Duke Energy

Proxy issued:                     March 26, 2015

Annual meeting:              May 7, 2015

Almost every component of pay increased this year for Duke CEO Lynn Good. Salary increased by more than $200,000, crossing the tax-deductibility threshold.  The stock awards grant date value went up to $5.2 million and bonus to $1.12 million. Total compensation was $8.3 million.

Peer groups are one way pay gets inflated. The company notes that it considers some positions utility-specific, and compares compensation for those positions with other energy companies. But for its executives it “has developed a customized peer group for review of executive compensation levels.” Among the peers are defense contractors (a very highly-paid sector), and several companies that are in very different industries (Colgate-Palmolive for example).

However, when looking at companies to compare performance with, the company returns to more similar companies by sector, though many are smaller than Duke. Performance shares granted in 2014 “have a TSR performance goal based on Duke Energy’s relative TSR for the three-year performance period from January 1, 2014, to December 31, 2016, as compared to the companies in the Philadelphia Utility Index.”

Also for these grants the company increased the potential payout, from 150% of target to 200% and raised the bar to hit that maximum.

Of most concern, the company continues to allow vesting of some performance shares at low levels of achievement. If three quarters of all companies in the Philadelphia Utility Index perform better than Duke does, the executives will receive 50% of target awards.

Finally, given the uncertain fate of the energy and utility sectors, it appears the executives may receive large performance grants even if the sector on the whole – and shareholders — suffer.