder return (TSR) and earnings growth. By using a combination of relative (TSR) and absolute
(earnings growth) performance measures, the 2009 PSSP allows the Committee to consider the Company’s
performance as compared to our peers’, and management’s achievement of internal goals.
• TSRisdefinedastheappreciationordepreciationinthevalueofthestock,plusdividends
paid during the year, divided by the closing value of the stock on the last trading day of the
preceding year.
• EarningsgrowthisbasedontheCompany’songoingannualearningspershare(EPS).The
ongoing EPS is determined in accordance with the Company’s “Policy for Press Release
Earnings Disclosure.”
The Committee selected a highly regulated peer group for the PSSP awards comprised of highly
regulated companies with a business strategy similar to ours. In addition, the peer group was selected
based on other factors including revenues, market capitalization, enterprise value and percent of regulated
earnings. The table below lists the companies in the peer group.
Alliant Energy Corp Great Plains SCANA Corporation
American Electric Power
Company, Inc. NV Energy Southern Company
Consolidated Edison Inc. PG&E Corporation Westar Energy Inc.
DPL Inc. Pinnacle West Capital Corporation Wisconsin Energy Corp.
Duke Energy Corporation Portland General Electric Xcel Energy Inc.
This peer group differs from the peer group the Committee uses for purposes of benchmarking
compensation, which is a broader group that represents those companies with which we primarily compete
for executive talent. That group includes companies that are not regulated integrated utilities. The Committee
believes that for purposes of our long-term incentive plan, it is more appropriate to use a peer group
comprised of companies that derive a significant percentage of their earnings from regulated businesses.
Restricted Stock and Restricted Stock Units
The restricted stock component of the current long-term incentive program helps us retain
executives and aligns the interests of management with those of our shareholders and management by
rewarding executives for increasing shareholder value. In 2007, the Committee began issuing restricted
stock units rather than restricted stock. The restricted stock units provide the same incentives and value
as restricted stock, but are more flexible and cost effective for the Company. Executive officers typically
receive a grant of service-based restricted stock units in the first quarter of each year. The size of each grant
is based on the executive officer’s target and determined using the closing stock price on the last trading day
prior to the Committee’s action. The Committee establishes target levels based on the peer group information
discussed under the caption “Competitive Positioning Philosophy” on page 20 above. The 2008 restricted
stock unit targets for the named executive officer positions are shown in the “Long-Term Incentive Award
Target” table on page 26 above. The restricted stock units pay quarterly cash dividend equivalents equal
to the amount of any dividends paid on our common stock. The Committee believes that the service-based
nature of restricted stock units is effective in retaining an experienced and capable management team.