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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SEMPRA ENERGY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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March 29, 2022
Dear fellow shareholders:
We are pleased to invite you to attend our 2022 Annual Shareholders Meeting, which is scheduled for Friday, May 13, 2022, at 9 a.m., Pacific Time. This year’s meeting will be held virtually and the accompanying proxy information outlines how to participate and the matters that will be voted on at the meeting.
Our society and our industry continued to experience immense change in 2021, in large part due to the lingering impacts of COVID-19. We are proud that our employees have consistently demonstrated resilience in the face of these challenges and a steadfast focus on safety, while delivering energy with purpose to our customers.
At Sempra, we are focused on building essential energy networks, applying breakthrough ideas with scale and reach, and energizing people to help shape a better future. As our society’s priorities change from time to time, our company’s strategic vision continues to evolve to better meet the needs of our customers. For example, sustainability has moved to the center of our business strategy as we work to be more responsive to the needs of society by promoting energy diversification, resiliency, and affordable energy access. This strategic direction builds on our long-standing excellence in environmental, social and governance practices.
We also continued to advance our commitment to a high-performing culture focusing on employee and community safety, workforce and leadership development and diversity and inclusion, which have been priorities at our company since its inception. Our board members both embrace and reflect these priorities. Since its formation, Sempra’s board has always included women and/or people of color. Today, 58% of our board members are women and/or people of color. The backgrounds, perspectives, and skills of our board members bring a wealth of diverse experiences to our business and demonstrate that differing perspectives are encouraged and valued throughout our organization.
This year, William D. Jones, our current Lead Independent Director, is not standing for reelection and will retire from the board following our Annual Shareholders Meeting. In light of this, the board has indicated that it intends to appoint Cynthia J. (CJ) Warner, our current Corporate Governance Committee Chair, to the role of Lead Independent Director upon William's retirement. William has been a director since Sempra's inception and has served in several leadership positions on our board, including Lead Independent Director for the past three years. We are truly grateful for his commitment to Sempra, our shareholders and all of our stakeholders over the years and for his invaluable contributions to our company.
We continue to find great value in our shareholder engagement program and are grateful for the discussions and feedback we have received from our investors. These recurring conversations allow us to gather important input that helps shape our policies and initiatives with a view toward providing durable, long-term value to our owners. During our most recent engagement season, we engaged directly with shareholders representing approximately 57% of our outstanding shares of common stock. William and CJ participated in several of these conversations.
With this year's Annual Shareholders Meeting being held virtually, it has been designed to provide shareholders with an opportunity to participate in a manner that is substantially similar to an in-person meeting. The content of the meeting will focus on the shareholder business items outlined in the accompanying meeting notice. For more information about our business, our 2021 Annual Report to Shareholders is available online at www.sempra.com/2022-annual-meeting and www.proxyvote.com.
Please review the accompanying materials and promptly vote your shares. As in past years, you can vote in advance of the meeting by telephone, via the Internet or by completing, signing, dating and returning the accompanying proxy or voting instruction card.
On behalf of your board of directors and management, we appreciate your vote and thank you for your continued investment in Sempra.
Sincerely,
Jeffrey W. Martin
Chairman and Chief Executive Officer
Table of Contents
| 488 8th Avenue, San Diego, California 92101 (877) 736-7727 | ||||
Notice of Annual Shareholders Meeting
Friday, May 13, 2022, 9 a.m. Pacific Time
Virtual-only meeting at www.virtualshareholdermeeting.com/SRE2022
The 2022 annual meeting of shareholders (Annual Shareholders Meeting) of Sempra Energy, doing business and referred to as Sempra, will be held on Friday, May 13, 2022, at 9 a.m. Pacific Time. There will be no physical location for the meeting. To help protect the health and safety of our shareholders, employees and directors in light of the uncertainty created by the ongoing COVID-19 pandemic, the Annual Shareholders Meeting will be a completely virtual meeting of our shareholders conducted online via live audio webcast. In line with our strategic focus on helping enable a just energy transition, the online virtual-only format also reduces the transportation costs and environmental impact of the Annual Shareholders Meeting by providing all shareholders the opportunity to attend and participate in the meeting from any location. You will be able to attend the Annual Shareholders Meeting and vote and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/SRE2022 and entering your 16-digit control number as described below.
Business Items
(1)Election of the following director nominees, all of whom are currently directors: Alan L. Boeckmann; Andrés Conesa; Maria Contreras-Sweet; Pablo A. Ferrero; Jeffrey W. Martin; Bethany J. Mayer; Michael N. Mears; Jack T. Taylor; Cynthia L. Walker; Cynthia J. Warner; and James C. Yardley.
(2)Ratification of appointment of independent registered public accounting firm.
(3)Advisory approval of our executive compensation.
(4)Shareholder proposal requiring an independent board chairman, if properly presented at the meeting.
(5)Consideration of other matters that may properly come before the meeting, if any.
Adjournments and Postponements
The business items for the Annual Shareholders Meeting may be considered at the meeting and any adjournment or postponement of the meeting.
Record Date
The record date for the Annual Shareholders Meeting is March 17, 2022. You are entitled to notice of and to vote at the Annual Shareholders Meeting and any adjournment or postponement thereof, only if you were a holder of our common stock at the close of business on the record date.
Meeting Attendance and Participation
The Annual Shareholders Meeting conducted online via live audio webcast will begin promptly at 9 a.m. Pacific Time on Friday, May 13, 2022. We encourage you to access the meeting site at www.virtualshareholdermeeting.com/SRE2022 and enter your 16-digit control number prior to the start time. Online check-in will begin at 8:30 a.m. Pacific Time, and you should allow ample time for the check-in procedures the day of the meeting.
Attending the Meeting in Listen-Only Mode. We will permit all persons, including shareholders of record, beneficial owners of shares held in “street name” through a bank, broker or other nominee and non-shareholder guests, to attend the Annual Shareholders Meeting being conducted online via live audio webcast in listen-only mode. Please visit www.virtualshareholdermeeting.com/SRE2022 at the date and time of the meeting to attend in this limited capacity.
Participating in the Meeting, Including Voting and Submitting Questions. You are only eligible to participate in the Annual Shareholders Meeting, including to submit questions at the meeting and vote your shares at the meeting prior to the closing of the polls, if you were a shareholder as of March 17, 2022, the record date for the meeting, and you log into the meeting site using the 16-digit control number shown on your notice about the Internet availability of our proxy materials, proxy card or voting instruction form. However, if you are a beneficial owner of shares held through a bank, broker or other nominee and your voting instruction form does not indicate that you may vote your shares through www.proxyvote.com, you will need to obtain a “legal proxy” from your bank, broker or other nominee (preferably at least five days before the Annual Shareholders Meeting) to receive a 16-digit control number that may be used to log into the meeting site. If you need to obtain such a “legal proxy” to attend the meeting, please follow the specific instructions to do so provided by your bank, broker or other nominee. Owners of shares in the Employee Savings Plans, as defined in the accompanying proxy statement, may submit questions at the meeting but will not be able to vote these shares at the meeting.
Additional Information. Additional instructions on how to attend and participate in the virtual meeting are included in “About the Annual Shareholders Meeting and Voting” in the accompanying proxy statement and are posted at www.proxyvote.com. If you encounter difficulties accessing the meeting site during the check-in or meeting time, please call (844) 983-0876 (U.S. and Canada) or +1 (303) 562-9303 (International) beginning April 13, 2022 for technical support, which numbers also will be posted on the login page at www.virtualshareholdermeeting.com/SRE2022.
Voting
Your vote is important. Whether or not you plan to attend the virtual Annual Shareholders Meeting, we encourage you to read the accompanying proxy statement and promptly vote your shares. You may vote by attending the meeting and voting your shares at the meeting prior to the closing of the polls. You also may vote in advance of the meeting by telephone or via the Internet, or if you received a paper copy of our proxy materials, by completing, signing and dating the enclosed proxy card or voting instruction form and returning it in the enclosed envelope. Internet and telephone voting for holders of record will be available until 11:59 p.m. Eastern Time on May 12, 2022. For specific instructions on how to vote your shares, including if you are a beneficial owner of shares through a bank, broker or other nominee, see “About the Annual Shareholders Meeting and Voting” in the accompanying proxy statement and the instructions on your notice about the Internet availability of our proxy materials, proxy card or voting instruction form. Our proxy materials, including this Notice of Annual Shareholders Meeting and the accompanying proxy statement and form of proxy card or voting instruction form, are being provided to shareholders beginning on or about March 29, 2022.
Jennifer F. Jett
Corporate Secretary
Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials
for the Annual Shareholders Meeting to be Held on May 13, 2022.
This Notice of Annual Shareholders Meeting, the Accompanying Proxy Statement, the Proxy Card and the
Annual Report to Shareholders are available on the Internet at www.proxyvote.com.
for the Annual Shareholders Meeting to be Held on May 13, 2022.
This Notice of Annual Shareholders Meeting, the Accompanying Proxy Statement, the Proxy Card and the
Annual Report to Shareholders are available on the Internet at www.proxyvote.com.
Proxy Statement Summary
This proxy statement is being provided in connection with the 2022 annual meeting of shareholders of Sempra Energy, doing business and referred to as Sempra (Annual Shareholders Meeting). This summary highlights selected information to assist you in your review of this proxy statement. It does not contain all the information you should consider, and you should read the entire proxy statement carefully before voting. More information regarding the performance of Sempra is available in the company’s Annual Report to Shareholders for the year ended December 31, 2021, which accompanies this proxy statement and is available on the company’s website at www.sempra.com/2022-annual-meeting. For additional information about the Annual Shareholders Meeting and voting, see “About the Annual Shareholders Meeting and Voting” below. This proxy statement and the accompanying form of proxy card or voting instruction form are first being made available to shareholders on or about March 29, 2022. All website references in our proxy materials are inactive textual references, and the information on, or that can be accessed through, such websites does not constitute a part of these materials.
Annual Shareholders Meeting Details
| Date/Time | Location | ||||
| Friday, May 13, 2022 — 9 a.m. Pacific Time | www.virtualshareholdermeeting.com/SRE2022 | ||||
Shareholder Voting Matters
| Proposals | Board Recommendations | |||||||
| 1. | Election of directors | FOR each director nominee | ||||||
| 2. | Ratification of appointment of independent registered public accounting firm | FOR ratification of appointment of independent registered public accounting firm | ||||||
| 3. | Advisory approval of our executive compensation | FOR advisory approval of our executive compensation | ||||||
| 4. | Shareholder proposal requiring an independent board chairman | AGAINST shareholder proposal requiring an independent board chairman | ||||||
Director Nominees
Name and Occupation | Age | Director Since | Inde- pendent | Standing Board Committee Memberships(A) | ||||||||||||||||||||||
AC | C&TD | CGC | SS&T | EC | ||||||||||||||||||||||
Alan L. Boeckmann Executive Chair, Fluor Corporation | 73 | 2011 | ✓ | ✓ | ✓ | |||||||||||||||||||||
Andrés Conesa, Ph.D. Chief Executive Officer, Grupo Aeroméxico, S.A.B. de C.V | 52 | 2017 | ✓ | ✓ | C | ✓ | ||||||||||||||||||||
Maria Contreras-Sweet Managing Partner, Contreras Sweet Companies, LLC and Rockway Equity Partners; 24th Administrator, U.S. Small Business Administration | 66 | 2017 | ✓ | ✓ | ✓ | |||||||||||||||||||||
Pablo A. Ferrero Independent energy consultant | 59 | 2013 | ✓ | ✓ | ✓ | |||||||||||||||||||||
Jeffrey W. Martin Chairman of the Board, Chief Executive Officer and President, Sempra | 60 | 2018 | C | |||||||||||||||||||||||
Bethany J. Mayer Executive Advisor, Siris Capital Group LLC | 60 | 2019(B) | ✓ | C | ✓ | |||||||||||||||||||||
Michael N. Mears Chairman, President and Chief Executive Officer, Magellan Midstream Partners L.P. | 59 | 2018 | ✓ | ✓ | ✓ | |||||||||||||||||||||
Jack T. Taylor Former Chief Operating Officer-Americas and Executive Vice Chair of U.S. Operations, KPMG LLP (U.S.) | 70 | 2013 | ✓ | C F | ✓ | ✓ | ||||||||||||||||||||
Cynthia L. Walker Former Senior Vice President, Midstream & Marketing, Occidental Petroleum Corporation | 45 | 2018 | ✓ | ✓ F | ✓ | |||||||||||||||||||||
Cynthia J. Warner President and Chief Executive Officer, Renewable Energy Group, Inc. | 63 | 2019 | ✓ | ✓ | C | ✓ | ||||||||||||||||||||
James C. Yardley Former Executive Vice President, El Paso Corp. | 70 | 2013 | ✓ | ✓ | ✓ | |||||||||||||||||||||
| Board Committees with 100% independent director membership | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
| (A) Director nominee membership in the following standing board committees and other designations as of the mailing date of this proxy statement: | ||||||||
AC = Audit Committee | ✓ = Committee Member | |||||||
C&TD = Compensation and Talent Development Committee | C = Committee Chair | |||||||
CGC = Corporate Governance Committee | F = Audit Committee Financial Expert | |||||||
SS&T = Safety, Sustainability and Technology Committee | ||||||||
EC = Executive Committee | ||||||||
| (B) Ms. Mayer previously served as a director from February 2017 through November 2018. | ||||||||
2 | Sempra 2022 Proxy Statement | ||||||||||
| Proxy Statement Summary | |||||||||||
Director Nominee Composition
| *One director is a Latina woman | |||||
Our board has made it a priority to develop and support a high-performance culture, with respect to our board, our management and our workforce. At the board level, the board seeks directors with diversity of skills and experience and of gender and ethnicity, among other things. To assist our board in maintaining its focus on board diversity, we conduct an annual director skills assessment and board evaluation that are fundamental to the board’s process for assembling a group of directors with a diverse and appropriate mix of experience, competencies and backgrounds. The board uses the results of the assessment and evaluation to critically analyze its effectiveness and skill set, which helps position the board to oversee Sempra’s current and future strategies and operations.
We have a strong track record of board refreshment. Including Jeffrey W. Martin, we have added seven new directors since the beginning of 2017. Under the standards established by the New York Stock Exchange (NYSE), Mr. Martin is not an independent director due to his ongoing service as our Chief Executive Officer and President.
Robust Shareholder Engagement
Sempra conducts regular engagement with our shareholders throughout the year, including a spring engagement cycle in connection with our annual shareholders meetings, and a fall/winter “off-season” engagement cycle. This cadence may be supplemented in cases where the company has notable updates or wishes to gain additional feedback from investors on a particular matter. This regular dialogue provides Sempra’s board and management team with valuable insight into our shareholders’ priorities and feedback on matters of significance to the company and our shareholders, including our board composition and leadership, corporate governance and executive compensation practices, business strategy, sustainability efforts and other key environmental, social and governance (ESG) topics, and approach to disclosure and transparency.
As part of our 2021 engagement cycle, Sempra conducted spring engagement in advance of our 2021 annual shareholders meeting primarily focused on our key ballot items, including a shareholder proposal requesting a report on alignment of our lobbying activities (direct and through trade associations) with the Paris Agreement. While this proposal was not supported by a majority of our shareholders, Sempra’s board and management team determined to continue to strengthen our disclosure and transparency in this area by taking the lead in developing a standardized disclosure template for use by trade associations in our industry for the purpose of sharing their climate positions and related lobbying activities. The purpose of this effort is to help enable companies to consistently evaluate the alignment of their own climate positions with those of the trade associations to which they belong and, in turn, help enable investors to more effectively evaluate that alignment. As part of this effort, we engaged with certain shareholders in the summer of 2021 to seek additional input and feedback to help ensure these efforts are responsive to shareholder perspectives. Sempra further conducted regular off-season engagement in December 2021 and January 2022 with a broad range of our shareholders to discuss matters of shareholder interest. Our Lead Independent Director and the chair of our Corporate Governance Committee each participated in several of these meetings. The feedback we received during these engagements indicated that overall our shareholders view our practices and disclosures positively, and served as valuable input that directly informed the board’s and management’s decision-making.
In total, our outreach to shareholders in our 2021 engagement cycle, including our spring 2021, summer 2021, December 2021 and January 2022 engagements, represented approximately 59% of our total outstanding shares of common stock, and we engaged with holders of approximately 57%(1) of our outstanding shares of common stock (a significant majority of our institutional share ownership) by holding telephonic or videoconference meetings.
(1) Includes engagement with Newport Trust Company, the independent fiduciary for the Sempra Energy Common Stock Fund. Newport Trust Company exercises its discretion on all matters to vote shares held in the Sempra Energy Common Stock Fund under the Employee Savings Plans (as defined below) for which it receives no voting instructions. Newport Trust Company also votes shares held in the Sempra Energy Common Stock Fund for which it receives timely voting instructions from the underlying shareholder in accordance with such instructions. We engaged with Newport Trust Company on behalf of the holders of shares held in the Sempra Energy Common Stock Fund during our 2021 engagement cycle, and we included the number of shares Newport Trust Company voted at our 2021 annual shareholders meeting (including shares voted on both a discretionary and shareholder-directed basis) in calculating these percentages, which was approximately 8,300,000.
Sempra 2022 Proxy Statement | 3 | |||||||
| Proxy Statement Summary | |||||||||||
Strong Governance Practices
Supported by feedback from our shareholders, we believe the following reflect strong corporate governance practices:
•Lead Independent Director with clearly defined and robust responsibilities •Annual election of all directors •Proxy access right for shareholder nominations of director candidates •Majority-vote and resignation policy for directors in uncontested elections •Shareholders representing in the aggregate 10% or more of our outstanding shares may call a special meeting of shareholders •Comprehensive, ongoing succession planning for key executives by the board •Strong history of board refreshment designed to maintain balanced and diverse board composition and tenure •Directors should not be nominated to stand for election after attaining age 75 •Board oversight of sustainability, including enhanced ESG focus of Safety, Sustainability and Technology Committee •Board-level oversight of human capital management, including diversity and inclusion initiatives | •Annual board, director and standing committee self-evaluations (except for Executive Committee) •10 of our 11 director nominees are independent under NYSE independence standards •NYSE-required board committees are 100% independent •Director overboarding policy revised in 2020 to align with the preferences and policies of many of our shareholders •Executive sessions of non-management directors at all regular board meetings •Prohibition on hedging or pledging company stock •Robust share ownership guidelines for directors and officers •98% attendance of directors at board and committee meetings in the aggregate in 2021 •Active shareholder engagement, including with our Lead Independent Director and/or the chair of our Corporate Governance Committee •Code of conduct applicable to directors and principal and executive officers, as well as a separate code of conduct applicable to all employees | |||||||
4 | Sempra 2022 Proxy Statement | ||||||||||
| Proxy Statement Summary | |||||||||||
Business and Performance
Company Overview
Sempra’s businesses develop, build, operate and invest in critical infrastructure and provide electric and gas services to customers through regulated utilities, all in North America. Our mission is to be North America’s premier energy infrastructure company, and we are focused on transmission and distribution investments, among other areas, that we believe can produce stable cash flows and enhance earnings visibility, all with the goal of delivering safe and reliable energy to our customers.
Sempra California and Sempra Texas | Sempra Infrastructure | ||||
•We own or hold interests in regulated electric and gas utilities in California and Texas. •Our utility businesses will continue to require investments in critical transmission and distribution infrastructure, support the build-out of a cleaner energy system and remain focused on delivering cleaner, safer and more reliable energy. | •Our energy infrastructure businesses are primarily focused on supporting the clean energy transition by investing in renewables and energy networks in North America, together with natural gas infrastructure to support exports to foreign markets. We believe diverse sources of energy will continue to be important domestically and internationally. •Our revenues for these businesses generally are tied to long-term contracts with counterparties we believe are creditworthy. | ||||
In addition to focusing on key markets in North America, we are making critical investments in the portion of the energy value chain where we target attractive risk-adjusted returns:
Sempra 2022 Proxy Statement | 5 | |||||||
| Proxy Statement Summary | |||||||||||
Performance Highlights
Financial Performance
In 2021, our GAAP earnings per common share (EPS) was $4.01 and our adjusted EPS was $8.43.(1)(2) We outperformed our most recent 2021 GAAP EPS guidance range of $3.36 to $3.96, as well as our most recent 2021 adjusted EPS guidance range of $7.75 to $8.35.(2)
Our 2021 achievements build on our strong long-term financial performance. Our GAAP EPS was $5.51 in 2011, $5.46 in 2016 and $4.01 in 2021. Since 2011, we have delivered consistently strong adjusted EPS growth, increasing adjusted EPS from $4.34 in 2011 to $4.98 in 2016 and to $8.43 in 2021.(2) This performance has contributed to our robust long-term growth and shareholder value creation. Since 2011, we have had total shareholder return of 228%, exceeding the return of the S&P 500 Utilities Index during the same period. In addition, our market capitalization more than tripled over the past 10 years.
The company has a long track record of returning value to shareholders. The compound annual growth rate (CAGR) of our common stock dividend exceeded the median CAGR for companies in the S&P 500 Utilities Index over the past one, three, five and ten years. From 2011 to 2021, we increased our annual dividend from $1.92 to $4.40 per common share. The Board of Directors raised the dividend for the twelfth consecutive year in 2022, increasing the dividend to $4.58 per common share on an annualized basis. The company's strong dividend is coupled with $1 billion of share repurchases since July 2020, including $500 million of share repurchases that have been completed since November 2021, and there remains board authorization for an additional $1.5 billion to support share repurchases in the future.
Long-Term Growth(3) | ||||||||
Adjusted EPS(2) | Dividends | Market Capitalization(4) | ||||||
Figure 1
(1)GAAP means generally accepted accounting principles in the United States of America.
(2)Adjusted EPS and adjusted EPS guidance range are non-GAAP financial measures. Adjusted EPS and adjusted EPS guidance range for the years ended December 31, 2011 and 2016 have been updated to exclude additional items to conform to the presentation for the year ended December 31, 2021. For a reconciliation of GAAP EPS to adjusted EPS and GAAP EPS guidance range to adjusted EPS guidance range, see Appendix A to this proxy statement.
(3)As of or for the years ended December 31, 2011, 2016 and 2021, as the context requires.
(4)Dollars in billions.
6 | Sempra 2022 Proxy Statement | ||||||||||
| Proxy Statement Summary | |||||||||||
Strategic Performance
Key strategic and operational accomplishments are highlighted below:
Recent Strategic Performance Highlights | ||||||||
Sempra •Sempra executed on its disciplined strategy with a focus on investing in energy infrastructure across its three growth platforms •Sempra executed integrated transactions to simplify its energy infrastructure investments under one platform, Sempra Infrastructure •Sempra announced a $500 million share repurchase program which was fully executed in early 2022 •Sempra launched its Sustainable Financing Framework, outlining criteria and other parameters for issuances of sustainable financing instruments •Sempra announced its aim to have net-zero emissions by 2050 •Sempra was named: –a Top Energy Company on The Wall Street Journal’s Management Top 250 Ranking –a Trendsetter in Political Disclosure And Accountability (sixth consecutive year) –to the Dow Jones Sustainability World Index (fourth consecutive year) –to Fortune Magazine’s "World’s Most Admired Companies” List for 2021 –one of "America's Best Employers For Diversity" by Forbes and honored for diversity and inclusion leadership by Bloomberg and Human Rights Campaign •Sempra was recognized for ESG performance and transparency on "100 Best Corporate Citizens" list | Sempra California •San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) received a final General Rate Case (GRC) decision from the California Public Utilities Commission (CPUC) for 2022 and 2023 attrition rates •SDG&E continued its commitment to wildfire safety and received its 2021 safety certification from the Office of Energy Infrastructure Safety under the California Natural Resources Agency •SoCalGas announced agreements expected to resolve substantially all material civil litigation against SoCalGas and Sempra related to the 2015 Aliso Canyon natural gas storage facility leak •SDG&E announced it is developing two hydrogen pilot projects, building on its sustainability strategy and its aim to have net-zero emissions by 2045 •SoCalGas achieved approximately 20% methane reductions below 2015 levels in 2020, which is five years earlier than mandated •SoCalGas announced a proposal to develop what would be the nation’s largest green hydrogen energy infrastructure system, Angeles Link Sempra Texas •Oncor Electric Delivery Company LLC (Oncor) announced a new five-year (2022-2026) capital plan of approximately $15 billion, largely driven by investments needed for economic development, generation interconnections, premise growth and grid resiliency(1) | Sempra Infrastructure •Sempra Infrastructure Partners (SI Partners) increased its ownership in our Mexican energy business Infraestructura Energética Nova, S.A.P.I. de C.V. (IEnova) to 99.9% following completion of Sempra’s exchange and cash tender offers to acquire IEnova’s publicly owned shares •Sempra sold a 20% noncontrolling interest in SI Partners to an affiliate of Kohlberg Kravis Roberts & Co. L.P. (KKR) for $3.2 billion in cash, including post-closing adjustments and net of transaction costs •Sempra announced an agreement to sell an additional 10% noncontrolling interest in SI Partners to Abu Dhabi Investment Authority (ADIA) for $1.785 billion in cash, subject to adjustments(2) •Sempra Infrastructure continued to work toward reaching a final investment decision in the first half of 2023 for its proposed Cameron LNG JV Phase 2(3) •Sempra Infrastructure continued progress on construction of ECA LNG JV Phase 1(3) with the goal of beginning to produce liquefied natural gas (LNG) by the end of 2024 •Sempra Infrastructure placed a new 150 megawatt solar power generation facility (Border Solar) into service in Mexico •Sempra Infrastructure began commercial operations of Veracruz and Mexico City refined products storage terminals | ||||||
(1)Represents 100% of Oncor’s forecasted capital expenditures for 2022-2026. Actual amounts expended will depend on a number of factors and may differ materially from the amounts reflected in the capital plan.
(2) The consummation of the sale to ADIA is subject to receipt of certain regulatory and third-party approvals and other customary closing conditions.
(3) The successful development and ultimate construction of Sempra’s LNG projects are subject to a number of risks and uncertainties and there can be no assurance that any of the projects will be completed.
Sempra 2022 Proxy Statement | 7 | |||||||
| Proxy Statement Summary | |||||||||||
Executive Compensation
2021 Compensation Overview
Our executive compensation program is designed to attract, motivate and retain key executive talent and promote strong, sustainable long-term performance. We place an emphasis on variable performance-based pay, with each component designed to promote value creation and alignment of our management team’s compensation with our long-term strategic objectives.
| Chief Executive Officer Pay Mix at Target | |||||||||||
 | Performance-Based Annual Bonus | ||||||||||
| • 80% ABP Earnings (as defined below) | |||||||||||
| • Provides an accurate, comprehensive, and understandable picture of annual financial performance | |||||||||||
| • 12% Safety Measures (as defined below) | |||||||||||
| • Promotes safe and responsible operations and the safety of our customers and employees | |||||||||||
| • 8% ESG Measures (as defined below) | |||||||||||
| • Promotes sustainable operations and strong governance | |||||||||||
Long-Term Equity-Based Incentives(1) | |||||||||||
• Performance-Based Restricted Stock Units (weighted at two-thirds, collectively) | |||||||||||
| • One-third based on 3-year relative total shareholder return (TSR), allocated evenly between | |||||||||||
–Relative TSR vs. S&P 500 Utilities Index(2) | |||||||||||
–Relative TSR vs. S&P 500 Index | |||||||||||
• One-third based on 3-year EPS CAGR with payout scale set based on forward consensus estimates of EPS CAGR of S&P 500 Utilities Index peers(2) | |||||||||||
| • Stock Options (weighted at one-third) | |||||||||||
| • Focus on growth and shareholder alignment | |||||||||||
(1)As used in this proxy statement, the term “long-term equity-based incentives” refers to the annual long-term incentive plan (LTIP) awards granted on January 3, 2021 and, unless stated or the context indicates otherwise, does not include any special awards.
(2)For purposes of long-term equity-based incentives and labor market reviews, all references to the S&P 500 Utilities Index or our S&P 500 Utilities Index peers refer to the companies constituting the S&P 500 Utilities Index, excluding water companies.
Note: The Chief Executive Officer’s pay mix at target is based on 2021 annual base salary, 2021 target performance-based annual bonus and the target grant date value of 2021 long-term equity-based incentives.
2021 Compensation Decisions and Outcomes
Base Salary. Mr. Martin received a 2021 annual salary planning increase of 3.8% and increases for the other named executive officers ranged from 4.0% to 8.3%. Ms. Sedgwick was promoted to Chief Administrative Officer and Chief Human Resources Officer effective December 20, 2021 and received an additional salary increase of 17.9% in connection with her change in roles.
Performance-Based Annual Bonus. Our 2021 target earnings for annual bonus plan purposes (ABP Earnings) were $2,368 million, an increase of $336 million, or 17%, over our 2020 target ABP Earnings of $2,032 million, and $29 million higher than our 2020 actual ABP Earnings of $2,339 million. In addition, the $142 million range between the 2021 ABP Earnings target and maximum goals was significantly broader than the $81 million range between the 2020 ABP Earnings target and maximum goals. Actual ABP Earnings for 2021 were $2,558 million, which exceeded our plan maximum goal of $2,510 million. In determining ABP Earnings for 2021, the Compensation and Talent Development Committee made certain predefined adjustments to GAAP earnings. See “Reconciliation of GAAP Earnings to ABP Earnings” on page 45 and Appendix D to this proxy statement for additional information. After accounting for performance on employee and public safety measures (Safety Measures) and environmental, social and governance measures (ESG Measures), 2021 annual bonuses were achieved at 195% of target.
Long-Term Equity-Based Incentives. Long-term equity-based incentives are the largest single component of the total 2021 target compensation package for each named executive officer. In accordance with our pay-for-performance philosophy, 100% of our Chief Executive Officer’s 2021 annual LTIP award was performance-based, with one-third of the award’s grant date value tied to relative TSR performance, one-third tied to EPS growth and one-third in nonqualified stock options, which the Compensation and Talent Development Committee views as performance-based because their value depends on our stock price increasing over time. The overall payout for the 2019-2021 LTIP awards based on relative TSR and EPS growth was 89% of target.
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Voting Information
Eligibility: Shareholders of our common stock at the close of business on the record date, March 17, 2022, are entitled to notice of the Annual Shareholders Meeting and to vote their shares as described below on each of the proposals to be voted on at the meeting. Each share of common stock is entitled to one vote on each director nominee and one vote on each of the other proposals to be voted on at the meeting.
Shareholders of Record May Vote in the Following Ways:
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| Using the Internet at www.proxyvote.com or scanning the QR code included in your proxy materials | Calling 1-800-690-6903 in the U.S. and Canada | Mailing your marked, dated and signed proxy card | Attending the Annual Shareholders Meeting at www.virtualshareholdermeeting. com/SRE2022 | ||||||||
For Internet and telephone voting, you will need to have your notice about the Internet availability of our proxy materials or proxy card available and use the company number and account number shown on the notice and card. Internet and telephone voting are available for shareholders of record until 11:59 p.m. Eastern Time on May 12, 2022.
Voting By Other Shareholders: Beneficial owners of shares should follow the voting instructions provided by their bank, broker or other nominee. If you hold shares in the Employee Savings Plans, as defined in Question 12 under “About the Annual Shareholders Meeting and Voting” below, you are considered a beneficial owner of such shares and your voting instructions with respect to such shares must be received by 8 a.m. Eastern Time on May 10, 2022.
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Corporate Governance
Generally, our business and affairs are managed and all corporate powers are exercised by or under the direction of our Board of Directors. The board establishes fundamental corporate policies and oversees the performance of the company as well as our Chairman and Chief Executive Officer and the other officers to whom the board has delegated authority to manage our day-to-day business operations.
The board has adopted Corporate Governance Guidelines that set forth expectations for director performance, director independence standards, board committee structure and functions, and other policies for the company’s governance. It also has adopted a Code of Business Conduct and Ethics for Directors and Principal and Executive Officers, which applies to each member of the Board of Directors of Sempra, the principal executive, financial and accounting officers (or persons performing similar functions) of Sempra, SDG&E and SoCalGas and all other executive officers of Sempra. Officers also are subject to our Code of Business Conduct, which applies to all employees of Sempra and any subsidiary or other entity as to which Sempra has majority ownership and control. Several standing and ad hoc committees assist the board in carrying out its responsibilities. Each standing committee operates under a written charter adopted by the board.
Our Corporate Governance Guidelines, standing committee charters, including our Audit, Compensation and Talent Development and Corporate Governance Committee charters, Code of Business Conduct and Ethics for Directors and Principal and Executive Officers and Code of Business Conduct that applies to all employees, are all posted on our website at www.sempra.com under the “Investors” and “Governance” tabs. Paper copies may be obtained upon request by writing to the attention of our Corporate Secretary at Sempra’s principal executive offices at 488 8th Avenue, San Diego, California 92101. If we either (1) amend a provision of our Code of Business Conduct and Ethics for Directors and Principal and Executive Officers and the amendment relates to any element of the code of ethics definition set forth in Item 406(b) of Securities and Exchange Commission (SEC) Regulation S-K or (2) grant to our principal executive officer, principal financial officer or principal accounting officer or controller a waiver, including an implicit waiver, from a provision of our Code of Business Conduct and Ethics for Directors and Principal and Executive Officers and the waiver relates to one or more of the elements of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K, then we intend to describe on our website under the “Investors” and “Governance” tabs the date and nature of any such amendment or waiver and, if applicable, the name of the person to whom the waiver was granted, or if we do not make such disclosure on our website, we will include it in a current report on Form 8-K filed with the SEC.
Board of Directors
Functions
In addition to its general oversight role, our Board of Directors performs a number of specific functions, including, among others:
•Selecting our Chief Executive Officer and overseeing his or her performance and that of other senior management in the operation of the company •Reviewing and monitoring strategic, financial and operating plans and budgets and their development and implementation by management •Assessing and monitoring risks to the company’s business and evaluating and overseeing risk management strategies •Reviewing and approving significant corporate actions | •Fostering the company’s values-driven culture and reviewing and monitoring processes designed to maintain the company’s integrity, including financial statements, compliance with law and ethics and relationships with shareholders, employees, customers, suppliers and other stakeholders •Planning for management succession •Nominating directors, evaluating board effectiveness, appointing board committee members and overseeing effective corporate governance | |||||||
Leadership Structure
The Board of Directors retains the flexibility to determine, from time to time on an ongoing basis, whether the offices of Chief Executive Officer and Chairman of the Board should be combined or separated and whether an independent director should serve as Chairman of the Board. This flexibility permits the board to organize its functions and conduct its business in a manner it deems most effective in then-prevailing circumstances, and to select the individual it considers to be best-suited to serve as Chairman of the Board at any particular time. The non-management directors have historically evaluated the board’s leadership structure on an annual basis and expect to continue to do so, and their board leadership decisions are made based on their determination of the leadership structure that is in the best interests of the company and our shareholders at the time. Currently, Jeffrey W. Martin serves as both our Chief Executive Officer and our Chairman of the Board. In each annual evaluation of its leadership structure since Mr. Martin’s appointment to these roles, the board has considered various matters, including his qualifications, experience and performance as Chairman, benefits of different leadership structures in facilitating board effectiveness, the company’s performance under the existing board leadership structure, feedback from our shareholders, and the role of our independent directors generally. See “Shareholder Proposal—Proposal No. 4: Shareholder Proposal Requiring an Independent Board Chairman,” including the board's statement opposing the shareholder proposal, for more information about these annual evaluations.
An important part of the board’s annual deliberations on its leadership structure is the overall composition of the board and the strong role of the company’s independent directors. During periods in which we do not have an independent Chairman of the Board, our Corporate Governance Guidelines require the independent directors to select annually an independent director to serve as the Lead Independent Director (which is referred to as the “Lead Director” in our bylaws). If a Lead Independent Director is appointed, the role has broad powers and responsibilities. The position and role of the Lead Independent Director is intended to provide board leadership where the roles of a combined Chairman of the Board and Chief Executive Officer may be in conflict. It is also intended to expand lines of communication between the board and members of management and it is not intended to reduce the free and open access and communications that each director has with other directors and members of management. William D. Jones, who has been a director since Sempra's inception and has served as our Lead Independent Director since 2019, is not standing for reelection and will retire as a director immediately following the Annual Shareholders Meeting. The board has indicated it intends to appoint Cynthia J. Warner to be the Lead Independent Director, succeeding Mr. Jones. Our robust Lead Independent Director role includes the following functions and responsibilities:
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•Provide leadership to the Board of Directors if circumstances arise in which the role of the Chairman of the Board may be, or may be perceived by the Lead Independent Director or by the other independent directors to be, in conflict •Preside at all meetings of the Board of Directors at which the Chairman of the Board is not available •Organize, convene and preside over executive sessions of the non-management directors •Act as the principal liaison between the independent directors and the Chairman of the Board and Chief Executive Officer •Review and approve all board and committee agendas and approve information sent to the board, providing input to management on the scope and quality of such information •Consult with the Chairman of the Board, Chief Executive Officer and committee chairs regarding the topics and schedules of the meetings of the board and its committees and approve such schedules to assure that there is sufficient time for discussion of all agenda items •Call a special meeting of the Board of Directors or the independent directors at any time, at any place and for any purpose •In consultation with the Chief Executive Officer, assist the board, the Corporate Governance Committee and management in complying with the Corporate Governance Guidelines | •Be available for consultation and direct communication with the company’s major shareholders •Collect and communicate to the Chairman of the Board and Chief Executive Officer the views and recommendations of the independent directors relating to his or her performance, other than with respect to the annual performance review •Consult with the Corporate Governance Committee as part of the committee’s review of director nominations and recommendations of director candidates •Together with the Chair of the Corporate Governance Committee and the Chairman of the Board, has the authority to extend the board’s invitation to selected candidates to join or be nominated for election to the board •Consult with directors regarding acceptance of memberships on other boards to assure that multiple board service does not conflict or otherwise interfere with such directors’ service to the company •Led by the Compensation and Talent Development Committee and together with the Chairman of the Board, report annually to the board on succession planning, including policies and principles for executive officer selection •Perform such other duties as may be assigned from time to time by the independent directors | |||||||
We conducted an extensive shareholder outreach program in 2021 regarding our board leadership structure and various other matters, in which we reached out to shareholders representing approximately 59% of our total outstanding shares of common stock and we engaged with holders of approximately 57% of our outstanding shares of common stock. Among the shareholders with whom we engaged, the majority (in terms of number of shares represented) indicated no preference for an independent Chairman of the Board as long as the Lead Independent Director has significant duties, as is the case at Sempra.
The Board of Directors believes its independence and oversight of management and company risks are maintained effectively through its flexible leadership structure, including the robust role of the Lead Independent Director, sound corporate governance policies and practices, and the board’s overall composition, which currently includes 11 independent directors (92% of the board) and 100% independent director composition of all NYSE-required board committees.
Based on the foregoing and other factors, the Board of Directors determined in its most recent evaluation of the board’s leadership structure, and continues to believe, that combining the roles of Chief Executive Officer and Chairman of the Board continues to best serve the interests of Sempra and our shareholders.
Director Independence
The Board of Directors determines the independence of each of our directors and director nominees by applying the independence standards established by the NYSE. These standards provide that a director is independent only if the board affirmatively determines that the director has no direct or indirect material relationship with the company. Material relationships may include, depending on the circumstances, commercial, industrial, banking, consulting, legal, accounting, charitable, family and other business, professional and personal relationships. These standards also identify various relationships that preclude a determination of director independence.
Applying these standards, the board annually reviews and determines the independence of each of the company’s directors and director nominees. In its most recent review, the board considered, among other things: each non-employee director’s directorships, employment or other service relationships, significant ownership, other affiliations or any of the foregoing relationships of a director’s immediate family members, with organizations with which Sempra or any of its subsidiaries or other entities as to which it has majority ownership does business; the absence of any employment relationships between Sempra or any of its subsidiaries or other entities as to which it has majority ownership and each director and his or her immediate family members; the absence of any of the other specific relationships that would preclude a determination of independence under NYSE independence standards; the absence of any affiliation of each director or his or her immediate family members with the company’s independent registered public accounting firm, compensation consultants, legal counsel or investment banks; the absence of any transactions in which a director or his or her immediate family members has a direct or indirect material interest that would require disclosure in this proxy statement under SEC rules regarding related person transactions; and our discretionary contributions to non-profit organizations with which some of our directors or their respective immediate family members may be associated. In assessing the materiality of director relationships, the board broadly considers all relevant facts and circumstances both from the standpoint of the director and also from that of persons or organizations with which the director has an affiliation.
Based on this review, the board has affirmatively determined that each of the following non-employee directors, each of whom is a director nominee standing for reelection at the Annual Shareholders Meeting, is independent:(1)
| Alan L. Boeckmann | Bethany J. Mayer | Cynthia L. Walker | ||||||
| Andrés Conesa | Michael N. Mears | Cynthia J. Warner | ||||||
| Maria Contreras-Sweet | Jack T. Taylor | James C. Yardley | ||||||
| Pablo A. Ferrero | ||||||||
| (1) | Ms. Mayer was not eligible to be considered independent under NYSE standards until January 4, 2022 because of her service as an executive officer of the company within the three years prior to that date, which is one of the relationships that precludes a board from determining a director to be independent under NYSE standards. Following the end of that three-year period, the board was able to, and did, determine Ms. Mayer to be independent using the same review process as the other directors described above. | |||||||
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Based on its review, the board also has affirmatively determined the independence of William D. Jones, who is currently a director but is not standing for reelection as a director in 2022 and will retire from the board immediately following our Annual Shareholders Meeting. Mr. Martin could not be considered independent due to his position as an executive officer of the company.
Director Share Ownership Guideline
The board has established a director share ownership guideline to further strengthen the link between director and shareholder interests. For non-employee directors, the guideline is ownership of a number of our shares having a value of five times the directors’ annual base retainer of $90,000, resulting in an ownership guideline equal to $450,000. For these purposes, in addition to shares owned directly, share ownership includes phantom shares into which compensation has been deferred and unvested service-based restricted stock units. The Compensation and Talent Development Committee annually reviews adherence to this guideline, which is expected to be attained within five years of becoming a director. Following its review in 2021, the Compensation and Talent Development Committee determined that all of our non-employee directors who have been on the board for at least five years meet or exceed this guideline.
The board also has established executive officer share ownership guidelines. For information about these guidelines, see “Executive Compensation—Compensation Discussion and Analysis—Share Ownership Guidelines.”
Director Overboarding Policy
Our director “overboarding” policy was recently revised to be in line with shareholder feedback and the voting policies of some of our major shareholders. Pursuant to the policy, any director or director nominee who is a named executive officer of a public company should not serve on more than two public company boards (including the board of the company for which the director serves as a named executive officer), and such directors and director nominees will be expected to become compliant with this policy in advance of being nominated to stand for election at Sempra’s next annual shareholders meeting. In addition, any director or director nominee who is not also a named executive officer of a public company should not serve on more than four public company boards (including our board). Finally, our Corporate Governance Guidelines provide that no member of the Audit Committee may serve on more than a total of three audit committees of public companies (including our Audit Committee) unless the board affirmatively determines that a director’s multiple service on audit committees does not impair the director’s effectiveness on our Audit Committee.
Board, Committee and Shareholder Meetings
At regularly scheduled board and committee meetings, directors review and discuss management reports regarding the company’s performance, prospects and plans, as well as significant opportunities and material risks facing the company and other matters the board considers necessary to carry out its responsibilities. At least once a year, the board reviews management’s long-term strategic and financial plans, including an annual detailed and comprehensive strategy discussion. The Chairman of the Board or, in certain circumstances as described in “Leadership Structure” above, the Lead Independent Director, presides over each board meeting.
The Chairman of the Board proposes the agenda and schedule for each meeting, which the Lead Independent Director then reviews and modifies or approves. Committee agendas and schedules are set by or in consultation with the committee chair and with the approval of the Lead Independent Director. All directors are encouraged to propose agenda items, and any director also may raise subjects that are not on the agenda at any meeting.
At executive sessions, directors convene in both director-only sessions and sessions with only non-management directors to discuss issues such as succession planning, Chief Executive Officer performance and compensation (the Chief Executive Officer is not present for deliberations or approvals of his own compensation), executive development, board performance and other matters deemed relevant. An executive session is held at each regular board meeting, and any director may call for an executive session at any board meeting. The Lead Independent Director presides over executive sessions in which the Chairman of the Board is not present.
Information and other materials important to understanding the business to be conducted at each board and committee meeting, to the extent available, are distributed in writing to directors in advance of the meeting. Additional information and materials may be presented at the meetings.
During 2021, the full board held 13 meetings and committees of the board, including standing and ad hoc committees, collectively held 39 meetings. Directors, on an aggregate basis, attended 98% of the combined number of these meetings. Each incumbent director attended at least 75% of the aggregate number of meetings of the board and each committee of which the director was a member (in each case during the periods when he or she was a member).
The board expects that each director will attend the Annual Shareholders Meeting. All of the director nominees who were up for election at our 2021 annual shareholders meeting attended that meeting, which was also held virtually. One then-director who was not nominated for reelection at our 2021 annual shareholders meeting did not attend that meeting.
Evaluation of Board and Director Performance
The Corporate Governance Committee annually leads a self-evaluation by the directors of the performance of the Board of Directors in a number of categories, including board oversight, leadership, composition and independence, conduct of meetings and committees. In this review, the Corporate Governance Committee assesses the board’s performance as a whole and identifies areas in which the board or senior management believes performance could improve. The purpose of the review is to increase the effectiveness of the board and its committees, and the results are reviewed with the board and its committees. The results also are considered in connection with board refreshment efforts. In addition, each standing committee, other than the Executive Committee, conducts an annual self-evaluation, in accordance with its charter.
As illustrated below, the board also conducts an annual peer evaluation by which each director is afforded the opportunity to comment anonymously on each other board member’s performance. In order to help ensure the objectivity and integrity of this process, an outside law firm is engaged every year to conduct the peer review portion of this evaluation and compile the results.
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| Each independent director receives an evaluation survey for each other independent director | Directors forward completed surveys to an outside law firm that compiles results, maintaining confidentiality | The law firm provides compiled results to the Corporate Governance Committee Chair who discusses with the Chairman | The Corporate Governance Committee Chair and Chairman address specific issues directly with individual directors as needed | The full board discusses results and identifies areas in which the board can be improved and enhanced to increase board effectiveness | ||||||||||||||||||||||||||||
Our board annually reviews the individual performance, commitments and qualifications of each director who may wish to be considered for nomination for election for an additional term. The evaluations are reviewed by the Corporate Governance Committee, which makes recommendations to the board regarding nominees to stand for election as directors. Our board appreciates the importance of critically evaluating directors and their contributions to the board in connection with the re-nomination decision, including their collective skills, qualifications and experience, feedback from the annual board evaluation, and individual performance, attendance, participation, independence and outside board and other affiliations.
The Board’s Role in Risk Oversight
Risks are inherent in our business operations, including, among others, health, safety and operational risks, human capital risks, regulatory and compliance risks, cybersecurity risks, climate and other environmental risks, business and financial risks and reputational risks.
Management has developed an integrated risk management framework to assess, prioritize, manage and monitor risks across the company’s operations. Sempra’s board has ultimate responsibility for risk oversight under this framework. Consistent with this approach, our Corporate Governance Guidelines provide that the specific functions of the Board of Directors include assessing and monitoring risks and risk management strategies.
The board believes that risk oversight stretches beyond any one committee. As a result, the board has diversified its risk oversight responsibilities across its membership, housing categories of risk oversight within standing board committees by topic and forming ad hoc committees to manage and oversee certain specific risks as needed. For example, the responsibilities of the board’s Safety, Sustainability and Technology (SS&T) Committee include oversight of a variety of sustainability matters, including climate change, diversity and inclusion, human rights developments and other environmental and social issues affecting the company’s business. This committee, the members of which are all independent directors, also oversees the company’s overall health and safety policies, reinforcing our company’s strong commitment to robust safety practices. Additionally, this committee oversees cybersecurity and other information technology risks and keeps abreast of technology advancements important to our business and other current events or developments that could impact our cyber risk. Any risk oversight that does not fall within the responsibility of a particular committee remains with the full board. The committee chairs periodically report to the full board regarding their respective committees’ risk oversight roles.
The board and its appropriate committees periodically review and evaluate the material risks we face. In addition, a review of what are believed to be Sempra’s most material risks and mitigation strategies for these risks is presented by senior management to the full board annually. The board also reviews and monitors strategic, financial and operating plans and goals intended to support sustainable long-term growth and each of our principal operating companies is responsible for identifying and moderating risk in a manner consistent with these plans and goals. The board fulfills its risk oversight function by, among other things, reviewing reports provided to the board and to appropriate board committees, discussing material risks and opportunities with management, appointing outside experts, selecting director candidates with diverse experience and qualifications, forming ad hoc committees to manage and oversee certain specific risks as needed, and staying informed about developments in our industry and other current events that may impact the company. Based on the foregoing, the board and its committees establish new or monitor and, as needed, amend existing risk oversight and control mechanisms, policies and practices. In addition, the company has a robust internal audit function that reports directly to the Audit Committee.
The board and its committees seek to manage risk by establishing policies and practices that apply to various aspects of our business, including, among others:
•The appropriate capital structure for our businesses •Utility investment plans consistent with state policy objectives and regulatory review and approval of significant investments •Non-utility investment policies, including requiring contractual commitments from third parties to purchase a substantial portion of the capacity or output of major non-utility projects before commencing construction on the projects, subject to exceptions •An employee compensation program that encourages and rewards sustainable growth in our business and is within an acceptable risk profile | •Commitment policies that require board review and/or approval above certain dollar thresholds •Reviews of the company’s high-performing culture with a focus on key areas of our operations, such as safety, sustainability, diversity and inclusion of our workforce and customer service •With respect to investments in which we do not operate or control the applicable entity, careful selection of business partners and representation on the entity’s board or equivalent governing body when possible | |||||||
Active Board Oversight of ESG Matters
The board recognizes the importance of risks and opportunities related to environmental stewardship, safety, stakeholder engagement and responsible governance and believes a focus on these factors is consistent with our vision, mission and values and can help our company achieve better business outcomes.
As described below under “Proposal 1: Election of Directors," our board collectively possesses a broad and deep range of skills that enables effective oversight of strategy and risk management, including as it relates to our ESG priorities. Our directors come from a variety of backgrounds
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including as executives of global companies, government service and public policy, financial institution leadership, and others, both within and outside of our industry. These diverse backgrounds provide a multidimensional perspective to the board’s evaluation and oversight of key ESG matters. Further, a number of our directors have had direct exposure to, and in many cases direct oversight or decision-making responsibility for, key environmental, human capital, cybersecurity, and regulatory and government affairs matters. Finally, the insights our directors bring from their leadership on other public company boards is highly valuable in deepening our board’s understanding of cross-cutting ESG matters, which often are evolving as the business and market context and regulatory environment continues to shift for Sempra and other companies globally. These diverse backgrounds, experiences and insights guide the board as it effectively oversees management.
The board monitors overall governance processes and delegates specific areas of focus to standing committees. For example, the board’s Safety, Sustainability and Technology (SS&T) Committee is responsible for the oversight of the company’s risk management and oversight programs and performance related to environmental, health, safety, security, technology, climate change, human rights, sustainability and related ESG matters. The board updated the SS&T Committee’s charter in 2020 and 2021 to strengthen and clarify the way this committee oversees and considers sustainability and other related matters. In addition, the board's Compensation and Talent Development (C&TD) Committee is responsible for the oversight of the company's programs and initiatives related to human capital matters, including our commitment to fostering a diverse and inclusive workplace. These committees and the full board continue to strongly focus on the ESG topics discussed below.
High-Performance Culture
The board actively oversees management’s commitment to building a high-performance culture that is consistent with our company values – do the right thing, champion people and shape the future. Sempra’s high-performance culture has an unwavering focus on safety in everything we do, a commitment to leadership and employee development, and a continued dedication to advancing diverse perspectives while creating an inclusive environment for our workforce and communities. We want our thousands of employees to feel valued, to feel a sense of belonging and to be appropriately challenged because we believe this helps our businesses thrive.
Safety
Health and safety are foundational to the Sempra family of companies. Safety is engrained in, and a key component of, our company’s culture and we encourage everyone to feel responsible for their own safety as well as the safety of others. Comprehensive safety management plans that follow relevant safety laws, regulations and protocols are integral to our approach. Our businesses manage the safe operation of their assets, with oversight provided by their respective boards of directors as well as the SS&T Committee of the Sempra board. The Sempra board influences the tone and safety culture of the entire Sempra organization through, among other things, the questions they ask, the focus they place on key organizational issues, the messages they give during direct interaction with employees and overall compensation programs, including basing a portion of executive compensation on the company’s performance on key safety measures.
COVID-19
In response to the ever-changing nature of the COVID-19 pandemic, the board has oversight of our efforts to advance and adapt our safety protocols in alignment with local, state and federal laws and guidelines to help protect the health and safety of our employees and their families, our customers and the communities we serve. As part of this program, we continue to drive enterprise-wide collaboration and discussion around best practices. To help ensure our leadership and employees have access to the most timely and relevant information, we have established ongoing engagement with medical experts to help identify and mitigate risks to our employees and communities associated with COVID-19.
Employee Development
We make significant efforts to invest in recruitment, development and retention of high-potential employees who represent the communities we serve, and we provide a range of programs to advance these objectives, including internal and external mentoring and leadership training, workshops and a tuition reimbursement program. We also invest in internal communications programs, including in-person and virtual learning and networking opportunities as well as regular executive communications. In addition, we offer a variety of in-person and virtual employee community service opportunities and, at our U.S. operations, we support employees’ personal volunteering and charitable giving through Sempra’s charitable matching program. Our board, mostly through its C&TD Committee, oversees these initiatives.
Diversity and Inclusion
We are committed to an inclusive workplace, in which we embrace diverse views, lived experiences and the importance of a culture of caring and belonging. We believe we are a stronger company when every employee feels empowered to bring their best selves to work, and we are continuously evaluating how we can create a true sense of belonging for all our employees and communities. This belief has inspired us to take actions that help to improve the diversity and inclusion efforts within our workplace and in the communities we serve. These actions include the development of our enterprise-wide action plan which is centered on three core goals:
•To increase the number of employees from under-represented communities throughout all management and leadership levels of our company;
•To increase our focus on recruitment and retention of women and employees from under-represented communities; and
•To advance diversity and inclusion in the communities we serve through charitable giving, stakeholder engagement and thought leadership.
Our board takes an active role in overseeing these efforts to promote diversity and inclusion in our workforce and the communities we serve, primarily through its C&TD Committee. The board's efforts include working with senior management to help ensure that we are guided by our values and that we fulfill our commitment to invest in our employees and enhance and advance our high-performance culture. It is our belief that our actions help elevate our performance and help create a more connected and caring workplace. Additionally, a portion of named executive officer compensation is linked to progress on certain diversity and inclusion objectives.
Energy Transition
The board, primarily through its SS&T Committee, takes an active role in providing oversight of the company’s strategies to help enable a just energy transition in the markets we serve, including our aim to have net-zero emissions by 2050(1). This includes reviewing business risks and opportunities in the context of local, national and global energy, economic and climate trends, as well as overseeing the company’s strategies and capabilities relating to safety and reliability; decarbonization of key market sectors, including power generation, industry and transportation;
| (1) | For this purpose, we expect that achievement of net-zero emissions will be determined based on company operations in 2050 and emissions will be calculated according to widely accepted emissions reporting guidelines or mandates at that time. Our current emissions inventory includes both consolidated operations and our Cameron LNG and TAG Norte Holding joint ventures, which are unconsolidated equity method investments. Where applicable, we try to work with our business partners to manage environmental impacts, including emissions. Our net-zero aspiration does not include Oncor, which sets its own aspirations due to certain ring-fencing measures that limit Sempra's ability to direct the management of Oncor. | |||||||
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digitization of energy systems, including use of robotics and artificial intelligence; and diversification of energy systems, including the integration of distributed energy resources. The board also oversees the company’s efforts to reduce the impact of company operations on the environment.
We understand that a successful energy transition will require industry leadership, technological advancements that are economically and technically feasible, and broad coordination and support from every level of government, among other things. Following review by the SS&T Committee, in 2021 the company issued its energy transition action plan, defining representative capabilities and investment opportunities to advance our aim to have net-zero emissions by mid-century. A portion of named executive officer compensation is linked to achieving milestones in this area.
Transparency
The board believes transparency with respect to key ESG risks and opportunities is an important way for us to convey to our shareholders and other stakeholders how we prioritize these topics. As a result, we perform stakeholder-driven materiality assessments and make extensive disclosures about these topics, in many cases surpassing the standards of our peers or expectations for our industry, and our board oversees many of these disclosures. For example, our annual corporate sustainability report includes activities, goals and results in the areas of greenhouse gas emissions (including emissions reductions), renewable energy, energy efficiency, water use, employee and public safety, electric reliability, customer assistance programs, employee diversity and inclusion, employee engagement, community giving, stakeholder engagement and political lobbying. We also publicly report detailed information annually on our greenhouse gas emissions and climate-related risks and opportunities. We prepare our sustainability disclosures in alignment with some of the leading sustainability frameworks, including Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), the CDP (formerly Carbon Disclosure Project) and the Edison Electric Institute and American Gas Association combined ESG template. In 2021, we piloted 22 of the World Economic Forum’s Stakeholder Capitalism Metrics to support continuing efforts to create greater transparency around ESG disclosures.
In addition to aligning our sustainability reporting with global standards and topics generally of interest to investors and other stakeholders, we also listen carefully to our shareholders and seek to provide transparency on topics of particular focus for them. For example, after robust engagement with our shareholders in 2021 following our receipt of a shareholder proposal on the topic, we began working to further enhance our disclosures about our key trade associations' alignment with the Paris Agreement and with Sempra’s climate positions. To assist in this endeavor, we developed a standardized trade association template in consultation with shareholders and other key stakeholders that we have requested our key trade associations to complete. We intend to use the information we receive to evaluate these associations and their alignment with the Paris Agreement and Sempra’s climate positions. As another example, we disclosed our company’s Equal Employment Opportunity-1 (EEO-1) data for the first time in 2021, to respond to shareholder interest for this information and to share important progress we are making in diversity in our workforce composition. This data is posted on our website at www.sempra.com under the "Sustainability" tab. We also include descriptions and other detailed information about our efforts and goals to promote diversity and inclusion in our workforce, including information about the gender and racial/ethnic make-up of our workforce, in our Annual Report to Shareholders.
Succession Planning and Management Development
Our Compensation and Talent Development Committee oversees and regularly evaluates leadership succession planning practices and results. The committee reports annually to the Board of Directors on succession planning, including principles for executive officer selection. In connection with this review, the board appointed Karen L. Sedgwick as Chief Administrative Officer and Chief Human Resources Officer of Sempra in December 2021.
Review of Related Person Transactions
SEC rules require us to describe any transaction since the beginning of 2021 or any currently proposed transaction, in each case involving more than $120,000, in which we were or will be a participant and any of our directors, director nominees, executive officers, persons or entities known by us to be a beneficial owner of more than 5% of our common stock, or any member of their respective immediate families, had or will have a direct or indirect material interest. The charter of our Corporate Governance Committee requires the committee to review and approve any such “related person transaction” that is required to be disclosed. When evaluating any such transaction, the Corporate Governance Committee focuses on a variety of factors on a case-by-case basis, including, among other things, the identity of the related person, the nature and terms of the transaction, the interest of the related person in the transaction and the dollar amount involved. There have been no transactions requiring such review since the beginning of 2021.
Director Orientation and Education Programs
Every new director participates in an orientation program and receives materials and briefings to acquaint him or her with our business, industry, management and corporate governance policies and practices. Continuing education is provided for all directors through board materials and presentations, discussions with management, visits to corporate facilities and other sources. Several directors, at the company’s expense, also attend third-party offered education courses and participate in the National Association of Corporate Directors (NACD), of which the company is a member.
Director Access to Senior Management, Independent Accountant and Counsel
Directors have complete access to our senior management and other employees, as well as to our independent registered public accounting firm. Directors also have complete access to counsel, advisors and experts of their choice to assist the board as needed in discharging its duties.
Retirement Policy
In accordance with our Corporate Governance Guidelines, directors should not be nominated to stand for election after attaining age 75.
Sempra 2022 Proxy Statement | 15 | ||||
Board Committees
Our standing board committees consist of the Audit Committee, Compensation and Talent Development Committee, Corporate Governance Committee, Safety, Sustainability and Technology Committee and Executive Committee. In addition to these standing board committees, the board may, from time to time, establish ad hoc committees to address particular matters, transactions and projects.
Except for the Executive Committee, all members of all standing board committees are independent. The following chart sets forth our standing board committees and membership on these committees as of the mailing date of this proxy statement:
Audit | Compensation and Talent Development | Corporate Governance | Safety, Sustainability and Technology | Executive | |||||||||||||
Alan L. Boeckmann | ✓ | ✓ | |||||||||||||||
Andrés Conesa | ✓ | C | ✓ | ||||||||||||||
Maria Contreras-Sweet | ✓ | ✓ | |||||||||||||||
Pablo A. Ferrero | ✓ | ✓ | |||||||||||||||
William D. Jones | ✓ | ✓ | ✓ | ||||||||||||||
Jeffrey W. Martin | C | ||||||||||||||||
Bethany J. Mayer | C | ✓ | |||||||||||||||
Michael N. Mears | ✓ | ✓ | |||||||||||||||
Jack T. Taylor | C F | ✓ | ✓ | ||||||||||||||
Cynthia L. Walker | ✓ F | ✓ | |||||||||||||||
Cynthia J. Warner | ✓ | C | ✓ | ||||||||||||||
James C. Yardley | ✓ | ✓ | |||||||||||||||
✓ = Committee Member | C = Committee Chair | F = Audit Committee Financial Expert | |||||||||||||||
Audit Committee
Our Audit Committee currently is, and at all times in 2021 was, entirely composed of independent directors under the independence standards for such a committee established by the NYSE and the SEC. It is directly responsible and has sole authority for the appointment, compensation, retention and oversight of our independent registered public accounting firm, which reports directly to the committee. The committee also prepares the report included in this proxy statement under “Audit Committee Report.” In addition, it assists the Board of Directors in fulfilling oversight responsibilities regarding, among other things:
•The company’s internal controls over financial reporting •The integrity of our financial statements •Our compliance with legal and regulatory requirements | •The independent registered public accounting firm’s qualifications and independence •The performance of our internal audit function and independent registered public accounting firm | |||||||
The board has determined that each member of the Audit Committee is financially literate. It also has determined that Mr. Taylor, who chairs the committee, and Ms. Walker, who is a member of the committee, are audit committee financial experts as defined by the rules of the SEC.
During 2021, the Audit Committee held six meetings.
Compensation and Talent Development Committee
Our Compensation and Talent Development Committee currently is, and at all times in 2021 was, entirely composed of independent directors under the independence standards for such a committee established by the NYSE and the SEC. It assists the board in the evaluation and compensation of our executives, and it establishes our compensation principles and policies and designs and oversees our executive compensation program. The committee’s responsibilities include, among others:
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| Corporate Governance | |||||
•Reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer's compensation •Evaluating our Chief Executive Officer’s performance in light of those goals and objectives and determining and approving (and recommending for ratification by the board acting solely through the independent directors) his or her compensation level based on the committee’s performance evaluation •Determining and approving (and periodically reviewing with the board) other executive officer compensation •Making recommendations to the board with respect to incentive compensation plans and equity-based plans that are subject to board approval •Evaluating and overseeing risk in our compensation programs •Overseeing benefit plans and programs | •Reviewing and discussing the Compensation Discussion and Analysis required to be included in the company’s proxy statement and Annual Report on Form 10-K (Form 10-K) with management and determining whether to recommend to the board that such disclosure be so included •Producing the report included in this proxy statement under “Compensation and Talent Development Committee Report” •Reporting to the board annually on succession planning together with the Chairman of the Board and Lead Independent Director, including on principles for executive officer selection •Reviewing reports on the company's human capital management policies, initiatives and outcomes, including broader organizational leadership development and career progression and the company's efforts to build a more diverse and inclusive workplace | |||||||
Corporate Governance Committee
Our Corporate Governance Committee currently is, and at all times in 2021 was, entirely composed of independent directors under the independence standards established by the NYSE. The committee’s responsibilities include, among others:
•Identifying individuals qualified to become directors consistent with criteria approved by the board •Recommending to the board nominees to stand for election as directors and candidates to fill board vacancies •Overseeing the evaluation of the board and management | •Recommending directors for appointment by the board as members of board committees •Developing and recommending to the board corporate governance guidelines •Reviewing public policy priorities on an annual basis, including charitable giving, political contributions and lobbying activities | |||||||
The committee reviews with the board the skills and characteristics required of directors in the context of the board’s current composition and the needs of the board as a whole in light of the company’s long-term business strategy. It seeks a group of individuals who bring to the board a variety of complementary skills and a range of viewpoints, backgrounds, experiences and other individual qualities and attributes that contribute to overall board diversity. It solicits the names of director candidates from a variety of sources, including, at its discretion, members of the board and search firms. The committee also considers candidates submitted by shareholders pursuant to the process described in Question 33 under “Information About 2023 Shareholder Proposals and Director Nominations” below.
The committee reviews biographical data and other relevant information regarding potential board candidates, may request additional information from the candidates or other sources and, if the committee deems it appropriate, may interview candidates and consult references and others who may assist in candidate evaluation. The committee evaluates all candidates in the same manner, whether identified by shareholders or through other sources.
In considering potential director candidates, the committee evaluates each candidate’s character, integrity, independence, judgment, knowledge, experience, background and other relevant factors to develop an informed opinion of his or her qualifications and ability and dedication to meet the board’s expectations for directors as set forth in our Corporate Governance Guidelines. The committee’s deliberations reflect the board’s requirement that substantially all directors must be independent and that all director nominees must be financially literate or must become financially literate within a reasonable period of time after becoming a director. They also reflect the board’s views regarding the appropriate number of directors and the composition of the board, including its belief that the membership of the board should reflect diversity and be drawn from a pool of diverse, qualified candidates.
The committee assesses the effectiveness of these director nomination policies and practices as part of its annual review of board composition and board, committee and individual director performance and in its recommendations to the board of nominees to stand for election as directors at the next annual meeting of our shareholders.
The committee, in recommending nominees to stand for election as directors at the Annual Shareholders Meeting, and the board, in approving the nominees, considered, among other things, the individual experience, background, qualifications, attributes and skills of each nominee (including his or her prior contributions to the board), with a view toward constituting a board that, as a whole, is well-qualified to oversee our businesses.
With respect to Dr. Conesa, the committee and the board also considered that he has been the Chief Executive Officer and a director of Grupo Aeroméxico S.A.B. de C.V. since 2005 and that Grupo Aeroméxico filed a voluntary petition under Chapter 11 of the U.S. federal bankruptcy laws on June 30, 2020. The committee and the board concluded that this event does not reflect upon the integrity of Dr. Conesa or his ability and qualifications to serve on our board, but was a direct result of the unprecedented and ongoing global COVID-19 pandemic that resulted in domestic and international travel restrictions and severely impacted the air travel industry.
For additional information about the nominees and their qualifications, see “Proposal 1: Election of Directors.”
During 2021, the Corporate Governance Committee held four meetings.
Sempra 2022 Proxy Statement | 17 | ||||
Safety, Sustainability and Technology Committee
Our Safety, Sustainability and Technology Committee currently is entirely composed of independent directors under the independence standards established by the NYSE. This committee’s responsibilities include, among others, assisting the board:
•In overseeing the company’s risk management and oversight programs and performance related to environmental, health, safety, security (including cybersecurity), technology, climate change, sustainability and other related ESG matters (including human rights) affecting the company •In overseeing matters relating to environmental, health and safety laws, regulations and other ESG developments at the global, national, regional and local levels and evaluating ways to address these matters as part of the company’s immediate and longer-term business strategies and operations •In reviewing and monitoring the company's Human Rights Policy and related implementation efforts, including the company's response to domestic and international developments in human rights that affect the company's business | •In reviewing management’s implementation of risk management protocols with respect to cybersecurity issues, and overseeing matters relating to technology developments that advance the company’s environmental, health, safety, security (including cybersecurity), climate change, sustainability and other related ESG goals •In reviewing with management and, where appropriate, making recommendations to management and the Board of Directors regarding the company’s policies, practices and strategies with respect to environmental, health, safety, security (including cybersecurity), technology, climate change, sustainability and other related ESG matters | |||||||
Executive Committee
Our Executive Committee meets on call by the Chairman of this committee to act on emergency or other time-sensitive issues during periods between meetings of the Board of Directors when scheduling or other requirements make it difficult to convene the full board. The Executive Committee did not meet in 2021.
Communications with the Board
The board has adopted a Director Communications Screening Policy to facilitate communications with the company’s Board of Directors, which is available on our website under the “Investors” and “Governance” tabs. Under this policy, shareholders, employees and other interested parties who wish to communicate with the board, non-management directors as a group, a board committee, the Chair of a board committee or another specific director may do so by writing to the board or the specific directors or group of directors and in care of our Corporate Secretary. All such communications regarding (i) executive compensation will be relayed to the Compensation and Talent Development Committee Chair for appropriate evaluation and consideration and (ii) accounting, accounting policies, internal accounting controls and procedures, auditing matters, financial reporting processes or disclosure controls and procedures will be relayed to the Audit Committee Chair.
All other communications are reviewed by the Corporate Secretary and provided to the directors consistent with a screening policy providing that unsolicited items, marketing or advertising materials and other routine items, as well as items unrelated to the duties and responsibilities of the board, are not relayed to directors. Any communication that is not relayed is recorded in a log and made available to the directors upon request.
The address to which communications to the board should be sent is:
| C/O Corporate Secretary Board of Directors Sempra 488 8th Avenue San Diego, CA 92101 | ||||
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| Corporate Governance | |||||
Director Compensation
Overview
The Compensation and Talent Development Committee of the Sempra Board of Directors reviews non-employee director compensation on an annual basis. The committee’s independent compensation consultant, Exequity, annually provides the committee with a report that analyzes the competitiveness of Sempra’s director compensation in total and by component. Any changes to director compensation are approved by the Board of Directors.
Directors who also are employees of the company are not additionally compensated for service as a director. Compensation of Jeffrey W. Martin, our Chairman, Chief Executive Officer and President, is summarized in the 2021 Summary Compensation Table appearing under “Executive Compensation—Compensation Tables” below.
Our 2021 non-employee director compensation program is summarized in the table below.
2021 Non-Employee Director Compensation Program | |||||
Board Retainers: | |||||
Annual Base Retainer | $ | 90,000 | |||
Lead Director Retainer | $ | 40,000 | |||
Committee Chair Retainers: | |||||
Audit Committee Chair Retainer | $ | 20,000 | |||
| Compensation and Talent Development Committee Chair Retainer | $ | 15,000 | |||
Other Committee Chair Retainer(A) | $ | 10,000 | |||
| Committee Member Retainers: | |||||
| Audit Committee Member Retainer | $ | 20,000 | |||
Other Committee Member Retainer(B) | $ | 10,000 | |||
| Equity: | |||||
| Mandatory Deferred Equity | $ | 50,000 | |||
| Annual Equity Award | $ | 115,000 | |||
| Initial Equity Award for New Director | $ | 115,000 | |||
(A)Applicable to the Corporate Governance Committee and Safety, Sustainability and Technology Committee.
(B)Applicable to the Compensation and Talent Development Committee; Corporate Governance Committee; Safety, Sustainability and Technology Committee and Executive Committee.
Retainers
Directors who are not employees of Sempra received annual retainers in 2021 as set forth in the table above. Directors could elect to receive their retainer in cash or to defer it into phantom investment funds (including a fund for which interest is credited at the higher of 110% of the Moody’s Corporate Bond Yield Average or the Moody’s Corporate Bond Yield Average plus 1%) or phantom shares of our common stock.
Equity
Each quarter in 2021, non-employee directors were credited with a number of vested phantom shares of our common stock having a market value of $12,500, which we refer to as Mandatory Deferred Equity, and are required to hold these phantom shares until retirement or other separation from the board. Following the director’s retirement or other separation from the board, the current market value of the shares credited to the director’s account (together with related reinvested dividend equivalents) is paid to the director in cash. Directors also received initial or annual equity awards, which are described below.
In our 2021 director compensation program, any newly appointed non-employee director would have received an initial equity award having a market value of $115,000 and vesting (together with related reinvested dividend equivalents) on the first anniversary of the grant date. Thereafter, at each annual shareholders meeting (other than any annual meeting that is immediately following and in the same calendar year as the director’s initial appointment to the board), each non-employee director who continues to serve as a director receives an annual equity award that, in our 2021 director compensation program, had a market value of $115,000 and vests (together with related reinvested dividend equivalents) on the date of the next annual shareholders meeting. Directors could elect to receive the initial and annual equity awards in the form of restricted stock units or phantom shares of our common stock.
Unvested restricted stock units or phantom shares of our common stock immediately vest if the director’s service on the board terminates by reason of death, disability or removal without cause. Upon any other termination event, all unvested restricted stock units or phantom shares are forfeited.
2021 Compensation Program Updates
The following changes were made to our non-employee director compensation program during 2021:
• The annual base retainer was increased from $85,000 to $90,000 for all non-employee directors, and
• The grant date market value of the annual equity award and initial equity award was increased from $90,000 to $115,000.
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Director Compensation Table
We summarize below the 2021 compensation of our non-employee directors who served on our board during the year.
2021 DIRECTOR COMPENSATION TABLE
| Fees Earned or Paid in Cash | Stock Awards (B) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (C) | All Other Compensation (D) | Total | |||||||||||||
| Alan L. Boeckmann | $ | 106,319 | $ | 165,000 | $ | 1,496 | $ | 20,000 | $ | 292,815 | |||||||
Kathleen L. Brown (A) | $ | 44,505 | $ | 18,544 | — | $ | 24,993 | $ | 88,042 | ||||||||
| Andrés Conesa | $ | 145,000 | $ | 165,046 | $ | 1,384 | — | $ | 311,430 | ||||||||
| Maria Contreras-Sweet | $ | 120,000 | $ | 165,000 | $ | 347 | $ | 3,500 | $ | 288,847 | |||||||
| Pablo A. Ferrero | $ | 110,000 | $ | 165,046 | $ | 225 | — | $ | 275,271 | ||||||||
| William D. Jones | $ | 163,681 | $ | 165,046 | $ | 3,653 | $ | 25,000 | $ | 357,380 | |||||||
| Bethany J. Mayer | $ | 120,000 | $ | 165,000 | — | — | $ | 285,000 | |||||||||
| Michael N. Mears | $ | 120,000 | $ | 165,000 | $ | 4,100 | $ | 20,400 | $ | 309,500 | |||||||
| Jack T. Taylor | $ | 150,000 | $ | 165,000 | — | $ | 14,000 | $ | 329,000 | ||||||||
| Cynthia L. Walker | $ | 120,000 | $ | 165,000 | — | — | $ | 285,000 | |||||||||
| Cynthia J. Warner | $ | 122,637 | $ | 165,046 | — | $ | 25,000 | $ | 312,683 | ||||||||
| James C. Yardley | $ | 120,000 | $ | 165,000 | — | $ | 25,000 | $ | 310,000 | ||||||||
(A)Ms. Brown was not nominated to stand for reelection at our 2021 annual shareholders meeting and retired from the board effective May 14, 2021.
(B)Represents the grant date fair value of the equity awards of restricted stock units and phantom shares of our common stock granted during the year. These amounts represent our grant date estimate of the aggregate compensation expense that we will recognize over the service period of the awards. They are calculated in accordance with GAAP for financial reporting purposes based on the assumptions described in Note 10 of the Notes to Consolidated Financial Statements included in our Annual Report to Shareholders but disregarding estimates of forfeitures related to service-based vesting conditions. These awards were valued at the fair market value of our shares at the crediting date without reduction for non-transferability. The amounts set forth in this column are equal to the number of shares subject to 2021 awards multiplied by the grant date closing price of Sempra’s common stock. The restricted stock units will be settled in shares of Sempra common stock upon vesting. The phantom shares are paid in cash in accordance with the director’s payout election under the terms of the company’s nonqualified deferred compensation plan following the director’s retirement or other separation from the board. Restricted stock unit awards are rounded up to the next whole number of units at grant, while phantom share awards are not rounded at grant but are rounded to the nearest whole number of shares solely for purposes of presentation in these tables.
The following table reflects the components of the stock awards granted to each non-employee director in 2021:
Mandatory Deferred Equity(1) | Equity Grant | Total | ||||||||||||
| Phantom Shares | Restricted Stock Units | |||||||||||||
| Alan L. Boeckmann | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Kathleen L. Brown | $ | 18,544 | — | — | $ | 18,544 | ||||||||
| Andrés Conesa | $ | 50,000 | — | $ | 115,046 | $ | 165,046 | |||||||
| Maria Contreras-Sweet | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Pablo A. Ferrero | $ | 50,000 | — | $ | 115,046 | $ | 165,046 | |||||||
| William D. Jones | $ | 50,000 | — | $ | 115,046 | $ | 165,046 | |||||||
| Bethany J. Mayer | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Michael N. Mears | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Jack T. Taylor | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Cynthia L. Walker | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
| Cynthia J. Warner | $ | 50,000 | — | $ | 115,046 | $ | 165,046 | |||||||
| James C. Yardley | $ | 50,000 | $ | 115,000 | — | $ | 165,000 | |||||||
(1) Mandatory deferred equity was prorated for Ms. Brown, who retired effective May 14, 2021.
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| Corporate Governance | |||||
The following table summarizes outstanding equity balances for each non-employee director at December 31, 2021:
| Phantom Shares | Restricted Stock Units | Total | |||||||||
| Alan L. Boeckmann | 25,451 | — | 25,451 | ||||||||
| Kathleen L. Brown | 10,158 | — | 10,158 | ||||||||
| Andrés Conesa | 3,688 | 847 | 4,535 | ||||||||
| Maria Contreras-Sweet | 2,987 | — | 2,987 | ||||||||
| Pablo A. Ferrero | 4,173 | 847 | 5,020 | ||||||||
| William D. Jones | 35,367 | 847 | 36,214 | ||||||||
| Bethany J. Mayer | 3,570 | — | 3,570 | ||||||||
| Michael N. Mears | 4,671 | — | 4,671 | ||||||||
| Jack T. Taylor | 13,803 | — | 13,803 | ||||||||
| Cynthia L. Walker | 2,953 | — | 2,953 | ||||||||
| Cynthia J. Warner | 2,101 | 847 | 2,948 | ||||||||
| James C. Yardley | 13,548 | — | 13,548 | ||||||||
(C)Consists of (i) the aggregate change in the actuarial value of accumulated benefits under defined benefit pension plans and (ii) above-market interest (interest in excess of 120% of the federal long-term rate) on deferred compensation. The 2021 amounts are:
| Change in Accumulated Benefits | Above-Market Interest | Total | |||||||||
| Alan L. Boeckmann | — | $ | 1,496 | $ | 1,496 | ||||||
| Kathleen L. Brown | — | — | — | ||||||||
| Andrés Conesa | — | $ | 1,384 | $ | 1,384 | ||||||
| Maria Contreras-Sweet | — | $ | 347 | $ | 347 | ||||||
| Pablo A. Ferrero | — | $ | 225 | $ | 225 | ||||||
| William D. Jones | $ | (16,050) | $ | 3,653 | $ | (12,397) | |||||
| Bethany J. Mayer | — | — | — | ||||||||
| Michael N. Mears | — | $ | 4,100 | $ | 4,100 | ||||||
| Jack T. Taylor | — | — | — | ||||||||
| Cynthia L. Walker | — | — | — | ||||||||
| Cynthia J. Warner | — | — | — | ||||||||
| James C. Yardley | — | — | — | ||||||||
Only Mr. Jones is entitled to receive pension benefits under a grandfathered pension plan and he has attained the maximum years of service credit. The annual benefit is based on the annual board retainer at the date the benefit is paid. It commences upon the latter of the conclusion of his board service or attaining age 65 and continues for a period not to exceed his years of service as a director of predecessor companies plus up to 10 years of service as a director of the company. The actuarial equivalent of the total retirement benefit is paid in a single lump sum upon the conclusion of board service, unless the director has elected to receive the annual benefit. As of December 31, 2021, the aggregate actuarial present value of the accumulated benefit under the grandfathered pension plan for Mr. Jones was $808,803 (compared to $824,853 as of December 31, 2020). The change in present value of pension benefits is $(16,050) for Mr. Jones. This value is displayed in the table above in this footnote (C), but is not reflected in the Change in Pension Value and Nonqualified Deferred Compensation Earnings or Total columns for Mr. Jones in the 2021 Director Compensation Table.
(D)Consists of our contributions to charitable, educational and other non-profit organizations to match the personal contributions of directors on a dollar-for-dollar basis up to an annual maximum match of $25,000 for each director.
In addition to the compensation for non-employee directors set forth above, Sempra has agreements with these directors that provide for indemnification for monetary damages to the fullest extent permissible under California law, which are intended to help mitigate concern about personal liability in connection with their service for the company.
Sempra 2022 Proxy Statement | 21 | ||||
Audit Committee Report
The Audit Committee of the Board of Directors is composed of the six directors named below, all of whom have been determined by the board to be independent directors. The board also has determined that all members of the committee are financially literate and that Mr. Taylor, the Chair of the committee, and Ms. Walker, a member of the committee, are audit committee financial experts as defined by the rules of the Securities and Exchange Commission. The committee’s charter, adopted by the board, is posted on the company’s website at www.sempra.com under the “Investors” and “Governance” tabs.
The committee’s responsibilities include appointing the company’s independent registered public accounting firm, pre-approving both audit and non-audit services to be provided by the firm and assisting the board in providing oversight of the company’s financial reporting process. In fulfilling its oversight responsibilities, the committee meets with the company’s independent registered public accounting firm, internal auditors and management to review accounting, auditing, internal control and financial reporting matters.
It is not the committee’s responsibility to plan or conduct audits or to determine that the company’s financial statements and disclosures are complete, accurate and in accordance with accounting principles generally accepted in the United States of America and applicable laws, rules and regulations. Management is responsible for the company’s financial statements, including the estimates and judgments on which they are based, as well as the company’s financial reporting process, accounting policies, internal audit function, internal control over financial reporting, disclosure controls and procedures, and risk management. The company’s independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an audit of the company’s annual financial statements, expressing an opinion as to the conformity of the annual financial statements with accounting principles generally accepted in the United States of America, expressing an opinion as to the effectiveness of the company’s internal control over financial reporting and reviewing the company’s quarterly financial statements.
The committee has discussed with Deloitte & Touche LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission, which require the independent registered public accounting firm to communicate information to the committee regarding the scope and results of its audit of the company’s financial statements, including information with respect to the firm’s responsibilities under auditing standards generally accepted in the United States, significant accounting policies, management judgments and estimates, any significant unusual transactions or audit adjustments, any disagreements with management and any difficulties encountered in performing the audit and other similar matters required to be discussed with the committee by those standards.
The committee also has received from Deloitte & Touche LLP a report providing the disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence. Deloitte & Touche LLP also has discussed its independence with the committee and confirmed in the report that, in its professional judgment, it is independent of the company within the meaning of the federal securities laws. The committee also considered whether Deloitte & Touche LLP’s provision of non-audit services to the company and its affiliates is compatible with its independence.
The committee also has reviewed and discussed with the company’s management the audited financial statements included in the company’s Annual Report on Form 10-K for the year ended December 31, 2021, and management’s report on internal control over financial reporting. Management has confirmed to the committee that the financial statements have been prepared with integrity and objectivity and that management has maintained an effective system of internal control over financial reporting. Deloitte & Touche LLP has expressed its professional opinions that the financial statements present fairly, in all material respects, the financial position and results of operations of the company in conformity with accounting principles generally accepted in the United States of America, and that management has maintained an effective system of internal control over financial reporting. In addition, the company’s Chief Executive Officer and Chief Financial Officer have reviewed with the committee the certifications that each will file with the Securities and Exchange Commission pursuant to the requirements of the Sarbanes-Oxley Act of 2002 and the policies and procedures management has adopted to support the certifications.
Based on these considerations, the Audit Committee has recommended to the Board of Directors that the company’s audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the Securities and Exchange Commission.
Audit Committee
Jack T. Taylor, Chair
Andrés Conesa
Maria Contreras-Sweet
Michael N. Mears
Cynthia L. Walker
James C. Yardley
Jack T. Taylor, Chair
Andrés Conesa
Maria Contreras-Sweet
Michael N. Mears
Cynthia L. Walker
James C. Yardley
22 | Sempra 2022 Proxy Statement | ||||
Share Ownership
The following table shows the number of shares of our common stock beneficially owned as of March 1, 2022, by each of our directors, by each of our executive officers named in the executive compensation tables in this proxy statement (named executive officers), and by all of our directors and executive officers as a group. The shares of common stock beneficially owned by each of our directors and named executive officers and by our directors and executive officers as a group in each case total less than 1% of our outstanding shares of common stock. In calculating these percentages, shares under the heading “Phantom Shares” are not included because these phantom shares (i) cannot be voted and (ii) may only be settled for cash or cannot be settled for shares of our common stock within 60 days after March 1, 2022. In addition, in calculating these percentages we used the 315,771,323 shares of our common stock that were outstanding as of March 1, 2022.
Name | Beneficial Holdings(A) | Shares Subject to Exercisable Options(B) | Total Without Phantom Shares | Phantom Shares(C) | Total Including Phantom Shares | ||||||||||||
Alan L. Boeckmann | 6,000 | — | 6,000 | 25,064 | 31,064 | ||||||||||||
Andrés Conesa | 7,585 | — | 7,585 | 3,812 | 11,397 | ||||||||||||
Maria Contreras-Sweet | 4,063 | — | 4,063 | 2,251 | 6,314 | ||||||||||||
Pablo A. Ferrero | 4,782 | — | 4,782 | 4,301 | 9,083 | ||||||||||||
William D. Jones(D) | 4,278 | — | 4,278 | 35,746 | 40,024 | ||||||||||||
Jeffrey W. Martin | 58,123 | 256,741 | 314,864 | 43,684 | 358,548 | ||||||||||||
Bethany J. Mayer | 678 | — | 678 | 2,840 | 3,518 | ||||||||||||
Michael N. Mears | 2,000 | — | 2,000 | 3,949 | 5,949 | ||||||||||||
Trevor I. Mihalik | 15,088 | 39,646 | 54,734 | 13,460 | 68,194 | ||||||||||||
Kevin C. Sagara | 8,700 | 11,176 | 19,876 | 13,804 | 33,680 | ||||||||||||
| Karen L. Sedgwick | 15,448 | — | 15,448 | — | 15,448 | ||||||||||||
Jack T. Taylor | 131 | — | 131 | 13,155 | 13,286 | ||||||||||||
Cynthia L. Walker | 4,663 | — | 4,663 | 2,217 | 6,880 | ||||||||||||
Peter R. Wall | 5 | — | 5 | — | 5 | ||||||||||||
Cynthia J. Warner | 749 | — | 749 | 2,293 | 3,042 | ||||||||||||
James C. Yardley | — | — | — | 12,898 | 12,898 | ||||||||||||
Directors and Executive Officers as a Group (16 persons) | 132,293 | 307,563 | 439,856 | 179,474 | 619,330 | ||||||||||||
(A)None of our directors or executive officers beneficially owned any shares of our 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C, at March 1, 2022; therefore, no such shares are shown in this table.
(B) Shares that may be acquired through the exercise of stock options that currently are exercisable or will become exercisable within 60 days after March 1, 2022.
(C) Phantom shares represent deferred compensation deemed invested in shares of our common stock. These phantom shares track the performance of our common stock but cannot be voted and may only be settled for cash, except for 1,319.35 phantom shares deferred by Mr. Mihalik in connection with the vesting of certain performance-based restricted stock units, which also cannot be voted but may only be settled for shares of our common stock following separation of service from the company. All phantom shares are either fully vested or will vest within 60 days after March 1, 2022.
(D) Mr. Jones is not standing for reelection at the Annual Shareholders Meeting and will retire from the board immediately following the meeting.
For information regarding share ownership guidelines applicable to our directors and executive officers, see “Corporate Governance—Board of Directors—Director Share Ownership Guideline” and “Executive Compensation—Compensation Discussion and Analysis—Share Ownership Guidelines,” respectively.
Sempra 2022 Proxy Statement | 23 | ||||
| Share Ownership | |||||
Based on a review of filings made under Section 13(g) of the Securities Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2021, the persons or entities known by us to be a beneficial owner of more than 5% of our common stock were as follows:
Name and Address of Beneficial Owner | Shares of Sempra Common Stock | Percent of Class(F) | ||||||
BlackRock, Inc.(A) 55 East 52nd Street New York, NY 10055 | 29,524,516 | 9.3% | ||||||
The Vanguard Group(B) 100 Vanguard Blvd. Malvern, PA 19355 | 27,348,804 | 8.7% | ||||||
Capital International Investors, division of Capital Research and Management Company(C) 333 South Hope Street, 55th Floor Los Angeles, CA 90071 | 19,663,365 | 6.2% | ||||||
T. Rowe Price Associates, Inc.(D) 100 E. Pratt Street Baltimore, MD 21202 | 19,235,734 | 6.1% | ||||||
State Street Corporation(E) State Street Financial Center 1 Lincoln Street Boston, MA 02111 | 17,724,761 | 5.6% | ||||||
(A)The information regarding BlackRock, Inc. is based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 1, 2022 reflecting shares of our common stock beneficially owned as of December 31, 2021 (the BlackRock 13G/A). According to the BlackRock 13G/A, includes sole voting power with respect to 25,173,203 shares and sole dispositive power with respect to 29,524,516 shares.
(B)The information regarding The Vanguard Group is based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 9, 2022 reflecting shares of our common stock beneficially owned as of December 31, 2021 (the Vanguard 13G/A). According to the Vanguard 13G/A, includes shared voting power with respect to 642,141 shares, sole dispositive power with respect to 25,900,866 shares and shared dispositive power with respect to 1,447,938 shares.
(C)The information regarding Capital International Investors, a division of Capital Research and Management Company, as well as certain of its investment management subsidiaries and affiliates (Capital), is based solely on a Schedule 13G/A filed by Capital with the SEC on February 11, 2022 reflecting shares of our common stock beneficially owned as of December 31, 2021 (the Capital 13G/A). According to the Capital 13G/A, includes sole voting power with respect to 19,605,052 shares of our common stock and sole dispositive power with respect to 19,663,365 shares.
(D)The information regarding T. Rowe Price Associates, Inc. is based solely on a Schedule 13G/A filed by T. Rowe Price Associates, Inc. with the SEC on February 14, 2022 reflecting shares of our common stock beneficially owned as of December 31, 2021 (the TRP 13G/A). According to the TRP 13G/A, includes sole voting power with respect to 9,772,132 shares and sole dispositive power with respect to 19,235,734 shares.
(E)The information regarding State Street Corporation is based solely on a Schedule 13G/A filed by State Street Corporation with the SEC on February 14, 2022 reflecting shares of our common stock beneficially owned as of December 31, 2021 (the State Street 13G/A). According to the State Street 13G/A, includes shared voting power with respect to 15,750,642 shares and shared dispositive power with respect to 17,723,061 shares.
(F)The percentages are calculated based on (i) the number of shares of our common stock reflected as being beneficially owned by each beneficial owner in its filing made under Section 13(g) of the Exchange Act as described in the other footnotes to this table, and (ii) 315,771,323 shares of our common stock outstanding as of March 1, 2022.
24 | Sempra 2022 Proxy Statement | ||||
Proposals to be Voted On
Board of Directors Proposals
Proposals 1, 2 and 3 have been included in this proxy statement at the direction of the Board of Directors. The board recommends that you vote “FOR” each director nominee in Proposal 1 and “FOR” each of Proposals 2 and 3.
Proposal 1: Election of Directors
Directors are elected at each annual meeting of our shareholders for terms expiring at the next annual meeting of our shareholders. The Board of Directors has nominated the following 11 individuals to stand for election as directors, all of whom are currently directors:
Alan L. Boeckmann | Jeffrey W. Martin | Cynthia L. Walker | ||||||
Andrés Conesa | Bethany J. Mayer | Cynthia J. Warner | ||||||
Maria Contreras-Sweet | Michael N. Mears | James C. Yardley | ||||||
Pablo A. Ferrero | Jack T. Taylor | |||||||
Properly executed proxies will be voted “FOR” each of these 11 nominees unless other instructions are specified. If any nominee should become unavailable to serve, the proxies may be voted for a substitute nominee designated by the board, or the board may reduce the authorized number of directors. In no event may the proxies be voted for more than 11 nominees.
The board has determined that each non-employee nominee is an independent director under the NYSE independence standards. Information about director independence is described under “Corporate Governance—Board of Directors—Director Independence.”
Our board possesses a robust breadth and depth of experience and qualifications to oversee the company’s multiple businesses and global operations. The following chart sets forth the aggregate experience, skills and qualifications of the director nominees in areas of particular importance to our businesses:
| Experience / Qualifications | ||||||||||||||||||||||||||||||||
| Accounting and Finance | 10 | |||||||||||||||||||||||||||||||
| Experience in accounting and financial matters, including the oversight of financial statements and operating results | ||||||||||||||||||||||||||||||||
| Business / Markets | 9 | |||||||||||||||||||||||||||||||
| Experience as a senior leader specifically in regions and markets where Sempra and its operating companies have operations | ||||||||||||||||||||||||||||||||
| Corporate Governance | 9 | |||||||||||||||||||||||||||||||
| Experience on or supporting a public company board, maintaining board and management accountability, protecting shareholder interests and observing appropriate governance practices | ||||||||||||||||||||||||||||||||
| Cybersecurity | 5 | |||||||||||||||||||||||||||||||
| In-depth knowledge of technology and data security systems through industry experience or academia | ||||||||||||||||||||||||||||||||
| Diversity, Equity and Inclusion (DE&I) | 6 | |||||||||||||||||||||||||||||||
| Experience participating in or leading executive DE&I councils, chairing/sponsoring employee DE&I councils or business resource groups, signing on to DE&I commitments or mentoring talent from under-represented groups | ||||||||||||||||||||||||||||||||
| Electric and/or Gas Utility | 4 | |||||||||||||||||||||||||||||||
| Electric and/or gas utility experience outside of Sempra | ||||||||||||||||||||||||||||||||
| Energy Industry | 6 | |||||||||||||||||||||||||||||||
| Experience in the energy industry outside of Sempra | ||||||||||||||||||||||||||||||||
| Environmental, Health and Safety | 9 | |||||||||||||||||||||||||||||||
| Experience in operating responsible and sustainable businesses and oversight of environmental, health and safety systems and procedures | ||||||||||||||||||||||||||||||||
| Government, Regulatory and Public Policy | 8 | |||||||||||||||||||||||||||||||
| Experience in managing governmental and regulatory affairs, advancing public policy and community and public relations | ||||||||||||||||||||||||||||||||
| Infrastructure Development | 10 | |||||||||||||||||||||||||||||||
| Experience in the development and management or oversight of capital projects involving physical systems (e.g., transportation, water and electric systems), real estate acquisitions and construction activities | ||||||||||||||||||||||||||||||||
| Risk Management | 9 | |||||||||||||||||||||||||||||||
| Experience in oversight of risk management, or in a senior compliance or regulatory role | ||||||||||||||||||||||||||||||||
| Strategic Planning | 10 | |||||||||||||||||||||||||||||||
| Experience in developing corporate strategies and long-term business plans | ||||||||||||||||||||||||||||||||
| Technology | 6 | |||||||||||||||||||||||||||||||
| Leadership and oversight experience in technological trends, digital platforms and/or efficiency improvements through technology | ||||||||||||||||||||||||||||||||
Sempra 2022 Proxy Statement | 25 | ||||
| Proposals to be Voted On | |||||
The charts below summarize the diversity, tenure and independence of our directors nominated to stand for election at the Annual Shareholders Meeting: 55% of our director nominees are women and/or people of color; 45% of our director nominees have served less than five years, with an average tenure of six years; and 91% of our director nominees are independent under NYSE independence standards.
| *One director is a Latina woman | |||||
Biographical information regarding each director nominee and his or her qualifications to serve as a director is set forth on the succeeding pages. In each biography below, unless otherwise indicated, the year shown as the beginning of each director’s tenure on the board is the year during which the director was first elected or appointed as a director of Sempra, and the age shown for each director is as of the mailing date of this proxy statement.
 | Alan L. Boeckmann, 73, has been a director since 2011. He has been the Executive Chairman and a director of Fluor Corporation, a leading engineering, procurement, construction and maintenance services company, since May 2019. In 2012, he retired as the Non-Executive Chairman of Fluor. From 2002 to early 2011, Mr. Boeckmann was the Chairman and Chief Executive Officer of Fluor. Prior to that, he held a number of senior management and operating positions at Fluor. He is a former director of Archer-Daniels-Midland Company, BHP Billiton, BP p.l.c., Burlington Northern Santa Fe Corporation and the National Petroleum Council. Mr. Boeckmann has announced his retirement as Executive Chairman and a director of Fluor effective May 4, 2022. Mr. Boeckmann has been an outspoken business leader in promoting international standards for business ethics and was instrumental in the formation of the World Economic Forum’s Partnering Against Corruption Initiative in 2004. His extensive board, executive management and infrastructure construction experience, coupled with his commitment to ethical conduct in international business activities, makes him a valuable member of our board. | ||||
 | Andrés Conesa, Ph.D., 52, has been a director since 2017. He has been the Chief Executive Officer and a director of Grupo Aeroméxico, S.A.B. de C.V., an air transportation services company, since 2005. Previously, Dr. Conesa held several positions in the Mexico Federal Government: from 2003 to 2005, he was Chairman of the Board of Directors of CINTRA (the holding company of Aeroméxico and Mexicana), and from 1991 to 2004, he served in various capacities at the Mexican Ministry of Finance, most recently as Deputy Undersecretary of Public Credit. He was a member of the Board of Governors of the International Air Transport Association from 2008 until June 2018 and served as its Chairman during the 2015 term. Dr. Conesa is a former director of IEnova, Genomma Lab International and the Mexican Stock Exchange. Dr. Conesa’s extensive experience and knowledge of transnational business activities and the Mexican regulatory and financial sectors make him a valuable member of our board, particularly as we look to expand our operations in Mexico. | ||||
 | Maria Contreras-Sweet, 66, has been a director since 2017. She became the Managing Member of both Contreras Sweet Companies, LLC, a marketing and research solutions company, and Rockway Equity Partners, a private-equity firm that invests in technology, manufacturing and infrastructure-related companies, in October 2017. From April 7, 2014 through January 20, 2017, she served as the 24th Administrator of the U.S. Small Business Administration and as a member of President Obama’s cabinet. Ms. Contreras-Sweet was a founder of ProAmerica Bank where she served as Executive Chairwoman from 2006 to 2014. She was Co-Founder and Managing Partner of Fortius Holdings from 2003 to 2006. Prior to that, she served as the California cabinet Secretary of the Business, Transportation and Housing Agency from 1999 to 2003. She was appointed chair to the finance committee of CA-ISO (California Independent System Operator) to help solve the state’s 2000-2001 energy crisis. Ms. Contreras-Sweet served as a senior executive for Westinghouse Electric Company’s 7-Up/RC Bottling Company, where she became an equity partner. She is a director of Regional Management Corp., TriNet, Inc., Zions Bancorporation, N.A. and the Bipartisan Policy Center and is a distinguished fellow of the Larta Institute. Ms. Contreras-Sweet served on the Federal Glass Ceiling Commission and is a Founding President of Hispanas Organized for Political Equality (HOPE), a non-profit, nonpartisan organization committed to ensuring political and economic parity for Latinas. She has received honorary doctorates from Tufts University, Whittier College, La Verne University, Mount St. Mary’s University and California State University, Los Angeles. Ms. Contreras-Sweet possesses extensive knowledge and executive experience in both the public and private sectors. She brings a strong understanding of banking, infrastructure, supply chains, global innovation, infrastructure safety management, and diversity and inclusion matters, as well as a deep understanding and familiarity with government and regulatory bodies in our marketplace and experience with small and medium-sized businesses, which makes her a valuable contributor to our board. | ||||
26 | Sempra 2022 Proxy Statement | ||||
| Proposals to be Voted On | |||||
 | Pablo A. Ferrero, 59, has been a director since 2013. He is an independent energy consultant. From 2006 to 2011, Mr. Ferrero served as Executive Vice President for the Southern Cone at AEI Energy, a power generation and distribution and gas transmission and distribution company. From 2004 to 2006, he was the Chief Executive Officer of Transportadora de Gas del Sur S.A. He is executive director at MSU Energy S.A. and a former director of Metrogas, Pampa Energía, RDA Renting, S.A., TGS, Transener Edesur, Petrobras Energía, Emdersa, EDESA Holding, EDEN, Emgasud, Servicios Petroleros Argentina, Refinor, Oldelval, Termap, Chilquinta Energía (Chile), Luz del Sur (Peru), Petrolera Andina (Bolivia) and Promigas (Colombia). Mr. Ferrero also served as a member of the Board of Directors on the Argentine Business Council for Sustainable Development, a partner organization to the World Business Council for sustainable Development, from 2004 to 2006. Mr. Ferrero has a deep understanding of the energy industry and in particular international energy operations and sustainable development. This understanding of international energy operations along with his extensive executive and board experience make him a valuable member of our board. | ||||
 | Jeffrey W. Martin, 60, has been a director since 2018. Mr. Martin is the Chairman and Chief Executive Officer of the company. Previously, Mr. Martin served as Executive Vice President and Chief Financial Officer of the company since January 2017. Prior to that, he served at SDG&E as the Chief Executive Officer and a director beginning in January 2014. In addition to those roles at SDG&E, he was appointed as President in October 2015 and as Chairman in November 2015, serving in each of these offices through December 2016. From 2010 to 2013, Mr. Martin served as the President and Chief Executive Officer of Sempra U.S. Gas & Power (USGP), a previous business unit of the company, and USGP's predecessor organization, Sempra Generation. Earlier, he served as Vice President - Investor Relations for Sempra. Prior to joining the company in December 2004, Mr. Martin was chief financial officer of NewEnergy, Inc. He also formerly served as corporate counsel at Unisource Energy Corporation and was an attorney at the law firm of Snell & Wilmer, LLP. Mr. Martin currently serves as a director of Oncor, of which Sempra indirectly owns 80.25%. Mr. Martin serves on the board of directors of the American Petroleum Institute and on the board of trustees of the University of San Diego. He also is a governor of the Oil and Gas community and Co-Chair of the Electricity community for the World Economic Forum and is the Co-Chair of the U.S.-Saudi Business Council of the U.S. Chamber of Commerce. He previously served on the boards of directors of SoCalGas, the Edison Electric Institute, California Chamber of Commerce and National Association of Manufacturers. Mr. Martin, in his position as Chairman and Chief Executive Officer of Sempra, oversees the management of all aspects of our business and leads the overall activities of the Board of Directors. His performance and leadership in previous senior executive positions at Sempra, his experience as an employee of the company and its subsidiaries for more than 17 years, and his broad understanding of the energy industry, make Mr. Martin a valuable member and leader of our board. | ||||
 | Bethany J. Mayer, 60, has been a director since 2019. She previously served as a director from February 2017 until October 2018 when she was appointed Executive Vice President — Corporate Development and Technology of the company effective November 26, 2018, a position from which she resigned in January 2019. From January 2018 to May 2021, she was an Executive Partner at Siris Capital Group LLC, a private equity firm that invests in technology companies, and in May 2021 became an Executive Advisor with Siris. From April to December 2017, she was the Senior Vice President of Keysight Technologies, an electronics testing and measurement equipment and software manufacturing company, and President of its Ixia Solutions Group. From 2014 until its acquisition by Keysight Technologies in 2017 she was the President and Chief Executive Officer and a director of Ixia, a provider of testing, visibility and security solutions for physical and virtual networks. Prior to joining Ixia, Ms. Mayer held several key executive roles at HP since 2010, including as Senior Vice President and General Manager of HP’s Network Business Unit. Prior to joining HP, Ms. Mayer served as Senior Vice President, Worldwide Marketing and Corporate Development at Blue Coat Systems and, before that, she held roles at Cisco Systems, Apple Computer and Lockheed Martin. Ms. Mayer is the non-executive Chair of Box Inc. and a board member of LAM Research Corporation and Marvell Technology Group Ltd and a former director of Delphi Automotive plc. She is pursuing an advanced degree and expects to receive a master of science in cybersecurity risk and strategy through New York University in May 2022. Ms. Mayer’s executive and public company board experience, together with her extensive technology background, deep understanding of network security, and ongoing cybersecurity studies, make her a valuable member of our board. | ||||
 | Michael N. Mears, 59, has been a director since 2018. He has been Chairman, President and Chief Executive Officer of Magellan Midstream Partners, L.P., which transports, stores and distributes petroleum and petroleum products, since 2011. From 2008 through 2011, he served as Chief Operating Officer of Magellan. Mr. Mears was a Senior Vice President of Magellan GP, LLC, general partner of Magellan, from 2007 through 2008 and a Vice President from 2004 to 2007. Prior to joining Magellan in 2004, he served as a Vice President of Subsidiaries of The Williams Companies, Inc. from 1996 to 2004. Mr. Mears also worked in various management positions with Williams Pipe Line Company (now known as Magellan Pipeline Company, L.P.) since joining Williams in 1985. He is a member of the board of directors of the Association of Oil Pipelines and is a director of the Tulsa Regional Chamber. Mr. Mears has announced his retirement as Chairman, Chief Executive Officer and President and a director of Magellan effective April 30, 2022. Mr. Mears’ extensive knowledge of the energy industry, as well as his executive, commercial and operational experience, make him a valuable member of our board. | ||||
Sempra 2022 Proxy Statement | 27 | ||||
| Proposals to be Voted On | |||||
 | Jack T. Taylor, 70, has been a director since 2013. He was the Chief Operating Officer — Americas and Executive Vice Chair of U.S. Operations for KPMG LLP from 2005 to 2010. From 2001 to 2005, he served as the Vice Chairman of U.S. Audit and Risk Advisory Services for KPMG. Mr. Taylor is an NACD Board Leadership Fellow and a member of the NACD Audit Committee Chair Advisory Council. He is a director of Genesis Energy LP and Murphy USA Inc. Mr. Taylor has extensive experience with financial and public accounting issues as well as a deep knowledge of the energy industry. He spent over 35 years as a public accountant at KPMG LLP, many of which he worked in a leadership capacity. Mr. Taylor sponsored formation of the KPMG Diversity Advisory Board in 2007 and served as its chair until his retirement in 2010. This experience with financial and public accounting issues, together with his executive experience and knowledge of the energy industry, makes him a valuable member of our board. | ||||
 | Cynthia L. Walker, 45, has been a director since 2018. She served as Senior Vice President, Midstream & Marketing, for Occidental Petroleum Corporation, an integrated oil and gas exploration and production company, from 2016 until October 2019. From 2014 to 2016, she was Occidental’s Senior Vice President, Strategy and Development. She joined Occidental in 2012 as Executive Vice President and Chief Financial Officer. Prior to that, Ms. Walker was a managing director at Goldman Sachs & Co. where she worked for 12 years providing strategic advice in high-profile energy industry transactions as a senior member of the Global Natural Resources Group and Mergers and Acquisitions Group. She is a director of Oasis Petroleum Inc. and of the Houston Zoo and the Children’s Museum of Houston. Ms. Walker’s extensive knowledge and executive experience in the natural gas and energy industries, as well as her prior experience in finance and mergers and acquisitions, make her a valuable member of our board. | ||||
 | Cynthia J. Warner, 63, has been a director since 2019. She has served as President and Chief Executive Officer and a director of Renewable Energy Group, Inc (REGI)., an advanced biofuel producer, since January 2019. Ms. Warner served as Executive Vice President of Operations for Andeavor (formerly Tesoro Corporation), a refiner and marketer of petroleum products, from August 2016 until October 2018, when Andeavor was acquired by Marathon Petroleum Corp. Prior to that, she served as Andeavor’s Executive Vice President of Strategy and Business Development from October 2014 to August 2016. Ms. Warner previously served as Chairman and Chief Executive Officer of Sapphire Energy, Inc. after a 25-year career at BP and Amoco, Inc. (prior to its acquisition by BP). Ms. Warner is a member of the National Petroleum Council, Board of Visitors of Vanderbilt University School of Engineering and Advisory Board to the Columbia University Center for Global Energy Policy. Ms. Warner previously served on President Obama’s Renewable Energy Task Force and currently serves on the Iowa Governor’s Carbon Sequestration Task Force. She is a former director of IDEX Corporation. Chevron Corporation has announced that it has entered into an agreement to acquire REGI in a transaction expected to close in the second half of 2022 and intends to appoint Ms. Warner as a director of Chevron following the closing of that transaction. Ms. Warner’s extensive experience and leadership in the global energy industry, particularly with respect to clean and renewable energy, makes her a valuable member of our board. | ||||
 | James C. Yardley, 70, has been a director since 2013. He was Executive Vice President of El Paso Corporation, a natural gas pipeline company and oil and gas producer, and President of its Pipeline Group from 2006 through 2012. Mr. Yardley was also the President and Chief Executive Officer of El Paso Pipeline GP Company LLC, the general partner of El Paso Pipeline Partners, L.P., a master limited partnership that owned and operated interstate natural gas transportation pipelines, storage and other midstream assets, from 2007 through 2012. From 1998 through 2006, he was the President of Southern Natural Gas Company, previously a unit of El Paso Corporation and now a unit held jointly by Kinder Morgan Inc. and The Southern Company. Mr. Yardley is a former director of El Paso Pipeline GP Company LLC, and Scorpion Offshore Ltd. Mr. Yardley has extensive experience in the natural gas industry and in particular the midstream portion of that industry. He has spent over 34 years in the energy sector, many of which he worked in a leadership capacity, and has public company board experience. This specialized energy industry experience, together with Mr. Yardley’s executive and public company board experience, makes him a valuable member of our board. | ||||
Proposal to be Voted on, Board Recommendation and Vote Required
We are asking our shareholders to elect each of the 11 nominees named in this proxy statement as directors of our company. We have not received notice of any additional candidates to be nominated to stand for election as directors at the Annual Shareholders Meeting and the deadline for notice of the nomination of additional candidates has passed. Consequently, the election of directors will be an uncontested election and our bylaw providing for majority voting in uncontested elections will apply. Under this bylaw, to be elected as a director, a nominee must receive votes “FOR” his or her election constituting a majority of the shares represented and voting at the Annual Shareholders Meeting at which a quorum is present, and the approving majority also must represent more than 25% of our outstanding shares. If a nominee who currently is serving as a director does not receive sufficient “FOR” votes to be re-elected, the director will cease to be a director not later than 90 days following the certification of the election results, and the resulting vacancy on the board may be filled by the remaining directors. If a nominee receives sufficient “FOR” votes, he or she will be re-elected to serve until our next annual shareholders meeting and until his or her successor has been elected and qualified or until his or her earlier resignation or removal.
| The Board of Directors recommends that on Proposal 1 you vote “FOR” each of its nominees for election to the board. | ||
28 | Sempra 2022 Proxy Statement | ||||
| Proposals to be Voted On | |||||
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors has retained Deloitte & Touche LLP as the independent registered public accounting firm to audit our financial statements and the effectiveness of our internal control over financial reporting for 2022. Deloitte & Touche LLP has served as our independent registered public accounting firm continuously since our inception in 1998. Deloitte & Touche LLP or its predecessors have continuously served as the independent registered public accounting firm of SDG&E and SoCalGas or their parent companies since 1935 and 1937, respectively. Representatives of Deloitte & Touche LLP are expected to attend the Annual Shareholders Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders.
The following table shows fees paid to Deloitte & Touche LLP for services provided to Sempra in 2021 and 2020:
Dollars in Thousands | 2021 | 2020 | |||||||||||||||
| Fees | % of Total | Fees | % of Total | ||||||||||||||
Audit fees | |||||||||||||||||
Consolidated financial statements, internal controls audits and subsidiary audits | $ | 10,166 | $ | 9,145 | |||||||||||||
| Regulatory filings and related services | $ | 807 | $ | 827 | |||||||||||||
| Total audit fees | $ | 10,973 | 81 | % | $ | 9,972 | 82 | % | |||||||||
| Audit-related fees | |||||||||||||||||
| Employee benefit plan audits | $ | 520 | $ | 505 | |||||||||||||
Other audit-related services(A) | $ | 1,840 | $ | 1,494 | |||||||||||||
| Total audit-related fees | $ | 2,360 | 17 | % | $ | 1,999 | 17 | % | |||||||||
Tax fees(B) | $ | 272 | 2 | % | $ | 156 | 1 | % | |||||||||
All other fees(C) | $ | 13 | — | % | $ | 22 | — | % | |||||||||
| Total fees | $ | 13,618 | 100 | % | $ | 12,149 | 100 | % | |||||||||
(A)Other audit-related services in 2021 primarily relate to statutory audits and agreed upon procedures. Other audit-related services in 2020 primarily relate to statutory audits, agreed upon procedures and permitted internal control advisory services.
(B)Tax fees relate to tax consulting and compliance services.
(C)All other fees relate to training and conferences.
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight, including the oversight of the audit fee negotiations, of our independent registered public accounting firm. Except where pre-approval is not required by SEC rules, the committee pre-approves all audit, audit-related and permissible non-audit services provided by Deloitte & Touche LLP for Sempra and its subsidiaries, including all services provided by Deloitte & Touche LLP for Sempra in 2021 and 2020. The committee’s pre-approval policies and procedures provide for the general pre-approval of specific types of services and give detailed guidance to management as to the services that are eligible for general pre-approval, and they require specific pre-approval of all other permitted services. For both types of pre-approval, the committee considers whether the services to be provided are consistent with maintaining the firm’s independence. The committee’s policies and procedures also delegate authority to the chair of the committee to address any requests for pre-approval of services between committee meetings, with any pre-approval decisions to be reported to the committee at its next scheduled meeting.
The Audit Committee regularly meets in executive session with only committee members present and with Deloitte & Touche LLP’s lead engagement partner without members of management present. This provides an opportunity for the Audit Committee to assess Deloitte & Touche LLP’s effectiveness and independence for determining reappointment as well as consideration of rotating audit firms. The Audit Committee considers various factors in determining whether to reappoint Deloitte & Touche LLP, including: the firm’s level and quality of service and professional integrity and objectivity in executing audits; professional qualifications; understanding of our businesses and industry and capability and expertise in handling the breadth and complexity of our businesses; independence policies and processes for maintaining independence; and external data such as peer reviews and recent Public Company Accounting Oversight Board reports on the firm. The Audit Committee also considers the firm’s tenure in serving as our independent registered public accounting firm. While the Public Company Accounting Oversight Board has acknowledged that there is no conclusive linkage between tenure and audit quality, auditor tenure may be one data point. Deloitte & Touche LLP’s tenure as our independent public accounting firm has allowed it to gain institutional knowledge and a deep understanding of our businesses, accounting policies, and internal control over financial reporting, which the Audit Committee considers beneficial. In addition, in conjunction with the mandated five-year rotation of the audit firm’s lead engagement partner, which most recently occurred in 2019, the Audit Committee and its Chair are directly involved in the selection of the new lead engagement partner.
Proposal to be Voted On, Board Recommendation and Vote Required
We are asking our shareholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022. Ratification would be advisory only, but the Audit Committee may reconsider the appointment if it is not ratified. The members of the Audit Committee and the Board of Directors believe the continued retention of Deloitte & Touche LLP as our independent registered public accounting firm is in the best interests of the company and our shareholders. Ratification requires the receipt of “FOR” votes constituting a majority of the shares represented and voting at the Annual Shareholders Meeting at which a quorum is present, and the approving majority also must represent more than 25% of our outstanding shares.
The Board of Directors recommends that you vote “FOR” Proposal 2. | ||
Sempra 2022 Proxy Statement | 29 | ||||
| Proposals to be Voted On | |||||
Proposal 3: Advisory Approval of Our Executive Compensation
Pursuant to Section 14A of the Exchange Act, we are asking our shareholders to approve an advisory resolution on the compensation of the named executive officers as reported in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our 2021 executive compensation program. We currently provide our shareholders the opportunity to vote on a say-on-pay proposal every year, and as a result, the next vote on a say-on-pay proposal following the Annual Shareholders Meeting will occur at our 2023 annual shareholders meeting.
Proposal to be Voted on, Board Recommendation and Vote Required
We are asking our shareholders to indicate their support for the compensation of our named executive officers as described in this proxy statement by voting in favor of the following resolution:
“RESOLVED, that, as an advisory matter, the shareholders of Sempra approve the compensation paid to the company’s named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K promulgated by the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
Approval requires the receipt of “FOR” votes constituting a majority of the shares represented and voting at the Annual Shareholders Meeting at which a quorum is present, and the approving majority also must represent more than 25% of our outstanding shares.
Even though the say-on-pay vote is advisory and will not be binding on the company, the Compensation and Talent Development Committee and the Board of Directors value the opinions of our shareholders. Accordingly, to the extent there is a significant vote against the compensation of our named executive officers, we will consider our shareholders’ concerns, and the Compensation and Talent Development Committee will evaluate and determine what actions may be necessary or appropriate to address those concerns when making future executive compensation decisions.
The Board of Directors recommends that you vote “FOR” Proposal 3. | ||
30 | Sempra 2022 Proxy Statement | ||||
| Proposals to be Voted On | |||||
Shareholder Proposal
Proposal 4 was submitted for inclusion in this proxy statement at the direction of a shareholder of the company and will be submitted to a vote at the Annual Shareholders Meeting if properly presented at the meeting. The board recommends that you vote “AGAINST” Proposal 4. In accordance with SEC rules, the proposal and its supporting statement are being reprinted exactly as they were submitted to Sempra by the proponent and Sempra takes no responsibility for them. As a result, the proposal and its supporting statement may contain assertions about the company or other statements that we do not endorse or that we believe are incorrect, but the board has not attempted to refute all of these assertions. We have put boxes around the materials provided by the proponent so that readers can easily distinguish between material provided by the proponent and material provided by the company.
Proposal 4: Shareholder Proposal Requiring an Independent Board Chairman
Proposal 4 was submitted by Mr. John Chevedden, who has advised us that he or a representative intends to introduce the proposal included below at the Annual Shareholders Meeting. Sempra has been advised that Mr. Chevedden is the owner of no fewer than 40 shares of Sempra common stock. The company will furnish the address of Mr. Chevedden promptly upon a shareholder’s oral or written request.
The Proposal
Proposal 4— Independent Board Chairman The shareholders request that the Board of Directors adopt an enduring policy, and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO as follows: Selection of the Chairman of the Board The Board requires the separation of the offices of the Chairman of the Board and the Chief Executive Officer. Whenever possible, the Chairman of the Board shall be an Independent Director. The Board has the discretion to select a Temporary Chairman of the Board who is not an Independent Director to serve while the Board is seeking an Independent Chairman of the Board. The Chairman shall not be a former CEO of the company. This policy could be phased in when there is a contract renewal for our current CEO or for the next CEO transition. This proposal topic won 42%-support at our 2012 annual meeting. This 42%-support may have represented 51%-support from the shares that have access to independent proxy voting advice and are not forced to rely on the biased recommendations of management. With the current CEO serving as Chair this means giving up a substantial check and balance safeguard that can only occur with an independent Board Chairman. A lead director is no substitute for an independent board chairman. A lead director cannot call a special shareholder meeting and cannot even call a special meeting of the board. A lead director can delegate most of his lead director duties to the CEO office and then the lead director can simply rubber-stamp it. There is no way shareholders can be sure of what goes on. Sempra is an example of one of the worst practices associated with a Lead Director – assigning the role to a director who has excessive tenure – Lead Director William Jones has 24-years tenure and at age 66 could be the Lead Director for many more years. As director tenure goes up director independence goes down. Mr. Jones’ excessive tenure makes him a prime candidate to retire. Plus Mr. Jones ironically chairs the Governance Committee which is unfortunately in charge of resisting shareholder proposals. Mr. Jones and Mr. Jeffrey Martin, Chairman and CEO, were the Sempra directors who received the most negative votes at our 2021 annual meeting. The lack of an independent Board Chairman is an unfortunate way to discourage new outside ideas and an unfortunate way to encourage the CEO to pursue pet projects that would not stand up to effective oversight. One sign that Sempra management does not believe in real engagement with shareholders is that Sempra management drills shareholders on voting according to the management party line. Sempra sent out how to vote the management way for dummies material after it distributed the 2021 annual meeting proxy. Please vote yes: Independent Board Chairman—Proposal 4 | ||
Sempra 2022 Proxy Statement | 31 | ||||
| Proposals to be Voted On | |||||
Board of Directors’ Statement Opposing the Shareholder Proposal Requiring an Independent Board Chairman
The Board of Directors recommends a vote “AGAINST” this proposal because it believes our company and our shareholders are best served by retaining the board’s flexibility to determine, from time to time on an ongoing basis, who should serve as Chairman of the Board.
Our Flexible Board Leadership Structure Facilitates Effective Oversight
The board’s flexible leadership structure enables it to re-evaluate the needs of our company from time to time and make determinations regarding board leadership based upon then-existing conditions, including business needs, shareholder preferences and individual director skills and experiences. The board’s annual deliberations regarding its leadership structure comprise a robust process, including extensive shareholder engagement, comprehensive reviews of the company’s performance and the Chairman’s and the board’s effectiveness during the prior year, a thorough evaluation of the role of the company’s independent directors as a whole, and thoughtful consideration of potential alternatives to the then-existing leadership structure in light of the board’s composition. In all cases, these and other factors deemed relevant are considered by the board as a whole and by the independent directors meeting separately.
Thorough Consideration of the Current Chairman’s Performance
As part of the board’s annual evaluation of its leadership structure, the board thoroughly reviews the performance of the acting Chairman of the Board. The following summarizes some of the factors the board has considered in this review in recent years:
•After Debra L. Reed announced her retirement as President, Chief Executive Officer and Chairman of the Board, the board undertook extensive deliberations regarding our leadership structure that ultimately led to the appointment of Jeffrey W. Martin as Chief Executive Officer effective May 1, 2018 and as Chairman of the Board effective December 1, 2018. The non-management directors determined at that time that Mr. Martin was exceptionally qualified to serve as Chairman of the Board based upon, among other factors, his leadership skills and qualifications and his extensive industry experience, including working with and adhering to the rules established by the CPUC, the principal regulator of our California utilities, and as a long-tenured employee of the Sempra family of companies with an outstanding career of achievement.
•In their deliberations in 2019, 2020 and 2021, the non-management directors considered Mr. Martin’s skills and qualifications described above and various other factors, including shareholder feedback, and Mr. Martin’s contributions as a director, performance as Chairman of the Board and significant accumulated experience since his appointment to each of these roles. During this time, Mr. Martin has contributed to the board additional and valuable perspectives on, among other topics, strategy, business development, mergers and acquisitions, investor relations, succession planning, capital markets activities and regulated utilities. Mr. Martin’s combined service as Chairman and Chief Executive Officer also has allowed him to lead the board while acting as a bridge between the board and the operating organization and providing critical leadership for strategic initiatives and challenges. The board believes this structure has enhanced board effectiveness, as Mr. Martin’s involvement in our day-to-day operations has afforded him in-depth and first-hand knowledge of the issues, opportunities and challenges facing our company that enables him to help focus our directors’ time and attention on the company’s most critical matters and concurrently incorporate the board’s goals, strategies and initiatives directly into the management of our businesses.
Sempra Has Delivered Strong Performance Under its Existing Board Leadership Structure
In its annual deliberations on its leadership structure, the board also considers our company’s performance during various periods to help determine the effectiveness of the acting Chairman of the Board and the existing leadership structure. During Mr. Martin’s tenure as Chairman and Chief Executive Officer, he has effectively led the company and the board through a number of impactful achievements, including those discussed in “Proxy Statement Summary—Business and Performance” above, and has shown strong leadership through two years of significant pandemic-related challenges. In addition, our company has outperformed many of our peer groups with respect to total shareholder return and dividends and has achieved strong EPS growth as follows:
•We instituted a board leadership structure with a strong Lead Independent Director role when the Chairman is not independent or when the roles of Chairman and Chief Executive Officer are combined almost 10 years ago in 2012. We have had total shareholder return of 190% during that period, which outperforms the S&P 500 Utilities Index.(1)
•The CAGR of our common stock dividend exceeded the median CAGR for companies in the S&P 500 Utilities Index over the past three, five and 10 years.
•We have achieved a CAGR of 41% and 11% for our GAAP EPS and adjusted EPS for the four-year period from 2017 through 2021, respectively.(2)
Our Lead Independent Director and Engaged Independent Directors Provide Strong Independent Board Leadership
Another important element of the board’s annual evaluation of its leadership structure is the overall composition of the board and the strong role of the company’s independent directors as a whole. During periods in which we do not have an independent Chairman of the Board, our Corporate Governance Guidelines require an independent director to be selected annually to serve as the Lead Independent Director and prescribe certain functions and responsibilities of this role. These functions and responsibilities, which were substantially strengthened in 2012 and have been further augmented over time, are broad and similar to those of an independent Chairman of the Board, as described above in “Corporate Governance—Board of Directors—Leadership Structure.” Importantly, and contrary to statements in the proposal, the powers of the Lead Independent Director as specified in our Corporate Governance Guidelines and Bylaws include the ability to call special meetings of the board and the independent directors at any time, as well as reviewing and approving all board and committee meeting agendas and materials, having direct communication with major shareholders as appropriate, and a number of other key authorities. In addition, the independent directors may assign to the Lead Independent Director, from time to time, any additional duties over and above these fixed responsibilities as they deem appropriate. In determining its leadership structure, our board thoroughly reviews the actions of the Lead Independent Director during the past year in fulfilling the responsibilities of this role, in order to evaluate the level of leadership of this position. The board also carefully considers the board's overall composition and relationships in determining who to appoint as the Lead Independent Director each year, including the relationships among all directors and particularly the
| (1) | The Sempra board adopted revisions to the company’s bylaws and Corporate Governance Guidelines on September 12, 2012 to significantly expand the functions and authorities of the Lead Independent Director when the Chairman is not independent or when the roles of the Chief Executive Officer and Chairman are combined. As a result, the total shareholder return of our company and the S&P 500 Utilities Index was calculated for the period from September 12, 2012 through February 28, 2022. | |||||||
| (2) | Adjusted EPS is a non-GAAP financial measure. Adjusted EPS for the year ended December 31, 2017 has been updated to exclude additional items to conform to the presentation for the year ended December 31, 2021. For a reconciliation of GAAP EPS to adjusted EPS, see Appendix A to this proxy statement. | |||||||
32 | Sempra 2022 Proxy Statement | ||||
| Proposals to be Voted On | |||||
relationship of the proposed Lead Independent Director with the Chairman of the Board and with the other independent directors, with a view toward enhancing the functionality of the Lead Independent Director role.
Additionally, except for Mr. Martin, all members of our board are independent directors, and all standing board committees other than the Executive Committee consist solely of independent directors. Further, our non-management directors meet in executive sessions, which the Lead Independent Director chairs, at every regular board meeting, and any director may call for an executive session at any board meeting. The members of the standing board committees also routinely meet in executive sessions. Further, our Chairman and Chief Executive Officer’s performance is evaluated annually by the Corporate Governance Committee and the Compensation and Talent Development Committee, each of which is composed entirely of independent directors. These committee structures, as well as the robust responsibilities of our Lead Independent Director and the active and engaged role of our other independent directors, contribute to overall strong independent board leadership.
Sempra Has a Strong Track Record of Board Refreshment
Our board regularly reviews board and committee composition and leadership roles to help ensure the full board and each committee has the right balance of experience, competencies and backgrounds and are chaired and otherwise led by the directors most suitable for those roles in order to fulfill their oversight obligations for our company and our shareholders. As part of that process, the full board and the Corporate Governance Committee consider each director’s tenure and the overall tenure of the board and each committee. Our board has added a significant number of new independent directors over the last several years, with six of our 10 independent director nominees having joined our board since 2017. Of our 10 independent director nominees, four have served fewer than five years, five have served between five and 10 years and only one has served longer than 10 years. In addition, our board has determined in accordance with our leadership rotation policy to refresh the role of the Lead Independent Director by appointing Cynthia J. Warner to this role as of the Annual Shareholders Meeting. We believe our company and our shareholders are best served by a board composed of a select group of longer-tenured directors who can share their wealth of experience and serve on particular committees where their expertise may be most valuable, mixed with shorter-tenured directors who can offer new and fresh ideas and perspectives to the discourse of the board and its committees. Our board is dedicated to attaining this balance of tenure and refreshment in the composition of the board as a whole, of each of our standing board committees, and of the directors appointed to board leadership positions.
We Believe Our Board Structure Is Consistent with Best Practices
We believe our board structure is responsive to the overall desires of the holders of a majority of our shares. Shareholders voted on independent chair policy proposals at our 2019 and 2020 annual shareholders meetings, neither of which were approved and received declining support year over year. In our robust shareholder engagement efforts in 2021, we engaged with holders of approximately 57% of our outstanding shares of common stock on a variety of matters, including their views on our board leadership structure. Among the shareholders with whom we engaged, the majority (in terms of number of shares represented) indicated no preference for an independent Chairman of the Board as long as the Lead Independent Director has significant duties, as is the case at Sempra. Based upon this feedback and various other factors, the board believes its existing flexible leadership structure is consistent with best governance practices and the preferences of holders of a majority of our shares.
Conclusion
The board believes it should retain the flexibility to select the board leadership structure that is best-suited to meet the needs of Sempra and our shareholders in light of prevailing circumstances. Adopting a rigid independent chair policy as requested by this proposal would unduly impair the board’s ability to annually name as Chairman of the Board the director it believes is best-suited for the role and structure its leadership in the manner it believes most effectively serves company and shareholder interests at the time. In addition, our board believes the adoption of such a policy is contrary to the preferences of the holders of a majority of our shares and unnecessary due to Sempra’s strong governance practices, including our robust Lead Independent Director role, active and engaged independent directors and consistent history of board refreshment, and the performance of our business and stock price since 2012 when we instituted a strong Lead Independent Director role with functions similar to an independent Chairman.
The Board of Directors recommends that you vote “AGAINST” Proposal 4. | ||
Sempra 2022 Proxy Statement | 33 | ||||
Executive Compensation
Compensation Discussion and Analysis
Executive Summary
In this Compensation Discussion and Analysis, we:
•Outline our compensation philosophy and program goals
•Discuss how the Compensation and Talent Development Committee determines executive pay
•Describe each element of executive pay, including base salaries, short-term and long-term incentives and executive benefits
•Describe the rationale for each element of executive pay in the context of our compensation philosophy and program goals
| Section | Page | |||||||
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| Executive Compensation | |||||
This Compensation Discussion and Analysis focuses on the compensation of the following individuals, who we collectively refer to as our named executive officers:
| Named Executive Officer | Title | |||||||||||||
| Jeffrey W. Martin | Chairman, Chief Executive Officer and President | |||||||||||||
| Trevor I. Mihalik | Executive Vice President and Chief Financial Officer | |||||||||||||
| Kevin C. Sagara | Executive Vice President and Group President | |||||||||||||
Karen L. Sedgwick(1) | Chief Administrative Officer and Chief Human Resources Officer | |||||||||||||
| Peter R. Wall | Senior Vice President, Controller and Chief Accounting Officer | |||||||||||||
(1)Ms. Sedgwick was promoted from Senior Vice President and Chief Human Resources Officer to Chief Administrative Officer and Chief Human Resources Officer effective December 20, 2021.
Business Overview and Strategy
Sempra’s management team has set a clear mission to be North America’s premier energy infrastructure company. In alignment with this, we have:
•Simplified our business model in order to improve execution, build scale and deliver improved financial results
•Continued our strategic focus on investing in transmission and distribution infrastructure, which is the portion of the energy value chain where we believe there is an attractive risk/reward profile for our owners
•Positioned our three integrated growth platforms in highly attractive and contiguous markets in North America to better serve tens of millions of consumers in both the United States and abroad to help enable the energy transition
Our investments are focused on opportunities across our platforms that are backed by regulated returns or long-term contracts, which improves our visibility to our earnings and helps mitigate the risk profile of our businesses.
While the majority of our operations are focused on regulated utilities, we also have a strong non-utility infrastructure business and therefore evaluate our performance against both the S&P 500 Utilities Index and the broader market, including the S&P 500 Index. Our labor market for senior management talent also extends beyond the utility industry, as discussed under “Labor Market Reviews.” Some significant business achievements over the past 10 years include:
•Advancing major infrastructure projects at SDG&E and SoCalGas, such as the deployment of advanced meter infrastructure and investments in grid resiliency and mitigation of climate-related vulnerabilities, including wildfires
•Acquiring an 80.25% indirect interest in Oncor, a regulated electric transmission and distribution business that, with its 140,000 miles of transmission and distribution lines, operates the largest transmission and distribution system in Texas
•Establishing our Sempra Infrastructure platform, which develops infrastructure projects in North America across three business lines — LNG and Net-Zero Solutions, Energy Networks and Clean Power — and has a portfolio of LNG opportunities strategically located in the Pacific and Gulf coasts of North America, and completing the sale of a 20% noncontrolling interest in SI Partners to an affiliate of KKR for $3.2 billion in cash (including post-closing adjustments and net of transaction costs)
•Completing a multi-year capital rotation program that resulted in the divestiture of our U.S. renewables business, U.S. non-utility natural gas storage assets and South American businesses, which generated total gross cash proceeds of approximately $8.3 billion
We strive to deliver solid growth across our businesses, which we believe should provide us with a broad spectrum of opportunities to deploy capital on attractive terms. Specifically, we have launched a five-year capital plan for 2022-2026 that is a record-high for our company (including subsidiaries and equity method investments) and is focused on utility growth and infrastructure projects that we believe should yield attractive returns consistent with our strategy. Further, we remain focused on delivering shareholder value by privileging the return of capital to shareholders through a competitive dividend and opportunistic share repurchases.
Sempra 2022 Proxy Statement | 35 | ||||
| Executive Compensation | |||||
Performance Highlights
Financial Performance
In 2021, our GAAP EPS was $4.01 and our adjusted EPS was $8.43.(1) We outperformed our most recent 2021 GAAP EPS guidance range of $3.36 to $3.96, as well as our most recent 2021 adjusted EPS guidance range of $7.75 to $8.35.(1)
Our 2021 achievements build on our strong long-term financial performance. Our GAAP EPS was $5.51 in 2011, $5.46 in 2016 and $4.01 in 2021. Since 2011, we have delivered consistently strong adjusted EPS growth, increasing adjusted EPS from $4.34 in 2011 to $4.98 in 2016 and to $8.43 in 2021.(1) This performance has contributed to our robust long-term growth and shareholder value creation. Since 2011, we have had total shareholder return of 228%, exceeding the return of the S&P 500 Utilities Index during the same period. In addition, our market capitalization more than tripled over the past 10 years.
The company has a long track record of returning value to shareholders. The CAGR of our common stock dividend exceeded the median CAGR for companies in the S&P 500 Utilities Index over the past one, three, five and ten years. From 2011 to 2021, we increased our annual dividend from $1.92 to $4.40 per common share. The Board of Directors raised the dividend for the twelfth consecutive year in 2022, increasing the dividend to $4.58 per common share on an annualized basis. The company's strong dividend is coupled with $1 billion of share repurchases since July 2020, including $500 million of share repurchases that have been completed since November 2021, and there remains board authorization for an additional $1.5 billion to support share repurchases in the future.
Long-Term Growth(2) | ||||||||
Adjusted EPS(1) | Dividends | Market Capitalization(3) | ||||||
Figure 1
(1)Adjusted EPS and adjusted EPS guidance range are non-GAAP financial measures. Adjusted EPS and adjusted EPS guidance range for the years ended December 31, 2011 and 2016 have been updated to exclude additional items to conform to the presentation for the year ended December 31, 2021. For a reconciliation of GAAP EPS to adjusted EPS and GAAP EPS guidance range to adjusted EPS guidance range, see Appendix A to this proxy statement.
(2)As of or for the years ended December 31, 2011, 2016 and 2021, as the context requires.
(3)Dollars in billions.
36 | Sempra 2022 Proxy Statement | ||||
| Executive Compensation | |||||
Strategic Performance
Recent Strategic Performance Highlights | ||||||||
Sempra •Sempra executed on its disciplined strategy with a focus on investing in energy infrastructure across its three growth platforms •Sempra executed integrated transactions to simplify its energy infrastructure investments under one platform, Sempra Infrastructure •Sempra announced a $500 million share repurchase program which was fully executed in early 2022 •Sempra launched its Sustainable Financing Framework, outlining criteria and other parameters for issuances of sustainable financing instruments •Sempra announced its aim to have net-zero emissions by 2050 •Sempra was named: –a Top Energy Company on The Wall Street Journal’s Management Top 250 Ranking –a Trendsetter in Political Disclosure And Accountability (sixth consecutive year) –to the Dow Jones Sustainability World Index (fourth consecutive year) –to Fortune Magazine’s "World’s Most Admired Companies” List for 2021 –one of "America's Best Employers For Diversity" by Forbes and honored for diversity and inclusion leadership by Bloomberg and Human Rights Campaign •Sempra was recognized for ESG performance and transparency on "100 Best Corporate Citizens" list | Sempra California •SDG&E and SoCalGas received a final GRC decision from the CPUC for 2022 and 2023 attrition rates •SDG&E continued its commitment to wildfire safety and received its 2021 safety certification from the Office of Energy Infrastructure Safety under the California Natural Resources Agency •SoCalGas announced agreements expected to resolve substantially all material civil litigation against SoCalGas and Sempra related to the 2015 Aliso Canyon natural gas storage facility leak •SDG&E announced it is developing two hydrogen pilot projects, building on its sustainability strategy and its aim to have net-zero emissions by 2045 •SoCalGas achieved approximately 20% methane reductions below 2015 levels in 2020, which is five years earlier than mandated •SoCalGas announced a proposal to develop what would be the nation’s largest green hydrogen energy infrastructure system, Angeles Link Sempra Texas •Oncor announced a new five-year (2022-2026) capital plan of approximately $15 billion, largely driven by investments needed for economic development, generation interconnections, premise growth and grid resiliency(1) | Sempra Infrastructure •SI Partners increased its ownership in our Mexican energy business IEnova to 99.9% following completion of Sempra’s exchange and cash tender offers to acquire IEnova’s publicly owned shares •Sempra sold a 20% noncontrolling interest in SI Partners to an affiliate of KKR for $3.2 billion in cash, including post-closing adjustments and net of transaction costs •Sempra announced an agreement to sell an additional 10% noncontrolling interest in SI Partners to ADIA for $1.785 billion in cash, subject to adjustments(2) •Sempra Infrastructure continued to work toward reaching a final investment decision in the first half of 2023 for Cameron LNG JV Phase 2(3) •Sempra Infrastructure continued progress on construction of ECA LNG JV Phase 1(3) with the goal of beginning to produce LNG by the end of 2024 •Sempra Infrastructure placed a new 150 megawatt solar power generation facility (Border Solar) into service in Mexico •Sempra Infrastructure began commercial operations of Veracruz and Mexico City refined products storage terminals | ||||||
(1)Represents 100% of Oncor’s forecasted capital expenditures for 2022-2026. Actual amounts expended will depend on a number of factors and may differ materially from the amounts reflected in the capital plan.
(2) The consummation of the sale to ADIA is subject to receipt of certain regulatory and third-party approvals and other customary closing conditions.
(3) The successful development and ultimate construction of Sempra’s LNG projects are subject to a number of risks and uncertainties and there can be no assurance that any of the projects will be completed.
Shareholder Engagement
Incorporating shareholder feedback into the decision-making process is a critical component of our compensation program and our overall corporate governance philosophy. Our board and management have a long-standing commitment to engaging our shareholders and listening to their perspectives on key performance, governance and compensation matters. With respect to compensation matters, we engage extensively with shareholders to gather feedback on our current compensation program and any potential changes to the program the Compensation and Talent Development Committee is considering. Our Lead Independent Director and/or Corporate Governance Committee Chair, both of whom serve on the Compensation and Talent Development Committee, participate in these shareholder engagement efforts, including attending many of the meetings with our shareholders, to strengthen the communication of shareholder feedback directly to the board.
During the shareholder engagement campaign beginning in spring 2021 and continuing through January 2022, which was in addition to our normal investor relations outreach, we reached out to shareholders representing approximately 59% of our total outstanding shares of common stock and held telephonic or videoconference meetings with shareholders representing approximately 57% of our total outstanding shares of common stock (a significant majority of our institutional share ownership). During these meetings, we reviewed our executive compensation program and a variety of other topics as discussed in our proxy statement summary above, gathered shareholder feedback on our program and gained insight into their views and priorities with respect to these matters. The Compensation and Talent Development Committee considered insights gained during our shareholder engagement meetings when they incorporated the ESG Measures into the 2021 performance-based annual bonus plan.
Our shareholders presently have the opportunity to cast an advisory vote on our executive compensation, or a “say-on-pay” vote, once every year at our annual shareholders meetings. At our 2021 annual shareholders meeting, the say-on-pay proposal received more than 97% approval. The Compensation and Talent Development Committee believes this high level of approval affirms our shareholders’ support for our approach to executive compensation, and therefore the committee did not seek to significantly alter our compensation policies or practices for 2021.
Sempra 2022 Proxy Statement | 37 | ||||
| Executive Compensation | |||||
2021 Compensation Program Overview
Our executive compensation program is designed to attract, motivate and retain key executive talent and promote strong, sustainable long-term performance. The three components of total direct compensation delivered in our program are: (1) Base Salary; (2) Performance-Based Annual Bonus; and (3) Long-Term Equity-Based Incentives. We place an emphasis on variable performance-based pay, with each component designed to promote value creation and alignment of our management team’s compensation with our long-term strategic objectives.
| Type | Component | Form | Key Characteristics | ||||||||
Fixed | Base Salary | Cash | •Base salary is targeted to generally align to the median of comparably-sized general industry peers (excluding financial services companies) | ||||||||
Variable | Performance-Based Annual Bonus | Cash | •Based on ABP Earnings (weighted at 80%), Safety Measures (weighted at 12%) and ESG Measures (weighted at 8%) •No bonus payment unless company exceeds threshold performance level for the year and maximum payouts are capped | ||||||||
Long-Term Equity-Based Incentives | Equity | •Performance-Based Restricted Stock Units (weighted at two-thirds collectively) •Relative TSR Performance-Based Restricted Stock Units (weighted at one-third): 3-year relative TSR, allocated evenly between: –Relative TSR measured against S&P 500 Utilities Index; maximum payout requires performance at 90th percentile of S&P 500 Utilities Index peers –Relative TSR measured against S&P 500 Index; maximum payout requires performance at 90th percentile of S&P 500 Index peers •EPS Growth Performance-Based Restricted Stock Units (weighted at one-third): 3-year EPS CAGR, with payout scale set based on forward consensus estimates of EPS CAGR of S&P 500 Utilities Index peers; maximum payout requires performance at the 90th percentile of estimates for S&P 500 Utilities Index peers •3-year performance period for each performance measure •For all of our performance-based restricted stock unit awards, performance below threshold results in zero payout •Stock Options and/or Service-Based Restricted Stock Units (weighted at one-third):(1) Vest ratably over three years | |||||||||
| Table 2 | |||||||||||
(1)Stock options were weighted at one-third for Messrs. Martin, Mihalik, and Sagara. Service-based restricted stock units were weighted at one-third for Ms. Sedgwick and Mr. Wall. The 2021 annual LTIP award for Messrs. Martin, Mihalik and Sagara did not include service-based restricted stock units, and the 2021 annual LTIP award for Ms. Sedgwick and Mr. Wall did not include stock options.
Note: Based on 2021 annual base salary, 2021 target performance-based annual bonus and the target grant date value of 2021 long-term equity-based incentives.
The relative value of Mr. Martin’s 2021 total direct pay opportunity for each of the three components of total direct compensation at target company performance is shown below in Figure 2.
Chief Executive Officer Pay Mix at Target
Figure 2
Note: Based on 2021 annual base salary, 2021 target performance-based annual bonus and the target grant date value of 2021 long-term equity-based incentives.
Our pay mix is designed to align our executives’ interests with our shareholders’ interests by providing a greater proportion of target annual compensation through performance-based annual bonuses and long-term equity-based incentives rather than base salary. This means that most pay is intended to be variable and increase or decrease based on company performance. As shown in Figure 2, over 70% of Mr. Martin’s total target direct pay opportunity in 2021 was in the form of performance-based equity awards (comprising two-thirds performance-based restricted stock units and one-third nonqualified stock options) and 89% was in the form of at-risk variable incentive pay.
Actual pay mix may vary substantially from target pay mix. This may occur as a result of company performance, which greatly affects annual bonuses and payout percentages for EPS growth-based LTIP awards, and stock performance, which significantly impacts payout percentages for TSR-based LTIP awards and the ultimate value realized for all equity awards. Figure 3 shows the percentage of each component of the total 2021 direct pay opportunity as of December 31, 2021 at target company performance for each of our named executive officers except Ms. Sedgwick,
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who was promoted to Chief Administrative Officer and Chief Human Resources Officer on December 20, 2021. For Ms. Sedgwick, Figure 3 is based on her 2021 direct pay opportunity in effect prior to her December 20, 2021 promotion.
| Components of Total Target Direct Compensation | ||||||||
Figure 3
Note: Based on annual base salary and target performance-based annual bonus as of December 31, 2021 and the target grant date value of the 2021 annual long-term incentive plan award, excluding any special awards, for each named executive officer except Ms. Sedgwick. For Ms. Sedgwick, the chart above reflects her base salary prior to her December 20, 2021 promotion, her 2021 target performance-based annual bonus (which was based on her pre-promotion base salary and annual bonus plan target) and the target grant date value of her 2021 annual long-term incentive plan award. Ms. Sedgwick’s post-promotion total target direct compensation includes a base salary of $460,000 effective December 20, 2021, target performance-based annual bonus equal to 60% of base salary effective January 1, 2022, and long-term equity-based incentives of $736,000 effective January 1, 2022, representing 31%, 19% and 50% of total target direct compensation, respectively.
Chief Executive Officer Target Compensation Summary
The table below summarizes Mr. Martin’s 2021 base salary, the target value of his 2021 performance-based annual bonus, and the target value of his 2021 annual LTIP award.
Base Salary | Target Value of Performance- Based Annual Bonus | Target 2021 LTIP Award Value | Target 2021 Total Direct Compensation | ||||||||||||||||||||
| $1,350,000 | $2,025,000 | $8,500,000 | $11,875,000 | ||||||||||||||||||||
Pay-for-Performance Alignment
The Compensation and Talent Development Committee believes that pay should be structured to align executive compensation with company performance and with the interests of our shareholders. As a result, our incentive plans are designed to deliver payouts that are aligned with company performance. Our LTIP awards measure TSR performance relative to companies in the S&P 500 Utilities Index and S&P 500 Index and the payout scale for our EPS growth-based LTIP awards is based on forward consensus estimates of EPS growth for our S&P 500 Utilities Index peers.
This is demonstrated by comparing the performance outcomes of our recent LTIP payouts for our TSR-based and EPS growth-based annual LTIP awards, which comprised 100% of the annual LTIP grant date award value of our 2015-2017, 2016-2018 and 2017-2019 awards and 70% of the annual LTIP grant date award value for our 2018-2020 and 2019-2021 awards (with the remaining 30% consisting of stock options or service-based restricted stock units, which are not reflected in the table below).
| Award Cycle | Realized Payout | ||||
| 2015-2017 | 40% of Target | ||||
| 2016-2018 | 40% of Target | ||||
| 2017-2019 | 151% of Target | ||||
| 2018-2020 | 137% of Target | ||||
| 2019-2021 | 89% of Target | ||||
Rigor of Incentive Targets
At the start of each year, our Compensation and Talent Development Committee aims to set challenging yet achievable incentive targets, designed to motivate our team to drive strong performance and sustained value creation and to closely align executives’ interests with those of our shareholders.
Performance-Based Annual Bonus Plan
For 2021, the Compensation and Talent Development Committee selected earnings, weighted at 80%, safety, weighted at 12% and environmental, social and governance, weighted at 8%, for the measurement of annual company performance under the performance-based annual bonus plan. The committee utilizes earnings as the basis of the primary annual bonus metric because it believes this measure provides an accurate and comprehensive picture of annual company financial performance that plan participants, shareholders, analysts and other parties clearly understand.
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The committee makes certain predefined adjustments to GAAP earnings as described in Appendix D to this proxy statement to calculate ABP Earnings.
For 2021, the committee set a challenging ABP Earnings target of $2,368 million based on the company’s financial plan. The financial plan also informs the basis of the company's GAAP EPS guidance range and adjusted EPS guidance range. The 2021 target reflected an increase of $336 million, or 17%, over our 2020 target ABP Earnings of $2,032 million, and also was $29 million higher than our 2020 actual ABP Earnings of $2,339 million. In addition, the $142 million range between the 2021 ABP Earnings target and maximum goals is significantly broader than the $81 million range between the 2020 ABP Earnings target and maximum goals.
Our 2021 ABP Earnings were $2,558 million, an increase of more than 9% above 2020 ABP Earnings, which exceeded the upper end of the earnings used in our 2021 EPS guidance range that was reaffirmed on February 25, 2021.
Adjustments to GAAP earnings were predefined at the time the Compensation and Talent Development Committee determined the 2021 annual bonus plan goals. For a reconciliation of GAAP earnings to ABP Earnings, see “Reconciliation of 2021 GAAP Earnings to ABP Earnings” below. For detailed information about the component measurements of annual company performance under the performance-based annual bonus plan, see Appendix D to this proxy statement.
Long-Term Equity-Based Incentives
The 2021 annual LTIP award design for Messrs. Martin, Mihalik and Sagara is 100% performance based, with two-thirds in performance-based restricted stock units and one-third in nonqualified stock options, which the Compensation and Talent Development Committee views as performance-based because their value depends on our stock price increasing over time. The 2021 annual LTIP award design for the other named executive officers is two-thirds performance-based restricted stock units and one-third service-based restricted stock units. The performance measures and weightings for the 2021 annual long-term incentive plan awards are:
| 2021 Annual LTIP Award Design | ||||||||
Figures 4 and 5
Note: The TSR portion of the awards includes two equally-weighted components: one that measures TSR relative to the S&P 500 Utilities Index and one that measures TSR relative to our S&P 500 Index peers.
The 2021 annual long-term incentive plan awards include two performance measures — relative total shareholder return (weighted at one-third of the total award value, half of which is based on performance against the S&P 500 Utilities Index and half of which is based on performance against the S&P 500 Index) and EPS growth (weighted at one-third of the total award value). The Compensation and Talent Development Committee measures performance against challenging targets in order to drive long-term growth and closely align executives’ interests with those of our shareholders.
In the event that Sempra’s total shareholder return is below the 25th percentile of the relevant index (S&P 500 Utilities Index or S&P 500 Index), participants receive zero shares for that portion of the award. To achieve the maximum payout, performance at or above the 90th percentile of the relevant index (S&P 500 Utilities Index or S&P 500 Index) is required. For the EPS growth portion of the annual LTIP award, no payout is made if our EPS CAGR is below the 25th percentile of consensus expectations for our S&P 500 Utilities Index peers. To achieve maximum payout, performance at or above the 90th percentile of consensus expectations for our S&P 500 Utilities Index peers is required.
Actual payouts for performance-based restricted stock unit awards for the past five completed award cycles ranged from 40% of target to 151% of target, with three cycles paying out below target and two cycles paying out above target.
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Compensation Governance
We believe our compensation practices, which are highlighted below, reflect our pay-for performance philosophy and goals and our commitment to sound corporate governance:
| a | What We Do | X | What We Don’t Do | ||||||||||||||||||||||||||
Incorporate shareholder feedback in our compensation program design Multiple LTIP award and annual bonus plan performance measures LTIPs include “double trigger” equity vesting upon a change in control(1) Clawback policy Share ownership guidelines (8x base salary for Chief Executive Officer) Independent advisors conduct risk assessment of compensation program Independent compensation consultant | No excise tax gross-ups for named executive officers No employment contracts for named executive officers No stock-option repricing(2) No hedging or pledging of shares No uncapped incentives No single-trigger cash severance payments upon a change in control(1) | ||||||||||||||||||||||||||||
(1)See “Severance and Change in Control Arrangements” for additional information.
(2)Long-term incentive plan awards are granted from a shareholder-approved plan that prohibits stock option repricing and cash buyouts without shareholder approval.
Compensation Philosophy and Program Goals
Compensation Philosophy
The Compensation and Talent Development Committee of our Board of Directors sets the company’s executive pay philosophy, which emphasizes four key areas:
| Sempra's Executive Compensation Philosophy | |||||||||||||||||||||||||||||
Performance-based incentives aligned with shareholder value creation | Alignment of pay with short-term and long-term company performance | ||||||||||||||||||||||||||||
| Balance between short-term and long-term incentives | More pay tied to performance at higher levels of responsibility | ||||||||||||||||||||||||||||
We believe this compensation philosophy enables us to attract, motivate and retain key executive talent and promote strong, sustainable long-term performance.
Executive Compensation Program Goals
Our executive compensation program goals include:
•Aligning executive compensation with shareholders’ interests
•Linking executive compensation to both annual and long-term business and individual performance
•Motivating executives to achieve superior performance
•Attracting and retaining executives with outstanding ability and experience who demonstrate high standards of integrity and ethics
Labor Market Reviews
Labor Market
The Compensation and Talent Development Committee uses external pay data to help align executive compensation levels with the labor market. The committee views the labor market for our most senior positions as a nationwide, broad cross-section of companies in various industries, and
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the committee recognizes that this labor market varies by position. The committee’s use of both general industry and utility industry compensation data reflects the competitive labor market from which we recruit executives.
Sempra’s 19 officers as of December 31, 2021 were hired from a broad range of industries, including accounting and finance, consulting, energy and law.
Figure 6
Market Review
The Compensation and Talent Development Committee seeks to provide compensation opportunities for our executives that are commensurate with the competitive labor market. The committee considers general industry survey data as its primary source of external market data because it reflects the labor market from which officer roles are recruited. The committee reviews compensation data at the 25th, 50th and 75th percentiles of the general industry survey data, in total and by component (base salaries, target performance-based annual bonuses and target long-term equity-based incentives) and generally targets alignment with the 50th percentile. Positioning relative to the 50th percentile may vary based on factors such as the comparability of market survey positions to the scope and structure of our positions, performance, experience, time in position and succession planning considerations.
Based on the November 2020 market review, 2021 total target compensation for Messrs. Martin, Mihalik, Sagara and Wall fell within the third quartile (between the 50th and 75th percentiles) of the general industry survey data. Ms. Sedgwick was not included in the November 2020 market review.
Actual compensation may be higher or lower than target compensation, as it reflects actual performance and payouts under our performance-based annual bonus plan and our long-term incentive plan.
General Industry Compensation Data
When determining executive pay, the Compensation and Talent Development Committee first reviews general industry market pay data from the Aon Total Compensation Management (TCM) Database for non-financial services Fortune 500 companies with revenues between $5.75 billion and $23.5 billion. The November 2020 market review, which informed 2021 compensation decisions, consisted of 105 companies, which are listed on Appendix B to this proxy statement, and are referred to in this Compensation Discussion and Analysis as our “general industry peer group.”
Table 5 summarizes the market capitalization, earnings and revenue of the general industry peer group compared to Sempra.
| (Dollars in Millions) | Market Capitalization(1) | Earnings(2) | Revenue(2) | ||||||||
| Sempra | $ | 42,242 | $ | 1,254 | $ | 12,857 | |||||
Sempra Percentile Rank | 74th | 55th | 52nd | ||||||||
75th Percentile | $ | 43,188 | $ | 1,816 | $ | 17,518 | |||||
| Median | $ | 20,872 | $ | 1,019 | $ | 12,708 | |||||
25th Percentile | $ | 10,453 | $ | 571 | $ | 8,919 | |||||
Table 5
(1)Market capitalization is calculated using the common stock closing price on December 31, 2021 and the number of outstanding shares of common stock based on publicly reported information available as of December 31, 2021.
(2)Earnings and revenue for the general industry peer group companies are for fiscal year 2021 unless otherwise noted in Appendix B to this proxy statement.
Utilities Industry Compensation Data
The Compensation and Talent Development Committee also reviews pay and performance data in proxy statements and other public filings of energy and utility companies. This peer group is composed of the 26 companies that make up the S&P 500 Utilities Index, excluding water companies. These companies are listed in Appendix C to this proxy statement and are referred to in this Compensation Discussion and Analysis as
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our “utilities peer group” or our “S&P 500 Utilities Index peers.” We used the companies in the utilities peer group as comparators for the EPS-growth and one of the two relative TSR components of the 2021 annual LTIP award.
Table 6 summarizes the market capitalization, earnings and revenue of the utilities peer group compared to Sempra.
| (Dollars in Millions) | Market Capitalization(1) | Earnings(2) | Revenue(2) | ||||||||
| Sempra | $ | 42,242 | $ | 1,254 | $ | 12,857 | |||||
Sempra Percentile Rank | 79th | 50th | 59th | ||||||||
75th Percentile | $ | 35,787 | $ | 1,679 | $ | 14,949 | |||||
| Median | $ | 23,436 | $ | 1,252 | $ | 11,042 | |||||
25th Percentile | $ | 16,539 | $ | 689 | $ | 6,422 | |||||
Table 6
(1) Market capitalization is calculated using the common stock closing price on December 31, 2021 and the number of outstanding shares of common stock based on publicly reported information available as of December 31, 2021.
(2) Earnings and revenue for the utilities peer group companies are for fiscal year 2021.
Role of Internal Pay Equity
The Compensation and Talent Development Committee uses internal pay equity principles to determine the compensation for positions that are unique or difficult to compare to market data. Internal equity is also considered in establishing compensation for positions considered to be equivalent in responsibilities and importance, especially where precise external data is not available.
Compensation Components
Primary Components of Executive Compensation Program
The primary components of our executive compensation program are:
•Base salaries
•Performance-based annual bonuses
•Long-term equity-based incentives
Additional benefits include participation in health and welfare programs and retirement and savings plans, as well as personal benefits and severance pay agreements.
All of our named executive officers generally participate in the same compensation program. However, compensation levels for named executive officers vary substantially based on the roles and responsibilities of the individual officers.
1.Base Salaries
Our executive compensation program emphasizes performance-based pay. This includes annual cash bonuses and long-term equity-based incentives. However, base salaries remain a common and necessary element of compensation for attracting and retaining outstanding employees at all levels.
The Compensation and Talent Development Committee annually reviews base salaries for executive officers. The committee considers the following factors, among others, in its annual review:
Factors Considered in Determining Base Salaries | ||||||||||||||||||||||||||
| ü | Peer group salary data | ü | Complexity of roles and responsibilities | ü | Reporting relationships | |||||||||||||||||||||
| ü | Individual contributions and performance | ü | Succession planning | ü | Internal pay equity | |||||||||||||||||||||
| ü | Labor market conditions | ü | Retention needs | ü | Experience | |||||||||||||||||||||
The Compensation and Talent Development Committee also may review and adjust base salaries during the year (between annual reviews) for various reasons, including in the event of promotions or other job title changes, modifications to reporting relationships or job functions, or changes to any of the factors described above or other circumstances considered relevant by the committee.
2021 Adjustments to Base Salaries
Mr. Martin received an increase of 3.8% and Messrs. Mihalik and Sagara received increases of 6.8% and 8.3%, respectively. Ms. Sedgwick and Mr. Wall each received increases of 4.0%. Ms. Sedgwick also received a 17.9% promotional increase effective December 20, 2021 in connection with her promotion to Chief Administrative Officer.
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2.Performance-Based Annual Bonuses
Performance Guidelines
Each year the Compensation and Talent Development Committee establishes performance measures and dollar guidelines for performance-based cash bonus payments. The committee strives to select financial and operational performance measures that are linked to our business strategy and shareholder interests.
Consistent with our pay-for-performance philosophy, the performance measures do not provide for any bonus payment unless the company surpasses the threshold (minimum) performance level for the year. Bonus opportunities increase from zero for performance at the threshold level to 200% of target for performance at the maximum level.
The committee may apply discretion in determining awards, including determining the results of performance measures and taking into consideration the contributions of each named executive officer or other factors it deems relevant.
Bonus Opportunities for Named Executive Officers
Potential bonus opportunities at threshold, target and maximum company performance as of December 31, 2021 are expressed as a percentage of each named executive officer’s base salary as of December 31, 2021 below.
| Named Executive Officer | Threshold | Target | Maximum | |||||||||||
| Jeffrey W. Martin | 0 | % | 150 | % | 300 | % | ||||||||
Trevor I. Mihalik | 0 | % | 90 | % | 180 | % | ||||||||
Kevin C. Sagara | 0 | % | 90 | % | 180 | % | ||||||||
Karen L. Sedgwick(1) | 0 | % | 50 | % | 100 | % | ||||||||
Peter R. Wall | 0 | % | 50 | % | 100 | % | ||||||||
Table 7
(1)The Compensation and Talent Development Committee approved an increase to Ms. Sedgwick’s target bonus opportunity in connection with her December 20, 2021 promotion to Chief Administrative Officer. Effective January 1, 2022, Ms. Sedgwick’s target bonus opportunity increased to 60%, with a threshold of 0% and a maximum of 120%.
Annual Bonus Performance Measures
For 2021, the Compensation and Talent Development Committee selected earnings, employee and public safety, and ESG criteria for the measurement of annual company performance. The ABP Earnings measure was weighted at 80%, Safety Measures were weighted at 12% and ESG Measures were weighted at 8%. For annual bonus plan purposes, ABP Earnings are Sempra’s GAAP net income, excluding earnings attributable to noncontrolling interests and preferred stock dividends and subject to certain other predefined adjustments. ABP Earnings may be higher or lower than earnings reported in our financial statements due to these adjustments, which are described in “Reconciliation of GAAP Earnings to ABP Earnings” below and in Appendix D to this proxy statement. The specific components of the Safety Measures are described in Appendix D to this proxy statement and the ESG Measures are described in Table 11 below. | ||||||||||||||
ABP Earnings + Safety + ESG | ||||||||||||||
Rationale for Selection of Performance Measures
The Compensation and Talent Development Committee selected earnings as the basis of the primary annual bonus plan metric for 2021, weighted at 80%, because it believes this measure continues to provide an accurate and comprehensive picture of annual company financial performance that plan participants, shareholders, analysts and other parties can clearly understand. Safety measures, which historically have been included in the annual bonus plan, are also included for 2021, weighted at 12%, because the committee believes that strong safety performance is critical to our infrastructure-intensive businesses. Performance measures include employee safety metrics as well as metrics that promote public safety and safe operations.
The committee added further ESG measures to the annual bonus plan in 2021 to incentivize progress on the company's key ESG commitments, including:
•Advancing a clean energy future
•Fostering our high-performance culture by promoting an inclusive work environment that embraces diverse backgrounds and perspectives
•Making a difference in the communities we serve
•Maintaining strong corporate governance practices
The 2021 ESG Measures are collectively weighted at 8% and the committee's selection of these measures reflects the company's key priorities and ESG-related initiatives. Expectations for progress on these priorities were discussed with management at the beginning of the year. Performance results were then based on a qualitative assessment by the committee, which involved a rigorous evaluation of management's demonstrated progress. While this is the first year in which such ESG goals were included in our annual bonus plan, the committee aims to develop more targeted and quantitative goals in future years.
During our shareholder engagement meetings, we solicit shareholders’ input on the performance measures and other aspects of our incentive plans. Some shareholders expressed a preference for the use of multiple performance measures in annual bonus plans, including a financial performance measure (there was not a clear preference for earnings or EPS), and for the use of different performance measures in our annual bonus and long-term incentive plans. Shareholder feedback related to our annual bonus plan performance measures and structure generally has been positive and shareholders generally support the incorporation of ESG measures into the plan for 2021.
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ABP Earnings Goal Determination
Table 8 shows the ABP Earnings criteria for 2021 performance-based annual bonuses:
Financial Performance Measure (Dollars in Millions) | Threshold | Target | Maximum | ||||||||
ABP Earnings (Attributable to Common Shares) | $ | 2,226 | $ | 2,368 | $ | 2,510 | |||||
Table 8
For 2021, the committee set a challenging ABP Earnings target of $2,368 million based on the company’s financial plan. The financial plan is based on anticipated earnings for each of our businesses, planned purchases or sales of assets, major capital projects and other significant issues that may impact the company’s earnings. The financial plan also informs the basis of the company's GAAP EPS guidance range and adjusted EPS guidance range. The 2021 target reflected an increase of $336 million, or 17%, over our 2020 target ABP Earnings of $2,032 million, and also was $29 million higher than our 2020 actual ABP Earnings of $2,339 million. In addition, the $142 million range between the 2021 ABP Earnings target and maximum goals is significantly broader than the $81 million range between the 2020 ABP Earnings target and maximum goals.
Consistent with the approach taken in prior years, the Compensation and Talent Development Committee also determined when it set earnings goals that the earnings calculation for 2021 annual bonus plan purposes would be adjusted by excluding the impact of major changes in accounting rules, certain items related to acquisitions and divestitures, the impact of legacy litigation matters, including the Aliso Canyon natural gas storage facility civil litigation, and other adjustments as described in Appendix D to this proxy statement. In addition, the Compensation and Talent Development Committee has, but did not use, discretion to adjust earnings for other unplanned or unforeseen items that may occur during the course of the year.
Reconciliation of GAAP Earnings to ABP Earnings
A reconciliation of 2021 GAAP earnings to ABP Earnings is provided in Table 9. For additional information about the adjustments made to GAAP earnings to calculate ABP Earnings, see Appendix D to this proxy statement.
| (Dollars in Millions) | Reconciliation | |||||||||||||
| GAAP Earnings | $ | 1,254 | ||||||||||||
| Predefined Adjustments: | ||||||||||||||
| Exclude gains or losses related to legacy litigation matters | 1,137 | |||||||||||||
| Exclude variance from plan of the Sempra Infrastructure Partners transactions and the IEnova tender offers | 147 | |||||||||||||
| Exclude nonrecurring gains or losses related to the PXiSE divestiture and adjustments to investment in Sempra Commodities, which was sold | (47) | |||||||||||||
| Exclude variance from plan of foreign exchange gains or losses, unrealized mark-to-market gains/losses on certain derivatives at Sempra Infrastructure, and unplanned rabbi trust investment returns (related to nonqualified pension and deferred compensation) in excess of specified limits | 69 | |||||||||||||
| Exclude one-time nonqualified pension settlement charges and LTIP tax windfall to the extent not included in the plan | (4) | |||||||||||||
| Exclude variance from plan of any impairments of the California Assembly Bill 1054 Wildfire Fund | 2 | |||||||||||||
| ABP Earnings | $ | 2,558 | ||||||||||||
Annual Bonus Performance Results
Overall company performance on the 2021 annual bonus plan performance measures was at 195% of target performance. A summary of the plan metrics and results is provided in Table 10 below, with additional detail in Appendix D to this proxy statement:
| 2021 Performance Measures | Weighted Percent of Target Achieved(1) | ||||||||||||||||||||||
| Goals | |||||||||||||||||||||||
| Target Weight | Threshold | Target | Maximum | Actual | |||||||||||||||||||
| Financial: | |||||||||||||||||||||||
ABP Earnings (Dollars in Millions) | 80 | % | $ | 2,226 | $ | 2,368 | $ | 2,510 | $ | 2,558 | 160 | % | |||||||||||
| Safety Measures: | |||||||||||||||||||||||
| Employee and Public Safety | 12 | % | See Appendix D for Detail | 21 | % | ||||||||||||||||||
| ESG Measures: | |||||||||||||||||||||||
| Environmental, Social and Governance | 8 | % | See Table 11 for Detail | 14 | % | ||||||||||||||||||
| TOTAL | 100 | % | 195 | % | |||||||||||||||||||
(1) ABP Earnings exceeded the maximum goal, resulting in achievement of 200% of target performance that corresponds to a weighted percent of target achievement of 160.00%. Overall performance for the Safety Measures resulted in achievement of 173.07% of target performance that corresponds to a weighted percent of target achievement of 20.77%, and overall performance for the ESG Measures resulted in achievement of 180.00% of target performance that corresponds to a weighted percent of target achievement of 14.40%.
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| Performance Factors | Performance Highlights | Performance Assessment | |||||||||
Environmental(1) | Establish high-level energy transition plan framework to achieve our aim of net-zero emissions by 2050 | •Developed and announced an aim to have net-zero emissions by 2050, including interim operational and value chain targets and action plans around decarbonization, diversification and digitalization •SDG&E and SoCalGas developed and announced their respective aims to have net-zero emissions by 2045 •Worked with industry leaders, academics, and environmental organizations to advance innovation and develop technical protocols in support of the enterprise action plan | é | ||||||||
Social(1)(2) | Enhance our high-performance workforce culture by advancing diversity and inclusion and promote community engagement and citizenship | •Implemented and completed leadership training for all U.S.-based officers on discussing topics involving race and gender •Expanded the use of diverse interview panels to mitigate the risk of selection bias •More than doubled participation of women and people of color in enterprise mentorship program and launched programs at SDG&E and SoCalGas that pair mentees with officers •Created and distributed diversity and inclusion snapshot to employees to increase transparency about our workforce population •Increased overall employee engagement to 87% in the 2021 employee engagement survey from 85% in the 2019 survey, with an 85% positive response on "I feel like I belong at this company" •Launched charitable giving priorities that support diverse and underserved communities in the areas of climate action, diversity and inclusion, economic prosperity and energy access •Continued to enhance supplier diversity programs, with SDG&E and SoCalGas each spending over $900 million with diverse suppliers and increasing their expenditures relative to 2020 with African American suppliers | é | ||||||||
Governance(1) | Maintain 80% or higher customer satisfaction at SoCalGas and SDG&E | •SoCalGas' performance was slightly above target and SDG&E's performance was slightly below target | è | ||||||||
| Expand training for directors | •All operating company directors completed corporate governance training led by the NACD as well as internal company-specific governance training | é | |||||||||
Table 11
(1) Excludes Oncor, which sets and maintains its own ESG goals and programs due to certain ring-fencing measures that limit Sempra's ability to direct the management of Oncor.
(2) Excludes IEnova, as programs and initiatives were designed around areas of focus within U.S.-based utility service territories.
2021 Bonus Payouts
Based on overall performance and its consideration of the contributions of each named executive officer in 2021, the Compensation and Talent Development Committee approved the payment of the annual bonuses shown in Table 12.
| Named Executive Officer | Base Salary at Year-End 2021 | X | Bonus Target | X | Performance Score(2) | = | Bonus Payout(3) | ||||||||||||||||
| Jeffrey W. Martin | $ | 1,350,000 | 150 | % | 195 | % | $ | 3,952,300 | |||||||||||||||
Trevor I. Mihalik | $ | 780,000 | 90 | % | 195 | % | $ | 1,370,100 | |||||||||||||||
Kevin C. Sagara | $ | 780,000 | 90 | % | 195 | % | $ | 1,370,100 | |||||||||||||||
Karen L. Sedgwick(1) | $ | 390,000 | 50 | % | 200 | % | $ | 390,000 | |||||||||||||||
Peter R. Wall | $ | 390,000 | 50 | % | 195 | % | $ | 380,600 | |||||||||||||||
Table 12
(1)Ms. Sedgwick’s 2021 performance-based annual bonus was based on her base salary and annual bonus target in effect prior to her December 20, 2021 promotion and the performance score of 200% of target under the bonus plan applicable to Ms. Sedgwick prior to her promotion.
(2)The actual performance score of 195.171% for Messrs. Martin, Mihalik, Sagara and Wall is rounded in this Table 12.
(3)Final award payouts are rounded up to the nearest hundred dollars.
3.Long-Term Equity-Based Incentives
Long-term equity-based incentives are the largest single component of each named executive officer’s total target direct compensation package. See Figure 3 for these percentages. In accordance with our pay-for-performance philosophy, and without regard to special equity awards granted in 2021 as discussed below, performance-based restricted stock units constitute two-thirds of the 2021 annual long-term incentive plan awards and stock options (or service-based restricted stock units for Ms. Sedgwick and Mr. Wall) constitute the remaining one-third of the awards.
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Rationale for 2021 Annual LTIP Award Design
The Compensation and Talent Development Committee has implemented what it believes is a balanced equity incentive award design that is based one-third on relative total shareholder return, one-third on relative EPS growth and one-third on nonqualified stock options (or service-based restricted stock units for Ms. Sedgwick and Mr. Wall). The committee believes this design creates a strong alignment with shareholder interests and with our growth strategy that is simple and easily communicated to participants and other stakeholders. The committee approved this equity award structure after considering many variables, including alignment with shareholder interests, retention, plan expense, share usage, market trends and feedback from our shareholder outreach.
In determining the design of the performance-based components of our 2021 annual LTIP awards, the Compensation and Talent Development Committee sought a direct link to long-term performance in comparison to indices and peers. To achieve this result, the committee used performance-based restricted stock units based on relative total shareholder return (constituting one-third of the target grant date award value, equally allocated between performance relative to the S&P 500 Utilities Index and performance relative to the S&P 500 Index). The link between pay and long-term earnings performance is further strengthened by the use of a second performance measure based on relative long-term EPS growth (constituting one-third of the target grant date award value). Stock options (weighted at one-third of the target grant date award value for Messrs. Martin, Mihalik and Sagara) also are aligned with the company’s strategic focus on long-term growth, and service-based restricted stock units (weighted at one-third for Ms. Sedgwick and Mr. Wall) promote retention.
| 2021 Annual LTIP Award Design | ||||||||
Figures 7 and 8
Determining Individual Equity Award Grants
In granting the 2021 awards, the Compensation and Talent Development Committee:
•Specified a target dollar value and other terms for each named executive officer’s award; and
•Calculated the number of shares underlying the awards using the specified target dollar value for each named executive officer, as opposed to using a fixed number of shares.
This approach allows maintenance of a pay mix the committee believes to be optimal.
On the grant date, we calculated the precise number of shares to be granted to each named executive officer by dividing the target dollar value of each named executive officer’s award by the grant date closing price of Sempra common stock for the performance-based and service-based restricted stock units and by the Black-Scholes value for nonqualified stock options.
These target grant values are presented below under “Target Value of Long-Term Equity-Based Incentives” and differ from the value reported in “Compensation Tables—Summary Compensation Table” and “Compensation Tables—Grants of Plan-Based Awards” with respect to awards based on relative total shareholder return, which are reported in those compensation tables based on a Monte Carlo valuation that is used to calculate the grant date fair value.
Target Value of Long-Term Equity-Based Incentives
The target values for the 2021 annual long-term incentive plan awards are summarized below in Table 13.
| Target Value of 2021 Annual LTIP Award | |||||
| Jeffrey W. Martin | $ | 8,500,000 | |||
| Trevor I. Mihalik | $ | 2,318,000 | |||
| Kevin C. Sagara | $ | 1,918,000 | |||
| Karen L. Sedgwick | $ | 468,000 | |||
| Peter R. Wall | $ | 515,000 | |||
The actual amounts realized by equity award recipients will depend on future stock price performance and our EPS performance and the degree to which the established performance measures are achieved. The amounts ultimately realized will not necessarily align with the target values at grant.