Progress Energy 2009 Annual Report Download - page 215

Progress Energy Proxy Statement
77
PROPOSAL 3—ADOPTION OF A “HOLD-INTO-RETIREMENT” POLICY FOR
EQUITY AWARDS
One of our shareholders has submitted the proposal set forth below relating to the adoption of a “hold-into-
retirement” policy for equity awards. Upon written or oral request, the Company will provide the name, address and
share ownership of the proponent. Any such requests should be directed to our Corporate Secretary. For the reasons
set forth after the proposal, the Board recommends a vote “AGAINST” the proposal.
Resolved: That stockholders of Progress Energy, Inc. (“Company”) urge the Compensation Committee
of the Board of Directors (the “Committee”) to adopt a policy requiring that senior executives retain a significant
percentage of shares acquired through equity compensation programs until two years following the termination
of their employment (through retirement or otherwise), and to report to stockholders regarding the policy before
Company 2011 annual meeting of stockholders. The stockholders recommend that the Committee not adopt a
percentage lower than 75% of net after-tax shares. The policy should address the permissibility of transactions such
as hedging transactions which are not sales but reduce the risk of loss to the executive.
Supporting Statement:
Equity-based compensation is an important component of senior executive compensation at the Company.
Requiring senior executives to hold a significant portion of shares obtained through compensation plans
after the termination of employment would focus them on Company long-term success and would better align
their interests with those of Company stockholders. In the context of the current financial climate, we believe it is
imperative that companies reshape their compensation policies and practices to discourage excessive risk-taking and
promote long-term, sustainable value creation. A 2002 report by a commission of The Conference Board endorsed
the idea of a holding requirement, stating that the long-term focus promoted thereby “may help prevent companies
from artificially propping up stock prices over the short-term to cash out options and making other potentially
negative short-term decisions.”
The Company has established stock ownership guidelines for executive officers. The guidelines were
increased in 2009 to a minimum level of ownership of five times base salary for the Chief Executive Officer
(“CEO”), four times base salary for the Chief Operating Officer (“COO”), and three times base salary for the Chief
Financial Officer and Presidents/Executive Vice Presidents/Senior Vice Presidents.
We believe this policy does not go far enough to ensure that equity compensation builds executive
ownership. We also view a retention requirement approach as superior to a stock ownership guideline because a
guideline loses effectiveness once it has been satisfied.
We urge stockholders to vote for this proposal.
COMPANY RESPONSE
The Board and management oppose this shareholder proposal and recommend a vote “AGAINST”
the proposal for the reasons set forth below:
The Board has considered this proposal and believes that its adoption is unnecessary and not in the best
interests of the Company or its shareholders. For the reasons discussed below, the Board recommends that you vote
“AGAINST” adoption of this proposal.