Progress Energy 2010 Annual Report Download - page 173

Progress Energy Proxy Statement
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consistency with analysts’ expectations, the 2010 projected analysts’ consensus on earnings growth for the PSSP
Peer Group, and continued uncertainties of the Florida regulatory environment. The table below shows the percent
of target awards that may be earned based on the Company’s earnings growth performance:
Performance and Award Structure (50%)
Performance Three-Year Average Ongoing EPS Growth Percent of Target Award Earned
2009-2011 2010-2012
Threshold 2% 1% 50%
Target 4% 3% 100%
Maximum 6% 5% 200%
Restricted Stock Units
The restricted stock unit 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 and sustaining shareholder value. The Committee believes that the service-based nature of RSUs is
essential in retaining an experienced and capable management team.
Executive officers typically receive a grant of service-based RSUs in the first quarter of each year which
are subject to a three-year graded vesting schedule. The size of each grant is based on the executive officer’s target
award percentage and is determined by using the closing price of the Company’s common stock on the last trading
day of the year prior to the date of the award. The Committee establishes target levels based on the peer group
information discussed under the caption “Competitive Positioning Philosophy” on page 26 above. The 2010 RSU
targets for the NEOs are shown in the “Long-Term Incentive Award Target” table on page 32 above. The granting
of RSUs does not provide the participant with any guarantee of vesting in the awards. Holders of RSUs receive
quarterly cash dividend equivalents equal to the amount of any quarterly dividends paid on our common stock.
To further accent the retention quality of the Equity Incentive Plan and to recognize the contribution of the
officer team, including the named executive officers, the Committee may also issue in its discretion service-based ad
hoc grants of restricted stock units to executives. No ad hoc grants were awarded by the Committee during 2010.
4. SUPPLEMENTAL SENIOR EXECUTIVE RETIREMENT PLAN
The Supplemental Senior Executive Retirement Plan (“SERP”) provides a supplemental, unfunded
pension benefit for executive officers who have at least 10 years of service with at least three years of service
on our Senior Management Committee (“SMC”), i.e., service as a Senior Vice President or above. The SERP is
designed to provide pension benefits above those earned under our qualified pension plan. Current tax laws place
various limits on the benefits payable under our qualified pension, including a limit on the amount of annual
compensation that can be taken into account when applying the plan’s benefit formulas. Therefore, the retirement
incomes provided to the named executive officers by the qualified plans generally constitute a smaller percentage of
final pay than is typically the case for other Company employees. To make up for this shortfall and to maintain the
market-competitiveness of the Company’s executive retirement benefits, we maintain the SERP for members of the
SMC, including the NEOs.
The SERP defines covered compensation as annual base salary plus the annual cash incentive award. The
qualified plans define covered compensation as base salary only. The Committee believes it is appropriate to include
annual cash incentive awards in the definition of covered compensation for purposes of determining pension plan
benefits for the named executive officers to ensure that the named executive officers can replace in retirement a
portion of total compensation received during employment. This approach takes into account the fact that base pay
alone comprises a relatively smaller percentage of a named executive officer’s total compensation than of other
Company employees’ total compensation.