UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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DTE Energy Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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One Energy Plaza
Detroit, Michigan 48226
2012 Notice of Annual Meeting of Shareholders and Proxy Statement
| Date: | Thursday, May 3, 2012 | |
| Time: | 10:00 a.m. Detroit time | |
| Place: | DTE Energy Building One Energy Plaza Detroit, Michigan 48226 | |
We invite you to attend the annual meeting of DTE Energy Company (“DTE Energy,” “Company,” “we,” “us” or “our”) to:
| 1. | Elect directors; |
| 2. | Ratify the appointment of PricewaterhouseCoopers LLP by the Audit Committee of the Board of Directors as our independent registered public accounting firm for the year 2012; |
| 3. | Vote on an advisory proposal relating to a nonbinding vote on executive compensation; |
| 4. | Vote on a Management proposal to amend the DTE Energy Company 2006 Long-Term Incentive Plan; |
| 5. | Vote on a Shareholder proposal relating to political contributions; |
| 6. | Vote on a Shareholder proposal relating to greenhouse gas emissions; and |
| 7. | Consider any other business that may properly come before the meeting or any adjournments of the meeting. |
The record date for this annual meeting is March 7, 2012. Only shareholders of record at the close of business on that date can vote at the meeting. For more information, please read the accompanying 2012 Proxy Statement.
This 2012 Notice of Annual Meeting, as well as the accompanying Proxy Statement and proxy card, will be first sent or given to our shareholders on or about March 21, 2012.
For this 2012 Annual Meeting, we will take advantage of the Securities and Exchange Commission’s “notice and access” rules that permit companies to electronically deliver proxy materials to some or all of their shareholders. These rules allow us to provide our shareholders with the information they need while lowering printing and mailing costs, reducing the amount of paper we use to print and energy required to deliver these materials and more efficiently complying with our obligations under the securities laws. On or about March 21, 2012, we first mailed a meeting notice to certain of our registered and beneficial shareholders containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K and vote online or how to request a paper copy of Proxy Statement and Annual Report on Form 10-K. Shareholders who receive that meeting notice will not receive a proxy card unless they request one.
Regardless of the size of your holdings, it is important to us that your shares be represented at the meeting. Shareholders may vote their shares (1) by telephone, (2) via the Internet, (3) if you received a paper copy, by completing and mailing the enclosed proxy card in the return envelope or (4) in person at the annual meeting,. Specific instructions for voting by telephone or via the Internet are attached to the proxy card or to the meeting notice that you received if you did not receive a paper copy. If you attend the meeting and vote at it, your vote at the meeting will replace any earlier vote by telephone, Internet or proxy. If your shares are directly held in your name as a shareholder of record, an admission ticket to the meeting is attached to your proxy card or to your meeting notice. Please vote your proxy, and bring the admission ticket with you to the meeting. If your shares are registered in the name of a bank, brokerage firm, or other nominee and you plan to attend the meeting, bring your statement of account showing evidence of ownership as of the record date. All shareholders who plan to attend the meeting must present a government-issued photo identification card, such as your driver’s license, state identification card or passport.
| By Order of the Board of Directors | ||
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Lisa A. Muschong Corporate Secretary |
Gerard M. Anderson Chairman, President and Chief Executive Officer | |
March 15, 2012
Important Notice Regarding the Availability of Proxy Materials for the
Annual Shareholders Meeting to Be Held on May 3, 2012:
The Proxy Statement and Annual Report are available to security holders at
www.proxydocs.com/dte
TABLE OF CONTENTS
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| 22 | ||||
| Nominees for Election at this Meeting for Terms Expiring in 2013 |
23 | |||
| 25 | ||||
| 26 | ||||
| PROPOSAL NO. 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
28 | |||
| 28 | ||||
| Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm |
29 | |||
| 29 | ||||
| PROPOSAL NO. 3 — ADVISORY PROPOSAL NONBINDING VOTE ON EXECUTIVE COMPENSATION |
31 | |||
| 32 | ||||
| PROPOSAL NO. 5 — SHAREHOLDER PROPOSAL — POLITICAL CONTRIBUTIONS |
36 | |||
| PROPOSAL NO. 6 — SHAREHOLDER PROPOSAL — GREENHOUSE GAS EMISSIONS |
39 | |||
| 41 | ||||
| 41 | ||||
| 55 | ||||
| 56 | ||||
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| 70 | ||||
| A-1 | ||||
| MAP TO ANNUAL SHAREHOLDER MEETING |
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2012 PROXY STATEMENT OF DTE ENERGY COMPANY
INFORMATION CONCERNING VOTING AND PROXY SOLICITATION
| Q: | What is a proxy? |
| A: | A proxy is an official instruction, made either (i) through a document also referred to as a “proxy card,” (ii) electronically over the internet or (iii) by telephone; through which you authorize someone else to vote for you in the way that you want to vote. You may also choose to abstain from voting. The Board of Directors (the “Board”) is soliciting proxies to be voted at the 2012 Annual Meeting of Shareholders and any adjournment or postponement of such meeting. |
| Q: | What is a Proxy Statement? |
| A: | A Proxy Statement is this document, required by the Securities and Exchange Commission (the “SEC”), which is furnished in connection with the solicitation of proxies and, among other things, explains the items on which you are asked to vote on the proxy. |
| Q: | What are the purposes of this annual meeting? |
| A: | At the meeting, our shareholders will be asked to: |
| 1. | Elect five directors. The nominees are Gerard M. Anderson, Charles G. McClure, Jr., Eugene A. Miller, Charles W. Pryor, Jr. and Ruth G. Shaw for terms expiring in 2013. (See “Proposal No. 1 — Election of Directors” on page 22); |
| 2. | Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year 2012. (See “Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm” on page 28); |
| 3. | Vote on an Advisory Proposal providing a nonbinding vote on the Company’s executive compensation. (See “Proposal No. 3 — Advisory Proposal — Nonbinding Vote on Executive Compensation” on page 31); |
| 4. | Vote on a Management Proposal to amend the DTE Energy Company 2006 Long-Term Incentive Plan. (See “Proposal No. 4 — Management Proposal — Approval of an Amendment to Amended and Restated the DTE Energy Company 2006 Long-Term Incentive Plan” on page 32); |
| 5. | Vote on a Shareholder Proposal relating to political contributions, if properly presented at the 2012 meeting. (See “Proposal No. 5 — Shareholder Proposal — Political Contributions” on page 36); |
| 6. | Vote on a Shareholder Proposal relating to greenhouse gas emissions, if properly presented at the 2012 meeting. (See “Proposal No. 6 — Shareholder Proposal — Greenhouse Gas Emissions” on page 39); and |
| 7. | Consider any other business that may properly come before the meeting or any adjournments or postponements of the meeting. (See “Consideration of Any Other Business That May Come Before the Meeting” on page 40). |
| Q: | Who is entitled to vote? |
| A: | Only our shareholders of record at the close of business on March 7, 2012 (the “Record Date”) are entitled to vote at the annual meeting. Each share of common stock has one vote with respect to each director position and each other matter coming before the meeting. |
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| Q: | What is the difference between a shareholder of record and a “street name” holder? |
| A: | If your shares are registered directly in your name with Wells Fargo Bank, National Association, Shareowner Services (“Wells Fargo”), our stock transfer agent, you are considered the shareholder of record for those shares. |
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of the shares, and your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank or other nominee how to vote their shares using the method described under “How do I vote?” below.
| Q: | How do I vote? |
| A: | If you hold your shares in your own name as shareholder of record, you may vote by telephone, through the Internet, by mail or by casting a ballot in person at the annual meeting. |
| • | To vote by mail, sign and date each proxy card (if you receive a paper copy) and return it in the enclosed prepaid envelope. Proxies will be voted as you specify on each proxy card. |
| • | To vote by telephone or through the Internet, follow the instructions attached to your proxy card or meeting notice. |
By completing, signing and returning the proxy card or voting by telephone or through the Internet, your shares will be voted as you direct. Please refer to the proxy card or meeting notice for instructions. If you sign and return your proxy card, but do not specify how you wish to vote, your shares will be voted as the Board recommends. Your shares will also be voted as recommended by the Board, in its discretion, on any other business that is properly presented for a vote at the meeting. (See “Consideration of Any Other Business That May Come Before the Meeting” on page 40).
If your shares are owned through the DTE Energy 401(k) plans (“401(k) plans”), see “What shares are included on my proxy card or meeting notice?” below.
If your shares are registered in street name, you must vote your shares in the manner prescribed by your brokerage firm, bank or other nominee. Your brokerage firm, bank or other nominee should have enclosed, or should provide, a voting instruction form for you to use in directing it how to vote your shares.
| Q: | Can I change my vote after I have voted? |
| A: | If you hold your shares in your own name as shareholder of record, any subsequent vote by any means will change your prior vote. For example, if you voted by telephone, a subsequent Internet vote will change your vote. If you wish to change your vote by mail, you may do so by requesting, in writing, a new proxy card from the tabulator, Wells Fargo, DTE Energy, c/o Wells Fargo Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-9397, or you can request a new proxy card by telephone at 1-866-388-8558. The last vote received prior to the meeting will be the one counted. Shareholders of record may also change their vote by voting in person at the annual meeting. If you hold your shares in street name, you should contact your brokerage firm, bank or other nominee. |
| Q: | Can I revoke a proxy? |
| A: | Yes. If you are a shareholder of record as of the Record Date, you may revoke a proxy by submitting a letter addressed to the tabulator, Wells Fargo, DTE Energy, c/o Wells Fargo Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-9397, prior to the meeting. If you hold your shares in street name, you should contact your brokerage firm, bank or other nominee. |
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| Q: | Is my vote confidential? |
| A: | Yes, your vote is confidential. The tabulator and inspectors of election will not be employees of the Company nor will they be affiliated with the Company in any way. Your vote will not be disclosed except as required by law or in other limited circumstances. |
| Q: | What shares are included on my proxy card or meeting notice? |
| A: | For shareholders of record — The proxy card or meeting notice you received covers the number of shares to be voted in your account as of the Record Date, including any shares held for participants in our Dividend Reinvestment and Stock Purchase Plan. |
For shareholders who are participants in the 401(k) plan — The proxy card serves as a voting instruction to the Trustee for DTE Energy common stock owned by employees and retirees of DTE Energy and its affiliates in their respective 401(k) plans.
For holders in street name — Separate voting instructions will be provided by your brokerage firm, bank or other nominee for shares you hold in street name.
| Q: | What does it mean if I get more than one proxy card or meeting notice? |
| A: | It indicates that your shares are registered differently and are in more than one account. Sign and return all proxy cards, or vote each account by telephone or on the Internet, to ensure that all your shares are voted. We encourage you to register all your accounts in the same name and address. To do this, contact Wells Fargo Shareowner Services at 1-866-388-8558. |
| Q: | What is “householding” and how am I affected? |
| A: | The SEC permits us to deliver a single copy of the annual report and proxy statement to shareholders that receive paper copies who have the same address and last name. Each shareholder will continue to receive a separate proxy card or, if not receiving a paper copy, a separate meeting notice. This procedure, called “householding,” will reduce the volume of duplicate information you receive and reduce our printing and postage costs. If you received one set of these documents at your household and you wish to receive separate copies, you may contact Wells Fargo Shareowner Services, Attn: Householding/DTE Energy, P.O. Box 64854, St. Paul, MN 55164-0854, or by telephone at 1-877-602-7615 and these documents will be promptly delivered to you. If you do not wish to participate in householding and prefer to receive separate copies of our annual reports and proxy statements, now or in the future, please submit a written request to Wells Fargo at the address listed above. |
Similarly, if you currently receive multiple copies of this document, you can request the elimination of the duplicate documents by contacting Wells Fargo Shareowner Services at the address or phone number listed above.
Beneficial owners can request information about householding by contacting their bank, brokerage firm or other nominee of record.
| Q: | Can I elect to receive or view DTE Energy’s annual report and proxy statement electronically? |
| A: | Yes. If you are a shareholder of record and you received a paper copy, you may elect to receive future copies of the Company’s annual report and proxy materials electronically rather than in printed form. |
If you wish to provide your consent and enroll in this service, log on to www.ematerials.com/dte, where step-by-step instructions will prompt you through the enrollment process. If you have previously enrolled, you should have received an e-mail notification directing you to the Web site hosting the annual report and proxy statement as well as voting instructions for voting via the Internet. If this is your first time registering for electronic delivery, your enrollment will be effective for the 2013 annual meeting.
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By consenting to electronic delivery, you are stating that you currently have, and expect to have in the future, access to the Internet. If you do not currently have, or expect to have in the future, access to the Internet, please do not elect to have documents delivered electronically, as we will rely on your consent and will not deliver paper copies of future annual reports and proxy materials.
If you do not register for electronic delivery, we will continue to mail you printed copies of the materials or meeting notice.
To view the current year’s proxy statement and annual report on Form 10-K, please visit our website at www.proxydocs.com/dte. There you will be able to view, search and print the documents. We also post these materials on our website at www.dteenergy.com, in the “Investors — Reports & Filings” section as soon as they are available so you may view them. To vote on the current year’s proxy, please refer to the question “How Do I Vote?” above.
| Q: | What constitutes a quorum? |
| A: | There were 170,048,905 shares of our common stock outstanding on the Record Date. Each share is entitled to one vote with respect to each director position and each other matter coming before the annual meeting. A majority of these outstanding shares present or represented by proxy at the meeting constitutes a quorum. A quorum is necessary to conduct an annual meeting. |
| Q: | What are abstentions and broker non-votes and how do they affect voting? |
| A: | Abstentions — If you specify on your proxy card that you wish to “abstain” from voting on an item, your shares will not be voted on that particular item. Abstentions are counted toward establishing a quorum but not toward determining the outcome of the proposal to which the abstention applies. |
Broker Non-Votes — Under the New York Stock Exchange (“NYSE”) rules, if your broker holds your shares in its name and does not receive voting instructions from you, your broker has discretion to vote these shares on certain “routine” matters, including the ratification of the appointment of the independent registered public accounting firm. Voting to elect directors in an uncontested election, to provide an advisory vote on executive compensation, to amend the company’s compensation plan, and to respond to the shareholder proposals relating to political contributions and greenhouse gas emissions are all non-routine matters. Consequently, your broker must receive voting instructions from you in order to vote with respect to proposals 1, 3, 4, 5 and 6 at our 2012 annual meeting. On routine matters, shares voted by brokers without instructions are counted toward the outcome.
| Q: | How does the voting work? |
| A: | For each item, voting works as follows: |
| • | Proposal No. 1 — Election of Directors — The election of each director requires approval by a majority of the votes cast, i.e., each of the five nominees for terms ending in 2013 must receive more than fifty percent of the votes cast at the meeting to be elected. You may withhold votes from one or more directors by writing their names in the space provided for that purpose on your proxy card. Failure to vote and broker non-votes will not be considered as votes cast for the election of directors and will not be counted either for or against each director. If you vote by telephone or the Internet, follow the instructions attached to the proxy card or meeting notice. Your broker is not entitled to vote your shares on this matter unless instructions are received from you. You cannot vote for more than five directors for terms ending in 2013. |
| • | Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm — Ratification of the appointment of an independent registered public accounting firm requires approval by a majority of the votes cast. Abstentions are not considered votes cast and will not be counted either for or against this matter. Your broker is entitled to vote your shares on this matter if no instructions are received from you. |
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| • | Proposal No. 3 — Advisory Proposal — Nonbinding Vote on Executive Compensation — Approval of the Advisory Proposal requires approval from a majority of the votes cast. Your broker is not entitled to vote your shares unless instructions are received from you. Abstentions and broker non-votes are not considered votes cast and will not be counted either for or against this matter. |
| • | Proposal No. 4 — Management Proposal — Approval of an Amendment to the Amended and Restated DTE Energy Company 2006 Long-Term Incentive Plan — Approval of the Management Proposal requires approval from a majority of the votes cast. Your broker is not entitled to vote your shares unless instructions are received from you. Abstentions are counted as votes cast but broker non-votes are not considered votes cast. Abstentions and broker non-votes will not be counted either for or against this matter. |
| • | Proposal No. 5 — Shareholder Proposal — Political Contributions — Approval of the Shareholder Proposal requires approval from a majority of the votes cast. Your broker is not entitled to vote your shares unless instructions are received from you. Abstentions and broker non-votes are not considered votes cast and will not be counted either for or against this matter. |
| • | Proposal No. 6 — Shareholder Proposal — Greenhouse Gas Emissions — Approval of the Shareholder Proposal requires approval from a majority of the votes cast. Your broker is not entitled to vote your shares unless instructions are received from you. Abstentions and broker non-votes are not considered votes cast and will not be counted either for or against this matter. |
| Q: | Who may attend the annual meeting? |
| A: | Shareholders of Record — Any shareholder of record as of the Record Date may attend. Your admission ticket to attend the meeting is attached to the lower portion of your proxy card or is your meeting notice itself. Please vote your proxy, and bring the admission ticket with you to the meeting. |
All Other Shareholders — If your shares are registered in the name of a bank, brokerage firm or other nominee and you plan to attend the meeting, bring your statement of account showing evidence of ownership as of the Record Date. However, as noted above, you will not be able to vote those shares at the annual meeting unless you have made arrangements with your bank, brokerage firm or other nominee of record.
All shareholders will be required to present a government-issued photo identification card, such as your driver’s license, state identification card or passport.
Seating and parking are limited and admission is on a first-come, first-served basis.
| Q: | How will the annual meeting be conducted? |
| A: | The Chairman of the Board (“Chairman”), or such other director as designated by the Board, will call the annual meeting to order, preside at the meeting and determine the order of business. The only business that will be conducted or considered at this meeting is business discussed in this Proxy Statement, as no other shareholder complied with the procedures disclosed in last year’s proxy statement for proposing other matters to be brought at the meeting. |
| Q: | How does a shareholder recommend a person for election to the Board for the 2013 annual meeting? |
| A: | Recommendations for nominations by shareholders should be in writing and addressed to our Corporate Secretary at our principal business address. See the “Shareholder Proposals and Nominations of Directors” section of this Proxy Statement on page 69 for further information on submitting nominations. Once the Corporate Secretary properly receives a recommendation for nomination, the recommendation is sent to the Corporate Governance Committee for consideration. Candidates for directors nominated by shareholders will be given the same consideration as candidates nominated by other sources. |
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At DTE Energy, we are committed to operating in an ethical, legal, environmentally sensitive and socially responsible manner, while creating long-term value for our shareholders. The foundation of our governance practices begins at the top, with the DTE Energy Board of Directors Mission and Guidelines (“Governance Guidelines”). The Governance Guidelines set forth the practices the Board follows with respect to Board composition and selection, Board meetings, the performance evaluation and succession planning for DTE Energy’s Chief Executive Officer (“CEO” or “Chief Executive Officer”), Board committees, Board compensation, and communicating with the Board, among other things. The Governance Guidelines are also intended to align the interests of directors and management with those of our shareholders. The following is a summary of the Governance Guidelines, along with other governance practices at DTE Energy.
Election of Directors and Vacancies
At the 2011 Annual Meeting, shareholders approved the declassification of the Board. Commencing with the 2012 Annual Meeting, directors with expiring terms will be elected annually for terms of one year.
If a vacancy on the Board occurs between annual shareholder meetings, the vacancy may be filled by a majority vote of the directors then in office, and such person will be subject to election by the shareholders at the next annual shareholder meeting.
Under the Governance Guidelines, the Corporate Governance Committee periodically assesses the skills, characteristics and composition of the Board, along with the need for expertise and other relevant factors as it deems appropriate. In light of these assessments, and in light of the standards set forth in the Governance Guidelines, the Corporate Governance Committee may seek candidates with specific qualifications and candidates who satisfy other requirements set by the Board. We believe our Board should be comprised of directors who have had high-level executive experience, have been directors on other boards and have been tested through economic downturns and crises. Industry experience, regional relationships and broad diversity of experience and backgrounds are also factors in Board nominee selection. While we do not have a formal policy relative to diversity in identifying director nominees, we believe that it is desirable for Board members to possess diverse characteristics of gender, race, ethnicity, and age, and we consider such factors in Board evaluation and in the identification of candidates for Board membership. We believe this type of composition enables the Board to oversee the management of the business and affairs of the Company effectively. Information about the skills, experiences and qualifications of our directors is included in their biographies beginning on page 23.
The Corporate Governance Committee considers candidates who have been properly nominated by shareholders, as well as candidates who have been identified by Board members and Company personnel. In addition, the Corporate Governance Committee may use a search firm to assist in the search for candidates and nominees and to evaluate the nominees’ skills against the Board’s criteria. Based on its review of all candidates, the Corporate Governance Committee recommends a slate of director nominees for election at the annual meeting of shareholders. The slate of nominees may include both incumbent and new nominees.
Potential candidates are reviewed and evaluated by the Corporate Governance Committee, and certain candidates are interviewed by one or more Corporate Governance Committee members. An invitation to join the Board is extended by the Board itself, through the Chairman and the Chair of the Corporate Governance Committee.
The Corporate Governance Committee screened director candidates and recommended to the Board that Charles G. McClure, Jr. be elected as a director. Mr. McClure was recommended as a potential candidate by the members of the Corporate Governance Committee. At the Board’s February 2, 2012 meeting, effective February 3, 2012, Mr. McClure was elected to serve for a term expiring in 2012, filling a vacancy created by an increase in the size of the Board from 13 to 14 directors.
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Composition of the Board and Director Independence
Our Governance Guidelines and our Bylaws state that the exact size of the Board will be determined by resolution of the Board from time to time. Our Board currently has 14 members.
Director Independence and Categorical Standards
As a matter of policy, in accordance with NYSE listing standards, we believe that the Board should consist of a majority of independent directors. The Board must affirmatively determine that a director has no material relationship with the Company, either directly or indirectly, or as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board has established the following categorical standards for director independence, which are more stringent than the NYSE independence standards for former Company executives:
A director, for whom any of the following is true, will not be considered independent:
| • | A director who is currently, or has been at any time in the past, an employee of the Company or a subsidiary. |
| • | A director whose immediate family member is, or has been within the last three years, an executive officer of the Company. |
| • | A director who receives, or whose immediate family member receives, more than $120,000 in direct compensation from the Company during any twelve-month period within the last three years, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). |
| • | A director or a director with an immediate family member who is a current partner of a firm that is the Company’s internal or external auditor; the director is a current employee of such a firm; the immediate family member is a current employee of such a firm and personally works on the Company’s audit; or the director or immediate family member was, within the last three years, a partner or employee of such a firm and personally worked on the Company’s audit within that time. |
| • | A director who is employed, or whose immediate family member is employed, or has been employed within the last three years, as an executive officer of another company where any of the Company’s present executives at the same time serves or served on that company’s compensation committee. |
| • | A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues is not independent until three years after the company falls below such threshold. |
Contributions to a tax-exempt organization will not be considered to be a material relationship that would impair a director’s independence if a director serves as an executive officer of a tax-exempt organization and, within the preceding three years, contributions in any single fiscal year were less than $1 million or 2% (whichever is greater) of such tax-exempt organization’s consolidated gross revenues.
Applying these standards, the Board has affirmatively determined that a majority of our directors qualify as independent and have no material relationship with the Company. The independent directors are Lillian Bauder, David A. Brandon, W. Frank Fountain, Jr., Frank M. Hennessey, Charles G. McClure, Jr., Gail J. McGovern, Eugene A. Miller, Mark A. Murray, Charles W. Pryor, Jr., General Josue Robles, Jr., Ruth G. Shaw and James H. Vandenberghe. Directors Gerard M. Anderson and John E. Lobbia are not independent directors and may be deemed to be affiliates of the Company under the categorical standards. Mr. Anderson is not considered independent due to his current employment as Chairman, President and Chief Executive Officer; and Mr. Lobbia is not considered independent due to his prior employment as Chairman and CEO of the Company and his son’s current employment at the Company.
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The Board has standing committees for Audit, Corporate Governance, Finance, Nuclear Review, Organization and Compensation and Public Responsibility. The Board committees act in an advisory capacity to the full Board, except that the Organization and Compensation Committee has direct responsibility for the CEO’s goals, performance and compensation along with compensation of other executives, and the Audit Committee has direct responsibility for appointing, replacing, compensating and overseeing the independent registered public accounting firm. Each committee has adopted a charter that clearly establishes the committee’s respective roles and responsibilities. In addition, each committee has authority to retain independent outside professional advisors or experts as it deems advisable or necessary, including the sole authority to retain and terminate any such advisors, to carry out its duties. The Board has determined that each member of the Audit, Corporate Governance, and Organization and Compensation Committees is independent under our categorical standards and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment. The Board has also determined that each member of the Audit Committee meets the independence requirements under the SEC rules and NYSE listing standards applicable to Audit Committee members.
Election of the Chairman and the CEO; Presiding Director
Our Bylaws currently provide that the Chairman may simultaneously serve as the CEO of the Company and shall preside at all meetings of the Board. In addition, the Board may elect an independent director as Presiding Director who would serve until the next annual meeting.
The Board believes it is in the best interests of the Company and shareholders for the Board to have flexibility in determining whether to separate or combine the roles of Chairman and Chief Executive Officer based on the Company’s circumstances. The Board has strong governance structures and processes in place to ensure the independence of the Board, eliminate conflicts of interest and prevent dominance of the Board by senior management. The Governance Guidelines and various committee charters provide for independent discussion among directors and for independent evaluation of, and communication with, many members of senior management.
The Board members have considerable experience and knowledge regarding the challenges and opportunities facing the Company and shareholders. The Board believes, therefore, that separating the roles of Chairman and Chief Executive Officer is unnecessary at this time. The Board believes that Mr. Anderson is well qualified through his experience and expertise to be the person who generally sets the agenda for, and leads discussions of, strategic issues for the Company. Nevertheless, the Board will separate these functions when it considers the separation to be in the best interests of the Company and shareholders.
With the Chairman and CEO positions held by Mr. Anderson, the Board continues to believe a good governance practice is to elect a Presiding Director from the independent directors. The Presiding Director will have such responsibilities as required under the NYSE listing standards, as well as such other responsibilities as determined by the Board. Mr. Miller currently serves as the Presiding Director and on February 2, 2012, the Board unanimously elected Lillian Bauder to succeed Mr. Miller as the Presiding Director effective May 3, 2012. The Presiding Director’s duties include:
| • | Calling regularly scheduled executive sessions; presiding at Board executive sessions of non-management directors or independent directors; and providing feedback regarding such sessions, as appropriate, to the Chairman and the CEO; |
| • | Reviewing shareholder communications addressed to the Board or to the Presiding Director; |
| • | Organizing Board meetings in the absence of the Chairman; presiding at any session of the Board where the Chairman is not present; |
| • | Designating one or more directors as alternate members of any committee to replace an absent or disqualified member at any committee meeting, provided that, in the event an alternate member is designated for the Audit, Corporate Governance or Organization and Compensation Committee, the designate meets the Company’s categorical standards for director independence and SEC requirements; |
9
| • | Consulting with the Chairman and the CEO in the selection of topics to be discussed when developing the annual Board calendar; |
| • | In consultation with the Board, retaining independent advisors on behalf of the Board as the Board determines to be necessary or appropriate; |
| • | Participating in the Organization and Compensation Committee’s annual review and approval of the CEO’s corporate goals and objectives and evaluation of the CEO’s performance against those goals; |
| • | Reviewing and consulting with the Chairman and the Corporate Secretary on Board meeting agendas; and |
| • | Collaborating with the Chairman and the Corporate Secretary on scheduling Board and Committee meetings. |
The Board met eight times in 2011. A portion of most Board meetings was spent with the Chairman and no other management members. All of the incumbent directors attended at least 75% of the Board meetings and the meetings of the committees on which they served, eight of whom had a 100% attendance record. The Board does not have a policy with regard to directors’ attendance at the annual meeting of shareholders. All directors then in office attended last year’s annual meeting.
The Board has not established term limits for directors. However, the Corporate Governance Committee of the Board has established policies that independent directors should not stand for election after attaining the age of 75, unless the Board waives this provision when circumstances exist which make it prudent to continue the service of the particular independent director. Directors who are retired CEOs of the Company or its subsidiaries shall not stand for election after attaining the age of 70. Except for the CEO, who may continue to serve as a director after retirement for so long as he is serving as Chairman, other employees who are also directors will not stand for re-election after retiring from employment with the Company.
Director John E. Lobbia reached age 70 during his current term which expires at the 2012 annual meeting, and in accordance with these policies, he will not stand for election and will retire from the Board at that time.
It is the Board’s practice that the non-management directors meet in executive session at most regular Board meetings and meet in executive session at other times whenever they believe it would be appropriate. The non-management directors met in executive sessions (sessions without the Chairman, CEO or any representatives of management present) at six Board meetings in 2011. At least once per year, the non-management directors meet in executive session to review the Organization and Compensation Committee’s performance review of the CEO. The Presiding Director chairs the executive sessions of non-management directors. In addition, the independent directors generally meet informally at least once per year without any representatives of management present.
Assessment of Board and Committee Performance
The Board evaluates its performance annually. In addition, each Board committee performs an annual self-assessment to determine its effectiveness. Periodically, the Board performs a peer review of all directors who have served one year or more. The results of the Board and Committee self-assessments are discussed with the Board and each Committee, respectively. The results of the individual peer review are reviewed by the Chair of the Corporate Governance Committee and discussed with the Corporate Governance Committee. The Chair of the Corporate Governance Committee discusses the results of the peer review with individual directors, as directed by the Corporate Governance Committee.
10
Board Compensation and Stock Ownership
The Company has established a Board compensation structure intended to provide compensation of approximately one-half cash and one-half equity. The Board has stock ownership guidelines that set specific Company stock ownership requirements based on the director’s years of service on the Board. (See “Director Stock Ownership” on page 17.)
Codes of Business Conduct and Ethics
The DTE Energy Board of Directors Code of Business Conduct and Ethics, the Officer Code of Business Conduct and Ethics and the DTE Energy Way are the standards of behavior for Company directors, officers, and employees. Any waiver of, or amendments to, the Board of Directors Code of Business Conduct and Ethics and the Officer Code of Business Conduct and Ethics as it pertains to the CEO, the Chief Financial Officer, senior financial officers and other Executive Officers, as defined in the “Security Ownership of Directors and Officers” section on page 19, will be disclosed promptly by posting such waivers or amendments on the Company website, www.dteenergy.com. There were no waivers or amendments during 2011.
The Company has established several methods for shareholders or other non-affiliated persons to communicate their concerns to the directors.
| • | Concerns regarding auditing, accounting practices, internal controls, or other business ethics issues may be submitted to the Audit Committee through its reporting channel: |
| By telephone: |
877-406-9448 | |
| Or |
||
| By Internet: |
ethicsinaction.dteenergy.com | |
| Or |
||
| By mail: |
For auditing, accounting practices or internal control matters: | |
| DTE Energy Company | ||
| Audit Committee | ||
| One Energy Plaza | ||
| Room 2441 WCB | ||
| Detroit, Michigan 48226-1279 | ||
| For business ethics issues: | ||
| DTE Energy Company | ||
| Office of the Assistant to the Chairman | ||
| One Energy Plaza | ||
| Room 2403 WCB | ||
| Detroit, Michigan 48226-1279 | ||
| • | Any other concern may be submitted to the Corporate Secretary by mail for prompt delivery to the Presiding Director at: |
Presiding Director
c/o Corporate Secretary
DTE Energy Company
One Energy Plaza
Room 2465 WCB
Detroit, Michigan 48226-1279
11
Periodically, we revise our governance information in response to changing regulatory requirements and evolving corporate governance developments. Current copies of the Governance Guidelines, committee charters, categorical standards of director independence and the codes of ethics referred to above are available on our website at www.dteenergy.com, in the “Investors — Corporate Governance” section. You can also request a copy of any or all of these documents and a copy of the Company’s annual report on Form 10-K, free of charge, by mailing your request to the Corporate Secretary, DTE Energy Company, One Energy Plaza, Room 2465 WCB, Detroit, Michigan 48226-1279.
The information on the Company’s website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings the Company makes with the SEC.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The table below reflects the membership and the number of meetings held by each Board Committee during 2011.
| Board Members | Audit | Corporate Governance |
Finance | Nuclear Review |
Organization & Compensation |
Public Responsibility |
||||||||||||||||||
| Gerard M. Anderson |
||||||||||||||||||||||||
| Lillian Bauder(1) |
X | * | X | X | 1 | X | 1 | |||||||||||||||||
| David A. Brandon(2) |
X | X | 2 | |||||||||||||||||||||
| W. Frank Fountain, Jr. |
X | X | * | |||||||||||||||||||||
| Frank M. Hennessey |
X | * | X | |||||||||||||||||||||
| John E. Lobbia |
X | X | ||||||||||||||||||||||
| Gail J. McGovern |
X | X | ||||||||||||||||||||||
| Eugene A. Miller |
X | X | X | * | ||||||||||||||||||||
| Mark A. Murray(3) |
X | 3 | X | 3 | X | |||||||||||||||||||
| Charles W. Pryor, Jr. |
X | X | * | |||||||||||||||||||||
| Josue Robles, Jr. |
X | X | ||||||||||||||||||||||
| Ruth G. Shaw |
X | X | ||||||||||||||||||||||
| James H. Vandenberghe |
X | X | X | * | ||||||||||||||||||||
| 2011 Meetings |
6 | 5 | 8 | 5 | 8 | 4 | ||||||||||||||||||
| * | Chair |
| (1) | Ms. Bauder began serving on the Organization and Compensation Committee in May 2011. She served on the Public Responsibility Committee until May 2011. |
| (2) | Mr. Brandon began serving on the Public Responsibility Committee in May 2011. |
| (3) | Mr. Murray began serving on the Nuclear Review Committee in May 2011. He served on the Finance Committee until May 2011. |
Following is a summary of the terms of each Committee’s charter and the responsibilities of its members:
Audit Committee
| • | Assists the Board in its oversight of the quality and integrity of our accounting, auditing and financial reporting practices and the independence of the independent registered public accounting firm. |
| • | Reviews scope of the annual audit and the annual audit report of the independent registered public accounting firm. |
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| • | Reviews financial reports, internal controls and financial and accounting risk exposures. |
| • | Reviews accounting policies and system of internal controls. |
| • | Responsible for the appointment, replacement, compensation and oversight of the independent registered public accounting firm. |
| • | Reviews and pre-approves permitted non-audit functions performed by the independent registered public accounting firm. |
| • | Reviews the scope of work performed by the internal audit staff. |
| • | Reviews legal or regulatory requirements or proposals that may affect the committee’s duties or obligations. |
| • | Retains independent outside professional advisors, as needed. |
The Board has determined that each member of the Audit Committee is financially literate. The Board has reviewed the qualifications and experience of each of the Audit Committee members and determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as that term has been defined by the SEC.
Corporate Governance Committee
| • | Reviews and assists the Board with corporate governance matters. |
| • | Considers the organizational structure of the Board. |
| • | Identifies and reports to the Board risks associated with the Company’s governance practices and the interaction of the Company’s governance with enterprise risk management. |
| • | Recommends the nominees for directors to the Board. |
| • | Reviews recommended compensation arrangements for the Board, director and officer indemnification and insurance for the Board. |
| • | Reviews recommendations for director nominations received from shareholders. |
| • | Reviews shareholder proposals and makes recommendations to the Board regarding the Company’s response. |
| • | Reviews best practices in corporate governance and recommends corporate and Board policies/practices, as appropriate. |
| • | Retains independent outside professional advisors, as needed. |
Finance Committee
| • | Reviews matters related to capital structure. |
| • | Reviews major financing plans. |
| • | Recommends dividend policy to the Board. |
| • | Reviews financial planning policies and investment strategy. |
| • | Reviews and approves the annual financial plan and forecasts. |
| • | Reviews certain capital expenditures. |
| • | Reviews insurance and business risk management. |
| • | Receives reports on the strategy, investment policies, adequacy of funding and performance of post-retirement obligations. |
| • | Reviews certain potential mergers, acquisitions and divestitures. |
| • | Reviews investor relations activities. |
| • | Retains independent outside professional advisors, as needed. |
Nuclear Review Committee
| • | Provides non-management oversight and review of the Company’s nuclear facilities. |
| • | Reviews the financial, operational and business plans at the Company’s nuclear facilities. |
| • | Reviews the overall performance at the Company’s nuclear facilities. |
| • | Reviews the policies, procedures and practices related to health and safety, potential risks, resources and compliance at the Company’s nuclear facilities. |
| • | Reviews the impact of changes in regulation on the Company’s nuclear facilities. |
| • | Retains independent outside professional advisors, as needed. |
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Organization and Compensation Committee
| • | Reviews the CEO’s performance and approves the CEO’s compensation. |
| • | Approves the compensation of certain other executives. |
| • | Administers the executive incentive plans and oversees the Company’s overall executive compensation and benefit plan philosophy, structure and practices, and the risks involved in executive compensation plans. |
| • | Reviews and approves executive employment agreements, severance agreements and change-in-control agreements, along with any amendments to those agreements. |
| • | Reviews executive compensation programs to determine competitiveness. |
| • | Recommends to the full Board the officers to be elected by the Board. |
| • | Reviews succession and talent planning. |
| • | Retains independent outside professional advisors, as needed. |
Public Responsibility Committee
| • | Reviews and advises the Board on emerging social, economic, political and environmental issues. |
| • | Reviews reports from management with respect to risk exposures related to social, economic, political, reputational and environment issues and advises the Board on management’s procedures for monitoring, controlling and reporting on such exposures. |
| • | Reviews the Company’s policies on social responsibilities. |
| • | Reviews employee policies and safety issues related to employees, customers and the general public. |
| • | Reviews strategic initiatives and activities relating to the environment. |
| • | Reviews the policies, programs, performance and activities relating to the Company’s compliance and ethics programs. |
| • | Retains independent outside professional advisors, as needed. |
BOARD OF DIRECTORS RISK OVERSIGHT FUNCTIONS
The Board receives, reviews and assesses reports from the Board Committees and from management relating to enterprise-level risks. Each Board Committee is responsible for overseeing and considering risk issues relating to their respective Committee and reporting their assessments to the full Board at each regularly scheduled Board meeting. When granting authority to management, approving strategies and receiving management reports, the Board and Committees consider, among other things, the risks we face. Each Committee reviews management’s assessment of risk for that Committee’s respective area of responsibility. The Audit Committee considers risk issues, policies and controls associated with our overall financial reporting and disclosure process and legal compliance, and reviews policies on risk control assessment and accounting risk exposure. In addition to its regularly scheduled meetings, the Audit Committee meets with the Chief Financial Officer, the General Auditor, the Chief Risk Officer and the independent registered public accounting firm in executive sessions at least quarterly, and meets in executive session with the General Counsel, the Chief Information Officer and the Chief Compliance Officer at least annually in separate executive sessions. The Finance Committee oversees financial, capital, credit and insurance risk. The Organization and Compensation Committee assesses and discusses with the Board the relationship between the inherent risks in executive compensation plans, executive compensation arrangements and executive performance goals and payouts, and how the level or risk corresponds to the Company’s business strategies. The Corporate Governance Committee reports to the Board regarding those risks associated with the Company’s governance practices and the interaction of the Company’s governance with enterprise risk-level management. The Nuclear Review Committee reviews risk relating to the operation of our nuclear power facilities. The Public Responsibility Committee deals with matters of risk associated with social responsibility, reputation, safety and the environment. As part of its oversight function, the Board discusses any risk conflicts that may arise between the Committees or assigns to a Committee risk issues that may arise which do not fall within a specific Committee. All Board Committees meet periodically with members of senior management to discuss the relevant risks and challenges facing the Company.
The Company also utilizes an internal Risk Management Committee, chaired by the Chairman, President and CEO and comprised of the Chief Financial Officer, Chief Risk Officer, General Counsel, General Auditor and
14
other senior officers, that, among other things, directs the development and maintenance of comprehensive risk management policies and procedures, and sets, reviews and monitors risk limits on a regular basis for enterprise-level risks, counter-party credit and commodity-based exposures. The Company’s Chief Risk Officer attends all Audit Committee meetings and meets annually with either the joint Audit Committee and Finance Committee or the full Board to update the members on the Company’s enterprise-level risk management. The Chief Risk Officer also periodically meets with the other Board Committees and the full Board as may be required.
The Board believes that the committee structure of risk oversight is in the best interests of the Company and its shareholders. Each Committee member has expertise on risks relative to the nature of the Committee on which he/she sits. With each Committee reporting on risk issues at full Board meetings, the entire Board is in a position to assess the overall risk implications, to evaluate how they may affect the Company and to provide oversight on appropriate actions for management to take.
With regard to risk and compensation programs and policies, the Company’s Energy Trading segment has compensation programs and policies that are structured differently than other units within the Company. These compensation programs and policies are designed to discourage excessive risk taking by the Energy Trading employees and are subject to specific written policies and procedures administered by members of the Company’s senior management. The Company has determined that the Energy Trading compensation programs and policies do not create risks that are reasonably likely to have a material adverse effect on the Company.
15
BOARD OF DIRECTORS COMPENSATION
Elements of Director Compensation
Employee directors receive no payment for service as directors. The goal of our compensation policies for non-employee directors is to tie their compensation to your interests as shareholders. Accordingly, approximately 50% of a director’s annual compensation is in the form of equity-based compensation, including phantom shares of our common stock. Generally, the compensation program for non-employee directors is reviewed on an annual basis by the Corporate Governance Committee and the Board. This review includes a review of a comparative peer group of companies that is identical to the peer group used to review executive compensation (See “Executive Compensation — Compensation Discussion and Analysis” beginning on page 41). Based on the review completed in December 2011, the Board of Directors voted to increase the annual equity grant to non-employee directors from a variable number of phantom shares valued at $90,000 annually to a variable number of phantom shares valued at $95,000 annually. For total compensation paid to each director during 2011, see the “2011 Director Compensation Table” on page 68. The compensation program effective January 1, 2012 is described below.
| Cash Compensation |
||
| Cash retainer |
$60,000 annually | |
| Presiding Director retainer |
$20,000 annually | |
| Committee chair retainer |
$10,000 annually for Audit Committee Chair and Organization and Compensation Committee Chair, $5,000 annually for all other Committee chairs | |
| Committee meeting fees and fees for special services |
$1,000 per meeting/occurrence | |
| Board meeting fee |
$2,000 per meeting | |
| Equity Compensation |
||
| Upon first election to the Board |
1,000 shares of restricted DTE Energy common stock | |
| Annual equity compensation |
A variable number of phantom shares of DTE Energy common stock valued at $95,000 annually, with the actual number of phantom shares to be granted each year determined based on the closing price of the Company’s common stock on the first business day of each calendar year(1) | |
| (1) | Phantom shares of DTE Energy common stock are credited to each non-employee director’s account in January of each year. Phantom share accounts are also credited with dividend equivalents which are reinvested into additional phantom shares. For phantom shares granted after 2004, payment of the cash value is made three years after the date of grant unless otherwise deferred by voluntary election of the director. For phantom shares granted before 2005, payment of the cash value occurs only after the date a director terminates his or her service on the Board. |
Payment of Non-Employee Director Fees and Expenses
Retainers and all meeting fees for non-employee directors are either (i) payable in cash or (ii) at the election of the director, deferred into an account pursuant to the DTE Energy Company Plan for Deferring the Payment of Directors’ Fees. Non-employee directors may defer up to 100% of their annual retainer and meeting fees into an unfunded deferred compensation plan. Deferred fees may accrue for future payment, with interest accrued monthly at the 5-year U.S. Treasury Bond rate as of the last business day of each month or, at the election of the director, they may be invested in phantom shares of our common stock with all imputed dividends reinvested.
In addition to the retainers and fees, non-employee directors are reimbursed for their travel expenses incurred in attending Board and committee meetings, along with reimbursement for fees and expenses incurred when attending director education seminars or special meetings requested by management. Non-employee directors of
16
the Company, along with salaried employees, are also eligible to participate in the DTE Energy matching gift program, whereby the Company matches certain charitable contributions.
Directors’ Retirement Plan
Benefits under the DTE Energy Company Retirement Plan for Non-Employee Directors were frozen as of December 31, 1998, and all non-employee directors were deemed vested on that date. No further benefits will accrue. Mr. Miller and Dr. Bauder are the only current directors covered by this plan and, upon their retirement from the Board, they will each receive $3,415 per month for 111 and 152 months, respectively.
Director Life Insurance
The Company provides each non-employee director with group term life insurance in the amount of $20,000 and travel accident insurance in the amount of $100,000.
Director Stock Ownership
We have established stock ownership guidelines for directors to more closely tie their interests to those of shareholders. Under these guidelines, the Board requires that each director own shares of the Company’s common stock beginning no later than 30 days after election to the Board. In addition, directors are required to own, within five years after initial election to the Board, shares of Company stock having a value equal to two times their annual cash and phantom stock compensation. Common stock, time-based restricted stock, and phantom shares held by a director are counted toward fulfillment of this ownership requirement. As of January 1, 2012, all directors met the initial common stock ownership requirement and those directors who have served as a director for at least five years after their initial election have fulfilled the five-year requirement.
INFORMATION ON COMPANY EXECUTIVE OFFICERS
Under our Bylaws, the officers of DTE Energy are elected annually by the Board of Directors, each to serve until his/her successor is elected and qualified, or until his/her resignation or removal. The current executive officers of the Company elected by the Board are as follows:
| Name |
Age(1) | Present Position |
Present Position Held Since |
|||||||
| Gerard M. Anderson |
53 | Chairman, President and Chief Executive Officer | 09/12/2011 | (2) | ||||||
| David E. Meador |
55 | Executive Vice President and Chief Financial Officer | 06/23/04 | |||||||
| Paul C. Hillegonds |
63 | Senior Vice President | 05/16/05 | |||||||
| Steven E. Kurmas |
56 | President and Chief Operating Officer, Detroit Edison and Group President, DTE Energy Company |
12/08/08 | (2) | ||||||
| Bruce D. Peterson |
55 | Senior Vice President and General Counsel | 06/25/02 | |||||||
| Gerardo Norcia |
49 | President and Chief Operating Officer, | 06/28/07 | (2) | ||||||
| MichCon and Group President, DTE Energy Company | ||||||||||
| Larry E. Steward |
59 | Vice President | 01/15/01 | |||||||
| Peter B. Oleksiak |
46 | Vice President and Controller and Chief Accounting Officer | 02/07/07 | |||||||
| Lisa A. Muschong |
42 | Corporate Secretary | 05/10/10 | (2) | ||||||
| (1) | As of March 15, 2012. |
| (2) | These executive officers have held various positions at DTE Energy for five or more years. |
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2011, the Organization and Compensation Committee consisted of Messrs. Hennessey and Miller, Dr. Shaw and Ms. Bauder. No member of the Organization and Compensation Committee serves as an officer or employee of the Company or any of its subsidiaries nor has any member of the Organization and Compensation Committee formerly served as an officer of the Company or any of its subsidiaries. During 2011, none of the executive officers of the Company served on the board of directors or on the compensation committee of any other entity, any of whose executive officers served either on the Board or on the Organization and Compensation Committee of the Company.
Pursuant to Article VI of our Articles of Incorporation, to the fullest extent permitted by law, no director of the Company shall be personally liable to the Company or its shareholders in the performance of his/her duties.
Article VII of our Articles of Incorporation provides that each person who is or was or had agreed to become a director or officer, or each person is or was serving or who had agreed to serve at the request of the Board of Directors as an employee or agent of the Company, or as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including heirs, executors, administrators or estate of such person), shall be indemnified by the Company to the fullest extent permitted by law. We have entered into indemnification agreements with each of our directors and executive officers. These agreements require the Company to indemnify such individuals for certain liabilities to which they may become subject as a result of their affiliation with the Company.
The Company, the directors and officers in their capacities as such are insured against liability for alleged wrongful acts (to the extent defined) under eight insurance policies providing aggregate coverage in the amount of $185 million.
18
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information as of January 3, 2012, with respect to beneficial ownership of common stock, phantom stock, performance shares, and options exercisable within 60 days for (i) each of our directors and nominees for director, (ii) our Chairman and Chief Executive Officer, Chief Financial Officer the three other highest paid executive officers and our former Executive Chairman who retired in September 2011 (together, the “Named Executive Officers”), and (iii) all executive officers and directors as a group. Executive officers for this purpose are those individuals defined as Executive Officers under Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless otherwise indicated, each of the named individuals has sole voting and/or investment power over the shares identified. To our knowledge, no member of our management team or director was a beneficial owner of one percent or more of the outstanding shares of common stock as of January 3, 2012.
Amount and Nature of Beneficial Ownership as of January 3, 2012
| Name of Beneficial Owners |
Common Stock(1) | Phantom Stock(2) | Other Shares
That May Be Acquired(3) |
Options Exercisable Within 60 Days |
||||||||||||
| Gerard M. Anderson |
182,619 | 10,478 | 93,401 | 392,220 | ||||||||||||
| Lillian Bauder |
6,983 | 26,757 | 0 | 0 | ||||||||||||
| David A. Brandon |
1,000 | 5,232 | 0 | 0 | ||||||||||||
| Anthony F. Earley, Jr. |
328,087 | 3,532 | 85,343 | 489,999 | ||||||||||||
| W. Frank Fountain, Jr. |
1,000 | 17,782 | 0 | 0 | ||||||||||||
| Frank M. Hennessey |
6,563 | 31,490 | 0 | 0 | ||||||||||||
| Steven E. Kurmas |
62,453 | 1,393 | 32,589 | 96,999 | ||||||||||||
| John E. Lobbia |
24,058 | 13,962 | 0 | 0 | ||||||||||||
| Gail J. McGovern |
1,000 | 16,740 | 0 | 1,0000 | ||||||||||||
| David E. Meador |
74,568 | 77 | 34,477 | 96,999 | ||||||||||||
| Eugene A. Miller |
4,400 | 35,899 | 0 | 2,000 | ||||||||||||
| Mark A. Murray |
1,000 | 5,976 | 0 | 0 | ||||||||||||
| Gerardo Norcia |
35,612 | 1,040 | 21,098 | 74,566 | ||||||||||||
| Bruce D. Peterson |
36,717 | 3,220 | 21,905 | 82,000 | ||||||||||||
| Charles W. Pryor, Jr. |
300 | 25,004 | 0 | 0 | ||||||||||||
| Josue Robles, Jr. |
1,000 | 7,445 | 0 | 1,000 | ||||||||||||
| Ruth G. Shaw |
1,000 | 5,976 | 0 | 0 | ||||||||||||
| James H. Vandenberghe |
2,000 | 8,159 | 0 | 0 | ||||||||||||
| Directors & Executive Officers as a group — 22 persons |
823,729 | 223,175 | 317,987 | 1,322,715 | ||||||||||||
| (1) | Includes directly held common stock, restricted stock and shares held pursuant to the 401(k) plan. The table reflects Mr. Earley’s forfeiture of 40,840 shares of restricted stock due to his retirement in September 2011. |
| (2) | Shares of phantom stock are acquired as follows: (a) by non-employee directors (i) as compensation under the DTE Energy Company Deferred Stock Compensation Plan for Non-Employee Directors and (ii) through participation in the DTE Energy Company Plan for Deferring the Payment of Directors’ Fees, and (b) by executive officers pursuant to the (i) DTE Energy Company Supplemental Savings Plan, (ii) DTE Energy Company Executive Deferred Compensation Plan (this plan was closed effective as of January 1, 2007 for future deferrals; none of the Named Executive Officers participate in the plan) and (iii) DTE Energy Company Executive Supplemental Retirement Plan. Shares of phantom stock may be paid out in either cash or stock. |
| (3) | Represents performance shares under the Long-Term Incentive Plan (as described beginning on page 49) that entitle the executive officers to receive shares or cash equivalents (or a combination thereof) in |
19
| the future if certain performance measures are met. The performance share numbers assume that target levels of performance are achieved. The number of performance shares reflected in the table includes an increase from the original grant amount, assuming full dividend reinvestment at the fair market value on the dividend payment date. Performance shares are not currently outstanding shares of our common stock and are subject to forfeiture if the performance measures are not achieved over a designated period of time. Executive officers do not have voting or investment power over the performance shares until performance measures are achieved. See the discussion in “Executive Compensation — Compensation Discussion and Analysis” beginning on page 41. The table reflects Mr. Earley’s forfeiture of 43,551 performance shares due to his retirement in September 2011. The remaining performance shares will be paid out in accordance with their terms when they were granted. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers and 10% shareholders (if any) to file reports of ownership and changes in ownership with respect to our securities with the SEC and to furnish copies of these reports to us. We reviewed the filed reports and written representations from our directors and executive officers (to our knowledge, we do not have any 10% shareholders) regarding the necessity of filing reports. Based on our review, none of our current executive officers had Section 16(a) filings during 2011 that were not filed on a timely basis. One former executive officer had a Section 16(a) filing during 2011 that was not filed on a timely basis. Ms. Lynne Ellyn retired as the Company’s Senior Vice President and Chief Information Officer effective June 1, 2011. On June 16, 2011 certain of Ms. Ellyn’s shares of DTE Energy stock were forfeited to satisfy tax obligations upon vesting of certain executive compensation and on June 29, 2011, Ms. Ellyn sold shares of DTE Energy stock held in her 401(k) account. These two transactions were not filed timely due to administrative oversight. Ms. Ellyn filed her late Form 4 on July 20, 2011 promptly after discovering the oversight.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the only persons or groups known to the Company to be beneficial owners of more than 5% of our outstanding common stock.
| Title of Class |
Name and Address of Beneficial Owner |
Amount and Nature
of Beneficial Ownership |
Percent of Class |
|||||||
| Common Stock |
BlackRock, Inc. 40 East 52nd Street New York, New York 10022 |
11,210,159 | (1) | 6.62 | % | |||||
| Common Stock |
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
9,865,669 | (2) | 5.82 | % | |||||
| Common Stock |
State Street Corporation State Street Financial Center One Lincoln Street Boston, MA 02111 |
9,220,923 | (3) | 5.4 | % | |||||
| (1) | Based on information contained in Schedule 13G/A filed on February 13, 2012. Shares listed as beneficially owned by BlackRock are owned by the following entities: BlackRock Japan Co. Ltd, BlackRock Advisors (UK) Limited, BlackRock Asset Management Deutschland AG, BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Asset Management Canada Limited, BlackRock Asset Management Australia Limited, BlackRock Advisors, LLC, BlackRock Investment Management, LLC, BlackRock Investment Management (Australia) Limited, BlackRock (Netherlands) B.V., BlackRock Fund Managers Limited, BlackRock Asset Management Ireland Limited, BlackRock International Limited, and BlackRock Investment Management (UK) Limited. BlackRock, Inc. has sole dispositive power and sole voting power and is deemed to beneficially own 11,210,159 shares. |
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| (2) | Based on information contained in Schedule 13G/A filed on February 8, 2012. Shares listed as beneficially owned by Vanguard are owned by the following entities: The Vanguard Fiduciary Trust Company and The Vanguard Group, Inc. The Vanguard Group, Inc. has sole voting power with respect to 233,828 shares, sole dispositive power with respect to 9,631,841 shares, shared dispositive power with respect to 233,828 shares and is deemed to beneficially own 9,865,669 shares. |
| (3) | Based on information contained in Schedule 13G filed on February 9, 2012. Shares listed as beneficially owned by State Street Corporation are owned by the following entities: State Street Global Advisors France S.A., State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors Limited, State Street Global Advisors Ltd, State Street Global Advisors, Australia Limited, State Street Global Advisors Japan Co., Ltd., State Street Global Advisors, Asia Limited and Ssaris Advisors LLC. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related-person transactions have the potential to create actual or perceived conflicts of interest. The Company has policies in place to address related-party transactions. In addition, our Corporate Governance Committee and Audit Committee review potential dealings or transactions with related parties. In conducting such reviews, the Committees consider various factors they deem appropriate, which may include (i) the identity of the related party and his or her relationship to the Company, (ii) the nature and size of the transaction, including whether it involved the provision of goods or services to the Company that are unavailable from unrelated third parties and whether the transaction is on terms that are comparable to the terms available from unrelated third parties, (iii) the nature and size of the related party’s interest in the transaction, (iv) the benefits to the Company of the transaction and (v) whether the transaction could involve an apparent or actual conflict of interest with the Company.
In general, employees and directors may not be involved in a business transaction where there is a conflict of interest with the Company. The DTE Energy Way requires non-officer employees to report conflicts of interest or potential conflicts of interest to their respective superiors; the Officer Code of Conduct and Ethics requires officers to report conflicts of interest or potential conflicts of interest to the Company’s General Counsel or to the Company’s Board of Directors; and the Board of Directors Code of Business Conduct and Ethics requires directors to disclose conflicts of interest or potential conflicts of interest to the Company’s Corporate Governance Committee or the Chairman of the Board. For directors and officers, any waivers of the Company’s conflict of interest policy must be approved by the Board or a Board committee, as required under the Officer Code of Conduct and Ethics or Board of Directors Code of Business Conduct and Ethics, disclosed to shareholders and posted to our website at http:/ /www.dteenergy.com/dteEnergyCompany/investors/corporateGovernance/ethics/code.html
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ELECTION OF DIRECTORS
Our current Bylaws require that commencing with the 2012 annual meeting of shareholders and for each annual meeting of shareholders thereafter, directors whose terms are expiring at an annual meeting of shareholders shall be elected for terms of one year. Each director whose term of office for which he or she was elected has not expired as of the 2012 annual meeting of shareholders shall continue to hold office until such time as his or her term has expired.
Proxies cannot be voted for more than five persons at this meeting. If any nominee becomes unable or unwilling to serve at the time of the meeting, the persons named in the enclosed proxy card have discretionary authority to vote for a substitute nominee or nominees. It is anticipated that all nominees will be available for election.
The biographies of each of the nominees and continuing directors below contain information regarding the person’s service as a director, business experience, and director positions held currently or at any time during at least the last five years. The dates shown for service as a director of DTE Energy include service as a director of Detroit Edison, our former corporate parent and, as a result of a share exchange in 1996, now our wholly-owned subsidiary. The age provided for each director is as of March 15, 2012. In addition to the information presented below regarding each person’s experience, qualifications, attributes, and skills that caused our Corporate Governance Committee and Board to determine that the person should serve as a director, the Board believes that all of the Company’s directors have a reputation for integrity and honesty and adherence to high ethical standards. They each have demonstrated business acumen, strategic insight, an ability to exercise sound judgment, and a commitment to service and community involvement. Finally, we value their significant experience on other public company boards of directors and board committees and the diversity that they bring to our Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES FOR ELECTION AT THIS MEETING.
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Nominees for Election at this Meeting for Terms Expiring in 2013
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Gerard M. Anderson, age 53 Director since 2009 Mr. Anderson has served as Chairman of the Board since September 12, 2011. Mr. Anderson has served as President and Chief Executive Officer of the Company since October 2010. From 2005 through 2010, Mr. Anderson served as President and Chief Operating Officer of the Company, prior to which he served in various positions at the Company since 1993, including service as President from 2004 to 2005 and Executive Vice President from 1997 to 2004. Prior to joining DTE Energy, Mr. Anderson worked for McKinsey & Co. He received his B.S. in civil engineering from the University of Notre Dame and his M.B.A. and M.P.P. from the University of Michigan. In addition to his service on the Company’s Board of Directors, he is a director of The Andersons, Inc. and a director of many community and non-profit organizations.
Mr. Anderson’s qualifications to sit on our Board include his significant number of years of experience in the energy industry, including five years as our President and Chief Operating Officer. Mr. Anderson also has extensive experience in strategic planning and corporate and business development, along with broad experience managing capital-intensive industries. He also has experience serving as a director of another publicly traded corporation. | |||
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Charles G. McClure, Jr., age 58 Director since 2012 Mr. McClure has served as the Chairman of the Board, Chief Executive Officer and President of Meritor, Inc., a leading global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets, since 2004. Prior to this position, he served as CEO, president and a member of the board of Federal-Mogul Corp. He joined Federal-Mogul in 2001 as president, COO and a member of the board. He also served as president, CEO and a member of the board of Detroit Diesel. He joined Detroit Diesel in 1997 after 14 years in a variety of management positions with Johnson Controls, including vice president and managing director of the company’s European and South African operations and later became President of the company’s Americas region. He has also previously held management positions at Hoover Universal and Ford as a heavy-duty truck sales engineer and field service engineer. From 1975 to 1979 he served as an officer on a U.S. Navy destroyer. Mr. McClure holds a Bachelor’s Degree in mechanical engineering from Cornell University and a Master of Business Administration from the University of Michigan. In addition to his service on the Company’s Board of Directors, he is a Director of General Cable Corporation, R.L. Polk and Company, National Association of Manufacturers (NAM), the Detroit Regional Chamber of Commerce, and a director, member or trustee of many community and professional organizations.
Mr. McClure’s qualifications to sit on our Board include his experience as CEO, president and director of several major domestic and international corporations and his strong, broad knowledge of business and industry, together with his proven leadership skills and financial expertise. He also has experience as a director of other publicly traded corporations. |
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Eugene A. Miller, age 74 Director since 1989 Mr. Miller is the retired Chairman, President and Chief Executive Officer of Comerica Incorporated and Comerica Bank, a financial services company, and served in this position from 1993 to 2002. During his career at Comerica Incorporated, he held various positions including President and Chief Operating Officer. Mr. Miller received his B.B.A. from the Detroit Institute of Technology. In addition to his service on the Company’s Board of Directors and Comerica Incorporated’s Board of Directors, he serves as a director of Handleman Company, TriMas Corporation and a director or trustee of many community and professional organizations.
Mr. Miller’s qualifications to sit on our Board include his experience as a chief executive officer and extensive executive experience in banking, corporate finance, corporate governance and strategic planning and corporate development, combined with strong skills in executive compensation, mergers and acquisitions, regulatory matters and community relations. He also has experience serving as a director of several other publicly traded corporations. | |||
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Charles W. Pryor, Jr., age 67 Director since 1999 Dr. Pryor serves as Chairman of Urenco USA, Inc., a mineral enrichment provider, and has served in this position since 2007. He also served as President and Chief Executive Officer of Urenco Investments from 2006 to 2007 and served as President and Chief Executive Officer of Urenco, Inc. from 2003 to 2006. From 2002 to 2003, he served as Chief Executive Officer of Utility Services Business Group of British Nuclear Fuels, plc, and, from 1997 to 2002, he served as Chief Executive Officer of Westinghouse Electric Co. Dr. Pryor received his B.S. in civil engineering and his M.S. and Ph.D. in structural engineering from Virginia Tech. He also received an executive M.B.A. from Northeastern University. In addition to his service on the Company’s Board of Directors and Urenco USA’s Board of Directors, Dr. Pryor is a director of Progress Energy, Inc. and a director or trustee of many community and professional organizations.
Dr. Pryor’s qualifications to sit on our Board include his experience as a chief executive officer and his extensive operational and engineering experience in the nuclear and energy industries. Dr. Pryor also has experience managing capital-intensive industries and strong skills in corporate finance, regulatory matters and strategic planning and corporate development. He also has experience serving as a director of another publicly traded corporation in the utility industry. | |||
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Ruth G. Shaw, age 64 Director since 2008 Dr. Shaw is retired from Duke Energy, an energy company. During her career at Duke Energy, she held various positions, including Executive Advisor from 2007 to 2009. From 2006 to 2007, she served as Group Executive for Public Policy and President of Duke Nuclear. She also served as President and Chief Executive Officer of Duke Power Company from 2003 to 2006, and previously served as Chief Administrative Officer. Dr. Shaw received her B.A. and M.A. from East Carolina University and her Ph.D. from the University of Texas at Austin. In addition to her service on the Company’s Board of Directors, she is a director of The Dow Chemical Company, ecoAmerica and a director or trustee of many community and professional organizations. Dr. Shaw is a previous board member of the Nuclear Energy Institute and the Institute of Nuclear Power Operations. She served as a director of Wachovia Corporation until 2008 and a director of Medcath until 2005.
Dr. Shaw’s qualifications to sit on our Board include her experience as a chief executive officer and her 15 years of experience in the energy and nuclear businesses and managing capital-intensive industries. She has broad knowledge of regulatory matters and strong skills in public policy, corporate communications, corporate governance, executive compensation and corporate finance. She also has experience serving as a director of other publicly traded corporations. |
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Directors Whose Present Terms Continue Until 2013
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David A. Brandon, age 59 Director since 2010 Mr. Brandon has served as the Athletic Director of the University of Michigan since March 2010. From 1999 until 2010, he was the chairman and CEO of Domino’s Pizza, Inc., a pizza delivery company. He continues to serve as Non-executive Chairman of Domino’s. From 1989 to 1998, he served as president and CEO of Valassis Communications, Inc., a marketing and sales promotion firm, and was Chairman of the Board there from 1997 to 1998. Mr. Brandon received a B.A. in communications from the University of Michigan. In addition to his service on the Company’s Board of Directors, he is a director of Domino’s Pizza, Inc., Kaydon Corporation and Herman Miller, Inc. He has previously served as a director of several corporations, including The TJX Companies, Northwest Airlines Corporation and Burger King Holdings, Inc. He has also served an 8-year term on the University of Michigan board of regents and as Chairman of the Board of Business Leaders for Michigan.
Mr. Brandon’s qualifications to sit on our Board include his experience as a chief executive officer and extensive executive experience in marketing and sales, and strong skill sets in corporate finance, corporate governance and strategic planning, executive compensation, and community relations. He also has experience serving as a director of several other publicly traded corporations. | |||
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Frank M. Hennessey, age 73 Director since 2001 Mr. Hennessey has served as Chairman and Chief Executive Officer of Hennessey Capital, LLC, a provider of business and financial resources, since 2002. He is also Chief Executive Officer of Hennessey Arabian, LLC. From 1995 to 2003, he was the Chairman of Emco Limited, a building materials manufacturer and distributor. He was also Vice Chairman and Chief Executive Officer of MascoTech, Inc., a transportation industry metalwork manufacturer from 1998 through 2000. Mr. Hennessey served as Chief Executive Officer of Handleman Company from 1980 to 1989. Prior to 1980, he was Group Managing Partner for Coopers & Lybrand. He received a B.S. in business administration from Northeastern University. In addition to his service on the Company’s Board of Directors, Emco Limited’s Board of Directors and MascoTech’s Board of Directors, Mr. Hennessey has served as a director or trustee of many community and professional organizations.
Mr. Hennessey’s qualifications to sit on our Board include his experience as a chief executive officer and in managing capital-intensive operations. In addition, he has extensive experience with public and financial accounting matters for complex organizations and strong skills in corporate finance, executive compensation and regulatory matters. | |||
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Gail J. McGovern, age 60 Director since 2003 Ms. McGovern is currently the President and Chief Executive Officer of the American Red Cross and has served in that position since 2008. From 2002 to 2008, she was a Professor at Harvard Business School. Ms. McGovern also served as President of Fidelity Personal Investments, a unit of Fidelity Investments, from 1998 to 2002 and Executive Vice President of Consumer Markets, a division of AT&T, from 1997 to 1998. She received her B.A. in quantitative sciences from Johns Hopkins University and her M.B.A. from Columbia University. In addition to her service on the Company’s Board of Directors, Ms. McGovern is a trustee of Johns Hopkins University. She also served as a director of Digitas, Inc. until 2007 and of Hartford Financial Services Group, Inc. until 2010.
Ms. McGovern’s qualifications to sit on our Board include her experience as a chief executive officer and extensive executive experience in marketing and sales, customer relations, corporate finance, strategic planning and government relations and knowledge of regulatory matters. She also has served as a director of other publicly traded corporations and a trustee of a major research university. |
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Directors Whose Present Terms Continue Until 2014
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Lillian Bauder, age 72 Director since 1986 Dr. Bauder is a retired Vice President of Masco Corporation, a consumer products and services provider. Prior to her retirement from Masco Corporation in 2007, she served in various positions at Masco Corporation, including Vice President of Corporate Affairs from 1996 to 2005 and Chairman and President of the Masco Corporation Foundation during this same time period. Earlier, she was President and Chief Executive Officer of Cranbrook Educational Community for 13 years. Dr. Bauder received her B.A. from Douglass College, Rutgers University, and an M.A. and Ph.D. from the University of Michigan. In addition to her service on the Company’s Board of Directors, she is a director or trustee of many community and professional organizations and served as a director of Comerica Incorporated until 2010.
Dr. Bauder’s qualifications to sit on our Board include her experience as a chief executive officer of a major non-profit educational institution. She also has extensive for-profit executive experience in corporate governance, strategic planning and corporate strategy development, combined with strong skill sets in organizational planning and community and governmental relations. She also has experience serving as a director of two other publicly traded corporations. | |||
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W. Frank Fountain, Jr., age 67 Director since 2007 Mr. Fountain has served as Chairman of the Walter P. Chrysler Museum Foundation Board of Directors since 2009. He is a retired executive of Chrysler, LLC, an automobile and automotive components manufacturer which was reorganized under Federal bankruptcy laws in 2009 after his retirement from that company. His positions at Chrysler, LLC included serving as Senior Advisor, Senior Vice President of External Affairs and Public Policy from 1998 to 2008 and Vice President, Government Affairs, from 1995 to 1998. Mr. Fountain received a B.A. in history and political science from Hampton University and an M.B.A. from the University of Pennsylvania Wharton School. In addition to his service on the Company’s Board of Directors, he is a director of Africare, The Wharton School, Hampton University Board of Trustees, National Council of Negro Women and Wittenburg Center on Global Ethics and he is a director or trustee of many community and professional organizations.
Mr. Fountain’s qualifications to sit on our Board include his experience as a leader of large business organizations and extensive experience with public and financial accounting for complex organizations, combined with strong skills in corporate finance, public policy, and government relations and his knowledge of regulatory matters. | |||
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Mark A. Murray, age 57 Director since 2009 Mr. Murray has served as President of Meijer, Inc., a regional retail chain, since 2006. From 2001 to 2006, he was the President of Grand Valley State University. He also served as Treasurer for the State of Michigan from 1999 to 2001 and Vice President of Finance and Administration for Michigan State University from 1998 to 1999. Mr. Murray received his B.S. in economics and his M.S. in labor and industrial relations from Michigan State University. In addition to his service on the Company’s Board of Directors, he is a director of Universal Forest Products, Incorporated and a director or trustee of many community and professional organizations.
Mr. Murray’s qualifications to sit on our Board include his experience as President of a major Michigan-based corporation and his experience as a university president and a State of Michigan government official. He also has extensive experience in financial accounting matters for complex organizations, strategic planning and corporate development, combined with strong skills in corporate finance, sales and marketing and government relations and public policy. He also has experience serving as a director of another publicly traded corporation. |
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Josue Robles, Jr., age 66 Director since 2003 Major General Josue (Joe) Robles, Jr. USA (Ret.) serves as President and Chief Executive Officer of USAA, an insurance and financial services company. He has held this position since 2007. He also served as Executive Vice President, Chief Financial Officer and Corporate Treasurer of USAA from 1994 to 2007. He received his B.B.A. in accounting from Kent State University and his M.B.A. from Indiana State University. General Robles served for more than 28 years in the military, including an assignment as Director of the Army Budget and the Commanding General, 1st Infantry Division (The Big Red One). In addition to his service on the Company’s Board of Directors, he is a director of community and charitable organizations.
General Robles’ qualifications to sit on our Board include his experience, both as a chief executive officer and a chief financial officer. He has extensive experience with public and financial accounting matters for complex organizations. He brings strong leadership skills as a result of his experience at the most senior levels of the United States Army. General Robles also has broad experience in corporate finance, information systems and controls, and government and community relations. | |||
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James H. Vandenberghe, age 62 Director since 2006 Mr. Vandenberghe is the retired Vice Chairman and a former director of Lear Corporation, an automotive supplier, and held this position from 1998 to 2008. Lear Corporation reorganized under Federal bankruptcy laws in 2009 after his retirement from that company. Mr. Vandenberghe also held various positions at Lear Corporation from 1988 to 1998, including President and Chief Operating Officer and Chief Financial Officer. He received his B.A. in business administration from Western Michigan University and his M.A. from Wayne State University. In addition to his service on the Company’s Board of Directors and his prior service on Lear Corporation’s Board of Directors, he is a director of Federal-Mogul Corporation and a director or trustee of many community and professional organizations.
Mr. Vandenberghe’s qualifications to sit on our Board include his experience as a leader of major organizations and managing capital-intensive industries. As a former chief financial officer, he has broad experience with public and financial accounting for complex organizations and corporate finance. He also has strong skills in corporate governance and strategic planning and corporate development and has experience serving as a director of other publicly traded corporations. |
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RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Subject to ratification by the shareholders, the Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2012 and to perform other audit-related services. Following the Audit Committee’s appointment, the Board voted unanimously to recommend that our shareholders vote to ratify the Audit Committee’s selection of PwC as our independent auditors for 2012.
The reports of PwC on the consolidated financial statements of DTE Energy for the year ended December 31, 2011 and for the year ended December 31, 2010 did not contain adverse opinions or a disclaimer of opinions and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company’s two most recent fiscal years, ended December 31, 2011 and 2010, and from January 1, 2012 through February 16, 2012, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to PwC’s satisfaction, would have caused PwC to make reference to the subject matter of such disagreements in connection with its reports on the Company’s consolidated financial statements for such years.
During the Company’s two most recent fiscal years, ended December 31, 2011 and 2010, and from January 1, 2012 through February 16, 2012, there were no “reportable events” as defined under Item 304(a)(1)(v) of Regulation S-K.
Representatives of PwC will be present at the annual meeting and will be afforded an opportunity to make a statement, if they desire, and to respond to appropriate questions from shareholders.
Fees to the Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by PwC for the audit of the Company’s annual financial statements for the years ended December 31, 2011 and December 31, 2010, and fees billed for other services rendered by PwC during those periods.
| 2011 | 2010 | |||||||
| Audit fees(1) |
$ | 5,352,391 | $ | 5,244,345 | ||||
| Audit related fees(2) |
47,030 | 48,000 | ||||||
| Tax fees(3) |
377,066 | 635,418 | ||||||
| All other fees(4) |
467,443 | 752,943 | ||||||
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| Total |
$ | 6,243,930 | $ | 6,680,706 | ||||
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| (1) | Represents fees for professional services performed by PwC for the audits of the Company’s annual financial statements included in the Company’s Form 10-K, review and audit of the Company’s internal control over financial reporting, the review of financial statements included in the Company’s Form 10-Q filings, and services that are normally provided in connection with regulatory filings or engagements. Audit fees are presented on an Audit Year basis in accordance with SEC guidelines and include an estimate of fees incurred for the most recent Audit Year. |
| (2) | Represents the aggregate fees billed for audit-related services and various attest services. |
| (3) | Represents fees billed for tax services, including tax reviews and planning. |
| (4) | Represents consulting services for the purpose of providing advice and recommendations. |
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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm
Consistent with SEC policies regarding the independence of the registered public accounting firm, the Audit Committee is responsible for appointing, approving professional service fees of, and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy regarding pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm.
Prior to engaging the independent registered public accounting firm to perform specific services, the Audit Committee pre-approves these services by category of service. The Audit Committee may delegate to the Chair of the Audit Committee, or to one or more other designated members of the Audit Committee, the authority to grant pre-approvals of all permitted services or classes of these permitted services to be provided by the independent registered public accounting firm up to, but not exceeding, a pre-defined limit. The decisions of the designated member to pre-approve a permitted service are reported to the Audit Committee at each scheduled meeting. At least quarterly, the Audit Committee reviews:
| • | A report summarizing the services, or groupings of related services, including fees, provided by the independent registered public accounting firm. |
| • | A listing of new services requiring pre-approval, if any. |
| • | As appropriate, an updated projection for the current fiscal year, presented in a manner consistent with the proxy disclosure requirements, of the estimated annual fees to be paid to the independent registered public accounting firm. |
All audit, audit-related, tax and other services performed by PwC were pre-approved by the Audit Committee in accordance with the regulations of the SEC. The Audit Committee considered and determined that the provision of the non-audit services by PwC during 2011 was compatible with maintaining independence of the registered public accounting firm.
The purpose of the Audit Committee is to assist the Board’s oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s independent registered public accounting firm’s qualifications and independence and the performance of the Company’s internal audit function. All members of the Audit Committee meet the criteria for independence as defined in our categorical standards and the audit committee independence requirements under the SEC rules. The Audit Committee Charter also complies with requirements of the NYSE.
Management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management is also responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing these financial statements and expressing an opinion as to their conformity with GAAP. The independent registered public accounting firm is also responsible for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to monitor and review these processes, acting in an oversight capacity, and the Audit Committee does not certify the financial statements or internal control over financial reporting or guarantee the independent registered public accounting firm’s reports. The Audit Committee relies, without independent verification, on the information provided to it including representations made by management and the reports of the independent registered public accounting firm.
The Audit Committee discussed with PwC the matters required to be discussed by audit standards, SEC regulations and NYSE requirements. Disclosures were received from PwC regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board and discussed with
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them. The Audit Committee has considered whether the services provided by PwC other than those services relating to audit services are compatible with maintaining PwC’s independence. The Audit Committee has concluded that such services have not impaired PwC’s independence. The Audit Committee reviewed and discussed the audited financial statements for the year ended December 31, 2011 with management and PwC. Based on the review and discussions noted above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2011. The Audit Committee reviewed and discussed Management’s Report on Internal Control over Financial Reporting as of December 31, 2011 with management and PwC. Based on the review and discussions noted above, the Audit Committee recommended to the Board that Management’s Report on Internal Control over Financial Reporting as of December 31, 2011 be included in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2011.
Audit Committee
Frank M. Hennessey, Chair
W. Frank Fountain, Jr.
Josue Robles, Jr.
James H. Vandenberghe
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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ADVISORY PROPOSAL
NONBINDING VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires the Company to provide shareholders with an opportunity to vote to approve, on an advisory basis, the compensation of our Named Executive Officers as described in the “Compensation Discussion and Analysis” (CD&A) section of this proxy statement and in the tabular and narrative disclosure regarding Named Executive Officer compensation, all contained under the heading “Executive Compensation” in this proxy statement.
The Company’s executive compensation program is designed to include elements of cash and equity-based compensation to motivate and reward executives who achieve short-term and long-term corporate and financial objectives leading to the success of the Company. We emphasize performance-based compensation for results that are consistent with shareholder interests. The program is also designed to attract and retain talented executives and align the interests of our executives with those of our shareholders. At the 2011 annual meeting, 93% of voting shareholders overwhelmingly approved the compensation of the Named Executive Officers.
Shareholders have in the past approved the incentive plans that we use to motivate and reward our executives, including the Annual Incentive Plan and the Long-Term Incentive Plan. At the Company’s 2010 annual meeting, shareholders overwhelmingly approved our Amended and Restated 2006 Long-Term Incentive Plan. In addition, the Company has enhanced our disclosures related to executive compensation to provide more detail to our shareholders about our compensation programs, including expanded disclosures relating to these plans in this proxy statement.
Our executive compensation programs have been important in driving the Company’s success in achieving its corporate and financial objectives by tying executive compensation to achieving those very specific goals. We explain each of our performance targets and measures in detail in our CD&A, but a few examples of Company success in areas related to our targets and measures include the following. First, our Company has exceeded its long-term goal of achieving between 5%-6% operating earnings per share growth, averaging 7.2% annual growth from 2007 through 2011. (Operating earnings exclude certain non-recurring items and discontinued operations.) Further, the Company also weathered the economic downtown of 2008-2009 with a strong cash flow position and balance sheet. The MPSC Complaints measurements at our utilities continue to trend downward. Additionally, in each of 2008, 2009, 2010 and 2011 the Company set a new DTE Energy record high result on the Gallup survey which tracks effectiveness of our efforts to improve employee engagement throughout the Company. Each of these accomplishments is related to a specific performance goal in our short- or long-term compensation programs.
The Organization and Compensation Committee employs the highest standards of corporate governance when implementing and reviewing our executive compensation programs. The Committee ensures independence of committee members and compensation consultants, avoids conflicts of interest and has enhanced shareholder disclosure in accordance with SEC and NYSE requirements. These programs have helped guide the Company through the economic downturn and position the Company for future growth and success in meeting corporate and financial objectives.
For the reasons discussed above, the Board recommends that shareholders vote in favor of the following resolution:
“RESOLVED, that the shareholders approve, on an advisory basis, the overall executive compensation paid to the Named Executive Officers of the Company, as described in the Compensation Discussion and Analysis and the tabular and narrative disclosure regarding Named Executive Officer compensation contained in this proxy statement.”
Because this vote is advisory, it will not be binding upon the Company or the Board. The Organization and Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
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MANAGEMENT PROPOSAL
APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED
DTE ENERGY COMPANY 2006 LONG-TERM INCENTIVE PLAN
The Board is seeking shareholder approval of an amendment to the Amended and Restated DTE Energy Company 2006 Long-Term Incentive Plan (LTIP). In 2006, the Board adopted the LTIP and our shareholders approved the LTIP on April 27, 2006. At the 2010 shareholder meeting, shareholders overwhelmingly approved additional amendments to the LTIP. In February 2012, the Board approved an additional amendment to the LTIP to be effective upon shareholder approval at the 2012 annual meeting.
The proposed amendment is to increase the aggregate number of shares of common stock that may be issued or acquired and delivered under the LTIP pursuant to the exercise of options, the grant of stock awards and the settlement of performance shares and performance units by 2,500,000 to 11,500,000. It is anticipated this will ensure the plan has sufficient shares to satisfy the needs of the plan through the end of 2014.
The Board is seeking approval of the amendment to enable the Company to continue to offer the incentives necessary to attract and retain the employees needed to support the Company’s future growth and success and align the long-term interests of employees with those of the shareholders.
The following summarizes the material provisions of the LTIP, assuming the amendment described above is approved by the shareholders by an affirmative vote of a majority of the votes cast. The summary is qualified in its entirety by reference to the full conformed text of the amended LTIP, which is attached as Exhibit A to this Proxy Statement.
Material Terms of the Amendment to the LTIP:
If the amendment is passed, Section 5.02(a) of the LTIP will be amended to provide that the maximum aggregate number of shares of common stock that may be issued or acquired and delivered under the LTIP pursuant to the exercise of options, the grant of stock awards and the settlement of performance shares and performance units is increased from 9,000,000 to 11,500,000, subject to adjustment in the event of certain changes in capitalization or other corporate transactions.
Material Terms of the LTIP (as amended):
| • | Participants: Any employee of DTE Energy or an entity in which DTE Energy has a direct or indirect ownership or other equity interest (“Subsidiary”) and any member of the Board, whether or not employed by DTE Energy or a Subsidiary, is eligible to participate if the plan administrator determines that the employee or director has contributed significantly, or may be expected to contribute significantly, to the profits or growth of DTE Energy or a Subsidiary. An eligible employee or director becomes a participant if he or she is selected to receive a LTIP award by the plan administrator. |
| • | Plan Administration: The Board administers the LTIP with respect to awards made to members of the Board who are not employees of DTE Energy or a Subsidiary. The Organization and Compensation Committee administers the LTIP with respect to awards made to employees of DTE Energy or a Subsidiary. The Committee may delegate to the CEO, and in certain instances, to the President, all or part of its authority and duties as to awards made to individuals not subject to Section 16 of the Exchange Act. References in this summary to the “plan administrator” include references to the Organization and Compensation Committee, any other committee appointed in its place, the CEO of DTE Energy or the Board, as the context requires. |
The plan administrator has the authority to determine the persons to whom awards will be made; to select the type, size and timing of each award; to set the terms and provisions of each award, consistent with the provisions of the LTIP; and to establish rules and policies for the plan. The plan administrator may not, however, grant to any participant in a single calendar year: (1) options for more than 500,000 shares of common stock; (2) stock awards for more than 150,000 shares of common stock; (3) performance share awards for more than 300,000 shares of common stock (based on the maximum payout under the award); or (4) more than 1,000,000 performance units, which have a face amount of $1.00 each.
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| • | Aggregate Number of Plan Shares: The maximum aggregate number of shares of common stock that may be issued or acquired and delivered under the LTIP pursuant to the exercise of options, the grant of stock awards and the settlement of performance shares and performance units is 11,500,000, subject to adjustment in the event of certain changes in capitalization or other corporate transactions. Of this total, the aggregate limit of awards to non-employee directors is 100,000 shares. It is anticipated that the plan would have sufficient shares to satisfy the needs of the plan through the end of 2014. If (i) an option is terminated, in whole or part, for any reason other than its exercise for shares of common stock; or (ii) a stock award is forfeited, in whole or in part; or (iii) an award of performance shares or performance units is terminated, in whole or in part for any reason other than its settlement in shares of common stock or cash, the number of shares subject to the terminated or forfeited portion of the award may be reallocated to other options, performance shares, performance units and stock awards, subject to the limits described above. Reallocation of shares shall not be permitted for shares repurchased by stock option proceeds, shares tendered in payment of an exercise price or shares tendered or withheld by the Company in satisfaction of tax obligations. |
| • | Stock Option Awards: Each stock option granted pursuant to the LTIP is evidenced by a written stock option agreement between the Company and the optionee. The option price will be fixed by the plan administrator but cannot be less than the Fair Market Value of DTE Energy common stock on the date of grant of the option. The option price may be paid in cash, cash equivalent acceptable to the plan administrator, or with unrestricted shares of DTE Energy common stock. The maximum period in which an option may be exercised will be fixed by the plan administrator on the date of grant, but cannot exceed ten years from the date of grant. The plan administrator also establishes, on the date of grant, the terms on which the option may be exercised and the consequences of termination of employment. Options granted under the LTIP may be either non-qualified options or incentive stock options. The plan administrator may not permit the exercise of any option earlier than one year after the date of the grant. Generally, one-third of the options covered by a single grant are exercisable one, two and three years after the date of the grant. |
The federal income tax consequences of the two types of options differ, as described below. No federal income tax is recognized by a participant at the time an option is granted. If the option is an incentive stock option, no income will be recognized upon the participant’s exercise of the option. Income is recognized by a participant when he or she disposes of shares acquired under an incentive stock option. The exercise of a non-qualified stock option is a taxable event that requires the participant to recognize, as ordinary income, the difference between the shares’ fair market value and the option price. The employer (either DTE Energy or a Subsidiary) will be entitled to claim a federal income tax deduction on account of the exercise of a non-qualified option equal to the amount of ordinary income recognized by the participant. The employer will not be entitled to a federal income tax deduction on account of the grant or exercise of an incentive stock option, but may claim a federal income tax deduction on account of certain dispositions of DTE Energy common stock acquired on exercise of an incentive stock option. The LTIP prohibits the reduction of the option price, and an option cannot be cancelled and replaced with new awards having a lower option price (where the economic effect would be the same as reducing the option price), without prior shareholder approval.
| • | Stock Awards: Awards of Company stock may be granted, and may be forfeitable or subject to certain restrictions on transfer, or both, unless conditions prescribed by the plan administrator on the date of grant are satisfied. The conditions may include a requirement that the participant continue employment with DTE Energy or that stated performance objectives be achieved. Rights to stock awards cannot become non-forfeitable or unrestricted earlier than three years after the date of the award, except in limited special circumstances, including awards to new hires and participants expected to retire within three years, when stock awards can become non-forfeitable or unrestricted as early as one year after the date of the award. The participant generally is entitled to vote and receive dividend equivalents on the stock award prior to the time the shares become non-forfeitable or transferable. A participant recognizes ordinary income on the first day that the shares subject to the restricted stock award are either transferable or not subject to a substantial risk of forfeiture. The amount of income recognized equals the fair market value of the shares on that date. The participant’s employer is entitled to a Federal income tax deduction equal to the ordinary income recognized by the participant. |
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| • | Performance Share Awards: Performance share awards entitle the participant to receive a specified number of shares of DTE Energy common stock or a cash payment, or a combination of the two, equal to the Fair Market Value of a specified number of shares or any combination of cash and common stock. The plan administrator may prescribe that performance shares will be earned only on satisfaction of performance objectives during a performance measurement period of at least one year or upon satisfaction of other requirements. The plan administrator may also specify the consequences of termination of employment. Rights in performance shares may not become non-forfeitable earlier than one year after the date of the award. Settlement will occur at the time specified by the plan administrator. A participant recognizes ordinary income on the settlement of a performance share award equal to any cash that is paid and the fair market value of common stock (on the date the shares are first transferable or not subject to a substantial risk of forfeiture) that is received in settlement of the award. The participant’s employer is entitled to a Federal income tax deduction equal to the amount of ordinary income recognized by the participant. Commencing in 2010, all agreements awarding performance shares shall provide that dividend equivalents with respect to the award will not be paid before the performance shares are earned and vested. During the period beginning on the date the performance shares are awarded and ending on the certification date of the performance objectives, the number of performance shares awarded will be increased, assuming full dividend reinvestment at the Fair Market Value (as defined in the LTIP) on the dividend payment date. The cumulative number of performance shares will be adjusted to determine the final payment based on the performance objectives as certified by the O&C Committee. The final adjusted number of performance shares will be paid as provided in the LTIP. |
| • | Performance Unit Awards: A performance unit award entitles the participant to receive a payment equal to $1.00 per performance unit if certain standards are met. The plan administrator will prescribe the performance objectives and other requirements that must be satisfied before a performance unit is earned and specify the consequences of termination of employment. Performance units may not become non-forfeitable earlier than one year after the date of the award. The period in which performance is measured will be at least one year. To the extent that performance units are earned, the obligation may be settled in cash, DTE Energy common stock, or a combination of the two. A participant recognizes ordinary income on the settlement of a performance unit award equal to any cash that is paid and the fair market value of common stock (on the date the shares are first transferable or not subject to a substantial risk of forfeiture) that is received in settlement of the award. The participant’s employer is entitled to a Federal income tax deduction equal to the amount of ordinary income recognized by the participant. |
| • | Performance Objectives: Vesting, settlement or exercise of an award made under the LTIP may be conditioned upon the achievement of specified performance objectives by DTE Energy, a Subsidiary, or a division of DTE Energy or a Subsidiary. The performance objectives may be stated with respect to (i) shareholder value growth based on stock price and dividends, (ii) customer price, (iii) customer satisfaction, (iv) growth based on increasing sales or profitability of one or more business units, (v) performance against the companies in the Dow Jones Electric Utility Industry Group (“DJEUIG”) index, the companies in the S&P 500 Electric Utility Industry index, a peer group or similar benchmark selected by the Organization and Compensation Committee, (vi) earnings per share growth, (vii) employee satisfaction, (viii) nuclear plant performance achievement, (ix) return on equity, (x) economic value added, (xi) cash flow, (xii) earnings growth, (xiii) diversity, (xiv) safety, (xv) production cost, or (xvi) such other measures as may be selected by the plan administrator. Each of the performance objectives described in the preceding sentence may be stated with respect to the performance of DTE Energy, a Subsidiary or a division of DTE Energy or a Subsidiary. The performance objectives listed above are intended to qualify as “performance goals” so that grants qualify as deductible performance-based compensation for purposes of IRC Section 162(m). |
| • | Amendments: The Board may amend the LTIP from time to time or terminate it at any time. However, no material amendment to the LTIP may become effective until shareholder approval is obtained. A material amendment to the LTIP is any amendment that would (a) materially increase the aggregate number of shares of common stock that may be issued or delivered under the Plan or that may be issued to a Participant; (b) permit the exercise of an option at an option price less than the Fair Market Value on the date of grant of the option or otherwise reduce the price at which an option is exercisable, either by amendment of an |
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| Agreement or substitution with a new award with a reduced price; (c) change the types of awards that may be granted under the LTIP; (d) expand the classes of persons eligible to receive awards or otherwise participate in the LTIP; or (e) require approval of the shareholders of the Company to comply with applicable law or the rules of the New York Stock Exchange. |
| • | Termination: No awards may be granted under the LTIP more than ten years after the LTIP was adopted by the Board. Awards granted before that date will remain valid in accordance with their terms. |
| • | Change in Control: In the event of a change in control (i) all options become fully exercisable, (ii) all stock awards become non-forfeitable and transferable, and (iii) all performance shares and performance units are earned, with the amount earned being the amount payable assuming attainment of the greater of target or actual performance levels through the date of the change in control. The accelerated exercisability, vesting or payment described in the preceding sentence may constitute a parachute payment, which may subject the affected participant to an excise tax imposed by IRC Section 4999. Consequently, the accelerated exercisability, vesting or payment is limited if, and to the extent that, the limitation will permit an affected participant to receive a greater net after-tax amount than he or she would receive absent the limitation. The limitation shall not apply to participants who are entitled to an indemnification of excise taxes by DTE Energy under change in control severance agreements or otherwise. Generally, a change in control occurs for purposes of the LTIP if DTE Energy or its assets are acquired by another company or DTE Energy merges with another company and less than 55% of the new or acquiring company’s combined voting stock is held by holders of voting stock of DTE Energy immediately prior to the transaction. Shareholder approval of a liquidation or dissolution is also considered a change in control. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE AN AMENDMENT TO AMENDED AND RESTATED THE DTE ENERGY COMPANY 2006 LONG-TERM INCENTIVE PLAN.
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SHAREHOLDER PROPOSAL POLITICAL CONTRIBUTIONS
The Company expects the following shareholder proposal to be presented for consideration at the annual meeting by the Office of the Comptroller of New York City, as the custodian and trustee of the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Fire Department Pension Fund and the New York City Police Pension Fund, and custodian of the New York City Board of Education Retirement System (collectively, the “New York City Funds”), which beneficially owned an aggregate of 406,340 shares of the Company’s common stock as of November 15, 2011. The proposal, along with the supporting statement, is included below. The New York City Funds’ request was submitted by John C. Liu, Comptroller, City of New York, 1 Centre Street, New York, New York 10007-2341 on behalf of the Boards of Trustees of the New York City Funds.
The following proposal and supporting statement were submitted by the New York City Funds:
Shareholder Proposal and Supporting Statement
Proposal
Resolved, that the shareholders of DTE Energy (“Company”) hereby request that the Company provide a report, updated semi-annually, disclosing the Company’s:
| 1. | Policies and procedures for political contributions and expenditures (both direct and indirect) made with corporate funds. |
| 2. | Monetary and non-monetary contributions and expenditures (direct and indirect) used to participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, and used in any attempt to influence the general public, or segments thereof, with respect to elections or referenda. The report shall include: |
| a. | An accounting through an itemized report that includes the identity of the recipient as well as the amount paid to each recipient of the Company’s funds that are used for political contributions or expenditures as described above; and |
| b. | The title(s) of the person(s) in the Company responsible for the decision(s) to make the political contribution or expenditure. |
The report shall be presented to the board of directors or relevant board oversight committee and posted on the Company’s website.
Stockholder Supporting Statement
As long-term shareholders of DTE Energy, we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect political contributions to candidates, political parties, or political organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
Disclosure is consistent with public policy, in the best interest of the company and its shareholders, and critical for compliance with federal ethics laws. Moreover, the Supreme Court’s Citizens United decision recognized the importance of political spending disclosure for shareholders when it said “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value.
DTE Energy contributed at least $2 million in corporate funds since the 2002 election cycle. (CQ:http://moneyline.cq.com/pml/home.do and National Institute on Money in State Politics: http://www.followthemoney.org/index.phtml.)
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However, relying on publicly available data does not provide a complete picture of the Company’s political expenditures. For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In many cases, even management does not know how trade associations use their company’s money politically. The proposal asks the Company to disclose all of its political spending, including payments to trade associations and other tax-exempt organizations for political purposes. This would bring our Company in line with a growing number of leading companies, including Exelon, Merck and Microsoft that support political disclosure and accountability and present this information on their websites.
The Company’s Board and its shareholders need complete disclosure to be able to fully evaluate the political use of corporate assets. Thus, we urge your support of this critical governance reform.
Board of Directors Response
THE BOARD OF DIRECTORS OPPOSES THIS SHAREHOLDER PROPOSAL AND RECOMMENDS A VOTE AGAINST IT FOR THE REASONS SET FORTH BELOW:
DTE Energy has a long tradition as a responsible corporate citizen and is committed to complying with the law regarding political contributions and expenditures. The Board believes the Company has a responsibility to shareholders to be engaged and to participate in the political process with respect to issues that affect the Company or are significant to our business. The Board also believes that it is in the best interests of our shareholders to support the legislative process by making corporate political contributions to organizations when such contributions are consistent with the Company’s business objectives and are permitted by federal, state and local laws.
This shareholder previously submitted substantially the same proposal in connection with each of our 2008, 2009, 2010 and 2011 Annual Meetings of Shareholders and the Board opposed the proposal on all four occasions. The Company expanded its political contribution information and disclosures on our website prior to the 2008 Annual Meeting of Shareholders. At the 2008 Annual Meeting of Shareholders, the proposal was defeated by a vote of 58,491,668 “Against,” 24,705,127 “For” and 14,316,494 “Abstain.” At the 2009 Annual Meeting of Shareholders, the proposal was defeated by a vote of 58,316,502 “Against,” 26,667,835 “For,” and 13,636,524 “Abstain.” At the 2010 Annual Meeting of Shareholders, the proposal was defeated by a vote of 57,891,538 “Against,” 26,767,566 “For,” and 19,458,783 “Abstain.” And, at the 2011 Annual Meeting of Shareholders, the proposal was defeated by a vote of 70,099,319 “Against,” 26,619,627 “For,” and 15,000,379 “Abstain.” The Board continues to believe that adoption of this resolution is unnecessary. Information about, and links to, publicly available information concerning political contributions are available on our website at http:/ /www.dteenergy.com/dteEnergyCompany/investors/corporateGovernance/political.html and available through various political contribution disclosure laws.
In addition, the Company has adopted a formal policy on corporate political participation that applies to all employees of the Company and its subsidiaries and is incorporated in our daily business practices. A copy of this policy is available on our website at http://www.dteenergy.com/pdfs/politicalParticipation.pdf. Among other things, the policy provides as follows:
A. Corporate Contributions — Our policy mandates that corporate contributions to political organizations be made only as permitted by applicable laws and authorized by our Vice President — Corporate & Government Affairs. Disclosure of the aggregate amount of these contributions will be annually posted on our website.
B. Political Action Committee Contributions — Political contributions to federal, state and local candidates, political party committees, and political action committees are made by the DTE Energy Political Action Committee (“PAC”), which is funded by voluntary contributions from eligible DTE Energy employees. The PAC’s activities are guided by a steering committee comprised of PAC members elected by all PAC members and are subject to comprehensive regulation, including detailed disclosure requirements. PAC contributions are reported to the Federal Election Commission and the Michigan Secretary of State’s Bureau of Elections. Links to these organizations are available on our website.
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C. Trade Associations — DTE Energy belongs to a number of trade associations that participate in the political process. DTE Energy’s sole purpose in becoming a member of these trade associations is not for political purposes, as DTE Energy may not agree with all positions taken by trade associations on issues. The benefits that DTE Energy does receive from trade associations are primarily expertise and the ability to gain insight on industry setting standards. Our policy on political participation provides that DTE Energy will request that trade associations to which our dues or other payments are significant provide a breakdown of the portion of our dues or payments that were used for political contributions. This information is included in the annual Board report of PAC and political activities.
D. Board Oversight — The Company’s political activities are reviewed annually by the Public Responsibility Committee of the DTE Energy Board of Directors. We believe this oversight process ensures accountability and transparency for the Company’s corporate political activities.
Given the Company’s policy on corporate political participation discussed above and the mandatory public disclosure requirements already required under the law, the Board has again concluded that the Company’s policy and disclosures exceed what is required by the law. This, coupled with ample public information regarding DTE Energy’s political participation, appropriately addresses the concerns cited in the New York City Funds’ proposal.
While the Company supports many of the objectives expressed in the shareholder proposal, the Company believes that the level of specific disclosure requested by the proposal could have unintended consequences and could hinder DTE Energy’s ability to pursue its business and strategic objectives. For example, disclosing specific contributions made to political parties, committees and other organizations could lead to increased requests for contributions from the Company from other such organizations with similar or opposing views. Additionally, such disclosure would make it easier for competitors and opponents to discern the Company’s public policy and political strategies which could have negative consequences for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE SHAREHOLDER PROPOSAL RELATING TO POLITICAL CONTRIBUTIONS.
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SHAREHOLDER PROPOSAL
GREENHOUSE GAS EMISSIONS
The Company expects the following shareholder proposal to be presented for consideration at the annual meeting by the Office of the Comptroller of the State of New York, as the sole trustee of the New York State Common Retirement Fund and the administrative head of the New York State and Local Employees’ Retirement System and the New York State Police and Fire Retirement System (“The New York State Fund”) which beneficially owned an aggregate of 606,861 shares of the Company’s common stock as of November 22, 2011. The proposal, along with the supporting statement, is included below. The New York State Fund’s request was submitted by Thomas P. DiNapoli, State Comptroller, State of New York, 633 Third Avenue, 31st Floor, New York, New York 10017.
The following proposal and supporting statement were submitted by The New York State Fund:
Shareholder Proposal and Supporting Statement
WHEREAS:
In October 2009, a National Academy of Sciences report stated that the burning of coal to generate electricity in the U.S. causes about $62 billion a year in “hidden costs” for environmental damage, not including the costs for damage associated with GHG emissions. According to the U.S. EPA, monetized costs and benefits of complying with the Clean Air Act and its amendments total over $700 billion and $23 trillion, respectively.
In a joint statement, 285 investors representing more than $20 trillion in assets stressed the urgent need for policy action which stimulates private sector investment into climate change solutions, creates jobs, and is essential for ensuring the long-term, stability of the world economic system.
The electric generating industry accounts for more carbon dioxide emissions than any other sector, including the transportation and industrial sectors. U. S. fossil fueled power plants account for nearly 40% of domestic and 10% of global carbon dioxide emissions.
The Environmental Protection Agency is taking steps to implement Clean Air Act requirements for large new or modified stationary sources, including power plants, to obtain permits that include greenhouse-gas emission limitations. These requirements are scheduled to take effect in the first half of 2012.
In July 2011, the EPA issued the Cross State Air Pollution Rule and is expected to issue its Mercury and Air Toxics Rule in before the end of 2011. These rules will set significantly more stringent limits on emissions of sulfur dioxide, nitrogen oxide, mercury and acid gases from power plants. Goldman Sachs estimates that over the next 5-8 years and, “roughly 47% of the coal fleet, 14% of the total US capacity, will need to install new pollution controls or be retired.”
Many utilities, including Xcel Energy, Calpine Corporation, and Progress Energy are planning to replace some of their coal-fired power plants, having determined that alternative such as natural gas, efficiency and renewable energy are more cost-effective than retrofitting the coal plants to comply with anticipated standards.
The Tennessee Valley Authority (TVA) has announced plans to, over the next five years, idle 1000 MW of coal generating capacity and add 1000 MW of gas and 1140 MW of nuclear generating capacity along with 1900 MW of energy efficiency and distributed renewable resources.
Several electric power companies have set absolute GHG emissions reduction targets including American Electric Power, Entergy, Duke Energy, Exelon, National Grid and Consolidated Edison. Others have set GHG intensity targets, including PSEG, NiSource and Pinnacle West.
RESOLVED:
Shareholders request that the Company adopt quantitative goals for the reduction of greenhouse gas and other air emissions in anticipation of emerging EPA regulations; and that the Company report to shareholders by September 30, 2012, on its plans to achieve this goal, including plans to retrofit or retire its existing coal plants. Such a report may omit proprietary information and be prepared at reasonable cost.
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Board of Directors Response
THE BOARD OF DIRECTORS OPPOSES THIS SHAREHOLDER PROPOSAL AND RECOMMENDS A VOTE AGAINST IT FOR THE REASONS SET FORTH BELOW:
The Board does not believe that it is necessary for the Company to adopt quantitative goals for the reduction of greenhouse gas and other air emissions (together, “GHG emissions”) and publish a report to shareholders on the goals and plans to achieve such goals. The subject of GHG emissions, especially the potential future legislation and regulations thereof, is currently unsettled. The Board believes that it would be premature and not in the best interests of shareholders at this time for the Company to establish and publish its own reduction targets.
Notwithstanding the evolving regulatory environment, the Company is committed to reducing its GHG emissions. The Company has taken and will continue to take steps to reduce GHG emissions from its electrical power generation fleet.
First, in compliance with Michigan law, the Company’s Detroit Edison subsidiary has developed a renewable energy plan that was approved by the Michigan Public Service Commission in 2011. Under that plan, by 2015, the Company will provide nearly 1,000 megawatts of renewable-generated electricity, enough to power 400,000 homes, primarily from wind generation. The first Detroit Edison-owned wind farm, a 212 MW facility in Michigan’s “thumb” area, is expected to be in service later in 2012.
In addition to adding renewable generation capacity, the Company is making significant investments to reduce GHG emissions from its existing generation fleet. Detroit Edison has committed to the voluntary goal of “Power Partners,” a group comprised of companies from the electric power industry and the United States Department of Energy. Along with this group of industry peers, Detroit Edison has voluntarily committed to reduce greenhouse emissions intensity 3% to 5% over the 2010-2012 measurement period from a 2000-2002 baseline. Detroit Edison has a long history of working to reduce emissions: since the early 1970s Detroit Edison has increased generation output by more than 40 percent while also reducing emissions of nitrogen oxide and sulfur dioxide by about 70 percent across our electrical generating fleet. Further, Detroit Edison is in the final stages of completing a $1.7 billion investment program to install state-of-the-art emission controls at the Monroe Power Plant, the largest generating plant in DTE Energy’s system and the fourth largest coal-fired plant in the country.
The Company currently provides the public with a wide variety of data about Detroit Edison’s renewable power and emissions controls plans, its generation fleet and its GHG emissions on the Company’s website. Detailed information about Detroit Edison’s renewable power plan can be found at: http://www.dteenergy.com/dteEnergyCompany/environment/renewableEnergy/overview.html Reports about the Company’s current GHG emissions can be found at: http://www.dteenergy.com/dteEnergyCompany/environment/generation/generation.html Details about the Company’s goals with respect to GHG emissions can be found at: http://www.dteenergy.com/dteEnergyCompany/aboutDTEEnergy/crreport/environmentalGoals.html
While the Company supports many of the objectives expressed in the shareholder proposal, the Company believes that the level of specific plans and disclosure requested by the proposal could have unintended consequences and could hinder DTE Energy’s ability to pursue its business and strategic objectives. The Company is committed to reducing its GHG emissions and is continuing to do so by investing in renewable power and emissions controls projects which are described on the Company’s website. The changing regulatory environment for GHG emissions makes it premature to establish further targets for these GHG emissions. For these reasons, the Board does not support the specific requests made in this Shareholder proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE SHAREHOLDER PROPOSAL RELATING TO GREENHOUSE GAS EMISSIONS.
CONSIDERATION OF ANY OTHER BUSINESS THAT MAY COME BEFORE THE MEETING
Our management does not intend to bring any other business before the meeting for action and has not been notified of any other business proposed to be brought before the meeting. However, if any other business should be properly presented for action, it is the intention of the persons named on the enclosed proxy card to vote in accordance with their judgment on such business.
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Compensation Discussion and Analysis
Executive Summary
The following provides an executive summary of our compensation philosophy and programs as described in greater detail below in this Compensation Discussion and Analysis.
| • | The Company believes in compensation that is competitive with our peers, that has a meaningful performance component and that has equity-based elements to encourage executives to have an ownership interest in the Company. |
| • | Our performance-based compensation programs result in a majority of the compensation of our Named Executive Officers (as identified below) being linked to the achievement of a combination of short- and long-term Company and personal goals and shareholder value creation. |
| • | The following elements comprise the total compensation awarded to our Named Executive Officers: base salary, cash-based annual incentive awards, and equity-based long-term incentive awards consisting of performance shares and restricted stock. |
| • | The objective of base salary is to provide a stable, fixed source of income that reflects an executive’s job responsibilities, experience, value to the Company and demonstrated performance. We target median base salaries for our peer group, taking into account differences in company size within the peer group. |
| • | Our annual incentive awards are intended to compensate individuals yearly based on the achievement of specific near-term, annual goals, which are established at the beginning of each year and approved by the Organization and Compensation Committee (the “O&C Committee”). The performance measures are established in several categories that are critical to the Company’s overall business success and vary among the Named Executive Officers to reflect the different areas of the Company’s business for which each Named Executive Officer has responsibility. |
| • | Our long-term incentive awards are used to align executive actions with long-term management and shareholder objectives, providing rewards consistent with the creation of shareholder value. Our plan is designed to help retain executives over time and ensure they have a strong sense of ownership in the Company. |
| • | We provide certain supplemental retirement programs for our executives which are not available to other salaried employees and our executives participate in the same group health benefit programs, on substantially the same terms, as other salaried employees. Our executives are allowed limited perquisites generally not available to our other employees as a matter of competitive practice and as a retention tool. |
| • | We target all elements of our compensation programs to provide compensation and benefit opportunity at the median of our peer group, taking into account differences in company size within the peer group. Actual payouts under these programs can be above or below the median based on Company and personal performance. The O&C Committee periodically reviews the level of compensation and benefits provided to executives against a peer group to assure they are reasonable and consistent with our overall compensation objectives. |
Overview
Your understanding of our executive compensation program is important to us. The goal of this Compensation Discussion and Analysis is to explain:
| • | Our compensation philosophy and objectives for executives of the Company, including our Named Executive Officers; |
| • | The roles of our O&C Committee and management in the executive compensation process; |
| • | The key components of the executive compensation program; and |
| • | The decisions we make in the compensation process that align with our philosophy and objectives. |
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Throughout this Proxy Statement, the term “Named Executive Officers” means: (1) the Chairman, President and Chief Executive Officer, Gerard M. Anderson; (2) the Executive Vice President and Chief Financial Officer, David E. Meador; (3) the Group President of our Company and the President and Chief Operating Officer of our electric utility subsidiary, The Detroit Edison Company (“Detroit Edison”), Steven E. Kurmas; (4) the Group President of our Company and the President and Chief Operating Officer of our gas utility subsidiary, Michigan Consolidated Gas Company (“MichCon”), Gerardo Norcia; (5) the Senior Vice President and General Counsel, Bruce D. Peterson and (6) the retired Executive Chairman, Anthony F. Earley, Jr. In addition, the term “executive” includes the Named Executive Officers and individuals who are at or above the level of corporate vice president (or equivalent), the General Auditor, and other individuals whose base annual salary is at or above $225,000, and includes Executive Officers as defined by the Exchange Act.
Philosophy and Objectives
Our executive compensation philosophy is to motivate and reward executives who achieve short-term and long-term corporate and financial objectives leading to the success of the Company. We will continue to emphasize performance-based compensation for results that are consistent with shareholder and customer interests. The main objectives underlying this philosophy are:
| • | Compensation must be competitive in order to attract and retain talented executives — data from peer group companies are taken into consideration when analyzing our compensation practices and levels; |
| • | Compensation should have a meaningful performance component — a portion of an executive’s total compensation opportunity is linked to predefined short-term and long-term corporate and financial objectives along with an executive’s individual performance; and |
| • | Compensation must include equity-based elements to encourage executives to have an ownership interest in the Company. |
Role of the Organization and Compensation Committee
The Board has a long-standing process for determining executive compensation that is performance-based, objective, and transparent. The process is designed to serve the purpose of recruiting, retaining and motivating executives for the benefit of shareholders and customers. The Board-designed governance process expressly delegates to the O&C Committee the responsibility to determine and approve the CEO’s compensation, as well as the compensation of certain other executives. The O&C Committee makes all decisions regarding compensation for the Named Executive Officers. Although the responsibilities have been delegated, the entire Board maintains oversight and receives direct reports after each O&C Committee meeting.
The O&C Committee is composed entirely of independent directors, none of whom derives a personal benefit from the compensation decisions the O&C Committee makes. Generally, the O&C Committee is responsible for our executive compensation programs throughout the enterprise (including subsidiaries). The O&C Committee responsibilities for executive compensation are more fully detailed in its charter, which is available at http://www.dteenergy.com/dteEnergyCompany/investors/corporateGovernance/charters/organization.html. The O&C Committee continually monitors the executive compensation program and adopts changes to reflect the dynamic marketplace in which we compete for talent. To the extent necessary, the O&C Committee also works with other Board Committees to review or approve reports, awards and other matters relating to compensation. For example, the Finance Committee reviews the financial components of performance measures and metrics, the Corporate Governance Committee assists in the review of this Compensation Discussion and Analysis and the Audit Committee reviews the internal controls over the data reported herein.
The O&C Committee uses information from several external sources to monitor and achieve an executive compensation program that supports our business goals and attracts executives whose performance will be measured against those goals. Independent outside consultants and external information enable the O&C Committee to maintain impartial decision-making regarding performance and pay. The O&C Committee annually reviews each component of the Named Executive Officers’ compensation and is advised directly by the
42
outside compensation consulting firm, discussed in further detail below, in connection with such review. The O&C Committee, based on input from its consultant and management and a review of competitive data from peer group companies (as discussed below), believes that the current structure is appropriately balanced and competitive to accomplish the important tasks of recruiting, retaining, and motivating talented executives in the energy industry in which we compete.
The O&C Committee also reviews and considers the results from the most recent shareholder advisory vote on executive compensation. At the 2011 annual meeting, 93% of voting shareholders approved the compensation of the Named Executive Officers. This result reinforces the O&C Committee’s confidence in our current compensation structure and no major changes to that structure are recommended for 2012.
Independent Review of Compensation Program — The O&C Committee employs an outside consulting firm, Mercer Human Resources Consulting LLC (“Mercer HR”), a subsidiary of Marsh & McClennan Companies, Inc. (“Marsh”), to advise the O&C Committee on various executive compensation matters, including current compensation trends. Mercer HR also provides objective recommendations as to the design of our executive compensation program. Mercer HR reports directly to the O&C Committee. Use of this outside consultant is an important component of the compensation setting process, as it enables the O&C Committee to make informed decisions based on market data and practices. The representative from Mercer HR, who is considered a leading professional in the compensation field, attends O&C Committee meetings, meets with Committee members in executive session and consults with the members as required and provides input with regard to the Chairman and CEO’s compensation and performance.
Mercer HR has served as the O&C Committee’s outside consultant since 2002 and is considered to be an independent consultant. Mercer HR has no affiliations with any of the Named Executive Officers or members of the Board other than in its role as an outside consultant. The lead consultant and partner in charge for Mercer HR, who provides executive compensation consulting services to the O&C Committee, does not provide any other services to the Company. To help ensure that the consultant maintains the highest level of independence from the Company, all work performed by Mercer HR and its affiliates (a) which falls outside the scope of work performed for the O&C Committee on executive compensation matters, and (b) which has a total cost of $25,000 or greater, requires pre-approval by the O&C Committee based upon the recommendation of management.
In 2011, we paid Mercer HR approximately $52,000 of which $9,479 related to services provided in 2010. In addition, in 2011 the Company paid approximately $500,000 for services unrelated to human resources consulting to an affiliate of Mercer HR. Company management recommended the engagement of the affiliate of Mercer HR for these additional services and the O&C Committee approved their retention.
Management’s Role
Our management works closely with the O&C Committee in the executive compensation process. Excluding the CEO’s compensation, management’s responsibilities include:
| • | Recommending performance measures and metrics that are formulated based on our corporate strategy and priorities; |
| • | Reporting executive performance evaluations; |
| • | Recommending base salary levels and other compensation, including equity awards; and |
| • | Recommending appointment of executives. |
The CEO’s compensation is determined solely by the O&C Committee, which bases its decisions on performance and market studies along with participation and recommendations from its independent outside consultant.
Compensation and Peer Group Assessment — Each component of executive compensation (see “Key Components of Executive Compensation” below) is compared, measured and evaluated against a peer group of companies. The O&C Committee approves the peer group and periodically reviews and updates the companies
43
included in that group. Management also retains an external consulting firm to conduct a market study covering compensation practices for similar positions in the peer group. The most recent study was completed in November 2011 by Aon Hewitt, whose comprehensive data base included all of our desired utility/energy peer companies and also included data for most of our utility/energy-related executive positions.
The peer group for the 2011 study, as approved by the O&C Committee, consisted of the following companies. Most of these companies, along with DTE Energy, participate in the same independent compensation surveys. The surveys provide us with availability of data needed for accurate compensation comparisons. The peer group consists primarily of utilities (including utility holding companies), broad-based energy companies, and significant non-energy companies selected on the basis of revenues, financial strength, geographic location and availability of compensation information. The O&C Committee reviews the peer group data for the Named Executive Officers and the Company’s mix of compensation components in making compensation decisions.
| Utility/Energy Companies |
Non-Energy Companies | |
| Ameren Corporation |
Cummins Inc. | |
| American Electric Power Company, Inc. |
Eaton Corporation | |
| CenterPoint Energy, Inc. |
Johnson Controls, Inc. | |
| CMS Energy Corporation |
Kellogg Company | |
| Constellation Energy Group, Inc. |
Masco Corporation | |
| Dominion Resources, Inc. |
Owens Corning | |
| Duke Energy Corporation |
PPG Industries, Inc. | |
| Edison International |
The Sherwin-Williams Company | |
| Energy Future Holdings Corp. |
TRW Automotive Inc. | |
| Entergy Corporation |
Whirlpool Corporation | |
| FirstEnergy Corp. |
||
| NiSource Inc. |
||
| PG&E Corporation |
||
| PPL Corporation |
||
| Progress Energy, Inc. |
||
| Public Service Enterprise Group Incorporated |
||
| SCANA Corporation |
||
| Sempra Energy |
||
| The Southern Company |
||
| Xcel Energy, Inc. |
Key Components of Executive Compensation
The key components of the compensation program include the following:
| • | Base Salary |
| • | Annual and Long-Term Incentive Plans |
| • | Retirement and Other Benefits |
| • | Post-Termination Agreements (Severance and Change-in-Control) |
While the programs and pay levels reflect differences in job responsibilities, the structure of the compensation and benefits program is applied consistently to our Named Executive Officers, including the CEO. Differences in compensation between the CEO and the other Named Executive Officers are due, in part, to an analysis of peer group benchmark data, as well as differences in the responsibilities of each Named Executive Officer. We review each element of total compensation, both individually and on a combined basis, for each Named Executive Officer and make adjustments as appropriate based on these comparisons. The following is a more detailed discussion of the components of the Company’s executive compensation program:
44
Base Salary
The objective of base salary is to provide a stable, fixed source of income that reflects an executive’s job responsibilities, experience, value to the Company, and demonstrated performance. When setting individual base salary levels, we consider several factors, including (i) the market reference point for the executive’s position, (ii) the responsibilities of the executive’s position, (iii) the experience and performance of the individual, and (iv) retention issues. Market reference points target the median for most positions, adjusted to take into account differences in company size within the peer group. In addition, we establish midpoints for each executive group level for determining base salary for those executives whose jobs cannot be easily matched in the marketplace. These midpoints are consistent with the market reference points for other executives in the same executive group. Annually, we review these midpoints to ensure they are consistent with the market and make salary adjustments, when appropriate.
Annual and Long-Term Incentive Plans
We have two primary incentive plans that reward executives for performance. The plans are consistent with our objectives of tying compensation to performance and encouraging executives to align their interests with those of the shareholders and customers of the Company. The DTE Energy Company Annual Incentive Plan (the “Annual Incentive Plan”) allows us to reward executives with annual cash bonuses for performance against pre-established objectives based on work performed in the prior year. The DTE Energy Company 2006 Long-Term Incentive Plan allows us to grant executives long-term equity incentives to encourage continued employment with DTE Energy, to accomplish pre-defined long-term performance objectives and create shareholder alignment. On April 27, 2006, the Company’s shareholders approved the 2006 Long-Term Incentive Plan, which replaced the 2001 Stock Incentive Plan (the two plans are referred to collectively as the “Long-Term Incentive Plan”). At the Company’s 2010 annual meeting, shareholders approved our Amended and Restated Long-Term Incentive Plan and management has proposed, an amendment to this plan for shareholder approval at the 2012 annual meeting.
We believe the current mix among base salary, the Annual Incentive Plan and the Long-Term Incentive Plan is appropriately set to provide market-competitive compensation when Company performance warrants. The mix is more heavily weighted toward incentive compensation at higher executive levels within DTE Energy. The interplay between the Annual Incentive Plan and the Long-Term Incentive Plan provides a balance of short- and long-term incentives to motivate executives to achieve our business goals and objectives and to properly reward executives for the achievement of such goals and objectives.
a. Annual Incentive Plan — The objective of the Annual Incentive Plan is to compensate individuals yearly based on the achievement of specific annual goals. Participating executives and other select employees may receive annual cash awards based on performance compared against pre-established Company and business unit objectives. The purpose of providing cash awards under the Annual Incentive Plan is to tie compensation to near-term performance. Objectives that management proposes are reviewed and approved or revised by the O&C Committee, with financial goal recommendations reviewed by the Board’s Finance Committee, no later than 90 days after the beginning of the performance period. The objectives include performance measures in several categories that are critical to our success. When setting these objectives, management and the O&C Committee determine the elements of our business that require the focused attention of the executives. The weights, which can change from year-to-year, are determined based on the Company’s key priorities and areas of focus for the upcoming year. The final awards, if any, are paid after the O&C Committee approves the final results of each objective.
The Annual Incentive Plan cash awards to executives are determined as follows:
1. The executive’s most recent year-end base salary is multiplied by an Annual Incentive Plan target percentage to arrive at the target award.
2. The overall performance payout percentage, which can range from 0% to 175%, is determined based on final results compared to threshold, target, and maximum levels for each objective.
45
3. The target award is then multiplied by the performance payout percentage to arrive at the pre-adjusted calculated award.
4. The pre-adjusted calculated award is then adjusted by an individual performance modifier (assessment of an individual executive’s achievements for the year), which can range from 0% to 150%, to arrive at the final award.
For 2011, the performance objectives and the related weightings, thresholds, targets, maximums and results for calculating the Named Executive Officers’ pre-adjusted awards were as follows:
For Messrs. Anderson, Meador, Peterson and Earley1:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
|||||||||||||||||||||
| DTE Energy Adjusted EPS |
25% | $ | 3.40 | $ | 3.60 | $ | 3.80 | $ | 3.73 | 148.8 | % | 37.2% | ||||||||||||||||
| DTE Energy Adjusted Cash Flow ($ millions) |
25% | $ | 700 | $ | 900 | $ | 1,100 | $ | 947 | 117.6 | % | 29.4% | ||||||||||||||||
| Customer Satisfaction Index |
13% | 70.5 | % | 71.7 | % | 72.5 | % | 70.1 | % | 0.0 | % | 0.0% | ||||||||||||||||
| DTE Cares Program Defect Rate |
8% | 10 | % | 15 | % | 25 | % | 20 | % | 135.7 | % | 10.9% | ||||||||||||||||
| MPSC Customer Complaints |
4% | 2,900 | 2,750 | 2,600 | 2,743 | 103.5 | % | 4.1% | ||||||||||||||||||||
| Employee Engagement |
9% | 3.80 | 4.0 | 4.09 | 3.98 | 92.5 | % | 8.3% | ||||||||||||||||||||
| Safety |
8% | 1.3 | 1.2 | 1.0 | 1.2 | 100.0 | % | 8.0% | 2 | |||||||||||||||||||
| Diversity Hiring — Minority |
4% | 15.3 | % | 17.0 | % | 18.7 | % | 38.5 | % | 175.0 | % | 7.0% | ||||||||||||||||
| Diversity Hiring — Female |
4% | 29.3 | % | 32.5 | % | 35.8 | % | 38.5 | % | 175.0 | % | 7.0% | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Total |
100% | 111.9% | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
The measures in the above table are defined below:
DTE Energy Adjusted EPS — DTE Energy net income after adjustments for certain non-operating items approved by the O&C Committee, divided by average shares outstanding, fully diluted.
DTE Energy Adjusted Cash Flow — DTE Energy net cash from operating activities adjusted by utility capital expenditures, asset sale proceeds and other items approved by the O&C Committee.
Customer Satisfaction Index — Satisfaction of six key drivers of residential customer satisfaction: (1) electric delivery, (2) gas delivery, (3) electric pricing, (4) gas pricing, (5) service reputation, and (6) corporate image using industry standard methodology developed by Market Strategies International.
DTE Cares Program Defect Rate — The calculation of a defect rate which will include defects from DTE Cares callbacks and total complaints (Michigan Public Service Commission (“MPSC”), corporate and web assists) measured as a reduction from 2010 rate.
MPSC Customer Complaints — Number of complaints received by the MPSC in the calendar year for all business units across DTE Energy.
Employee Engagement — DTE Energy Company Gallup Grand Mean score.
Safety — Number of Occupational Safety and Health Administration (“OSHA”) defined recordable injuries in the calendar year per 100 employees (working an average of 2,000 hours per year, per employee) divided by the actual number of hours worked.
Diversity Hiring — The percentage of minority and women non-represented placements (new hires and promotions).
| 1 | Due to Mr. Earley’s retirement, his award under this plan is prorated to reflect his term of service during 2011. |
| 2 | Due to an employee fatality, the Safety measure was reduced to zero for Mr. Anderson. |
46
The aggregate weighted payment percentage for Messrs. Meador, Peterson and Earley’s, pre-adjusted calculated award was 111.9%. The aggregate weighted payment percentage for Mr. Anderson, who was impacted by a safety adjustment, was 103.9%.
For Mr. Kurmas:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
|||||||||||||||||||||
| DTE Energy Adjusted EPS |
10% | $ | 3.40 | $ | 3.60 | $ | 3.80 | $ | 3.73 | 148.8 | % | 14.9% | ||||||||||||||||
| Detroit Edison Adjusted Net Income ($ millions) |
20% | $ | 433 | $ | 448 | $ | 458 | $ | 456 | 160.0 | % | 32.0% | ||||||||||||||||
| Detroit Edison Adjusted Cash Flow ($ millions) |
20% | $ | 195 | $ | 325 | $ | 455 | $ | 423 | 156.5 | % | 31.3% | ||||||||||||||||
| Customer Satisfaction Index |
13% | 70.5 | % | 71.7 | % | 72.5 | % | 70.1 | % | 0.0 | % | 0.0% | ||||||||||||||||
| DTE Cares Program Defect Rate |
8% | 10 | % | 15 | % | 25 | % | 20 | % | 135.7 | % | 10.9% | ||||||||||||||||
| MPSC Customer Complaints Employee Engagement |
|
4% 9% |
|
|
2,900 3.80 |
|
|
2,750 3.94 |
|
|
2,600 4.09 |
|
|
2,743 3.88 |
|
|
103.5 67.9 |
% % |
|
4.1% 6.1% |
| |||||||
| Safety |
8% | 1.6 | 1.4 | 1.2 | 1.4 | 100.0 | % | 8.0% | ||||||||||||||||||||
| Diversity Hiring — Minority |
4% | 19.4 | % | 21.5 | % | 23.7 | % | 24.5 | % | 175.0 | % | 7.0% | ||||||||||||||||
| Diversity Hiring — Female |
4% | 19.0 | % | 21.1 | % | 23.3 | % | 22.6 | % | 151.1 | % | 6.0% | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Total |
100% | 120.3% | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
The measures in the above table are defined below:
DTE Energy Adjusted EPS — DTE Energy net income after adjustments for certain non-operating items approved by the O&C Committee, divided by average shares outstanding, fully diluted.
Detroit Edison Adjusted Net Income — Detroit Edison net income after adjustments for certain non-operating items approved by the O&C Committee.
Detroit Edison Adjusted Cash Flow — Detroit Edison net cash from operating activities adjusted by Detroit Edison capital expenditures and other items approved by the O&C Committee.
Customer Satisfaction Index — Satisfaction of six key drivers of residential customer satisfaction: (1) electric delivery, (2) gas delivery, (3) electric pricing, (4) gas pricing, (5) service reputation, and (6) corporate image using industry standard methodology developed by Market Strategies International.
DTE Cares Program Defect Rate – The calculation of a defect rate which will include defects from DTE Cares callbacks and total complaints (MPSC, corporate and web assists) measured as a reduction from 2010 rate.
MPSC Customer Complaints — Number of complaints received by the MPSC in the calendar year for all business units across DTE Energy.
Employee Engagement — Detroit Edison Company Gallup Grand Mean score.
Safety — Number of OSHA defined recordable injuries in the calendar year per 100 employees (working an average of 2,000 hours per year, per employee) divided by the actual number of hours worked for Detroit Edison.
Diversity Hiring — The percentage of minority and women non-represented placements at Detroit Edison (new hires and promotions).
The aggregate weighted payment percentage for the pre-adjusted calculated award for Mr. Kurmas was 120.3%.
47
For Mr. Norcia:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
|||||||||||||||||||||
| DTE Energy Adjusted EPS |
10% | $ | 3.40 | $ | 3.60 | $ | 3.80 | $ | 3.73 | 148.8 | % | 14.9% | ||||||||||||||||
| MichCon Adjusted Net Income ($ millions) |
14% | $ | 105 | $ | 114 | $ | 118 | $ | 110 | 66.7 | % | 9.3% | ||||||||||||||||
| MichCon Adjusted Cash Flow ($ millions) |
14% | $ | 135 | $ | 185 | $ | 235 | $ | 185 | 99.9 | % | 14.0% | ||||||||||||||||
| Customer Satisfaction Index |
9.1% | 70.5 | % | 71.7 | % | 72.5 | % | 70.1 | 0.0 | % | 0.0% | |||||||||||||||||
| DTE Cares Program Defect Rate |
5.6% | 10 | % | 15 | % | 25 | % | 20 | % | 135.7 | % | 7.6% | ||||||||||||||||
| MPSC Customer Complaints |
2.8% | 2,900 | 2,750 | 2,600 | 2,743 | 103.5 | % | 2.9% | ||||||||||||||||||||
| Employee Engagement |
6.3% | 3.80 | 4.0 | 4.09 | 3.99 | 96.3 | % | 6.1% | ||||||||||||||||||||
| Safety |
5.6% | 1.9 | 1.7 | 1.5 | 1.8 | 62.5 | % | 3.5% | 1 | |||||||||||||||||||
| Diversity Hiring — Minority |
2.8% | 12.6 | % | 14.0 | % | 15.4 | % | 31.5 | % | 175.0 | % | 4.9% | ||||||||||||||||
| Diversity Hiring — Female |
2.8% | 24.5 | % | 27.2 | % | 29.9 | % | 31.5 | % | 175.0 | % | 4.9% | ||||||||||||||||
| GSP Adjusted Net Income ($ millions) |
10.5% | $ | 52 | $ | 55 | $ | 58 | $ | 57 | 160.0 | % | 16.8% | ||||||||||||||||
| GSP Adjusted Cash Flow ($ millions) |
6.0% | $ | 65 | $ | 72 | $ | 79 | $ | 87 | 175.0 | % | 10.5% | ||||||||||||||||
| GSP — New Project Development |
10.5% | 25 | % | 100 | % | 175 | % | 114 | % | 113.8 | % | 12.0% | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Total |
100% | 107.3% | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
The measures in the above table are defined below:
DTE Energy Adjusted EPS — DTE Energy net income after adjustments for certain non-operating items approved by the O&C Committee, divided by average shares outstanding, fully diluted.
MichCon Adjusted Net Income — MichCon net income after adjustments for certain non-operating items approved by the O&C Committee.
MichCon Adjusted Cash Flow — MichCon net cash from operating activities adjusted by MichCon capital expenditures and other items approved by the O&C Committee.
Customer Satisfaction Index — Satisfaction of six key drivers of residential customer satisfaction: (1) electric delivery, (2) gas delivery, (3) electric pricing, (4) gas pricing, (5) service reputation, and (6) corporate image using industry standard methodology developed by Market Strategies International.
DTE Cares Program Defect Rate — The calculation of a defect rate which will include defects from DTE Cares callbacks and total complaints (MPSC, corporate and web assists) measured as a reduction from 2010 rate.
MPSC Customer Complaints — Number of complaints received by the MPSC in the calendar year for all business units across DTE Energy.
Employee Engagement — MichCon’s Gallup Grand Mean score.
Safety — Number of OSHA defined recordable injuries in the calendar year per 100 employees (working an average of 2,000 hours per year, per employee) divided by the actual number of hours worked for MichCon.
Diversity Hiring — The percentage of minority and women non-represented placements at MichCon (new hires and promotions).
GSP Adjusted Net Income — DTE Energy’s Gas Storage and Pipeline Business Unit’s (“GSP”) net income after adjustments for certain non-operating items approved by the O&C Committee.
GSP Adjusted Cash Flow — GSP net cash from operating activities adjusted by GSP capital expenditures and other items approved by the O&C Committee.
GSP — New Project Development — Project performance against key milestones, objectives and deliverables identified at the beginning of the performance period for new business opportunities, or new geographies for current business.
| 1 | Due to an employee fatality, the Safety measure was reduced to zero for Mr. Norcia. |
48
The aggregate weighted payment percentage for the pre-adjusted calculated award for Mr. Norcia was 103.8%. Mr. Norcia’s percentage was impacted by a safety adjustment.
The earnings per share, cash flow and net income measures were chosen as indicators of the Company’s financial strength. The customer satisfaction, employee engagement, safety and diversity measures were selected to make the Company more responsive to our customers’ needs and to make the Company a safer and better place to work. The GSP — New Project Development measure is designed to reward growth in DTE Energy’s Gas Storage and Pipeline Business Unit.
Each objective has a minimum, target and maximum level. The Company or business unit must attain a minimum level of achievement for an objective before any compensation is payable with respect to that objective. The minimum established level of each objective will result in a payout of 25% of target (50% for GSP measures, 0% for GSP — New Product Development measure), and the maximum established for each level (or better) will result in a payment of up to 175% of target.
The pre-adjusted awards are adjusted by an individual performance modifier for each of the Named Executive Officers. Individual performance criteria are set at the beginning of each calendar year for each of the Named Executive Officers. For 2011, qualitative criteria include, as applicable, leadership performance, overall operational performance, employee engagement and customer performance, continuous operational improvements and other appropriate operating measures. The O&C Committee evaluates the individual performance of each of the Named Executive Officers and approves an adjustment to the annual award based on the individual contribution and performance. The individual performance modifier adjusts a Named Executive Officer’s annual cash bonus such that the Named Executive Officer’s actual cash bonus ranges between zero and 150% of the pre-adjusted calculated award. For 2011, after adjusting for individual performance, annual incentive awards for the Named Executive Officers ranged from 115% to 130% of the pre-adjusted calculated awards.
The final awards for 2011 year were paid to each of the Named Executive Officers in early 2012 and are reported in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” on page 56.
b. Long-Term Incentive Plan — The Long-Term Incentive Plan provides the O&C Committee the ability to design programs that focus on our long-term performance over a three-year period, with the objective to align executives’ interests with those of our shareholders. Our principles for ownership of stock, discussed on page 53, ensure that the executives and other employees have a vested interest in the long-term financial health, management, and success of the Company.
The Long-Term Incentive Plan rewards executives and other employees with stock-based compensation. Participants are eligible to receive restricted stock, performance shares, performance units, stock options or a combination of these awards. Since the creation of the plan, we have granted only performance shares, time-based restricted stock and non-qualified stock options. Further, in 2011, the O&C Committee did not grant stock options under the Long-term Incentive Plan. Executives receive Long-Term Incentive Plan grants based upon a target percentage of base salary. The targeted award levels for the Named Executive Officers for 2011 were as follows: Mr. Anderson — 250% of base salary; Mr. Meador — 150% of base salary; Mr. Kurmas — 155% of base salary; Mr. Norcia — 140% of base salary; Mr. Peterson — 115% of base salary; and Mr. Earley — 150% of base salary. In addition to the targeted award levels, the O&C Committee also considers previous years’ grants, career potential, and retention issues in determining the final number of awards granted. Due to Mr. Earley’s retirement, his award under this plan is prorated to reflect his term of service during 2011.
The value of each element of these Long-Term Incentive Plan grants for 2011 was as follows:
| Performance Shares |
Approximately 60% | |
| Restricted Stock |
Approximately 40% |
49
This mix was designed to provide a balance of incentives to executives for creating long-term shareholder value through strong financial and operating performance and to align executive interests with shareholder interests.
| • | Performance Shares Granted in 2011: In 2011, performance shares represented approximately 60% of the overall Long-Term Incentive Plan grant value. Granting of performance shares allows us to tie long-term performance objectives with creating shareholder value. Performance shares entitle the executive to receive a specified number of shares, or a cash payment equal to the fair market value of the shares, or a combination of the two, depending on the level of achievement of performance measures. The performance measurement period for the 2011 grants is January 1, 2011 through December 31, 2013. Payments earned under the 2011 grants and the related performance measures are described in footnote 2 to the “Grants of Plan-Based Awards” table on page 58. In the event a participant retires (age 55 or older with at least 10 years of service), dies or becomes disabled, the participant or beneficiary retains the right to a pro-rated number of performance shares. In the event employment terminates for any other reason, the participant forfeits all rights to any outstanding performance shares. In June 2009, the O&C Committee decided that, beginning with the 2010 performance share grants, dividends or dividend equivalents would not be paid on unvested or unearned performance shares. During the period beginning on the date the performance shares are awarded and ending on the certification date of the performance objectives, the number of performance shares awarded will be increased, assuming full dividend reinvestment at the fair market value on the dividend payment date. The cumulative number of performance shares will be adjusted to determine the final payment based on the performance objectives as certified by the Committee. |
| • | Performance Shares Paid in 2011: The performance shares granted in 2008 were paid in early 2011. The payout amounts were based upon performance measures, each of which was weighted to reflect its importance to the total calculation. The Company had to attain a minimum level for each measure before any compensation was payable with respect to that measure. The minimum established level of each measure would have resulted in a payout of 50% of target, and an established maximum (or better) for each level would have resulted in a payout of 200% of target. The payout amount was based upon the following performance measures (and related weighting): |
Long-Term Incentive Plan (2011 Payout of Awards Granted in 2008)
For Messrs. Anderson, Meador, Peterson and Earley:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
|||||||||||||||||||||
| Total Shareholder Return: DTE vs. Peer Group |
40% | |
25th percentile |
|
|
50th percentile |
|
|
75th percentile |
|
|
51st percentile |
|
104 | % | 41.6% | ||||||||||||
| Balance Sheet Health as of 12/31/2010 |
20% | |
Downgrade from 2 of the major agencies |
|
|
No change from 12/31/2007 ratings |
|
|
Upgrade from all of the major |
|
|
Upgrade from one agency |
|
125 | % | 25% | ||||||||||||
| EPS Growth Rate 2008 — 2010 |
40% | 3 | % | 5 | % | 7 | % | 9.2 | % | 200 | % | 80% | ||||||||||||||||
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|
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| Total |
100% | 146.6% | ||||||||||||||||||||||||||
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For Mr. Kurmas:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
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| Total Shareholder Return: DTE vs. Peer Group |
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75th percentile |
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51st percentile |
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104 | % | 41.6% | ||||||||||||
| Balance Sheet Health as of 12/31/2010 |
20% | |
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No change from 12/31/2007 ratings |
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125 | % | 25% | ||||||||||||
| Detroit Edison Average Return on Equity 2008 — 2010 |
40% | 10 | % | 11 | % | 12 | % | 10.4 | % | 70 | % | 28% | ||||||||||||||||
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100% | 94.6% | ||||||||||||||||||||||||||
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For Mr. Norcia:
| Measures |
Weight | Threshold | Target | Maximum | Result | Payout % |
Weighted Average Payout % |
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| Total Shareholder Return: DTE vs. Peer Group |
40% | |
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75th percentile |
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51st percentile |
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104 | % | 41.6% | ||||||||||||
| Balance Sheet Health as of 12/31/2010 |
20% | |
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No change from 12/31/2007 ratings |
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125 | % | 25% | ||||||||||||
| MichCon Average Return on Equity 2008 — 2010 |
28% | 10 | % | 11 | % | 12 | % | 10.2 | % | 60 | % | 16.8% | ||||||||||||||||
| Gas Storage & Pipeline 2008 — 2010 Net Income (millions) |
12% | $ | 40 | $ | 47 | $ | 54 | $ | 51.1 | 159 | % | 19.1% | ||||||||||||||||
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The measures in the above tables are defined below:
Total Shareholder Return — Total shareholder return compared to 22 peer group companies (as defined below) based on the average share prices from December 2007 through December 2010.
Balance Sheet Health — DTE Senior Unsecured Debt Bond Ratings as of December 31, 2010. All ratings must be at least investment grade or there will not be a payout for this measure.
EPS Growth Rate 2008 — 2010 — Three-year average growth of DTE Energy Company operating earnings per share.
Detroit Edison Average Return on Equity 2008 — 2010 — Detroit Edison’s three-year average segment return on equity, expressed as a percentage, calculated based on operating income.
MichCon Average Return on Equity 2008 — 2010 — MichCon’s three-year average segment return on equity, expressed as a percentage, calculated based on operating income.
Gas Storage & Pipeline 2008 — 2010 Net Income — Gas Storage and Pipelines’ three-year average segment net income, adjusted for corporate allocations and other items approved by the O&C Committee.
The peer group for the Long-Term Incentive Plan, as approved by the O&C Committee, consists of the companies set forth below. These companies were selected because: (1) their operations are largely regulated; (2) their size (based on market capitalization); and (3) their business strategies are similar to those of DTE Energy. In creating this peer group, the Company started with the S&P 1500 Multi-Utility and S&P 1500 Electric Utility Indices and eliminated companies with less than $2 billion of market capitalization and companies with material gas commodity exposure. In addition, companies that were in the process of being acquired were also eliminated. The O&C Committee reviews and approves this peer group annually.
| Alliant Energy Corporation |
NSTAR | |
| American Electric Power Company, Inc. |
PG&E Corporation | |
| CenterPoint Energy, Inc. |
Pinnacle West Capital Corporation | |
| CMS Energy Corporation |
Progress Energy, Inc. | |
| Consolidated Edison, Inc. |
SCANA Corporation | |
| DPL, Inc. |
TECO Energy, Inc. | |
| Great Plains Energy Inc. |
The Southern Company | |
| Integrys Energy Group, Inc. |
Vectren Corporation | |
| NiSource Inc. |
Westar Energy, Inc. | |
| Northeast Utilities |
Wisconsin Energy Corporation | |
| NV Energy, Inc. |
Xcel Energy Inc. |
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Total shareholder return compared to the Peer Group is the primary measure because it reflects how well our Company has performed on total return to its shareholders relative to the total shareholder returns of similar companies. See footnote 2 to the “Option Exercises and Stock Vested in 2011” table on page 61. Over the past three years, the payout level has ranged from 74.8% to 149.0%. For the 2008 — 2010 period, the minimum levels of performance for all three measures were exceeded. Based on the results of these measures, the 2011 payout level, as approved by the O&C Committee, was 146.6% for Messrs. Anderson, Meador, Peterson and Earley, 94.6% for Mr. Kurmas, and 102.5% for Mr. Norcia.
| • | Restricted Stock: The restricted stock we grant is time-based restricted stock and generally includes a three-year vesting period. The granting of restricted stock allows us to grant executives long-term equity incentives to encourage continued employment. In 2011, restricted stock was granted, representing approximately 40% of the overall Long-Term Incentive Plan grant value, with the restriction period ending on February 17, 2014. The three-year vesting period focuses on long-term value creation and executive retention. The three-year vesting period requires continued employment throughout the restriction period. These restricted stock grants do not qualify as performance-based compensation under Internal Revenue Code Section 162(m). As such, the full values of these shares are included in the Internal Revenue Code Section 162(m) computation in the year of vesting. For more information, see “Internal Revenue Code Limits on Deductibility of Compensation” on page 54. In the event a participant retires (age 55 or older with at least 10 years of service), dies or becomes disabled, the participant or beneficiary retains the right to a pro-rated number of restricted shares. In the event the employment terminates for any other reason, the participant forfeits all rights to any outstanding restricted shares. |
| • | Stock Options: In 2011, non-qualified stock options were not granted to executives. For the 2009-2010 period non-qualified stock options represented approximately 20% of the overall Long-Term Incentive Plan grant value. The granting of stock options allowed us to grant executives long-term equity incentives that align long-term performance with creating shareholder value. These stock options have a ten-year exercise period and vest one-third on each anniversary of the grant date over a three-year period. The stock option exercise price is based on the closing price on the date the options are granted. In the event a participant retires (age 55 or older with at least 10 years of service) or becomes disabled, the participant retains the rights to all outstanding vested and unvested stock options in accordance with the original terms of the grant. In the event a participant dies, the beneficiary has three years from the date of death to exercise the stock options. In the event employment terminates for any other reason, the participant forfeits all rights to any unvested stock options and has 90 days to exercise any vested stock options. |
Retirement and Other Benefits
Providing a supplemental retirement program for our executives is in keeping with our philosophy and objectives to attract and retain talented executives. The Pension Benefits Table and related footnotes beginning on page 62 describe both the qualified and nonqualified retirement benefit programs for which certain executives are eligible and are commonly offered by other employers in our peer group. Other benefit programs include the DTE Energy Company Supplemental Savings Plan (the “Supplemental Savings Plan”), which mirrors the 401(k) plan and allows executives to continue to defer base salary after certain IRS limits have been reached. The matching contributions we make in the Supplemental Savings Plan are the same as those provided under the 401(k) plan. For further description of the supplemental retirement programs, see “Pension Benefits” beginning on page 62.
Executive Benefits
We provide executives with certain benefits generally not available to our other employees as a matter of competitive practice and as a retention tool. The O&C Committee periodically reviews the level of benefits provided to executives against a peer group to assure they are reasonable and consistent with our overall compensation objectives.
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We provide a cash allowance to certain executives in lieu of executive benefits typically provided by other companies. The executive is permitted to use the allowance as he or she deems appropriate. Although the allowance is taxable for income tax purposes, it is not considered as compensation for any Company incentive or benefit program.
During 2011, we provided various benefits for a limited number of officers that included the following:
a. Home security program and security driver for business: Home security monitoring for most executives has been phased out and replaced by the executive benefit allowance. During 2011, the Company provided home security monitoring systems for certain executives, including some of the Named Executive Officers, based on our executive security policies and a security risk assessment by the Company’s chief security officer. These expenses are considered appropriate to protect the Company and its executives despite the incidental personal benefit to the executives. In addition to home security monitoring, under our executive security policy, the Board requires Mr. Anderson to use a Company car and security driver while on Company business and required Mr. Earley to do so prior to his retirement.
b. Corporate aircraft for limited business travel: We lease a fractional share of an aircraft for limited business travel by executives and other employees when there is an appropriate business purpose. Personal use of the aircraft is not allowed except in unusual circumstances and requires the prior approval of the CEO. During 2011, the corporate aircraft was used for one personal trip by one named executive officer.
c. Supplemental retirement program: Certain executives are eligible for both the qualified and non-qualified retirement benefit programs, which are commonly offered by other employers in our peer group. For further description of the supplemental retirement programs, see “Pension Benefits” beginning on page 62.
d. Other benefits: Executives are also allowed the limited use of corporate event tickets and the corporate condominium when available. In addition, as part of a Department of Energy-funded (“DOE”), General Motors (“GM”) Vehicle Electrification Demonstration Project, DTE has purchased 10 Chevrolet Volts. As part of the demonstration project, these Volts have been loaned to Company employees (including Named Executive Officers) to be driven as their primary vehicle for a period of one to two years. The Company is collecting vehicle charging data and driving data that will be shared with GM and the DOE.
Post-Termination Agreements
We have entered into indemnification agreements and change-in-control agreements with each of the Named Executive Officers and certain other executives. The indemnification agreements require that we indemnify these individuals for certain liabilities to which they may become subject as a result of their affiliation with the Company. The change-in-control agreements are intended to provide continuity of management in the event there is a change-in-control of the Company and to align executive and shareholder interests in support of corporate transactions. The important terms of, and the potential payments provided under, the change-in-control agreements are described beginning on page 66.
Stock Ownership Policy
Our principles for ownership of stock ensure that the executives and other employees have a vested interest in the financial health, management and success of the Company. We expect most executives and certain other employees to own, within five years of their appointment to such position, shares of our stock having a value equal to a multiple of their annual base salary. Common stock, time-based restricted stock, phantom stock, and unvested performance shares (assuming achievement of target levels of performance) are counted toward the fulfillment of this ownership requirement. The following are the requirements for the Named Executive Officers: (i) for Messrs. Anderson and Earley (until his retirement), five times their respective base salary; (ii) for Messrs. Kurmas, Meador and Norcia four times their respective base salary; and (iii) for Mr. Peterson, three
53
times his base salary. Other executives and employees may be required to hold from one to three times their base salaries as determined by their executive group level within the Company. As of January 1, 2012, 100% of the Named Executive Officers who were employees of the Company and 100% of the other required employees met the stock ownership guidelines. As of his retirement date the stock ownership guidelines ceased to apply to Mr. Earley.
Internal Revenue Code Limits on Deductibility of Compensation
In evaluating the potential compensation alternatives, our Organization and Compensation Committee considers the possible impact of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Code Section 162(m) places a limit of $1 million on the amount of compensation we can deduct as a business expense on our federal income tax return with respect to “covered employees” unless it is (i) based on performance and (ii) paid under a program that meets Internal Revenue Code requirements. In general, “covered employees” for these purposes are our CEO and the three highest paid executive officers named in the “Summary Compensation Table” on page 56 other than the CEO and CFO. The Annual Incentive Plan and the Long-Term Incentive Plan, previously approved by the shareholders, are designed to provide the opportunity for use of the performance-based compensation exception. The Long-Term Incentive Plan permits various types of awards, some of which qualify for exemption under Code Section 162(m) and some of which do not. We expect to continue to emphasize performance-based compensation programs designed to fulfill future corporate business objectives at all levels. Although these programs are generally designed to satisfy the requirements of Code Section 162(m), we believe it is important to preserve flexibility in designing compensation programs and it may be appropriate in certain circumstances to grant compensation that may not meet all of the Internal Revenue Code requirements for deducting compensation in excess of $1 million and, therefore, will not be tax deductible for the Company. For the 2011 tax year, the Company paid the Named Executive Officers a total of $1.48 million which was not deductible.
We have also structured all of our nonqualified compensation programs to be in compliance with Internal Revenue Code Section 409A, as added by the American Jobs Creation Act of 2004. Internal Revenue Code Section 409A imposes additional tax penalties on our executive officers for certain types of deferred compensation that are not in compliance with the form and timing of elections and distribution requirements of that section.
Accounting considerations also play a role in our executive compensation program. Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718” formerly, Financial Accounting Standards Board Statement SFAS No. 123R) requires us to expense the fair value of our stock option grants over the vesting period, which reduces the amount of our reported profits. Because of this stock-based expensing and the impact of dilution to our shareholders, we closely monitor the number and the fair values of the option shares.
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Report of the Organization and Compensation Committee
The O&C Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on that review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s 2012 Proxy Statement.
Organization and Compensation Committee
Eugene A. Miller, Chair
Lillian Bauder
Frank M. Hennessey
Ruth G. Shaw
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The table below summarizes the total compensation earned by each of the Named Executive Officers for the fiscal years ended December 31, 2009, December 31, 2010 and December 31, 2011.
| Name and Principal Position |
Year | Salary ($)(1) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Non-Equity Incentive Plan Compensation ($)(4) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) |
All Other Compensation ($)(6) |
Total ($) |
||||||||||||||||||||||||
| Gerard M. Anderson, |
2011 | 1,099,615 | 3,279,500 | 0 | 1,621,000 | 1,272,574 | 116,590 | 7,389,279 | ||||||||||||||||||||||||
| Chairman, President and |
2010 | 901,538 | 2,021,700 | 449,600 | 1,282,000 | 851,893 | 94,652 | 5,601,383 | ||||||||||||||||||||||||
| Chief Executive Officer(7) |
2009 | 820,000 | 1,385,000 | 441,000 | 1,170,000 | 984,958 | 87,983 | 4,888,941 | ||||||||||||||||||||||||
| David E. Meador, |
2011 | 590,577 | 1,072,865 | 0 | 629,400 | 767,867 | 78,233 | 3,138,942 | ||||||||||||||||||||||||
| Executive Vice President and |
2010 | 559,615 | 835,050 | 196,700 | 591,700 | 577,727 | 73,979 | 2,834,771 | ||||||||||||||||||||||||
| Chief Financial Officer |
2009 | 545,000 | 540,150 | 176,400 | 800,800 | 744,098 | 87,623 | 2,894,071 | ||||||||||||||||||||||||
| Steven E. Kurmas, |
2011 | 518,269 | 969,795 | 0 | 574,700 | 851,283 | 76,231 | 2,990,278 | ||||||||||||||||||||||||
| Group President |
2010 | 482,500 | 791,100 | 168,600 | 463,500 | 727,243 | 69,895 | 2,702,838 | ||||||||||||||||||||||||
| 2009 | 435,000 | 540,150 | 149,940 | 467,200 | 697,028 | 70,118 | 2,359,436 | |||||||||||||||||||||||||
| Gerardo Norcia, |
2011 | 443,269 | 749,600 | 0 | 394,900 | 127,576 | 71,275 | 1,786,620 | ||||||||||||||||||||||||
| Group President |
2010 | 408,846 | 483,450 | 112,400 | 330,500 | 137,660 | 65,159 | 1,538,015 | ||||||||||||||||||||||||
| 2009 | 365,000 | 277,000 | 88,200 | 333,200 | 212,390 | 61,833 | 1,337,623 | |||||||||||||||||||||||||
| Bruce D. Peterson, |
2011 | 483,962 | 669,955 | 0 | 376,800 | 157,301 | 69,273 | 1,757,291 | ||||||||||||||||||||||||
| Senior Vice President and |
2010 | 468,961 | 527,400 | 140,500 | 348,700 | 128,443 | 68,199 | 1,682,203 | ||||||||||||||||||||||||
| General Counsel |
2009 | 458,000 | 349,020 | 110,250 | 476,200 | 188,347 | 67,421 | 1,649,238 | ||||||||||||||||||||||||
| Anthony F. Earley, Jr., |
2011 | 808,769 | 1,780,300 | 0 | 784,400 | 1,732,760 | 88,510 | 5,194,739 | ||||||||||||||||||||||||
| Retired Executive Chairman(8) |
2010 | 1,219,692 | 3,691,800 | 843,000 | 1,870,000 | 716,856 | 135,446 | 8,476,794 | ||||||||||||||||||||||||
| 2009 | 1,200,000 | 3,185,000 | 749,700 | 2,275,000 | 1,663,241 | 138,160 | 9,211,101 | |||||||||||||||||||||||||
| (1) | The base salary amounts reported include amounts which were voluntarily deferred by the Named Executive Officers into the Supplemental Savings Plan. The amounts deferred by each of the Named Executive Officers were as follows: |
| Name |
2011 Deferred Amount | 2010 Deferred Amount | 2009 Deferred Amount | |||||||||
| Gerard M. Anderson |
$ | 93,461 | $ | 73,654 | $ | 65,500 | ||||||
| David E. Meador |
$ | 30,746 | $ | 28,269 | $ | 27,100 | ||||||
| Steven E. Kurmas |
$ | 16,396 | $ | 14,250 | $ | 11,400 | ||||||
| Gerardo Norcia |
$ | 18,962 | $ | 16,208 | $ | 12,700 | ||||||
| Bruce D. Peterson |
$ | 22,217 | $ | 21,017 | $ | 20,140 | ||||||
| Anthony F. Earley, Jr. |
$ | 64,377 | $ | 105,469 | $ | 103,500 | ||||||
| (2) | These amounts represent the grant date fair value of the restricted stock and performance shares granted in 2009, 2010 and 2011 in accordance with FASB ASC Topic 718. The number of awards granted and other information related to the 2011 grants are detailed in the “Grants of Plan-Based Awards” table on page 58. |
| (3) | These amounts represent the grant date fair value of the stock options granted in 2009, 2010 and 2011 in accordance with FASB ASC Topic 718. There were no stock options granted in 2011. |
| (4) | The 2011 Annual Incentive Plan amounts, shown in the Non-Equity Incentive Plan Compensation column, paid to the Named Executive Officers were calculated as described beginning on page 45 and include an individual performance modifier. |
| (5) | The amounts in this column represent the aggregate change in the actuarial present values of each Named Executive Officer’s accumulated benefits under the DTE Energy Company Retirement Plan, the DTE |
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| Energy Company Supplemental Retirement Plan, and the DTE Energy Company Executive Supplemental Retirement Plan. The measurement period for each of 2009, 2010 and 2011 was the calendar year. Amounts in this column change from year to year based on a number of different variables. The primary variable is the discount rate used for valuation purposes. Discount rates used for 2009, 2010 and 2011 valuations were 5.9%, 5.5%, and 5.0% respectively. These plans are described in more detail beginning on page 62. |
| (6) | The following table provides a breakdown of the 2011 amounts reported in this column. |
| Name |
Company Matching Contributions to the 401(k) Plan ($)* |
Company Matching Contributions to the Supplemental Savings Plan*, ** |
Additional Benefits ($)*** |
Total ($) |
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| Gerard M. Anderson |
11,538 | 54,438 | 50,613 | 116,590 | ||||||||||||
| David E. Meador |
13,281 | 22,154 | 42,798 | 78,233 | ||||||||||||
| Steven E. Kurmas |
14,700 | 16,396 | 45,135 | 76,231 | ||||||||||||
| Gerardo Norcia |
13,096 | 13,500 | 44,679 | 71,275 | ||||||||||||
| Bruce D. Peterson |
13,272 | 15,766 | 40,236 | 69,273 | ||||||||||||
| Anthony F. Earley, Jr. |
11,446 | 37,080 | 39,984 | 88,510 | ||||||||||||
| * | The matching contributions reflected in these two columns are predicated on the Named Executive Officers making contributions from base salary. The total combined Company matching contributions between the plans cannot exceed 6% for each of the Named Executive Officers. |
| ** | The Supplemental Savings Plan provides for deferring compensation in excess of various Internal Revenue Code limits imposed on tax qualified plans, including the maximum employee pre-tax contribution limit ($16,500 plus $5,500 per year catch-up contributions for 2009, 2010 and 2011) and the compensation limit ($245,000 for 2009, 2010 and 2011). Supplemental Savings Plan account balances are paid only in cash to the Named Executive Officer upon termination of employment. |
| *** | The value attributable to executive benefits for the Named Executive Officers. Beginning in 2007, the executives receive an annual cash executive benefit allowance in lieu of certain non-cash executive benefits. The cash executive benefit allowance paid to each Named Executive Officer during 2011 was $35,000. Other executive benefits made available to certain of the named executive officers during 2011 included security services, use of a company-owned Chevrolet Volt and limited personal use of corporate event tickets, the corporate condominium and the company aircraft. See “Executive Benefits” on page 52 for a full discussion of executive benefits. |
| (7) | Mr. Anderson served as President and Chief Executive Officer through September 12, 2011, when he assumed the additional role of Chairman. |
| (8) | Mr. Earley retired effective September 13, 2011. Upon his retirement, portions of the restricted stock and performance shares granted to Mr. Earley in 2009, 2010 and 2011 were forfeited in accordance with the terms of the Company’s Long-Term Incentive Plan. The value of such grants for 2011 as set forth in the table above (in the Stock Awards column) represents the full value of such grants; the value of the 2011 restricted stock and performance share grants retained by Mr. Earley following the forfeiture of a portion of such grants is $453,405. The 2011 Annual Incentive Plan payment to Mr. Earley as set forth in the table above (in the Non-Equity Incentive column) was paid to Mr. Earley in accordance with the terms of the Company’s Annual Incentive Plan and represents a pro-rata payment for the portion of 2011 during which Mr. Earley was employed by the Company. |
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| Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock |
All Other Option |
Grant | ||||||||||||||||||||||||||||||||||||||
| Name |
Grant Date |
Threshold ($) |
Target Award ($) |
Maximum ($) |
Threshold (#) |
Target (#) | Maximum (#) |
Awards: Number of Shares of Stock or Units (#)(3) |
Awards: Number of Securities Underlying Options (#)(4) |
Exercise or Base Price of Option Awards ($/Sh) |
Date Fair Value of Stock and Option Awards ($)(4) |
|||||||||||||||||||||||||||||||
| Gerard M. Anderson |
0 | 1,200,000 | 3,150,000 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 42,000 | 84,000 | 46.85 | 1,967,700 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 28,000 | 46.85 | 1,311,800 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| David E. Meador |
0 | 450,000 | 1,181,250 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 13,700 | 27,400 | 46.85 | 641,845 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 9,200 | 46.85 | 431,020 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| Steven E. Kurmas |
0 | 341,250 | 895,781 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 12,400 | 24,800 | 46.85 | 580,940 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 8,300 | 46.85 | 388,855 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| Gerardo Norcia |
0 | 292,500 | 767,813 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 9,600 | 19,200 | 46.85 | 449,760 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 6,400 | 46.85 | 299,840 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| Bruce D. Peterson |
0 | 292.800 | 768,600 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 8,600 | 17,200 | 46.85 | 402,910 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 5,700 | 46.85 | 267,045 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| Anthony F. Earley, Jr.(6) |
0 | 1,000,000 | 2,625,000 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 0 | 23,000 | 46,000 | 46.85 | 1,077,550 | |||||||||||||||||||||||||||||||||||||
| 2/17/2011 | 15,000 | 46.85 | 702,750 | |||||||||||||||||||||||||||||||||||||||
| 2/17/2011 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | These dollar amounts represent the threshold, target, and maximum payouts for the 2011 plan year under the Annual Incentive Plan. The various measures and details of the 2011 final awards are presented beginning on page 45. |
| (2) | The target column represents the number of performance shares granted to the Named Executive Officers under the Long-Term Incentive Plan on February 17, 2011. The performance measurement period for the 2011 grants is January 1, 2011 through December 31, 2013. Payments earned from the 2011 grants will be based on three performance measures weighted as follows: (i) total shareholder return vs. shareholder return of a custom peer group (70%), (ii) customer satisfaction index three year average (15%), and (iii) employee engagement (15%) for Messrs. Anderson, Earley, Meador and Peterson. Payments earned from the 2011 grants will be based on four performance measures weighted as follows: (i) total shareholder return vs. shareholder return of a custom peer group (35%), (ii) business unit specific measure (35%), (iii) customer satisfaction index three year average (15%), and (iv) employee engagement (15%) for Messrs. Kurmas and Norcia. The final payouts, if any, will occur after the O&C Committee approves the final results in early 2014. Beginning with 2010 performance share grants, dividends or dividend equivalents are not paid on unvested performance shares. |
| (3) | This column reports the number of shares of restricted stock granted under the Long-Term Incentive Plan to each of the Named Executive Officers on February 17, 2011. These shares of restricted stock will vest on February 17, 2014, assuming the Named Executive Officer is still actively employed by the Company on that date. Dividends on these shares of restricted stock are paid to the Named Executive Officer during the vesting period and are paid at the same rate as dividends paid to shareholders. |
58
| (4) | The Company did not grant stock options under the Long-Term Incentive Plan to the Named Executive Officers in 2011. |
| (5) | This column reports the grant date fair value of each equity award granted in 2011 computed in accordance with FASB ASC Topic 718. |
| (6) | Mr. Earley retired effective September 13, 2011. Payouts for Mr. Earley are prorated to reflect his retirement during the measurement period. |
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Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name |
Number of Securities Underlying Unexercised Options Exercisable (#) |
Number of Securities Underlying Unexercised Options Unexercisable (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(10) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(11) |
Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (12) |
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($) (13) |
||||||||||||||||||||||||
| Gerard M. Anderson |
76,000 | 4,138,200 | 93,401 | 5,085,680 | ||||||||||||||||||||||||||||
| 20,000 | (2) | 41.46 | 2/27/2013 | |||||||||||||||||||||||||||||
| 40,000 | (3) | 39.41 | 2/9/2014 | |||||||||||||||||||||||||||||
| 35,000 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 45,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 35,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 75,000 | (7) | 41.79 | 2/25/2018 | |||||||||||||||||||||||||||||
| 55,555 | (8) | 33,334 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||
| 26,666 | (9) | 53,334 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
| David E. Meador |
28,200 | 1,535,490 | 34,477 | 1,877,262 | ||||||||||||||||||||||||||||
| 17,000 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 20,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 15,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 8,333 | (7) | 41.79 | 2/25/2018 | |||||||||||||||||||||||||||||
| 13,334 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||||
| 11,666 | (9) | 23,334 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
| Steven E. Kurmas |
26,800 | 1,459,260 | 32,589 | 1,774,490 | ||||||||||||||||||||||||||||
| 8,000 | (2) | 41.46 | 2/27/2013 | |||||||||||||||||||||||||||||
| 10,000 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 10,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 5,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 10,000 | (7) | 41.79 | 2/25/2018 | |||||||||||||||||||||||||||||
| 22,666 | (8) | 11,334 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||
| 10,000 | (9) | 20,000 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
| Gerardo Norcia |
16,700 | 909,315 | 21,098 | 1,148,771 | ||||||||||||||||||||||||||||
| 5,000 | (1) | 46.23 | 11/4/2012 | |||||||||||||||||||||||||||||
| 2,420 | (2) | 41.46 | 2/27/2013 | |||||||||||||||||||||||||||||
| 3,000 | (3) | 39.41 | 2/9/2014 | |||||||||||||||||||||||||||||
| 2,480 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 10,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 5,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 20,000 | (7) | 41.79 | 2/25/2018 | |||||||||||||||||||||||||||||
| 6,667 | (8) | 6,667 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||
| 6,666 | (9) | 13,334 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
| Bruce D. Peterson |
17,800 | 969,210 | 21,905 | 1,192,704 | ||||||||||||||||||||||||||||
| 15,000 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 17,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 15,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 10,000 | (7) | 41.79 | 2/25/2018 | |||||||||||||||||||||||||||||
| 8,334 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||||
| 8,333 | (9) | 16,667 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
| Anthony F. Earley, Jr.(14) |
71,160 | 3,874,662 | 84,980 | 4,627,161 | ||||||||||||||||||||||||||||
| 100,000 | (4) | 44.72 | 2/15/2015 | |||||||||||||||||||||||||||||
| 115,000 | (5) | 43.42 | 2/28/2016 | |||||||||||||||||||||||||||||
| 115,000 | (6) | 47.75 | 2/23/2017 | |||||||||||||||||||||||||||||
| 3,333 | (8) | 56,667 | (8) | 27.70 | 2/26/2019 | |||||||||||||||||||||||||||
| 50,000 | (9) | 100,000 | (9) | 43.95 | 2/25/2020 | |||||||||||||||||||||||||||
60
| (1) | These stock options vested in three equal annual installments beginning on February 27, 2003. |
| (2) | These stock options vested in three installments as follows: 33% on February 27, 2004, 33% on February 27, 2005 and 34% on February 27, 2006. |
| (3) | These stock options vested in three equal annual installments beginning on February 9, 2005. |
| (4) | These stock options vested in three equal annual installments beginning on February 15, 2006. |
| (5) | These stock options vested in three equal annual installments beginning on February 28, 2007. |
| (6) | These stock options vested in three equal annual installments beginning on February 23, 2008. |
| (7) | These stock options vested in three equal annual installments beginning on February 25, 2009. |
| (8) | These stock options vested in three equal annual installments beginning on February 26, 2010. |
| (9) | These stock options vest in three equal annual installments beginning on February 25, 2011. |
| (10) | The numbers in this column reflect the total number of unvested shares of restricted stock granted on February 26, 2009, February 25, 2010 and February 27, 2011. Each of these grants will vest on the third anniversary of the date of the grant. |
| (11) | The dollar value of the unvested shares of restricted stock reported in the preceding column valued at the closing price of DTE Energy common stock on December 30, 2011 ($54.45 per share). |
| (12) | The numbers in this column reflect the total number of unvested performance shares, at target level of performance, granted on February 26, 2009, February 25, 2010 and February 17, 2011. The payout, if any, will occur after the end of the three-year performance period. |
| (13) | The dollar value of the unvested performance shares reported in the preceding column valued at the closing price of DTE Energy common stock on December 30, 2011 ($54.45 per share). |
| (14) | Mr. Earley retired effective September 13, 2011. As a result of his retirement, under the terms of his then existing restricted share awards, he forfeited 40,840 restricted shares and the remaining shares were paid out upon his retirement. Also as a result of his retirement, under the terms of his then existing performance share grants, he forfeited 43,551 performance shares and the rest will be paid in accordance with their terms when granted. |
Option Exercises and Stock Vested in 2011
| Option Awards | Stock Awards | |||||||||||||||
| Name |
Number of Shares Acquired on Exercise (#) |
Value Realized
on Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
||||||||||||
| Gerard M. Anderson |
30,000 | 229,296 | 19,000 | (1) | 890,150 | |||||||||||
| 30,786 | (2) | 1,442,324 | ||||||||||||||
| David E. Meador |
75,000 | 801,869 | 9,500 | (1) | 445,075 | |||||||||||
| 14,660 | (2) | 686,821 | ||||||||||||||
| Steven E. Kurmas |
25,000 | 302,606 | 2,700 | (1) | 126,495 | |||||||||||
| 2,838 | (2) | 132,960 | ||||||||||||||
| Gerardo Norcia |
0 | 0 | 4,800 | (1) | 224,880 | |||||||||||
| 5,330 | (2) | 249,711 | ||||||||||||||
| Bruce D. Peterson |
33,333 | 354,021 | 6,100 | (1) | 285,785 | |||||||||||
| 9,529 | (2) | 446,434 | ||||||||||||||
| Anthony F. Earley, Jr.(3) |
405,000 | 4,769,180 | 40,000 | (1) | 1,874,000 | |||||||||||
| 61,572 | (2) | 2,884,648 | ||||||||||||||
| (1) | This row is the number and related fair market value of the time-based restricted stock that was originally granted on February 25, 2008 and vested on February 25, 2011. |
61
| (2) | This row is the number and related fair market value of the performance shares that were originally granted on February 25, 2008 based upon performance measures described on page 49 in “Long-Term Incentive Plan.” |
| (3) | Mr. Earley retired effective September 13, 2011. As a result of his retirement, under the terms of his then existing restricted share awards, he forfeited 40,840 restricted shares and the remaining shares were paid upon his retirement. Also as a result of his retirement, under the terms of his then existing performance share grants, he forfeited 43,551 performance shares and the rest will be paid in accordance with their terms when granted. |
For purposes of the following discussion concerning the pension benefits and retirement plans in which our Named Executive Officers participate, we will be using the following terms:
| • | “Cash Balance Plan” means the New Horizon Cash Balance component of the Retirement Plan (tax-qualified plan) |
| • | “DC ESRP” means the Defined Contribution component of the ESRP (non-qualified plan for tax purposes) |
| • | “ESRP” means the DTE Energy Company Executive Supplemental Retirement Plan (nonqualified plan for tax purposes) |
| • | “MCN Retirement Plan” means the MCN Traditional component of the Retirement Plan |
| • | “MSBP” means the Management Supplemental Benefit Plan (nonqualified plan for tax purposes) |
| • | “Retirement Plan” means the DTE Energy Company Retirement Plan (tax-qualified plan) |
| • | “SRP” means the DTE Energy Company Supplemental Retirement Plan (nonqualified plan for tax purposes) |
| • | “Traditional Retirement Plan” means the Detroit Edison Traditional component of the Retirement Plan (tax-qualified plan) |
The “Pension Benefits” table below describes the retirement benefits for the Named Executive Officers.
| Name |
Plan Name(1) | Number of Years Credited Service (#) |
Present Value
of Accumulated Benefit ($) |
Payments During Last Fiscal Year ($) |
||||||||||
| Gerard M. Anderson |
Retirement Plan | 18.1 | 630,651 | 0 | ||||||||||
| SRP | 18.1 | 1,698,213 | 0 | |||||||||||
| ESRP | 18.1 | 3,256,970 | 0 | |||||||||||
| David E. Meador |
Retirement Plan | 14.8 | 545,377 | 0 | ||||||||||
| SRP | 14.8 | 711,862 | 0 | |||||||||||
| ESRP | 24.8 | (2) | 2,956,901 | 0 | ||||||||||
| Steven E. Kurmas |
Retirement Plan | 32.3 | 1,678,173 | 0 | ||||||||||
| SRP | 32.3 | 1,408,015 | 0 | |||||||||||
| ESRP | 32.3 | 782,290 | 0 | |||||||||||
| Gerardo Norcia |
Retirement Plan | 9.2 | 89,387 | 0 | ||||||||||
| SRP | 9.2 | 132,744 | 0 | |||||||||||
| ESRP | 9.2 | 460,118 | 0 | |||||||||||
| Bruce D. Peterson |
Retirement Plan | 9.5 | 183,772 | 0 | ||||||||||
| SRP | 9.5 | 330,082 | 0 | |||||||||||
| ESRP | 9.5 | 655,446 | 0 | |||||||||||
| Anthony F. Earley, Jr. ** |
Retirement Plan | 17.5 | 780,988 | 16,868 | ||||||||||
| SRP | 17.5 | 3,256,620 | 0 | |||||||||||
| ESRP | 32.5 | (2) | 9,220,682 | 158,323 | ||||||||||
62
| ** | Mr. Earley retired effective September 13, 2011. His payments from the Traditional Retirement Plan and the ESRP began in November 2011. Mr. Earley chose to receive his MSBP payment from the ESRP in lieu of the DC ESRP. A lump sum payment from the SRP will be made in 2012, in accordance with his distribution election. |
| (1) | As described below, Messrs. Anderson, Earley and Meador each have a choice between the MSBP and DC ESRP benefits. The ESRP number that is reported is the higher of the MSBP or DC ESRP. |
| (2) | For purposes of calculating the benefit under the MSBP only, Messrs. Earley and Meador have 15 and 10 years, respectively, of additional awarded service. Messrs. Earley and Meador’s eligibility for the additional awarded service, granted at the time of their hiring, is subject to their meeting the eligibility requirements of that plan. This additional time was granted to Messrs. Earley and Meador to compensate them for lost pension benefits from their respective previous employers. If additional service is awarded, the MSBP benefit is reduced by any benefit from the noncontributory portion of a prior employer’s retirement plan. |
Retirement Plan: The Retirement Plan includes a number of different benefit accrual formulas including the Traditional Retirement Plan, the MCN Retirement Plan and the Cash Balance Plan. Messrs. Anderson, Meador and Earley participate in the Traditional Retirement Plan. Mr. Kurmas participates in the MCN Retirement Plan. Messrs. Norcia and Peterson participate in the Cash Balance Plan.
| • | Traditional Retirement Plan: The benefits provided under the Traditional Retirement Plan are based on an employee’s years of benefit service, average final compensation and age at retirement. Compensation used to calculate the benefits under the Retirement Plan consists of (i) base salary and (ii) lump sums in lieu of base salary increases for the highest five consecutive calendar years within the last 10 years prior to retirement. The monthly benefit at age 65 equals 1.5% for each year of credited service times the average final compensation. Early retirement benefits are immediately available to any employee who has at least 15 years of service and has attained age 45. An annual benefit (payable in equal monthly installments for life) is calculated in the same manner as described above, subject to a reduction factor based on the employee’s age at the time the retirement allowance commences. The early retirement age is computed on the basis of the number of full months by which the employee is under the age to be attained at the employee’s next birthday. An employee who is qualified for early retirement may elect to defer benefit payments until age 65 with no reduction in the allowance or any earlier age with the corresponding reduction factor. Only Mr. Anderson is currently eligible for any early retirement benefit. |
| • | MCN Retirement Plan: The benefits provided under this plan are based on an employee’s years of benefit service, average final compensation and age at retirement. Compensation used to calculate the benefits under the MCN Retirement Plan consists of base salary for the highest five consecutive calendar years within the last 10 years prior to retirement. The monthly benefit at age 65 consists of the total of the following: |
| 1. | 1.33% for each year of credited service up to 30, times average final compensation, plus, |