Progress Energy 2009 Annual Report Download - page 216

PROXY STATEMENT
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to attracting and retaining experienced and effective executives and motivating them to perform in
the best interests of the Company and its shareholders.
The Board of Directors believes strongly that equity compensation and mandatory equity ownership
promote accountability and encourage executives to enhance long-term shareholder value. This belief is reflected
in our compensation policies and practices. Equity ownership is a fundamental element of the Company’s
executive compensation program and provides an essential source of incentive and motivation for our senior
executives. Approximately 60% of total target compensation for our executive officers is provided in equity and
focused on long-term performance. The Company’s executive compensation program is carefully designed to
provide a competitive level of at-risk and performance-based incentives through a combination of equity awards,
including restricted stock units and performance shares. The Board believes that the proposal would result in
an overemphasis on post-retirement compensation and undermine the effectiveness of the Company’s existing
executive compensation programs.
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have a significant equity stake in the future of the Company.
The Company’s stock ownership guidelines are consistent with those of the peer group the Organization
and Compensation Committee used to benchmark compensation and with which we compete for executive talent.
Our guidelines are consistent with the 50th percentile for both the base salary multiple and the time required to meet
ownership targets. The Company’s CEO currently holds 8.5 times his base salary although our guidelines require
him to hold 5 times his base salary in equity compensation. All of our senior executives are in compliance with the
Company’s stock ownership guidelines.
The proposal states that the two-year post retirement retention approach is “superior” because the guideline
approach loses effectiveness once the guidelines have been met. The Board of Directors does not believe this is
true, as executives are continually expected to meet the guidelines, even during market downturns. Moreover, the
ownership levels established in the guidelines represent a significant amount of money and, as a result, are a regular
and strong source of alignment with shareholders’ interests. Finally, three to five times an executive’s salary is a
significant amount that is not easily dismissed just because further accumulation of equity is no longer necessary.
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for executive officers to take unnecessary and excessive risks that threaten the value of the Company.
Post-termination holding periods are purported to prevent executives from taking actions that would cause the
price of a company’s stock to rise as they depart in order for them to be able to sell their holdings at an elevated price
before their behavior is discovered and corrected. As an integrated electric utility, primarily engaged in the regulated
utility business, the Company is highly regulated at both the federal and state levels. State and federal regulators set the
parameters within which the Company can operate. The state regulators have authority to review and approve the rates
we charge our customers. The regulators review certain of our costs and investments, and approve our recovery of them
from customers only if they determine that the costs and investments were reasonable and prudent when incurred. In
such a regulated environment, excessive risk-taking is neither encouraged nor allowed. Therefore, it is highly unlikely
our executives would be able to successfully engage in the type of behavior the proposal is intended to protect against.
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threshold and post-retirement holding period, is not a prevalent practice and may lead to an early
loss of executive talent.
The two-year post termination requirement would limit our executives’ financial resources at a time
when they no longer have any control over our operations or results. Long-term alignment is, of course, important.
However, for our compensation programs to have value, participants should be permitted the flexibility for