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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.     )

Filed by the Registrant ☒
Filed by a Party other than the Registrant o
 

Check the appropriate box:

oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material under Rule 14a-12

NISOURCE INC.
(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.
   
 
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
   
 
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
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Fee paid previously with preliminary materials.
   
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
 
 
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Amount Previously Paid:
 
 
 
 
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NiSource Inc.

801 E. 86th Avenue • Merrillville, Indiana 46410 • (877) 647-5990

NOTICE OF ANNUAL MEETING

April 1, 2019

To the Holders of Our Common Stock:

The 2019 annual meeting of stockholders (the “Annual Meeting”) of NiSource Inc., a Delaware corporation, will be held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, Illinois 60018 on Tuesday, May 7, 2019, at 10:00 a.m., local time, for the following purposes:

(1)To elect ten directors named in the proxy statement to hold office until the next annual stockholders’ meeting and until their respective successors have been elected or appointed and qualified;
(2)To approve named executive officer compensation on an advisory basis;
(3)To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019;
(4)To approve an amendment to our Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) to increase the number of authorized shares of common stock;
(5)To approve an amendment to our Certificate of Incorporation to eliminate the requirement of “cause” for removal of directors;
(6)To approve our Amended and Restated Employee Stock Purchase Plan to increase the number of shares available under the plan;
(7)To consider a stockholder proposal reducing the threshold stock ownership requirement for stockholders to call a special stockholder meeting from 25% to 10%; and
(8)To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

All stockholders of record as of the close of business on March 12, 2019, are eligible to vote at the Annual Meeting and any adjournment or postponement thereof.

Your vote is very important. Whether or not you plan to attend the Annual Meeting, please vote at your earliest convenience. You may vote your shares by marking, signing, dating and mailing the enclosed proxy card. You may also vote by telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the Annual Meeting, you may be able to vote your shares in person, even if you have previously submitted a proxy. See the section “Voting in Person” for specific instructions on voting your shares.

If you plan to attend the Annual Meeting, please so indicate in the space provided on the proxy card or respond when prompted on the telephone or through the Internet.

PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.

   
 
 

 
John G. Nassos
 
Vice President and Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials
For the Annual Meeting of Stockholders to be Held on May 7, 2019

The Proxy Statement, Notice of Annual Meeting and 2018 Annual Report to Stockholders
are available at https://www.nisource.com/filings

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EXHIBIT A
 
 
 
EXHIBIT B
 
 
 
EXHIBIT C
 
 
 

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PROXY STATEMENT SUMMARY

This summary highlights information that may be expanded upon elsewhere in this proxy statement (“Proxy Statement”). This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement before voting. The accompanying proxy is solicited on behalf of the Board of Directors of NiSource Inc. (the “Board”) for the 2019 annual meeting of the stockholders (the “Annual Meeting”).

   
2019 ANNUAL MEETING OF STOCKHOLDERS
   
Time and Date: 10:00 a.m., local time on Tuesday, May 7, 2019
Place: Hyatt Rosemont, 6350 N. River Road, Rosemont, Illinois 60018
Record Date: March 12, 2019
Shares of Common Stock Outstanding on Record Date: 372,969,199
Voting: Each share is entitled to one vote for each director to be elected and on each matter to be voted upon at the Annual Meeting.
   
This proxy statement and the accompanying proxy card are first being sent to stockholders on April 1, 2019.
   
   
   
VOTING MATTERS AND BOARD RECOMMENDATIONS
   
Item
 
Board
Recommendations
Page
Reference
   
Proposal 1
Election of ten directors named in this proxy statement;
For All Nominees
  6
   
Proposal 2
Advisory approval of the compensation of our named executive officers (the “Named Executive Officers”) on an advisory basis;
For
   
Proposal 3
Ratification of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for 2019;
For
   
Proposal 4
Approval of an amendment to our Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) to increase the number of authorized shares of common stock;
For
   
Proposal 5
Approval of an amendment to our Certificate of Incorporation to eliminate the requirement of “cause” for removal of directors;
For
   
Proposal 6
Approval of an Amended and Restated Employee Stock Purchase Plan to increase the number of shares available under the plan; and
For
   
Proposal 7
To consider a stockholder proposal reducing the threshold stock ownership requirement for stockholders to call a special stockholder meeting from 25% to 10%.
Against
   

In addition, a stockholder has notified us of his intent to propose a resolution at the Annual Meeting requesting that the Board issue an annual report, beginning in 2019, of actually incurred corporate costs and associated actual and significant benefits accruing to shareholders and the climate from our subsidiary NIPSCO’s climate-related activities that are voluntary and exceed government regulatory requirements (the “Floor Proposal”). We have not received notice of, and are not aware of, any business to come before the meeting other than the agenda items referred to above and the possible submission of the Floor Proposal.

The Floor Proposal is not included in this proxy statement. If the Floor Proposal is presented at the Annual Meeting, the proxy holders will have discretionary voting authority under Rule 14a-4(c) under the Securities Exchange Act of 1934 with respect to the Floor Proposal and intend to exercise such discretion to vote AGAINST such proposal. If any other matter properly comes before the stockholders for a vote at the meeting, the proxy holders will vote your shares in accordance with their judgment.

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BOARD OF DIRECTORS NOMINEES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Director Nominees (10)
Board Committees
 
 
 
 
Name
Age
Director
Since
Position
Audit
Comp
Finance
ESS
Nom
&
Gov
 
Peter A. Altabef
59
2017
Chairman, President & CEO, Unisys Corporation
 
 
✔*
✔ 
✔ 
 
 
Theodore H. Bunting, Jr.
60
2018
Retired Group President, Entergy Corporation
✔ 
✔ 
 
 
 
 
 
Eric L. Butler
58
2017
Retired Executive Vice President, Union Pacific Corporation
✔ 
✔ 
 
✔ 
 
 
 
Aristides S. Candris
67
2012
Retired President & CEO, Westinghouse
 
 
✔ 
✔*
✔ 
 
 
Wayne S. DeVeydt
49
2016
CEO, Surgery Partners, Inc.
✔ 
✔ 
✔ 
 
 
 
 
Joseph Hamrock
55
2015
President & CEO, NiSource Inc.
 
 
 
 
 
 
 
Deborah A. Henretta
57
2015
Partner, G100 Companies; Retired Group President, Procter & Gamble Co.
 
✔ 
✔ 
✔ 
 
 
 
Michael E. Jesanis
62
2008
Retired President & CEO, National Grid USA
✔*
✔ 
✔ 
 
 
 
 
Kevin T. Kabat
62
2015
Vice Chairman of the Board, NiSource Inc.; Retired Vice Chairman & CEO, Fifth Third Bancorp
✔ 
✔*
 
 
✔ 
 
 
Carolyn Y. Woo
64
1998
Retired President & CEO, Catholic Relief Services
✔ 
 
 
✔ 
✔*
 
 
* Chair of Committee

   

   
✔ 9 of 10
Are
Independent
(90%)
✔2 of 10
Are
Female
(20%)
✔3 of 10
Are
Diverse (Race/Ethnicity)
(30%)

   

   
✔Average Director
Age:
59 Years
✔Average Director
Tenure:
6 Years
   
See “Proposal 1 – Election of Directors” for more information on our director nominees.
   
CORPORATE GOVERNANCE HIGHLIGHTS
   
Annual election of directors
Majority voting for all directors with resignation policy
No supermajority voting provisions
No stockholder rights plan (“poison pill”)
Proxy access by-law (3% ownership / 3 years / 20%)
Stockholder right to call special meetings
Separate chairman and CEO
All directors independent except CEO
Board committees comprised of all independent directors
Regular executive sessions of independent directors
Annual Board and committee evaluation process and ongoing evaluations of individual directors
Strategic and risk oversight by Board and committees
Annual “Say-on-Pay” advisory votes
Strong alignment between pay and performance in incentive plans
Commitment to safety and customer care
Political contributions disclosure
Enhanced independent registered public accounting firm disclosure
   
See “Corporate Governance” for more information on our corporate governance practices.   

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EXECUTIVE COMPENSATION HIGHLIGHTS
   
 
We have designed our executive compensation program to meet our business objectives using various compensation elements intended to drive both long-term and short-term performance. We believe that a significant portion of total compensation should consist of at-risk performance-based compensation. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation policy and objectives.
 
   
 
See “Executive Compensation” for more information on our executive compensation program.
   
   
 
 
 
   
 
 
 
We DO Have This Practice
We Do NOT Have This Practice
 
 
   
 
 
 
Incentive award metrics that are tied to key company performance measures
Repricing of options without stockholder approval
 
 
Share ownership guidelines applicable to executive officers and independent directors
Hedging or pledging transactions or short sales by executive officers or directors
 
 
Compensation recoupment policy
Tax gross-ups for Named Executive Officers
 
 
Limited perquisites
Automatic single-trigger equity vesting upon a change-in-control
 
 
Prohibition against pledging unearned shares in our long-term incentive plan
Excise tax gross-ups under change-in-control agreements
 
 
Double-trigger severance benefits upon a change-in-control
Excessive pension benefits or defined benefit supplemental executive retirement plan
 
 
One-year minimum vesting for equity awards
Excessive use of non-performance based compensation
 
 
Significant portions of the executive compensation opportunity that are entirely contingent on performance against pre-established performance goals
Excessive severance benefits
 
 
Independent compensation consultant
Dividend equivalent rights or dividends on unvested performance shares or restricted stock units granted to executive officers
 
 
Annual Say-on-Pay vote by stockholders
 
 
 
 
 
 
 
 
   
GENERAL INFORMATION
   
Stock Symbol:   NI
Stock Exchange:   NYSE
Registrar and Transfer Agent:   Computershare Investor Services
State of Incorporation:   Delaware
Corporate Headquarters:   801 E. 86th Avenue, Merrillville, Indiana 46410
Corporate Website:   www.nisource.com
   
   
BUSINESS AND STRATEGY
   
We are an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving customers in seven states. We generate substantially all of our operating income through these rate-regulated businesses which are summarized for financial reporting purposes into two primary reportable segments: Gas Distribution Operations and Electric Operations.
   
Our goal is to develop strategies that benefit all stakeholders as we address changing customer conservation patterns, develop more contemporary pricing structures and embark on long-term infrastructure investment programs. These strategies are intended to improve reliability and safety, enhance customer service, and reduce emissions, while generating sustainable returns. Additionally, we continue to pursue regulatory and legislative initiatives that will allow residential customers not currently on our system to obtain gas service in a cost effective manner.
   
Our directors possess the necessary breadth and depth of skills and experience to oversee our business operations and long term strategy as set forth in “Proposal 1 – Election of Directors – Biographical Information and Skills.”
   

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PROXY STATEMENT

The accompanying proxy is solicited on behalf of the Board for the Annual Meeting to be held at the Hyatt Rosemont, 6350 North River Road, Rosemont, Illinois 60018 on Tuesday, May 7, 2019, at 10:00 a.m., local time. The common stock, $.01 par value per share, of the Company represented by the accompanying proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the Board:

“FOR” all of the nominees for director;
“FOR” advisory approval of the compensation of our Named Executive Officers;
“FOR” the ratification of the appointment of Deloitte as our independent registered public accounting firm for 2019;
“FOR” approval of the amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock;
“FOR” approval of the amendment to our Certificate of Incorporation to eliminate the requirement of “cause” for removal of directors;
“FOR” approval of our Amended and Restated Employee Stock Purchase Plan to increase the number of shares available under the plan; and
“AGAINST” a stockholder proposal reducing the threshold stock ownership requirement for stockholders to call special stockholder meeting from 25% to 10%.

In addition, a stockholder has notified us of his intent to propose a resolution at the Annual Meeting requesting that the Board issue an annual report, beginning in 2019, of actually incurred corporate costs and associated actual and significant benefits accruing to shareholders and the climate from NIPSCO’s climate-related activities that are voluntary and exceed government regulatory requirements (the “Floor Proposal”). We have not received notice of, and are not aware of, any business to come before the meeting other than the agenda items referred to above and the possible submission of the Floor Proposal.

The Floor Proposal is not included in this proxy statement. If the Floor Proposal is presented at the meeting, the proxy holders will have discretionary voting authority under Rule 14a-4(c) under the Securities Exchange Act of 1934 with respect to the Floor Proposal and intend to exercise such discretion to vote AGAINST such proposal. If any other matter properly comes before the stockholders for a vote at the meeting, the proxy holders will vote your shares in accordance with their judgment.

This proxy statement and the accompanying proxy card are first being sent to stockholders on April 1, 2019. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile, email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of $9,500, plus reimbursement of expenses. We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held as of 5:00 p.m. Eastern Time on March 12, 2019, the record date for voting.

We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this proxy statement to refer to NiSource Inc.

Who May Vote

Holders of shares of common stock as of the close of business on March 12, 2019, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 12, 2019, 372,969,199 shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.

Voting Your Proxy

If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy using any of the following methods:

Telephoning the toll-free number listed on the proxy card;
Using the Internet website listed on the proxy card; or
Marking, dating, signing and returning the enclosed proxy card.

All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 6, 2019.

If your shares are held in a brokerage account or by a bank, broker, trust or other nominee (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.

Discretionary Voting by Brokers and “Broker Non-Votes”

If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent registered public accounting firm is the only proposal considered a routine matter and, accordingly, at the Annual Meeting, Brokers will only have discretionary authority to vote your shares with regard to Proposal No. 3, the ratification of the appointment of Deloitte

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as our independent registered public accounting firm for 2019. A “broker non-vote” occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted. Brokers will not have discretionary authority to vote your shares with respect to the other proposals to be presented at the Annual Meeting. Therefore, it is important that you instruct your Broker or other nominee how to vote your shares. If Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting, which are considered “non-routine.”

Voting Shares Held in Our 401(k) Plan

If you hold your shares of common stock in our 401(k) Plan, those shares are held in the name of Fidelity Management Trust Company (“Fidelity”), the administrator of the 401(k) Plan. You will receive a proxy card that includes the number of shares of our common stock held in the 401(k) Plan. You should instruct Fidelity how to vote your shares by completing and returning the proxy card or by voting your shares by Internet or by telephone, as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares, Fidelity will vote your shares in the same proportion as the shares for which it receives instructions from all other participants, to the extent permitted under applicable law. To allow enough time for Fidelity to vote your shares in accordance with your direction, your voting instructions must be received by Fidelity no later than 11:59 p.m. Eastern Time on May 2, 2019.

Voting in Person

You also may come to the Annual Meeting and vote your shares in person by obtaining and submitting a ballot that will be available at the Annual Meeting. However, if your shares are held in street name by a Broker, then, in order to be able to vote at the Annual Meeting, you must obtain an executed proxy from the Broker indicating that you were the beneficial owner of the shares on March 12, 2019, the record date for voting, and that the Broker is giving you its proxy to vote the shares.

If your shares are held in the 401(k) Plan, you will not be able to vote your shares at the Annual Meeting.

Votes cast in person or represented by proxy at the Annual Meeting will be tabulated by the inspectors of election.

If you plan to attend the Annual Meeting, please so indicate when you return your proxy card, so that we may send you an admission ticket and make the necessary arrangements. Stockholders who plan to attend the Annual Meeting must present valid, government-issued photo identification along with an admission ticket or evidence of beneficial ownership.

Revoking Your Proxy

You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send a letter to our Corporate Secretary (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the Annual Meeting and voting in person. Attending the Annual Meeting will not in and of itself revoke a proxy.

Quorum for the Meeting

A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. Abstentions are counted for purposes of determining whether a quorum is present. As explained above under “Discretionary Voting by Brokers and ‘Broker Non-Votes,” if Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting.

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PROPOSAL 1 — ELECTION OF DIRECTORS

At the recommendation of the Nominating and Governance Committee, the Board has nominated the persons listed below to serve as directors, each for a one-year term, beginning at the Annual Meeting on May 7, 2019, and expiring at the 2020 annual meeting of our stockholders (the “2020 Annual Meeting”) and until their successors are duly elected or appointed and qualified. The nominees include nine independent directors, as defined in the applicable rules of the NYSE, and our President and Chief Executive Officer (“CEO”). The Board does not anticipate that any of the nominees will be unable to serve, but if any nominee is unable to serve, the proxies will be voted in accordance with the judgment of the person or persons voting the proxies.

All of the nominees currently serve on the Board.

Set forth below is information regarding all of our nominees (each of whom has consented to being named in the Proxy Statement and to serving, if elected).

Vote Required

In order to be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy will not be counted as a vote cast either “for” or “against” with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be broker non-votes which will have no effect on the vote.

Under our Corporate Governance Guidelines, each nominee will tender a conditional resignation prior to the Annual Meeting, effective only if both (a) the votes “against” a nominee’s election exceed the votes “for” election (a “failed re-election”) and (b) such resignation is subsequently accepted by the Board. Any failed re-election will be referred to the Nominating and Governance Committee, which will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will make a determination and publicly disclose its decision, the rationale for the decision and the directors who participated in the process within 90 days after the election. The Board expects the director who has not been re-elected to abstain from participating in the Nominating and Governance Committee or Board discussion or vote regarding whether to accept his or her resignation offer. A director who has had a failed re-election may participate in discussions or votes with respect to other directors who have had a failed re-election.

Biographical Information and Skills

Biographical information regarding each director nominee and his or her qualifications to serve as a director is set forth on the succeeding pages.

Our director nominees possess the necessary breadth and depth of skills and experience to oversee our business operations and long-term strategy as shown below:*

Industry Experience
 
   •
Gas Distribution or Transmission (50%)
 
   •
Electricity Distribution, Transmission or Generation (50%)
 
   •
Energy Markets or Technology (70%)
Other Operations / Customer Service (90%)
Government and Regulatory (90%)
Public Company Board (80%)
Financial or Capital Markets (90%)
Risk Management (100%)
Technology (50%)
Safety (60%)
Environmental, Sustainability, Corporate Responsibility and Ethics (100%)
Non-Profit Board / Community Service (100%)
CEO (Current or Prior) (70%)
Strategic Planning (100%)
Financial Literacy and Expertise (100%)
Talent Management (Executive Compensation and Benefits, and Talent Development) (100%)

* Percentages shown represent the portion of the Board with the indicated skill or experience.

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THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.

Peter A. Altabef

Director Since: 2017
Standing Board Committees:
Age: 59
Environmental, Safety and Sustainability Committee
 
Finance Committee (Chair)
 
Nominating and Governance Committee
   
   

Executive Experience: Mr. Altabef currently serves as Chairman, President and CEO of Unisys Corporation, a global information technology company, and is a member of its board of directors, a position he has held since January 2015. Prior to his current role, he served as president and CEO of MICROS Systems, Inc., a provider of integrated software and hardware solutions to the hospitality and retail industries, from 2013 to 2014, when it was acquired by Oracle Corporation. Before that, he served as president and CEO of Perot Systems Corporation from 2004 to 2009, when it was acquired by Dell Inc. Following that transaction, Mr. Altabef served as president of Dell Services, the information technology services and business process solutions unit of Dell Inc. until his departure in 2011.

Outside Board and Other Experience: Mr. Altabef is a member of the board of directors of Unisys Corporation. He is also a member of the President’s National Security Telecommunications Advisory Committee, a board member of EastWest Institute, and a member of the advisory board of Merit Energy Company, LLC and of the board of directors of Petrus Trust Company, LTA. He has previously served as a senior advisor to 2M Companies, Inc., in 2012, and as a director of MICROS Systems, Perot Systems Corporation and Belo Corporation. He is also active in community service activities, having served on the boards and committees of several cultural, medical, educational and charitable organizations and events.

Skills and Qualifications: Mr. Altabef has experience leading large organizations as CEO and a strong background in strategic planning, financial reporting, risk management, business operations and corporate governance. He also has more than 20 years of senior leadership experience at some of the world’s leading information technology companies. As a result, he has a deep understanding of the cybersecurity issues facing businesses today. His overall leadership experience and his cybersecurity background provide the Board with valuable perspective and insight into significant issues that we face.

Theodore H. Bunting, Jr.

Director Since: 2018
Standing Board Committees:
Age: 60
Audit Committee
 
Compensation Committee
   
   
   

Executive Experience: Mr. Bunting most recently served as group president, utility operations, at Entergy Corporation (“Entergy”), an integrated energy company, from 2012 until his retirement in 2017. Before that, he was senior vice president and chief accounting officer at Entergy from 2007 to 2012, and chief financial officer of several subsidiaries from 2000 to 2007. He held other management positions of increasing responsibility in accounting and operations at Entergy since joining the company in 1983.

Outside Board and Other Experience: Mr. Bunting has been a director of Unum Group since 2013 and is currently chairman of its regulatory compliance committee and a member of its human capital committee. He previously served as a director of Imation Corp., a global data storage and information security company. He also serves on the board of Foundation for the Mid South and previously served on the board of Hendrix College.

Skills and Qualifications: Mr. Bunting’s utility industry knowledge, including his experience in customer service, safety and regulatory relations, are valuable to us as we continue to execute on our robust long-term utility infrastructure investment plans. He also brings additional public company experience in the areas of strategic finance, accounting, auditing, and capital and risk management to the Board. He is a certified public accountant.

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Eric L. Butler

Director Since: 2017
Standing Board Committees:
Age: 58
Audit Committee
 
Compensation Committee
 
Environmental, Safety and Sustainability Committee
   
   

Executive Experience: Mr. Butler served in a number of executive leadership roles at Union Pacific Corporation (“Union Pacific”), a transportation company located in Omaha, Nebraska, until his retirement in February 2018. He began his career at Union Pacific in 1985 and held leadership roles in financial planning and analysis and in marketing, sales and commercial, including as Executive Vice President and Chief Marketing Officer from March 2012 to December 2016. He also held leadership roles in supply, procurement and purchasing, including as Vice President and General Manager – Industrial Products from April 2005 to March 2012. Most recently, he was Senior Vice President of Union Pacific from December 2017, Executive Vice President and Chief Administrative Officer from December 2016 through November 2017, and Corporate Secretary from February 2017 through November 2017.

Outside Board and Other Experience: Mr. Butler was appointed to the Federal Reserve Bank of Kansas City’s Omaha Branch Board in 2015 and, in 2018, was elected chairman. Additionally, he serves on the board of the Omaha Airport Authority, which he joined in 2007.

Skills and Qualifications: Mr. Butler developed and led strategic and financial planning, marketing, sales, commercial; and supply, procurement and purchasing for one of the largest transportation companies in the world, Union Pacific. He most recently led the corporate governance, human resources, labor relations and administration functions at Union Pacific. His knowledge of the railroad transportation industry and the challenges in maintaining top-tier safety, customer service and risk management standards while providing an important part of the nation’s infrastructure provides him with unique skills and insights that are valuable to the Board. In addition, he has experience in the purchase of fuel and energy materials and equipment. As a result, Mr. Butler has an understanding of the aging infrastructure, safety, organizational and regulatory issues facing utilities today and provides a fresh viewpoint from an industry that is similarly positioned. His overall leadership experience and his regulated public company background provides the Board with another perspective on significant issues that we face.

Aristides S. Candris

Director Since: 2012
Standing Board Committees:
Age: 67
Environmental, Safety and Sustainability Committee (Chair)
 
Finance Committee
 
Nominating and Governance Committee
   
   

Executive Experience: Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, a nuclear engineering company, which was a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement in March 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including as Senior Vice President, Nuclear Fuel, from September 2006 to July 2008, and continued to serve on the board of Westinghouse until October 2012.

Outside Board and Other Experience: Dr. Candris is an advisory board member of Atomos Nuclear and Space Corporation. He is also a member of the advisory boards of the Carnegie Institute of Technology and the Wilton E. Scott Institute for Energy Innovation at Carnegie Mellon University. He also serves on the boards of trustees of Transylvania University and the Hellenic-American University and the board of directors of The Hellenic Initiative. He previously served on the boards of Westinghouse, and Kurion Inc.

Skills and Qualifications: Dr. Candris is a nuclear scientist and engineer, and has significant experience leading a global nuclear power company. His knowledge of the electric industry gives him significant insight to the issues impacting the electric utility industry. His experience managing highly technical engineering operations, and particularly his extensive experience and expertise in risk assessment, as well as process optimization methodologies (such as Lean/Six Sigma), are of great value as we build and maintain facilities to address increasing environmental regulations and make long-term strategic decisions on electric power generation and gas and electric delivery. His technical and management skills are helpful as we build and modernize both our transmission and distribution systems. Dr. Candris has great insight from his experience developing customer focused programs and attaining excellence in business processes and behaviors, which will assist us to better meet the increasing expectations of customers and regulators.

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Wayne S. DeVeydt

Director Since: 2016
Standing Board Committees:
Age: 49
Audit Committee
 
Compensation Committee
 
Finance Committee
   
   
   

Executive Experience: Mr. DeVeydt has been serving as Chief Executive Officer and member of the board of directors of Surgery Partners, Inc., a healthcare services company, since January 2018. Previously, he served as a Senior Advisor to the Global Healthcare division of Bain Capital located in Boston, Massachusetts from January 2017 to January 2018, and as Executive Vice President and Chief Financial Officer (“CFO”) at Anthem, Inc., a health insurance company and an independent licensee of the Blue Cross and Blue Shield Association from May 2007 until his retirement in June 2016. He also served as Senior Vice President and Chief Accounting Officer at Anthem, Inc. beginning in 2005 and Chief of Staff to the Chairman and Chief Executive Officer from 2006 to 2007. Prior to joining Anthem, Inc., Mr. DeVeydt was a partner at PricewaterhouseCoopers LLP from 1996 to 2005, where he served in many roles in the financial services industry.

Outside Board and Other Experience: Mr. DeVeydt is a member of the board of directors of Surgery Partners, Inc., where he currently serves as Chief Executive Officer. He is also a member of the board of directors of Grupo Notre Dame Intermedica. He also served as a director of Myovant Sciences Ltd. from 2016 until July 2018 and served as its lead independent director, chair of its audit committee, and a member of its compensation committee. Mr. DeVeydt is an active leader in his community through his charitable activities.

Skills and Qualifications: Mr. DeVeydt’s positions as CEO and CFO at public companies in regulated industries and as a partner at PricewaterhouseCoopers LLP provide him with strong financial acumen along with a deep understanding of regulated industry operations and extensive leadership skills, particularly in the areas of accounting and finance. His significant experience in internal controls, capital markets, corporate governance, risk management and strategic planning from both a public company and public accounting perspective make him an asset to the Board.

Joseph Hamrock

Director, President and Chief Executive Officer
Standing Board Committees:
None
Director Since: 2015
 
Age: 55
   
   
 

Executive Experience: Mr. Hamrock has been our President and CEO since July 2015. From May 2012 to June 2015, he was Executive Vice President and Group CEO for NiSource’s Gas Distribution Operations, comprised of local gas distribution companies in Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania and Virginia. Prior thereto, he served in a variety of senior executive positions with American Electric Power (“AEP”), an electrical service public utility holding company in Columbus, Ohio, including as President and Chief Operating Officer of AEP Ohio from January 2008 to May 2012. He also served in leadership roles in engineering, transmission and distribution operations, customer service, marketing and information technology.

Outside Board and Other Experience: Mr. Hamrock is currently a member of the board of the American Gas Association, a gas industry trade association. He is also a board member of OhioHealth, a not-for-profit healthcare system in central Ohio, and A Kid Again, which supports families caring for children with life-threatening illnesses.

Skills and Qualifications: Mr. Hamrock has extensive knowledge of our industry from his more than 30 years of experience in a variety of positions at AEP and the Company. He began his career in the energy industry as an electrical engineer in transmission and distribution planning, and progressed to work in commercial and industrial customer services, earning a leadership role in commercial marketing, customer services, and strategic development, among other executive roles, before becoming CEO at NiSource. Consequently, he has a firm understanding of the needs of our customers and is uniquely qualified to lead a focused utility company to meet our customer commitments. Additionally, he has a solid understanding of our organization through his leadership of our gas distribution operations, where he led financial, operational, regulatory and commercial performance for the Columbia gas business. This significant industry experience provides Mr. Hamrock with a unique perspective into our operations, our markets, our people and the strategic vision needed to meet our long-term safety, customer value, business, financial and technology performance goals. In addition, he has been, and continues to be, an active supporter of educational, charitable and utility industry organizations.

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Deborah A. Henretta

Director Since: 2015
Standing Board Committees:
Age: 57
Compensation Committee
 
Environmental, Safety and Sustainability Committee
 
Finance Committee
   
   

Executive Experience: Ms. Henretta currently is a partner at G100 Companies, a C-suite learning and development company, where she serves as Senior Advisor spearheading digital transformation practice for SSA & Company, a G100 Company. She retired from Procter & Gamble Co. (“P&G”) in 2015, where she served as Group President of Global e-Business. Prior to her appointment as Group President of Global e-Business in January 2015, she held various senior positions throughout several P&G sectors, including as Group President of Global Beauty from 2012 to 2015 and as Group President of P&G Asia from 2007 to 2012. Prior to her appointment as Group President of P&G Asia, she was President Asia from 2005 to 2007 and President of Global Baby, Toddler and Adult Care from 2004 to 2005. She joined P&G in 1985.

Outside Board and Other Experience: Ms. Henretta has been a director at American Eagle Outfitters, Inc. since February 2019. Ms. Henretta has been a director at Corning Incorporated since 2013, and currently serves on its audit and corporate relations committees. She is a director of Meritage Homes Corporation, and serves on its nominating and corporate governance committees. Ms. Henretta served as a director of Staples, Inc. from June 2016 until September 2017 and served on its compensation committee. Additionally, she serves on the board of trustees for Xavier University and St. Bonaventure University.

Skills and Qualifications: Ms. Henretta has over 30 years of business leadership experience with P&G in a multi-jurisdictional regulatory and competitive business environment. She has experience across many markets, including P&L responsibility for multi-billion dollar businesses at P&G and responsibility for strategic planning, sales, marketing, e-business, government relations and customer service. Ms. Henretta led a dynamic business segment and is, therefore, keenly aware of the delicate balance of keeping pace with customer expectations in a changing environment, as well as maximizing the benefits that inclusion and diversity can provide. Because of this experience, Ms. Henretta brings valuable insights to the Board and strategic leadership to us as we operate in multiple regulatory environments and develop products and customer service programs to meet our customer commitments. In her partner role at G100 Companies, she assisted in establishing a Board Excellence Program, which provides board director education on board oversight and governance responsibilities, including in the areas of digital transformation and cybersecurity.

Michael E. Jesanis

Director Since: 2008
Standing Board Committees:
Age: 62
Audit Committee (Chair)
 
Compensation Committee
 
Finance Committee
   
   

Executive Experience: Mr. Jesanis is a co-founder and, since July 2013, has been Managing Director of HotZero, LLC, a firm formed to develop hot water district energy systems in New England. Mr. Jesanis has served as an advisor to several startups in energy-related fields. From July 2004 through December 2006, Mr. Jesanis was President and CEO of National Grid USA, a natural gas and electric utility, and a subsidiary of National Grid plc, of which Mr. Jesanis was also an Executive Director. Prior to that position, Mr. Jesanis was COO and CFO of National Grid USA from January 2001 to July 2004 and CFO of its predecessor utility holding company from 1998 to 2000.

Outside Board and Other Experience: Mr. Jesanis previously served as a director for several electric and energy companies, including Ameresco, Inc. Mr. Jesanis is the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university.

Skills and Qualifications: By virtue of his former positions as President and CEO, COO and, prior thereto, CFO, of a major electric and gas utility holding company as well as his current role with an energy efficiency consulting firm, Mr. Jesanis has extensive experience with regulated utilities. He has strong financial acumen and extensive managerial experience, having led modernization efforts in the areas of operating infrastructure improvements, customer service enhancements and management team development. Mr. Jesanis also demonstrates a commitment to education as the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university. As a result of his former senior managerial roles and his non-profit board service, Mr. Jesanis also has particular expertise with board governance issues.

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Kevin T. Kabat

Vice Chairman
Standing Board Committees:
Director Since: 2015
Audit Committee
Age: 62
Compensation Committee (Chair)
 
Nominating and Governance Committee
   
   
   

Executive Experience: From April 2007 to November 2015, Mr. Kabat was CEO of Fifth Third Bancorp, a bank holding company. He continued to serve as Vice Chairman of the board of directors of Fifth Third Bancorp until his retirement in April 2016. Before becoming CEO, he served as Fifth Third Bancorp’s President from June 2006 to September 2012 and as Executive Vice President from December 2003 to June 2006. Additionally, he was previously President and CEO of Fifth Third Bank (Michigan). Prior to that position, he was Vice Chairman and President of Old Kent Bank, which was acquired by Fifth Third Bancorp in 2001.

Outside Board and Other Experience: Mr. Kabat has been a director of Unum Group since 2008 and is currently chairman of the board and chair of its governance committee. In 2016, Mr. Kabat became the lead independent director of E*Trade Financial Corporation and is a member of its bank board and its compensation and governance committees. He has also held leadership positions on the boards and committees of local business, educational, cultural and charitable organizations and campaigns.

Skills and Qualifications: Mr. Kabat has significant leadership experience as a CEO in a regulated industry at a public company. As a result, he has a deep understanding of operating in a regulatory environment and balancing the interests of many stakeholders. His extensive experience in strategic planning, risk management, financial reporting, internal controls and capital markets makes him an asset to the Board, as he is able to provide unique strategic insight, financial expertise and risk management skills. In addition, he has broad corporate governance skills and perspective gained from his service in leadership positions on the boards of other publicly traded companies.

Carolyn Y. Woo

Director Since: 1998
Standing Board Committees:
Age: 64
Audit Committee
 
Environmental, Safety and Sustainability Committee
 
Nominating and Governance Committee (Chair)
   

Executive Experience: Dr. Woo was President and CEO of Catholic Relief Services, an international humanitarian agency serving over 100 countries, from January 2012 until her retirement in December 2016. Prior thereto, Dr. Woo was dean and a professor of Entrepreneurial Studies at the Mendoza College of Business, University of Notre Dame in Notre Dame, Indiana.

Outside Board and Other Experience: In addition to serving on our Board, Dr. Woo has been a director at AON plc since 1998, and currently serves on its audit, compliance, and organization and compensation committees. She is also on the board of Arabesque. She has previously served on the boards of directors of four additional public companies: Circuit City, St. Joseph Capital Bank, Arvin Industries and Bindley-Western Industries. She is also a current and past board member of several non-profit organizations, including an international relief organization, a global business school accreditation organization, leadership development organizations and an educational organization.

Skills and Qualifications: Dr. Woo’s experience as President and CEO of an international organization provides her with knowledge and experience in managing a large organization. Her experience as the dean of a major business school and her experience as a professor of entrepreneurship provides her with a deep understanding of business principles and extensive expertise with management and strategic planning issues. Through her current and previous service on the boards of directors, audit committees and compensation committees of public companies, including a global reinsurance and risk management consulting company, a pharmaceutical distribution company, an international automotive manufacturer and a financial institution, Dr. Woo has developed an excellent understanding of corporate governance, internal control, financial and strategic analysis and risk management issues. Dr. Woo is a leader in the areas of corporate social responsibility, sustainability and ethics, which adds an important perspective to the Board. In 2017, she was named to the Top 100 Most Influential in Business Ethics by the Ethisphere Institute. Dr. Woo’s commitment to social and educational organizations provides her with an important perspective on the various community and social issues confronting us in the communities that we serve.

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CORPORATE GOVERNANCE

Director Independence

Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section 303A.02 of the NYSE Listed Company Manual. The Board also has adopted an additional independence standard providing that a director who is an executive officer or director of a company that receives payments from us in an amount which exceeds 1% of such other company’s consolidated gross revenues is not “independent” until three years after falling below such threshold. A copy of our Corporate Governance Guidelines is posted on our website at https://www.nisource.com/investors/governance.

The Board has affirmatively determined that, with the exception of Mr. Hamrock, all of the members of the Board and all nominees are “independent directors” as defined in Section 303A.02 of the NYSE Listed Company Manual and meet the additional standard for independence set by the Board.

Policies and Procedures with Respect to Transactions with Related Persons

We have established policies and procedures with respect to the review, approval and ratification of any transactions with related persons.

Under its charter, the Nominating and Governance Committee reviews reports and disclosures of insider and related person transactions. Under our Code of Business Conduct, the following situations may present a conflict of interest and must be reviewed by the Nominating and Governance Committee to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members) or otherwise present a conflict of interest:

owning more than a 10% equity interest or a general partner interest in any entity that transacts business with the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
consulting for or being employed by a competitor of the Company; and
being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company.

Related person transactions are annually reviewed and, if appropriate, ratified by the Nominating and Governance Committee. Directors, individuals subject to Section 16 (“Section 16 Officer(s)”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and senior executive officers are expected to raise any potential transactions involving a conflict of interest that relate to them with the Nominating and Governance Committee so that they may be reviewed in a prompt manner.

There were no transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1, 2018, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules.

Executive Sessions of Non-Management Directors

To promote open discussion among the non-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its committees. The non-management members met separately from management seven times in 2018. The independent Chairman of the Board presided at all these executive sessions. All of the non-management members are “independent directors” as defined under the applicable NYSE and SEC rules.

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Communications with the Board and Non-Management Directors

Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows:

Communications to the Board may be made to the Board generally, any director individually, the non-management directors as a group, or the Chairman of the Board, by writing to the following address:

NiSource Inc.
Attention: Board of Directors, or any Board member, or non-management directors, or Chairman
of the Board
c/o Corporate Secretary
801 East 86th Avenue
Merrillville, Indiana 46410

The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting our Ethics and Compliance Officer at ethics@nisource.com, calling the business ethics hotline at 1-800-457-2814, or writing to:

NiSource Inc.
Attention: Director, Corporate Ethics
801 East 86th Avenue
Merrillville, Indiana 46410

Stockholder Engagement

We are committed to engaging with our stockholders and soliciting their views and input on important governance, environmental, social, executive compensation and other matters. Our Nominating and Governance Committee is responsible for overseeing the stockholder engagement process and the periodic review and assessment of stockholder input on governance matters. We engage with our stockholders on governance each year outside of the proxy season. Our independent directors are available to engage in dialogue with stockholders on matters of significance in order to understand stockholders’ views. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance and share its perspective on the Company and industry developments.

Code of Business Conduct

We have a Code of Business Conduct to promote: (i) ethical behavior, including the ethical handling of conflicts of interest; (ii) full, fair, accurate, timely and understandable financial disclosure; (iii) compliance with applicable laws, rules and regulations; (iv) accountability for adherence to our code; and (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller), as well as to our employees of and our affiliates. A copy of our Code of Business Conduct is available on our website at https://www.nisource.com/investors/governance and also is available to any stockholder upon written request to our Corporate Secretary at the address noted above under the heading “Communications with the Board and Non-Management Directors.”

Any waiver of our Code of Business Conduct for any director, executive officer or Section 16 officer may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted.

Corporate Governance Guidelines

The Nominating and Governance Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and submitting any recommended changes to the Board for its approval. A copy of the Corporate Governance Guidelines can be found on our website at https://www.nisource.com/investors/governance and is also available to any stockholder upon written request to our Corporate Secretary.

Board Leadership Structure

Our Corporate Governance Guidelines state that we should remain free to configure leadership of the Board in the way that best serves our interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of Chairman and CEO. If the Chairman is not an independent director, an independent Lead Director will be chosen annually by the Board, taking into account the recommendation of the Nominating and Governance Committee. The Chairman or, if the Chairman is not an independent director, the Lead Director will be the presiding director of executive sessions of the Board.

Since late 2006, the offices of Chairman and CEO of the Company have been held by different individuals, with the Chairman being an independent director.

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The duties of the Chairman of the Board are as follows:

providing leadership to the Board and management, and monitoring the discharge of their duties;
presiding at meetings of stockholders and the Board, including executive sessions of the Board and meetings of the independent directors;
serving as a liaison between the independent directors and management;
in consultation with the CEO, setting agendas for the meetings of the Board, and developing annual Board meeting schedules for approval by the Board;
ensuring proper flow of information to the Board;
having the authority to call special meetings of the Board and independent directors;
being available for consultation and direct communication with stockholders and other key stakeholders, as appropriate; and
having such other responsibilities and perform such duties as may from time to time be assigned to him or her by the Board.

The Board periodically reviews the structure and the division of responsibilities between the role of independent Chairman and CEO. The structure and division of responsibilities is intended to maintain the integrity of the oversight function of the Board by providing a separate framework of responsibilities for the independent Chairman as set forth above.

Board Oversight of Risk

The Board takes an active role in monitoring and assessing our strategic, compliance, operational and financial risks, as well as cybersecurity risks. The Board administers its oversight function through utilization of its various committees. Our Risk Management Committee, which consists of members of our senior management, is responsible for oversight of our risk management process. Senior management regularly provides reports on our risks to the Board, the Audit Committee and the Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent registered public accounting firm the effect of regulatory and accounting initiatives on our financial statements and is responsible for review and evaluation of our major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures. In addition, the Compensation Committee, the Environmental, Safety and Sustainability (“ESS”) Committee, the Finance Committee and the Nominating and Governance Committee are each charged with overseeing the risks associated with their respective areas of responsibility.

Meetings and Committees of the Board

The Board met 10 times during 2018. Each incumbent director attended at least 90% of the total number of meetings of the Board and of the committees of the Board on which he or she served, and in each case, during the periods that he or she served. Pursuant to our Corporate Governance Guidelines, directors are expected to attend all Board meetings, to spend the time needed to discharge their responsibilities as directors, and to attend the annual meeting of stockholders. All then-serving directors attended the 2018 annual meeting of stockholders.

Pursuant to our Corporate Governance Guidelines, the Board expects that our senior officers will regularly attend Board and Committee meetings, present proposals and otherwise assist in the work of the Board. Members of the Board have direct access to all of our employees, outside advisors and independent registered public accounting firm.

The Board has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Compensation Committee, the ESS Committee, the Finance Committee and the Nominating and Governance Committee. Beginning in 2015, the Board also established a Search Committee, an ad hoc committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. The Search Committee met twice during 2018. The Board evaluates the structure and membership of its committees on an annual basis, appoints the independent members of the Board to serve on the committees and elects committee chairs following the annual meeting of stockholders. The following table shows the composition of each standing Board committee as of the date of this proxy statement. Mr. Hamrock does not serve on any committee, but is invited to attend various committee meetings. Mr. Thompson, Chairman of the Board, and Mr. Kabat, Vice Chairman of the Board, are invited to attend all meetings of each of the committees.

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Board Committee Composition

Director
Audit
Compensation
ESS
Finance
Nominating
and
Governance
Peter A. Altabef
 
 
✔ 
✔*
✔ 
Theodore H. Bunting, Jr. (1) (2)
✔ 
✔ 
 
 
 
Eric L. Butler
✔ 
✔ 
✔ 
 
 
Aristides S. Candris
 
 
✔*
✔ 
✔ 
Wayne S. DeVeydt (2)
✔ 
✔ 
 
✔ 
 
Deborah A. Henretta
 
✔ 
✔ 
✔ 
 
Michael E. Jesanis (2)
✔*
✔ 
 
✔ 
 
Kevin T. Kabat (2)(3)
✔ 
✔*
 
 
✔ 
Richard L. Thompson (4)
 
 
 
 
✔ 
Carolyn Y. Woo
✔ 
 
✔ 
 
✔*
*Committee Chair
(1)Mr. Bunting was appointed to the Board on September 5, 2018 and appointed to the Audit and Compensation Committees on October 23, 2018.
(2)Audit Committee Financial Expert, as defined by SEC rules.
(3)Independent Vice Chairman of the Board.
(4)Independent Chairman of the Board.

The summaries below are qualified by reference to the entire charter for each of the Audit, Compensation, ESS, Finance and Nominating and Governance Committees; each of which can be found on our website at https://www.nisource.com/investors/governance and is also available to any stockholder upon written request to our Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules of the NYSE, the federal securities laws and such other requirements applicable to us, delegated to any committee by the Board, or in the case of the Compensation Committee, under any provision of any of our benefit or compensation plans.

   Audit Committee

The Audit Committee met nine times in 2018. Our Audit Committee is responsible for the oversight of our internal audit function and financial reporting process. The Audit Committee has the sole authority to appoint, retain or replace our independent registered public accounting firm and is responsible for, among other things:

reviewing our independent registered public accounting firm’s qualifications and independence and compensating our independent registered public accounting firm;
overseeing the performance of our internal audit function and our independent registered public accounting firm;
reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements before earnings announcements;
reviewing and discussing with management our annual and quarterly earnings press releases;
reviewing and discussing with management and our independent registered public accounting firm major issues regarding accounting principles and financial statement presentations, adequacy of internal controls, and any critical judgments or accounting estimates made in connection with the preparation of financial statements;
reviewing and evaluating our major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures, including discussion of our risk assessment and risk management policies; and
overseeing our compliance with legal and regulatory requirements.

The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet our additional independence standard set forth in our Corporate Governance Guidelines. The Audit Committee has reviewed and approved our independent registered public accounting firm for each of 2018 and 2019, and the fees relating to audit services and other services performed by our independent registered public accounting firm.

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For more information regarding the Audit Committee, see “Audit Committee Report” and “Proposal 3 — Ratification of Independent Registered Public Accounting Firm” below.

   Compensation Committee

The Compensation Committee met seven times in 2018. The Compensation Committee apprises the Board with respect to the evaluation, compensation and benefits of our executives. Its responsibilities include, among others:

evaluating the performance of our CEO and other executive officers in light of our goals and objectives;
reviewing and approving the corporate goals and objectives relevant to CEO and executive officer compensation;
making recommendations to the independent Board members regarding CEO compensation and approving compensation of the other executive officers;
reviewing and approving periodically a general compensation policy for our other officers and officers of our principal subsidiaries;
approving, or if appropriate, making recommendations to the Board with respect to incentive compensation plans and equity-based plans;
reviewing our officer candidates for election by the Board;
reviewing and evaluating the executive officers’ development and succession plan (other than our CEO’s succession plan, which is reviewed by the Nominating and Governance Committee);
evaluating the risks associated with our compensation policies and practices and the steps management has taken to monitor and control such risks; and
overseeing equal employment opportunity and diversity initiatives.

In making recommendations regarding the compensation of our CEO and approving the compensation of the other executive officers, the Compensation Committee takes into consideration its evaluation of the individual performance of each person. The Compensation Committee also considers recommendations from the independent compensation consultant that the Compensation Committee engages to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. Each year, the Compensation Committee evaluates the independence and quality of the services provided by its independent compensation consultant. Additionally, when considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the Compensation Committee also considers input from our CEO; Chief Services Officer; and Senior Vice President, Human Resources.

The Compensation Committee first engaged the services of Meridian Compensation Partners, LLC (“Meridian”) in August 2017 as its independent compensation consultant after conducting a request for proposal process. In reviewing the engagement in 2018, the Compensation Committee considered the factors set forth in SEC Rule 10C-1(b)(4) and the applicable NYSE rules and determined that Meridian was independent. Meridian provided no other services to the Company in 2018.

The Compensation Committee has authority to delegate its responsibilities to subcommittees as deemed appropriate, provided the subcommittees are composed entirely of independent directors who also meet the other requirements for membership of the Compensation Committee.

All of the directors serving on the Compensation Committee are: (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forth in the Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees; (ii) “non-employee directors” as defined under Rule 16b-3 of the Exchange Act; and (iii) “outside directors” as defined by Section 162(m) of the Internal Revenue Code (hereafter “Section 162(m) of the Code” or “Code Section 162(m)”).

   Compensation Committee Interlocks and Insider Participation

As of December 31, 2018, Messrs. Bunting, Butler, DeVeydt, Jesanis and Kabat, and Ms. Henretta served on the Compensation Committee. During the fiscal year ended December 31, 2018, there were no compensation committee interlocks or insider participation.

   Environmental, Safety and Sustainability Committee

The ESS Committee met five times during 2018. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. Its responsibilities include, among others:

evaluating our environmental and sustainability policies, practices and performance;
evaluating our safety policies, practices and performance relating to our employees, contractors and the general public;
reviewing and assessing stockholder proposals related to the environment, safety and sustainability;
reviewing and evaluating our programs, policies, practices and performance with respect to health and safety compliance auditing; and
assessing major legislation, regulation and other external influences that pertain to the ESS Committee’s responsibilities and assessing the impact on us.

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   Finance Committee

The Finance Committee met six times during 2018. Its responsibilities include the following, among others:

reviewing and evaluating our financial plans, capital structure, equity and debt levels, dividend policy and financial policies;
reviewing our corporate insurance programs;
reviewing our investment strategy and investments;
reviewing and evaluating our financial, tax, third party credit and commodity risks and the steps management has taken to monitor and control such risks;
reviewing our annual earnings guidance and capital budgets and recommending approval to the Board; and
reviewing our hedging policies and exempt swap transactions.

   Nominating and Governance Committee

The Nominating and Governance Committee met five times in 2018. Its responsibilities include, among others:

identifying individuals qualified to become Board members, consistent with criteria approved by the Board;
recommending to the Board director nominees for election at the next annual meeting of the stockholders;
developing and recommending to the Board the Corporate Governance Guidelines;
consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules;
reviewing and evaluating risks to our reputation and the steps management has taken to monitor and control such risks;
reviewing and evaluating our CEO succession plan and working with the Board to evaluate potential successors to our CEO;
reviewing and overseeing, at least annually, corporate and business unit political spending;
evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and
overseeing the evaluation of the performance of the Board and its committees.

The Nominating and Governance Committee, with the assistance of the independent compensation consultant, annually reviews the amount and composition of non-employee director compensation. Please see the discussion under the heading “Director Compensation” for a description of the compensation we provide to our non-employee directors.

Director Selection Process.   The Nominating and Governance Committee identifies and screens candidates for director and makes its recommendations for director to the Board. At times the Board may establish an ad hoc search committee to assist the Nominating and Governance Committee in this process. Additionally, the Nominating and Governance Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. In 2015, the Board established a search committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. In 2017 and 2018, the Nominating and Governance Committee also engaged the firm of Heidrick & Struggles International, Inc., which firm recommended Messrs. Butler and Bunting for director. In considering candidates for director, the Nominating and Governance Committee considers the skills, expertise, experience and qualifications that will best complement the overall mix of skills and expertise of the Board in view of the strategy of, and the risks and opportunities that we face, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. In addition, the Nominating and Governance Committee takes into account the racial, ethnic and gender diversity of the Board and actively seeks minority and female candidates.

The Nominating and Governance Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment who have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to us and our stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board, including limiting their service on other boards to a reasonable number. The Nominating and Governance Committee also takes into account the candidate’s level of financial literacy. The Nominating and Governance Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Nominating and Governance Committee also assesses the diversity of the Board as a part of its annual self-assessment process as described in more detail below. The Nominating and Governance Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders as it uses to evaluate the candidates identified by the Board.

The Board has determined that all of the members of the Nominating and Governance Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines.

For information on how to nominate a person for election as a director at the 2020 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 2020 Annual Meeting.”

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Board Evaluation Process.   The Nominating and Governance Committee oversees the self-evaluation process, which is used by the Board and by each committee of the Board to determine effectiveness and identify opportunities for improvement. Annually at its meeting in March, the Nominating and Governance Committee initiates the self-evaluation process and approves the form of written evaluation questionnaires that are distributed to each director for completion. The written evaluation questionnaires are updated each year as necessary to reflect changes identified in the prior year, any committee charter changes and any suggestions from the directors. The questionnaires solicit feedback on Board composition, Board meeting mechanics including information received, core responsibilities, relationship with management, committee functioning and other relevant matters. Our Chief Legal Officer compiles and summarizes the responses for discussion at the subsequent Board and committee meetings. In addition, on an ongoing basis, the Chairman meets with each director individually to solicit feedback with respect to both the full Board and any committee on which the director serves, in addition to individual director performance and Board dynamics. Our Board utilizes the results of these evaluations in making decisions on Board agendas, Board structure, committee responsibilities and agendas, information presented to the Board, and continued service of individual directors on the Board. This information is then shared with the Board, and appropriate actions or changes are then identified.

No Mandatory Retirement Age or Term Limits.   Our Corporate Governance Guidelines set forth that we do not believe that mandatory retirement ages or term limits serve our needs. The Board periodically evaluates the performance and qualifications of individual directors in connection with the nomination process. In addition, although the Nominating and Governance Committee will consider length of service in recommending candidates for re-election, the Board does not believe that adopting a set term limit for directors serves our interests. Such limits may result in the loss of contributions from directors who have been able to develop, over a period of time, increasing insight into our operations and our strategic direction. The Nominating and Governance Committee reviews these policies as part of its annual governance review and will consider modifications to these policies as deemed necessary and in our best interests and the best interests of our stockholders.

DIRECTOR COMPENSATION

Director Compensation.   This section describes compensation for our non-employee directors. To attract and retain highly qualified candidates to serve on the Board, we provide a combination of cash and equity awards. Our non-employee director compensation is reviewed annually by our Nominating and Governance Committee with the assistance of Meridian, the Compensation Committee’s independent compensation consultant. The Nominating and Governance Committee, with the assistance of Meridian, reviewed the amount and composition of director compensation for 2018 and recommended an increase of $7,500 in the value of the equity portion of the annual retainer and $7,500 in the cash portion of the annual retainer we provide to our non-employee directors, which was implemented. A full-time employee who serves as director does not receive any additional compensation for service on the Board. Consequently, because Mr. Hamrock is also our President and CEO, he does not receive additional compensation for his service as a Board member.

Each non-employee director receives an annual retainer of $235,000, consisting of $97,500 in cash and an award of restricted stock units valued at $137,500 at the time of the award. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter.

The restricted stock units are awarded annually, and the number of restricted stock units is determined by dividing the value of the grant by the closing price of our common stock on the grant date. Restricted stock units are granted to non-employee directors under the NiSource Inc. 2010 Omnibus Incentive Plan (“Omnibus Plan”), which was approved by the stockholders on May 11, 2010, and re-approved on May 12, 2015.

Additionally, each non-employee director who serves as chair of a Board committee receives compensation for this responsibility. The annual committee chair fees are $20,000 for each of the standing committees. The Chairman of the Board receives additional annual compensation of $160,000 for his role and the Vice Chairman of the Board receives additional annual compensation of $75,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.

All Other Compensation.   The other compensation included under the column “All Other Compensation” in the 2018 Director Compensation Table below consists of matching contributions made by the NiSource Charitable Foundation.

Omnibus Plan.   The Omnibus Plan permits equity awards to be made to non-employee directors in the form of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Except as provided below, terms and conditions of awards to non-employee directors are determined by the Board prior to grant. Since May 11, 2010, awards to directors have been made under the Omnibus Plan. Awards of restricted stock units associated with periods prior to June 1, 2011, vested immediately, but are not distributed in shares of common stock until after the director separates from the Board. Awards of restricted stock units made after June 1, 2011, vest and are payable in shares of our common stock on the earlier to occur of: (a) the last day of the director’s annual term for which the restricted stock units are awarded; or (b) the date that the director separates from service due to a “Change-in-Control” (as defined in the Omnibus Plan); provided, however, that effective in 2015, any director that commences services after the start of an annual term vests on the first anniversary of the initial grant; and, provided further, that in the event that the director separates from service prior to such time as a result of “Retirement” (defined as the cessation of services after providing a minimum of five continuous years of service as a member of the Board), death or “Disability” (as defined in the Omnibus Plan), the director’s restricted stock unit awards will pro rata vest in an amount determined by using a fraction, where the numerator is the number of full or partial calendar months elapsed between the grant date and the date of the director’s Retirement, death or Disability, and the denominator of which is the number of full or partial calendar months elapsed between the grant date and the last day of the director’s annual term for which the director is elected that corresponds to the year in which the restricted stock units are awarded. The vested restricted stock units awarded on or after June 1, 2011, are payable as soon as practicable following vesting, unless otherwise provided pursuant to any election the non-employee director may have made to defer distribution. With respect to restricted stock units that have not been distributed, additional restricted stock units are credited to each non-employee director to reflect dividends paid to stockholders on common stock. The restricted stock units have no voting or other stock ownership rights and are payable in shares of our common stock upon distribution.

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Director Stock Ownership.   The Board maintains stock ownership requirements for directors that are included in our Corporate Governance Guidelines. Within five years of becoming a non-employee director, each non-employee director is required to hold an amount of our stock with a value equal to five times the annual cash retainer paid to directors. Company stock that counts towards satisfaction of this requirement includes shares purchased on the open market, awards of restricted stock or restricted stock units through the prior Non-Employee Director Stock Incentive Plan or Omnibus Plan, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household. All of the non-employee director nominees are in compliance with the stock ownership requirements that are included in the Corporate Governance Guidelines.

Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value. Approximately fifty-nine percent (59%) of a non-employee director’s 2018 annual retainer (valued as of the time of award and excluding committee retainers) consisted of restricted stock units, which are converted into common stock when vested and distributed to the director.

2018 Director Compensation

The table below sets forth all compensation earned by or paid to our non-employee directors in 2018. Our CEO did not receive any additional compensation for his service on the Board. His compensation for serving as CEO is discussed in the Executive Compensation section of this Proxy Statement.

Name
Fees Earned or
Paid in Cash
($)(1)
Stock Awards
($)(2)(3)
All Other
Compensation
($)(4)
Total
($)
Richard A. Abdoo(5)
 
31,956
 
 
31,956
 
Peter A. Altabef
 
107,816
 
 
137,500
 
 
10,000
 
 
255,316
 
Theodore H. Bunting, Jr.(6)
 
31,417
 
 
92,727
 
 
124,144
 
Eric L. Butler
 
94,859
 
 
137,500
 
 
5,000
 
 
237,359
 
Aristides S. Candris
 
114,859
 
 
137,500
 
 
10,000
 
 
262,359
 
Wayne S. DeVeydt
 
94,859
 
 
137,500
 
 
232,359
 
Deborah A. Henretta
 
94,859
 
 
137,500
 
 
10,000
 
 
242,359
 
Michael E. Jesanis
 
114,859
 
 
137,500
 
 
10,000
 
 
262,359
 
Kevin T. Kabat
 
184,819
 
 
137,500
 
 
322,319
 
Richard L. Thompson
 
261,902
 
 
137,500
 
 
10,000
 
 
409,402
 
Carolyn Y. Woo
 
114,859
 
 
137,500
 
 
9,500
 
 
261,859
 
(1)The fees shown include the annual cash retainer and any Board and chair fees paid during the year to each non-employee director. With respect to Messrs. Abdoo and Bunting, the fees were prorated for partial year service on the Board; with respect to Messrs. Altabef, Kabat and Thompson the fees were prorated for partial year service as committee chairs. Mr. Abdoo, who did not stand for reelection in 2018, served on the Board until May 8, 2018. Mr. Bunting was appointed to the Board on September 5, 2018.
(2)The amounts shown reflect the grant date fair value of awards computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For restricted stock units, the grant date fair value is the number of shares multiplied by the closing price of our stock on the award date. Each non-employee director who was elected on May 8, 2018, received an award of restricted stock units valued at $137,500 which was equal to approximately 5,478 restricted stock units valued at $25.10 per unit, the closing price of our common stock on that date. See “Security Ownership of Certain Beneficial Owners and Management” and the footnotes to that table for information regarding the number of shares of stock held by each current director as of March 1, 2019.
(3)As of December 31, 2018, the number of equity awards (in the form of restricted stock units) that were outstanding for each non-employee director was as follows: Mr. Abdoo, 0; Mr. Altabef, 5,559; Mr. Bunting, 3,392; Mr. Butler, 5,559; Dr. Candris, 38,182; Mr. DeVeydt, 11,195; Ms. Henretta, 23,165; Mr. Jesanis, 5,559; Mr. Kabat, 5,559; Mr. Thompson, 63,900; and Dr. Woo, 33,767.
(4)The amounts shown reflect matching contributions made by the NiSource Charitable Foundation under the Director Charitable Match Program. The Foundation matches up to $10,000 annually in contributions by any non-employee director to approved tax-exempt charitable organizations. Any amount not utilized for the match in the year it is first available is carried over to the following year.
(5)Mr. Abdoo served on the Board until May 8, 2018.
(6)The amount shown in the Stock Awards column for Mr. Bunting is a pro-rated award which was equal to approximately 3,367 restricted stock units valued at $27.54 per unit, the closing price of our common stock on September 5, 2018, the date of his appointment to the Board.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows as of March 12, 2019, the number of shares of our outstanding common stock beneficially owned by: (i) each of our directors; (ii) each of the Named Executive Officers; (iii) our directors and executive officers as a group; and (iv) beneficial owners of more than 5% of our outstanding common stock (based solely on the Schedule 13G filings and any amendments thereto filed with the SEC on or before March 12, 2019) except as noted below. None of the Named Executive Officers or directors has any outstanding stock options as of that date. The business address of each of our directors and executive officers is our address.

Name and Address of Beneficial Owner
Number of Shares of
Common Stock
Beneficially Owned
Percent of Class
Outstanding
5% Owners
 
 
 
 
 
 
T. Rowe Price Associates, Inc.(1)
100 East Pratt Street
Baltimore, MD 21202
 
61,526,324
 
 
16.5
%
The Vanguard Group(2)
100 Vanguard Blvd.
Malvern, PA 19355
 
41,591,007
 
 
11.2
%
BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055
 
32,194,606
 
 
8.7
%
Directors and Executive Officers
 
 
 
 
 
 
Peter A. Altabef(4)
 
12,767
 
*
Donald E. Brown(5)
 
73,141
 
*
Theodore H. Bunting, Jr(4)
 
1,710
 
*
Eric L. Butler(4)
 
13,844
 
*
Aristides S. Candris(4)
 
13,889
 
*
Wayne S. DeVeydt(4)
 
17,214
 
*
Joseph Hamrock(5)
 
394,703
 
*
Deborah A. Henretta(4)
 
1,854
 
*
Carrie J. Hightman (5)(6)
 
352,076
 
*
Michael E. Jesanis(4)
 
38,001
 
*
Kevin T. Kabat(4)
 
22,607
 
*
Violet G. Sistovaris(5)
 
154,033
 
*
Richard L. Thompson(4)
 
42,827
 
*
Pablo A. Vegas(5)
 
69,458
 
*
Carolyn Y. Woo(4)
 
40,606
 
*
All directors and executive officers as a group (18 persons)
 
1,315,938
 
*
*Less than 1%
(1)As reported on an amendment to statement on Schedule 13G/A filed with the SEC on behalf of T. Rowe Price Associates, Inc. on February 14, 2019. T. Rowe Price Associates, Inc. reported sole voting power with respect to 19,349,267 shares and sole dispositive power with respect to 61,526,324 shares reported as beneficially owned.
(2)As reported on an amendment to statement on Schedule 13G/A filed with the SEC on behalf of The Vanguard Group on February 11, 2019. The Vanguard Group reported sole voting power with respect to 489,941 shares, shared voting power with respect to 172,007 shares, sole dispositive power with respect to 41,000,081 shares and shared dispositive power with respect to 590,926 shares.
(3)As reported on an amendment to statement on Schedule 13G/A filed with the SEC on behalf of BlackRock, Inc. on February 6, 2019. BlackRock, Inc. reported sole voting power with respect to 29,259,631 shares and sole dispositive power with respect to 32,194,606 shares reported.
(4) Does not include restricted stock units issued under the Omnibus Plan and the former Non-Employee Director Stock Incentive Plan unless the shares have been distributed or the non-employee director has the right to acquire the shares within 60 days of March 12, 2019.
(5) Includes shares held in our 401(k) Plan and shares that are distributable within 60 days of March 12, 2019.
(6)Includes shares owned by a trust over which Ms. Hightman maintains investment control and of which one or more of her immediate family members are the sole beneficiaries.

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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

Introduction

This CD&A describes our compensation philosophy and the material elements of our 2018 executive compensation program applicable to the Named Executive Officers.

The Named Executive Officers in 2018 were:

Joseph Hamrock—President and Chief Executive Officer (“CEO”)

Donald E. Brown—Executive Vice President and Chief Financial Officer (“CFO”)

Pablo A. Vegas—Executive Vice President and President, Gas Utilities

Violet G. Sistovaris—Executive Vice President and President, Northern Indiana Public Service Company LLC (“NIPSCO”)

Carrie J. Hightman—Executive Vice President and Chief Legal Officer (“CLO”)

2018 Business Developments

On September 13, 2018, a series of fires and explosions occurred in Lawrence, Andover and North Andover, Massachusetts, related to the delivery of natural gas by our subsidiary, Columbia Gas of Massachusetts (the “Greater Lawrence Incident”). As discussed further below, the Compensation Committee considered the impact of the Greater Lawrence Incident when evaluating 2018 performance which resulted in no payouts to the Named Executive Officers under our 2018 annual cash incentive plan.

We continued to execute on our established infrastructure-focused and investment-driven business strategy, despite the Greater Lawrence Incident noted above. Key business developments during 2018 included:

Investing approximately $1.8 billion of capital across our Columbia Gas and NIPSCO utilities in support of long-term safety and service reliability for our customers and communities.
Replacing approximately 302 miles of priority gas pipelines across seven states, with the goal of enhancing gas system safety and reliability, and reducing methane emissions.
Replacing approximately 64 miles of underground electric cable and more than 1,300 electric poles in Indiana to further support increased electric reliability.
Submitting our 2018 Integrated Resource Plan to the Indiana Utility Regulatory Commission, which outlines the transition of NIPSCO’s electric generation away from coal toward cleaner and more cost-competitive renewable energy sources, with the goal of reducing carbon emissions by more than 90 percent by 2028.
Opening a fourth state-of the-art field training center, completing the plans announced in 2016 to enhance training for gas operations employees and local first responders.
Achieving significant industry and national recognition, including: being named to the Dow Jones Sustainability-North America Index for the fifth consecutive year; one of the World’s Most Ethical Companies by the Ethisphere Institute for the eighth consecutive year; one of 104 companies globally in the inaugural Bloomberg Gender Equality Index; one of America’s Best Large Employers by Forbes magazine; the second-highest ranked utility in JUST Capital’s 2018 rankings of America’s Most Just Companies; and being named to the FTSE4Good index, an index that measures the performance of companies demonstrating strong environmental, social and governance practices.

Our total shareholder return was two percent for 2018, which underperformed both major utility indices and which also reflected the challenges experienced by the broader utility sector in 2018. Consequently, our shareholder return and share price appreciation fell short of our recent historic trends and the utility indices.


Total shareholder return shown in the chart above is calculated by share price appreciation plus the annual dividend amount. The NiSource 2015 share price appreciation and total shareholder return shown in the charts above are based on a 2014 year-end closing price calculated utilizing the Bloomberg separation formula taking into account the separation of Columbia Pipeline Group, Inc. from the Company on July 1, 2015 (the “Separation”).

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2018 Compensation Committee Notable Actions

During 2018, the Compensation Committee made the following key decisions with respect to 2018 compensation:

Recommended to the independent members of the Board an increase in our CEO’s base salary and the grant date value of his 2018 annual long-term equity incentive opportunity for the reasons explained in “Compensation Committee Actions Related to 2018 Compensation” in the sections entitled “2018 Base Salaries” and “2018 LTIP Awards,” respectively.
Approved increases in base salary and increases in the grant date value of the 2018 annual long-term equity incentive opportunities for Messrs. Brown and Vegas and Ms. Sistovaris for the reasons explained in “Compensation Committee Actions Related to 2018 Compensation” in the sections entitled “2018 Base Salaries” and “2018 LTIP Awards,” respectively.
Approved uniform trigger and stretch award opportunities of 40% and 160% of target opportunity, respectively, under the annual cash performance-based incentive plan, which is intended to provide consistent motivation towards achieving stretch performance goals.
Approved an increase in the target opportunities for Mr. Vegas and Ms. Sistovaris under the annual cash performance-based incentive plan for the reasons explained in “Compensation Committee Actions Related to 2018 Compensation” in the section entitled “2018 Cash Incentive Plan.”
Approved a redesigned annual long-term incentive program for 2018 to enhance its retentive characteristics by adding service-based restricted stock units (“RSUs”) to the mix of long-term equity incentives resulting in a long-term incentive program delivered in the form of performance-based restricted stock units (“PSUs”) (weighted 80%) and RSUs (weighted 20%).
Refined the PSU performance goals as compared to prior years by adding operational performance goals to the mix of financial and relative performance goals in order to (i) continue to incentivize financial performance with 80% of the target PSUs vesting based on the achievement of a financial performance goal, subject to a +/- 25% vesting modifier based on relative total shareholder return (“RTSR”) performance and (ii) further incentivize individual performance and drive accountability by tying the vesting of 20% of the target PSUs to the achievement of key business imperatives and a financial vesting trigger, as further explained in the sections entitled “Long-Term Incentive Program” and “2018 LTIP Awards.”

Greater Lawrence Incident

In January 2019, the Compensation Committee applied negative discretion retained by the Compensation Committee under the Omnibus Plan to entirely eliminate 2018 annual cash incentive plan payouts to the Named Executive Officers in light of the Greater Lawrence Incident. For details, please see the sections entitled “2018 Cash Incentive Plan” and “Implications of the Greater Lawrence Incident.”

Our Executive Compensation Philosophy

The key design priorities of our 2018 executive compensation program were to:

Maintain a financially responsible program that is aligned with our strategic plan to build stockholder value and support long-term, sustainable earnings and dividend growth.
Provide a total compensation package that is aligned with the standards in our industry thereby enhancing our ability to:
Attract and retain executives with competitive compensation opportunities;
Motivate and reward executives for sustaining high performance; and
Ensure that significant portions of pay remain at-risk for failure to achieve our business objectives.
Reward executives based upon level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of its business objectives.
Provide compensation that is both competitive with the market for executive talent and appropriately correlated to Company performance so that the executive receives increased payouts under our incentive programs when Company performance is high and decreased payouts under our incentive programs when Company performance is low.
Comply with applicable laws and regulations.

The Compensation Committee believes that our executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives and reward effective leadership decisions that create value for our stockholders, customers and other key stakeholders.

Overview of Our 2018 Executive Compensation Program

We design our executive compensation program to attract, retain and motivate highly-qualified executive talent. We believe highly-qualified executive talent is an essential driver of the Company’s success in achieving its business objectives.

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The principal elements of compensation that we provide to the Named Executive Officers, and all our executives, are: base salary, annual short-term performance-based cash incentives, and long-term performance-based and service-based equity incentive awards. We use short- and long-term performance-based compensation to motivate our executives to meet and exceed our short- and long-term business objectives. We included service-based equity in the 2018 executive compensation program in order to enhance the attractiveness and talent retention aspects of our executive compensation program.

Our long-term incentive program is denominated entirely in common stock to align the interests of executives with those of our stockholders as the ultimate value of our long-term incentive compensation is determined by the performance of our stock. The principal elements of our 2018 total compensation program, time horizon and design objectives of each element are shown below.

Elements of Total Compensation and Compensation Design Priorities
Element of
Total Compensation
Form of Compensation
Talent Attraction
Alignment with
Stockholder Interest
Talent Retention
Short-term:
Base Salary
Cash
Annual Performance-Based Cash Incentive
Cash
Long-term:
Long-Term Equity Incentive
PSUs
 
RSUs

We generally target total compensation (base salary, annual short-term performance-based cash incentives and long-term equity incentive awards) to be competitive with the compensation paid to similarly positioned executives at companies within our compensation peer group (the “Comparator Group”) as described in the section entitled “Our Executive Compensation Process - Competitive Market Review.” We do not, however, manage pay to a stipulated percentile of the Comparator Group practices.

When making decisions about our executive compensation program, the Compensation Committee takes into account the stockholders’ view of such matters. In 2018, approximately 97% of the votes cast by our investors were voted in favor of our Say-on-Pay Proposal at our 2018 annual meeting of stockholders. No changes were made to the design of our executive compensation program in response to the 2018 stockholder vote.

Our Executive Compensation Mix

We believe that a significant percentage of total compensation for the Named Executive Officers should consist of variable and at-risk compensation. The Compensation Committee believes the appropriate mix of compensation elements should take into account the Company’s financial and strategic objectives, the competitive environment, retentive elements, Company performance, individual performance and responsibilities, and evolving governance practices. Additionally, the Compensation Committee reviews and assesses total Named Executive Officer compensation to evaluate whether we offer well-balanced incentives for senior executives to focus on serving the interests of the Company and its stockholders.

The following charts illustrate the extent to which 2018 target total compensation for our CEO and the other Named Executive Officers was payable in fixed (base salary) and variable and at-risk (annual performance-based cash incentive payable at the target level and the grant date fair value of the annual long-term performance-based equity incentive award payable at the target level) formats.


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Target Total Compensation
Named Executive Officer
Annualized
Base Salary
($)
Annual
Cash Incentive
Target ($)
RSUs
($)
PSUs
Target
($)
Total
($)
Joseph Hamrock
President and CEO
 
1,000,000
 
 
1,200,000
 
 
860,000
 
 
3,440,000
 
 
6,500,000
 
Donald E. Brown
Executive Vice President and CFO
 
575,000
 
 
431,250
 
 
190,000
 
 
760,000
 
 
1,956,250
 
Pablo A. Vegas
Executive Vice President and President, Gas Utilities
 
525,000
 
 
393,750
 
 
190,000
 
 
760,000
 
 
1,868,750
 
Violet G. Sistovaris
Executive Vice President and President, NIPSCO
 
475,000
 
 
332,500
 
 
140,000
 
 
560,000
 
 
1,507,500
 
Carrie J. Hightman
Executive Vice President and CLO
 
490,000
 
 
294,000
 
 
140,000
 
 
560,000
 
 
1,484,000
 

Principal Elements of Our 2018 Executive Compensation Program

Base Salary

Base salary is designed to provide the Named Executive Officers, and all our other employees, with a level of fixed pay that is commensurate with the employee’s role and responsibility. We believe that by delivering base salaries that are reflective of market norms, we are well-positioned to attract, retain and motivate top caliber executives in an increasingly competitive labor environment. The Compensation Committee annually reviews the base salaries of the Named Executive Officers, along with the salaries of all our senior executives, to evaluate whether they are competitive within our industry. In reviewing the base salaries, the Compensation Committee considers the base salaries of similarly situated executives in the Comparator Group. See the section entitled “Our Executive Compensation Process - Competitive Market Review.”

The Compensation Committee determines any base salary changes for the Named Executive Officers, and all our senior executives, based on a combination of factors that include: competitive pay standards, level of responsibility, experience, internal equity considerations and historical compensation. Additionally, the Compensation Committee considers recommendations from our CEO, Mr. Hamrock, reflecting his assessment of individual Named Executive Officer performance and their contributions to the achievement of business objectives. Mr. Hamrock’s pay is evaluated separately by the Compensation Committee, taking into account those factors reviewed for all other senior executives other than the recommendation from Mr. Hamrock. The Compensation Committee then provides its recommendation regarding CEO compensation to the independent members of the Board for approval. See the section below entitled “Compensation Committee Actions Related to 2018 Compensation — 2018 Base Salaries” for more information.

Annual Performance-Based Cash Incentive Plan (“Cash Incentive Plan”)

The Cash Incentive Plan provides the Named Executive Officers with the opportunity to earn a cash award tied to both Company performance and their individual contributions to our performance. A threshold financial trigger of net operating earnings per share (hereafter “NOEPS” as defined in the section entitled “2018 Cash Incentive Plan”) must be met before any award may be paid under the Cash Incentive Plan. Once the financial trigger is met, awards to the Named Executive Officers, and all our senior executives, are subject to one corporate financial performance goal (weighted 75%) and several operational goals related to customer care and safety (weighted 25%).

The NOEPS financial performance goal is determined based on the Company’s annual financial plan, which is approved by the Board at the beginning of the year, and is designed to achieve our goal of creating sustainable stockholder value by growing earnings and providing a strong dividend. The customer care and safety goals are designed to incent achievement of our business imperatives. Additionally, the Compensation Committee retains discretion under the Omnibus Plan to reduce the formulaic payouts determined by the above performance goals to further reflect Company or individual performance.

 
Cash Incentive Plan
 
75% Financial Performance
 
 
25% Customer Care and Safety
 
   
 
 

Importantly, eligibility for participation in the Cash Incentive Plan extends to nearly all our employees. Every eligible employee has an incentive opportunity at trigger, target and stretch levels of performance. The Compensation Committee identifies expectations for all employees, senior executives, and the Named Executive Officers. With respect to the CEO, the Compensation Committee makes recommendations regarding his award opportunities for consideration and approval by the independent members of the Board. See the section below entitled “Compensation Committee Actions Related to 2018 Compensation — 2018 Cash Incentive Plan” for more information regarding the 2018 Cash Incentive Plan, including incentive opportunities, performance measures and weightings, goals and payouts for each of the Named Executive Officers.

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Long-Term Incentive Program (“LTIP”)

LTIP Design Overview. The LTIP provides the Named Executive Officers and our senior executives with the opportunity to earn shares of our stock based on performance and service. The 2018 LTIP awards consist of PSUs (80% of the 2018 LTIP award) that are eligible to vest based on financial performance and progress with respect to several key business imperatives that we believe build stockholder value, subject to a threshold cumulative financial trigger and RSUs (20% of the 2018 LTIP award) that will vest after the completion of a multi-year service condition. For 2018, the Compensation Committee approved a redesigned award program designed to:

Establish a direct link between compensation earned and the achievement of longer-term financial objectives through the grant of 80% of the target PSUs (65% of the 2018 LTIP award) with vesting tied to financial performance, while still maintaining a relative performance goal with the incorporation of a +/- 25% RTSR performance payout modifier with respect to this portion of the 2018 LTIP award.
Focus executives on key business imperatives that we believe build stockholder value in the categories of safety, customer care, cost containment, organizational culture and environmental impact, each weighted equally (the “Customer Value Framework”) in order to further align payouts with individual contributions and drive accountability through the grant of 20% of the target PSUs (15% of the 2018 LTIP award) with vesting tied to achievement of goals relating to the Customer Value Framework, with the vesting level subject to modification based on an assessment of the executive’s contributions towards the Company’s achievement of the Customer Value Framework.
Enhance retention by rewarding long-term service through the grant of RSUs (20% of the 2018 LTIP award), which vest subject to the executive’s continued employment through a multi-year service period.

For 2018, the long-term incentive award was delivered entirely in equity in the form of PSUs and RSUs. The key LTIP design elements that are intended to drive Company financial and operational performance and align with stockholder interests are shown below.

 
 
 
 
 
PSUs
80% of the target long-term incentive opportunity
 
 
 
Three-year performance period
 
 
 
80% of target PSUs (65% of the 2018 LTIP award) vesting based on NOEPS performance, subject to a +/- 25% payout modifier based on RTSR performance
 
 
 
20% of target PSUs (15% of the 2018 LTIP award) vesting based on Customer Value Framework performance goals and a NOEPS vesting trigger, subject to a payout modifier based on an assessment of executive’s contribution towards the Customer Value Framework
 
 
RSUs
20% of the long-term incentive opportunity
 
 
 
Vesting subject to the executive’s continued employment through a multi-year service period (in excess of three years)
 
 
 
 
 
 

The 2018 PSUs are eligible for vesting only if a cumulative NOEPS performance trigger is met over a three-year performance period. The Compensation Committee utilized NOEPS as a performance measure for the 2018 LTIP award in recognition that this straightforward measure is deemed to support enterprise-wide strategy and performance and be aligned with stockholder value. This measure was also used as a performance measure in our 2018 Cash Incentive Plan to align with stockholder value over the short-term and long-term.

For 2018, both the short- and long-term incentive programs are supplemented by additional measures to strike an appropriate balance with respect to incentivizing earnings strength and nonfinancial business imperatives. The remaining 20% of the 2018 LTIP award consists of RSUs that will vest based on the executive’s continued employment through February 26, 2021, subject to earlier vesting for certain qualifying terminations of employment prior to that date. This service-based award is designed to reward long-term service with the Company and thereby adds a retention incentive to our compensation mix. Additionally, RSUs are considered by the Compensation Committee to be at-risk and aligned with stockholder interests as the ultimate value of the RSUs will fluctuate based on our stock price performance.

Long-Term Performance Goals. The PSUs are subject to the achievement of a NOEPS performance trigger in order for any vesting to occur. The NOEPS financial performance goal is determined based on the Company’s annual financial plan, which is approved by the Board at the beginning of the performance period, and is designed to achieve our goal of creating sustainable stockholder value by growing earnings and providing a strong dividend. If the NOEPS performance trigger is achieved, 80% of the target PSUs (65% of the 2018 LTIP award) will vest based on NOEPS performance above the trigger, as modified by our RTSR performance (which can reduce or increase the vested amount of the award by up to 25%). The Compensation Committee selected cumulative NOEPS as a goal and RTSR as a modifier because it believes it is important that each executive has personal financial exposure to the performance of our stock and, therefore, is aligned with the financial interests of stockholders.

If the NOEPS vesting trigger is achieved, the remaining 20% of the target PSUs (15% of the 2018 LTIP award) will vest based on the Company’s successful execution of the Customer Value Framework goals and a discretionary assessment of the Named Executive Officer’s contributions to the Company’s achievement relative to the Customer Value Framework goals. Under the 2018 LTIP program design, the Company’s overall Customer Value Framework goal must be met in the respective category before a payout may occur with respect to such category. Once the Company’s Customer Value Framework goal is met, the actual payout for the Customer Value Framework portion of the award is determined based on a discretionary assessment of the individual executive’s contribution to the successful achievement of the respective Customer Value Framework goal over the three-year performance period.

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Provided the Customer Value Framework goal is met, the CEO performs the discretionary assessment of each Named Executive Officer other than himself and makes a recommendation to the Compensation Committee, with the Customer Value Framework vesting level approved by the Compensation Committee. In the case of the CEO, the Compensation Committee performs the discretionary assessment of his performance relative to the Customer Value Framework goals, and the independent members of the Board approve the CEO’s Customer Value Framework vesting level.

Design Considerations. The Compensation Committee believes that the long-term incentive program promotes decision making that is consistent with the Company’s long-term business objectives. When establishing long-term equity incentive opportunity levels for the Named Executive Officers, and our senior executives, the Compensation Committee considers, among other things, the executive’s base salary, the appropriate mix of cash and equity incentive opportunities, prior awards under the LTIP and the compensation practices for similarly situated executives within the Company and at companies in our Comparator Group. The actual value of the 2018 LTIP award, if any, will depend upon Company performance against pre-established performance measures, the individual executive’s performance as well as our stock price at the time the awards are settled.

Other Compensation and Benefits

The Named Executive Officers also receive executive severance and change-in-control compensation and benefits, an executive deferred compensation plan, a limited number of perquisites and a number of other employee benefits that generally are extended to our entire employee population. These other forms of compensation and benefits are generally comparable to those that are provided to similarly situated executives at other companies of our size and thereby serve the objectives of our compensation program to attract and retain our senior executives.

Severance and Change-In-Control Benefits

We provide Change-in-Control and Termination Agreements with the intent of ensuring that our senior executives continue to apply thoroughly objective judgment to appropriately safeguard stockholder value and maximize investor return in relation to any potential change-in-control. The Change-in-Control and Termination Agreements furnish cash severance benefits upon a double-trigger (meaning there must be both a qualifying change-in-control and termination of employment) and do not include any “gross-up” payments to executives for excise taxes incurred with respect to benefits received under a Change-in-Control and Termination Agreement. We maintain Change-in-Control and Termination Agreements with each of the Named Executive Officers and all the Named Executive Officers are subject to our executive severance policy.

Additionally, the Omnibus Plan provides for double-trigger vesting for equity awards that are assumed or replaced by an acquiring company upon a change-in-control; meaning that there must be both a change-in-control and a qualifying termination of employment in order for the equity awards to vest in connection with or following such change-in-control. In the event equity awards are not assumed or replaced in a change-in-control, then the outstanding equity awards will vest upon the occurrence of a change-in-control alone. For further information regarding the benefits to be received upon termination of employment or change-in-control, see the table in the section entitled “Potential Payments upon Termination of Employment or a Change-in-Control of the Company” and the accompanying narrative.

Perquisites

Perquisites are not a principal element of our executive compensation program. They are intended to assist executives in the performance of their duties on our behalf or to otherwise provide benefits that have a combined personal and business purpose. Generally, we do not reimburse the Named Executive Officers for the payment of personal income taxes they incur in connection with their receipt of these benefits. For information regarding 2018 perquisites, see the 2018 Summary Compensation Table and footnote (6) to that table.

Deferred Compensation Plan

Eligible executives, including the Named Executive Officers, may elect to defer between 5% and 80% of their base salary and annual cash incentive payout under our Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan provides an opportunity for eligible executives to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under the 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the 2018 Non-qualified Deferred Compensation Table.

Pension Programs

During 2018, we maintained a tax-qualified defined benefit pension plan for essentially all salaried exempt employees hired before January 1, 2010, all non-exempt employees (both non-union and certain union employees) hired before January 1, 2013, as well as for other union employees, regardless of hire date, and a non-qualified defined benefit pension plan (the “Pension Restoration Plan”) for all eligible employees with annual compensation or pension benefits in excess of the limits imposed by the Internal Revenue Service (“IRS”), including any eligible Named Executive Officer. The Pension Restoration Plan provides for a pension benefit under the same formula provided under the tax-qualified plan but without regard to the IRS limits and reduced by amounts paid under the tax-qualified plan. The material terms of the pension programs are described in the narrative to the 2018 Pension Benefits Table.

Savings Programs

The Named Executive Officers are eligible to participate in the same tax-qualified 401(k) Plan as most employees and in a non-qualified defined contribution plan (the “Savings Restoration Plan”) maintained for eligible executive employees. The 401(k) Plan includes a Company match that varies depending on the pension plan in which the employee participates and a Company profit sharing contribution for most employees of between 0.5% and 1.5% of the employee’s eligible earnings based on achievement of the overall corporate NOEPS measure. In addition, for salaried employees hired after January 1, 2010, and non-union non-exempt employees hired after January 1, 2013, the 401(k) Plan includes a 3% Company contribution to the employee accounts. The Savings Restoration Plan provides for Company contributions in excess of IRS limits under the 401(k) Plan for eligible employees, including the Named Executive Officers. The material terms of the Savings Restoration Plan are described in the narrative to the 2018 Non-qualified Deferred Compensation Table.

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Health and Welfare Benefits

We also provide the Named Executive Officers other broad-based benefits such as medical, dental, life insurance and long-term disability coverage on the same terms and conditions to all employees. We believe that these broad-based benefits enhance our reputation as an employer of choice.

Our Executive Compensation Process

The Compensation Committee is responsible for evaluating and determining the compensation of our senior executives and for overseeing the administration of our equity plans and grants. In doing so, Compensation Committee takes into account various factors when making compensation decisions, including:

Attainment of our established business and financial goals;
Competitiveness of our compensation program based upon competitive market data; and
An executive’s position, level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of its business objectives.

The Compensation Committee reviews the compensation of our CEO and his executive direct reports each year and apprises the Board accordingly. For our CEO, the Compensation Committee evaluates CEO performance in light of the Company’s goals and objectives and considers recommendations from Meridian, the Compensation Committee’s independent compensation consultant, that are reflective of the Compensation Committee’s assessment of our CEO’s performance and compensation competitiveness. Following this evaluation, the Compensation Committee submits its recommendations to the independent members of the Board for review and approval.

When considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the Compensation Committee considers input from the CEO, the Chief Services Officer and the Senior Vice President, Human Resources, in addition to the Compensation Committee’s independent compensation consultant.

Competitive Market Review

In connection with its compensation decision making, the Compensation Committee reviews the executive compensation practices in effect at other companies in the Comparator Group. These companies comprised leading gas, electric, and multi-line utilities that were selected by the Compensation Committee for their operational comparability and because we generally compete with these companies for similar executive talent. For 2018, the Compensation Committee, with input from Meridian, made one change to the Comparator Group removing Southern Company Gas due to its increased revenues as compared to the Comparator Group. For purposes of evaluating 2018 compensation practices, the Comparator Group included the companies shown below.

Alliant Energy Corporation
Piedmont Natural Gas Company, Inc.
Ameren Corporation
PNM Resources, Inc.
American Electric Power Company, Inc.
PPL Corporation
Atmos Energy Corporation
Public Service Enterprise Group Incorporated
CenterPoint Energy, Inc.
SCANA Corporation
CMS Energy Corporation
Sempra Energy
Dominion Energy, Inc.
Spire, Inc.
DTE Energy Company
Vectren Corporation
FirstEnergy Corp.
WEC Energy Group, Inc.
OGE Energy Corp.
WGL Holdings, Inc.
ONE Gas, Inc.
 
Compensation Peer Group
 
Revenue(1)
(millions)
 
Market Cap(1)
(millions)
NiSource
$
4,493
 
$
7,868
 
NiSource Percentile Rank
 
46th
%ile
 
29th
%ile
75th Percentile
$
9,208
 
$
20,524
 
Median
$
6,076
 
$
12,652
 
25th Percentile
$
2,350
 
$
6,609
 
(1)The Compensation Committee selected the 2018 Compensation Peer Group in August 2017 based on fiscal year-end 2016 revenue and market capitalization data. Fiscal year-end revenue and market capitalization data was compiled by Meridian.

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Compensation Committee Actions Related to 2018 Executive Compensation

The Compensation Committee reviewed and, as appropriate, took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. The Compensation Committee’s compensation determinations and recommendations were based primarily upon recognition of the roles, responsibilities and performance of each Named Executive Officer, a review of the Comparator Group and an assessment of total Named Executive Officer compensation.

   2018 Base Salaries

The Compensation Committee annually reviews the base salaries of the Named Executive Officers, and all our senior executives, to evaluate whether they are competitive and appropriately reflect performance. In setting 2018 base salary levels, the Compensation Committee considered competitive market data, the competitiveness of annual total target compensation of each Named Executive Officer, responsibilities, experience, internal pay equity, historical compensation practices, individual performance and contributions to achievement of business objectives. Based on this assessment, the Compensation Committee (or, in the case of Mr. Hamrock, the independent members of the Board) approved 2018 base salary levels, effective June 1, 2018. In the case of Mr. Brown’s increase of approximately 9.5%, the Compensation Committee considered in particular his effective performance during 2017 in core aspects of the chief financial officer role, his strong leadership in the execution of the Company’s customer value strategy and the need for further alignment of his cash compensation with the market median. Below are the 2018 and 2017 annual base salary levels for each Named Executive Officer.

 
Base Salary           
 
 
Named Executive Officer
2018 Annual Salary ($)
 
2017 Annual Salary ($)
Joseph Hamrock
 
1,000,000
 
 
975,000
 
Donald E. Brown
 
575,000
 
 
525,000
 
Pablo A. Vegas
 
525,000
 
 
500,000
 
Violet G. Sistovaris
 
475,000
 
 
450,000
 
Carrie J. Hightman
 
490,000
 
 
490,000
 

   2018 Cash Incentive Plan

In January 2018, the Compensation Committee established performance measures and goals to be used to determine the 2018 Cash Incentive Plan payouts for the Named Executive Officers and all of our other participating employees. In determining Cash Incentive Plan opportunities for the Named Executive Officers, the Compensation Committee considered competitive information from the Comparator Group, input from Meridian, the Compensation Committee’s independent compensation consultant, historical payouts and individual performance in its review of the trigger, target and stretch opportunities for the Named Executive Officers and made no changes to the target opportunities for Named Executive Officers, except for Mr. Vegas and Ms. Sistovaris. The Committee approved increases from 70% to 75% of target opportunity and from 65% to 70% of target opportunity for Mr. Vegas and Ms. Sistovaris, respectively, to reward exemplary leadership during 2017 and maintain market competitiveness.

Additionally, in its review of the trigger, target and stretch opportunities for the Named Executive Officers, the Compensation Committee (and, in the case of the CEO, the independent members of the Board) approved uniform trigger and stretch opportunities among all the Named Executive Officers relative to their target opportunities. Meridian reported to the Compensation Committee that market practice is to establish trigger and stretch opportunities as uniform percentages of target for all participants, (i.e., comparable proportionate pay outcomes for comparable performance). The Compensation Committee considered Meridian’s input and changed the trigger and stretch opportunities to 40% and 160%, respectively, of the target opportunity for each Named Executive Officer. Previously, their trigger opportunities ranged from 33% to 43% of the target opportunity while their stretch opportunities ranged from 146% to 162% of the target opportunity. These changes were made to simplify the compensation structure, provide consistent motivation towards the achievement of the underlying performance goal, and to be consistent with market practice as reported by Meridian.

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The 2018 Cash Incentive Plan awards for the Named Executive Officers, and all our senior executives, were subject to achievement of one corporate financial goal, NOEPS, and operational goals related to customer care and safety, as detailed in the table below. The Compensation Committee approved these measures for the annual performance period because they were deemed important to the Company’s success in increasing stockholder value. The incentive opportunities for the Named Executive Officers were contingent on achievement of goals relating to these measures. In addition, under the terms of the Omnibus Plan, the Compensation Committee retained discretion to adjust 2018 Cash Incentive Plan awards downward, either on a formulaic or discretionary basis, as the Compensation Committee determined to be appropriate in order to reflect other items of Company or individual performance deemed relevant by the Compensation Committee.

 
Performance Goal
Description
Reason Selected
 
Earnings
 
 
 
Net Operating Earnings Per Share (“NOEPS”), a non-GAAP measure.
Income from continuing operations determined in accordance with Generally Accepted Accounting Principles (“GAAP”), including, without limitation, the impact of incentive payouts and adjusted for certain items, such as fluctuations in weather and other significant unusual events disclosed in the Company’s earnings reports, (examples of which may include transaction-related costs, debt extinguishment costs or certain income tax items).(1)
Viewed by the Board as representative of the fundamental earnings strength and performance of the Company.
Net operating earnings is used internally for budgeting and reporting to the Board.
Consistent with the Company’s external reporting of results.
 
 
 
(1)For 2018, a pre-tax adjustment of $855 million was excluded from GAAP earnings and attributable to expenses and lost revenues related to the Greater Lawrence Incident. For details regarding the Greater Lawrence Incident, please see Note 18-E to our consolidated financial statements included in our Annual Report on Form 10-K.
 
 
Customer Care
 
 
 
2018 JD Power Gas and Electrical Utility Residential Customer Satisfaction Studies (“JD Power Studies”)
Measures relative performance of our operating companies as compared to peer companies within each operating company’s jurisdiction (based on company size and geographic region), as reported in the 2018 JD Power Studies, with the target set using the Company’s 2017 performance as the baseline. Threshold, target and maximum performance goals are based on the scoring set forth in the JD Power Studies.
Designed to track our progress in delivering satisfaction to our customers relative to our peers.
Aligned with our stakeholder commitment of top-tier customer satisfaction and brand perception.
2018 MSR Group overall post transaction customer satisfaction survey results (“MSR Group Survey”)
Measures our operating companies’ performance in a post transaction survey designed to assess the customer experience, with the target set using the Company’s 2017 performance as the baseline. Threshold, target and maximum performance goals are based on our percentile ranking as compared to the other surveyed companies.
Designed to track our progress in delivering satisfaction to our customers relative to our prior performance.
Aligned with our stakeholder commitment of top-tier customer satisfaction and brand perception.
Safety
 
 
 
DART Rate
Measures the rate of employee injuries that resulted in work days missed or restricted or an employee transfer, with the target set using industry benchmark of top decile.
Designed to track our progress in achieving the optimum safety climate.
2018 National Safety Council Barometer Survey developed by the National Safety Council (“NSCBS”)
A survey that gauges employee perception of our safety programs and benchmarks results against a proprietary database of over 800 companies, with the target set using the Company’s 2017 performance as the baseline. Threshold, target and maximum performance goals are based on our percentile ranking as compared to the other surveyed companies.
Designed to track our progress in achieving the optimum safety climate supported by the appropriate activities while also gauging management, supervisor and employee engagement.

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The performance measures and their associated weightings applicable to each of the Named Executive Officers and formulaic results as a percentage of the target Cash Incentive Plan opportunity for 2018 (prior to the negative discretionary adjustment made by the Compensation Committee, as discussed below) are shown below.

Corporate Measures(1)
Weight
Trigger
Target
Stretch
Result(2)
Weighted
Achievement(3)
Formulaic
Result
% of Target
NOEPS
 
75
%
$
1.23
 
  $1.28-
$1.30 
$
1.35
 
$
1.30
 
 
75
%
 
84
%
Customer Care (JD Power Studies)
 
10
%
 
737
 
738 
 
739
 
 
734
 
 
0
%
Customer Care (MSR Group Survey)
 
5
%
 
89
%
90%
 
91
%
 
90
%
 
5
%
Safety (DART Rate)
 
5
%
 
.43
 
.41 
 
.20
 
 
0.67
 
 
0
%
Safety (NSCBS)
 
5
%
 
89
%
92%
 
95
%
 
91
%
 
4
%
(1)For performance between two performance levels (for example, between target and stretch goals), the incentive opportunity is determined by interpolation and is expressed as a percentage of the target opportunity.
(2)The 2018 results were calculated as discussed above under “2018 Cash Incentive Plan.”
(3)Weighted achievement is determined by multiplying the weight by the achievement percentage.

   Implications of the Greater Lawrence Incident

In January 2019, in light of the profound effect of the Greater Lawrence Incident on the communities of Andover, North Andover and Lawrence, Massachusetts, the Compensation Committee exercised negative discretion retained by the Compensation Committee under the Omnibus Plan to eliminate the performance-based cash incentive payouts for all of the Named Executive Officers, and separately, with respect to our CEO, the Compensation Committee made a recommendation to the independent members of the Board that Mr. Hamrock’s annual performance-based cash incentive payout also be eliminated. The independent members of the Board considered and accepted the Compensation Committee’s recommendation.

The Compensation Committee certified the performance results relative to the goals set in 2018 as shown in the tables above and then exercised negative discretion in accordance with the terms of the Omnibus Plan to eliminate payouts to our Named Executive Officers. The formulaic result shown below would have been used to calculate payouts to the Named Executive Officers under the 2018 Cash Incentive Plan but for the Compensation Committee’s negative discretionary adjustment to eliminate payouts. The Compensation Committee exercised negative discretion in accordance with the terms of the Omnibus Plan in order to underscore our commitment to safe operations. In making such determination, the Compensation Committee noted the strong performance of certain business units and corporate functions of certain executives, but determined that the significance of the Greater Lawrence Incident and the totality of the community impact outweighed any consideration of business unit or individual performance.

With respect to our CEO, the Compensation Committee made a recommendation to the independent members of the Board that Mr. Hamrock’s 2018 Cash Incentive Plan payout also be eliminated in order to underscore our commitment to safe operations. The Compensation Committee determined it was appropriate to recommend that no 2018 Cash Incentive Plan payout be made to Mr. Hamrock due to the profound effect of the Greater Lawrence Incident on the communities served by our subsidiary, Columbia Gas of Massachusetts. The independent members of the Board considered and accepted the Compensation Committee’s recommendation.

Consequently, no 2018 Cash Incentive Plan payouts were made to any of the Named Executive Officers. The 2018 Cash Incentive Plan opportunities, formulaic amounts that would have been payable in accordance with the performance results shown in the tables above relative to the 2018 goals and the actual payouts following the Compensation Committee’s exercise of negative discretion are shown in the table below.

   2018 Cash Incentive Plan Payouts to the Named Executive Officers

The 2018 Cash Incentive Plan opportunities and actual payout amounts as approved by the Compensation Committee (and with respect to the CEO, by the independent members of the Board) are shown below.

Named Executive Officer
2018
Salary
($)
Target
  (% of Salary)|(1)
Formulaic
Result
  (% of Target)(2)
Formulaic
Amount
  ($)(3)
2018
Award
  ($)(4)
No payout
per
Compensation
Committee
exercise of
negative
discretion
Joseph Hamrock
 
1,000,000
 
 
120
%
 
84
%
 
1,008,000
 
 
-0-
 
Donald E. Brown
 
575,000
 
 
75
%
 
84
%
 
362,250
 
 
-0-
 
Pablo A. Vegas
 
525,000
 
 
75
%
 
84
%
 
330,750
 
 
-0-
 
Violet G. Sistovaris
 
475,000
 
 
70
%
 
84
%
 
279,300
 
 
-0-
 
Carrie J. Hightman
 
490,000
 
 
60
%
 
84
%
 
246,960
 
 
-0-
 
(1)Each Named Executive Officer has a trigger bonus opportunity equal to 40% of target and a stretch bonus opportunity equal to 160% of target.
(2)Formulaic Result reflects the percentage of  Target that would have been payable to the Named Executive Officers based on the Company’s 2018 results as determined by the pre-established performance goals, prior to the Compensation Committee’s negative discretionary adjustment.
(3)The Formulaic Amounts were calculated as follows: 2018 annual salary multiplied by his or her Target (% of Salary) multiplied by the applicable Formulaic Result (% of Target).
(4)The Compensation Committee exercised negative discretion to eliminate the 2018 award payouts, and in the case of our CEO, make its recommendation to the independent members of the Board to eliminate the 2018 award payout to Mr. Hamrock.

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   2018 LTIP Awards

In January 2018, the Compensation Committee redesigned the long-term equity incentive component of the executive compensation program to enhance its retention characteristics, better align payouts with individual executive contributions and drive accountability for achievement of certain key business imperatives while continuing to align incentives to Company financial performance and stockholder interests. Consistent with the philosophy and principles articulated above, the Compensation Committee believes that the 2018 LTIP awards:

Align the interests of executives with our stockholders as the ultimate value of the award is dependent upon the value of our stock;
Support our philosophy of paying for performance because the PSUs are not eligible to vest unless the Company achieves a threshold financial performance goal over the three-year performance period;
Provide competitive compensation to recruit and retain executive talent by including a long-term equity incentive component with vesting based on a multi-year service condition, subject to earlier vesting in the event of certain qualifying terminations of employment;
Offers compensation that emphasizes the value of continuous long-term service; and
Endorses the enterprise-wide customer value initiatives and drives accountability by aligning the actual value of the award to an assessment of an executive’s contributions to the achievement of the Customer Value Framework.

In determining the 2018 LTIP award values awarded to the Named Executive Officers and all our senior executives in January 2018, the Compensation Committee considered the competitive pay practices at companies within our Comparator Group, input from Meridian, the Compensation Committee’s independent compensation consultant, the historical mix of fixed compensation versus variable incentive compensation, internal pay equity and the expectations of the executive’s role in driving the Company’s strategic and financial objectives and individual performance. Based on this assessment, the Compensation Committee (or, in the case of Mr. Hamrock, the independent members of the Board) approved the 2018 award values for each Named Executive Officer.

In the case of Mr. Hamrock, the Compensation Committee noted that Mr. Hamrock’s 2017 performance consistently exceeded expectations and considered, in particular, his total compensation in relation to the Comparator Group and recommended to the independent members of the Board, an increased LTIP award value as compared to prior years to maintain the ma