Progress Energy 2010 Annual Report Download - page 165

Progress Energy Proxy Statement
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COMPETITIVE BENCHMARKING
On an annual basis, the Committee’s compensation consultant provides the Committee with a written
analysis comparing base salaries, target annual incentives and the grant date value of long-term incentives of
our executive officers to compensation opportunities provided to executive officers of our peers. For 2010, the
Committee approved the use of a peer group of 18 integrated utilities used in the prior year and added three new
companies: CenterPoint Energy, Inc., CMS Energy Corporation, and NiSource, Inc. (the “Benchmarking Peer
Group”). These companies were added to further the Benchmarking Peer Group’s alignment with the executive
market in which the Company competes for talent. Further, the addition of the new peer companies positioned the
Company’s revenue more closely to the overall median than the previous peer group. The Benchmarking Peer Group
is comprised of utilities that have transmission, distribution and generation assets and was chosen based primarily on
revenues. The median revenue of the Benchmarking Peer Group is $10.3 billion compared to the Company’s $10.2
billion. These companies would likely be companies with which we primarily compete for executive talent. The
table below lists the companies in the Benchmarking Peer Group.
Benchmarking Peer Group
Allegheny Energy, Inc. Duke Energy Corporation PG&E Corporation
Ameren Corporation Edison International Pinnacle West Capital Corporation
American Electric Power Co., Inc. Entergy Corporation PPL Corporation
CenterPoint Energy, Inc. Exelon Corporation SCANA Corporation
CMS Energy Corporation FirstEnergy Corporation Southern Company
Dominion Resources, Inc. NextEra Energy, Inc. TECO Energy, Inc.
DTE Energy Company NiSource, Inc. Xcel Energy, Inc.
The electric utility industry has subsectors identified frequently as competitive merchant, regulated
delivery, regulated integrated, and unregulated integrated (typically state-regulated delivery and unregulated
generation). Each of these subsectors typically differs in financial performance and market valuation characteristics
such as earnings multiples, earnings growth prospects and dividend yields. Progress Energy generally is identified
as being in the regulated integrated subsector. This means Progress Energy and its peer companies are primarily
rate-of-return regulated, operate in the full range of the value chain (generation, transmission and/or delivery), and
typically have requirements to serve all customers under state utility regulations. The Committee annually evaluates
the Benchmarking Peer Group to ensure that it remains appropriate for compensation comparisons.
SECTION 162(m) IMPACTS
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits, with certain exceptions, the
amount a publicly held company may deduct each year for compensation over $1 million paid or accrued with
respect to its chief executive officer and any of the other three most highly compensated officers (excluding the chief
financial officer). Certain performance-based compensation is, however, specifically exempt from the deduction
limit. To qualify as performance-based, compensation must be paid pursuant to a plan that is:
• administeredbyacommitteeofoutsidedirectors;
• basedonachievingobjectiveperformancegoals;and
• disclosedtoandapprovedbytheshareholders.
The Committee considers the impact of Section 162(m) when designing executive compensation elements
and attempts to minimize nondeductible compensation. The Company received shareholder approval of the Progress
Energy 2009 Executive Incentive Plan (the “EIP”), an annual cash incentive plan for the Company’s named
executive officers, at its 2009 Annual Meeting of Shareholders. The MICP and EIP were designed to work together