SEMPRA ENERGY DEF 14A 2008
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Reg. (S) 240.14a-101.
SEC 1913 (3-99)
TABLE OF CONTENTS
101 Ash Street
San Diego, California 92101-3017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
(2) Ratify independent registered public accounting firm.
(3) Approve 2008 Long Term Incentive Plan.
(4) Approve Amended and Restated Articles of Incorporation.
(5) Vote upon a shareholder proposal, if properly presented at the meeting.
(6) Consider other matters that may properly come before the meeting.
If you are a shareholder of record or hold shares through our Direct Registration Plan or Employee Savings Plans, an admission ticket is attached to your proxy card. If you plan to attend the meeting, please bring the admission ticket with you. If you do not bring the admission ticket, your name must be verified against our list of registered shareholders and plan participants.
If your shares are not registered in your name but are held in street name through a broker, trustee or other nominee, you must provide proof of beneficial ownership at the record date such as your most recent account statement prior to April 4, 2008, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of share ownership.
The meeting will begin promptly at 10:00 a.m., local time. Check-in will begin at 9:00 a.m. and you should allow ample time for check-in procedures.
This Notice of Annual Meeting and Proxy Statement, the accompanying form of proxy or voting instruction card and our annual report to shareholders are being mailed to shareholders beginning April 16, 2008. You also can view these documents on the Internet by accessing our website at www.sempra.com and clicking on the Investor tab.
Catherine C. Lee
The Board of Directors of Sempra Energy is providing these proxy materials to you in connection with our Annual Meeting of Shareholders. The meeting will be held on Thursday, May 22, 2008. As a shareholder, you are invited to attend the meeting and you are being requested to vote on the items of business described in this proxy statement.
Directors who are also employees of the company (Donald E. Felsinger, Chairman and Chief Executive Officer, and Neal Schmale, President and Chief Operating Officer) are not additionally compensated for their services as directors. Their compensation is summarized in the Summary Compensation Table appearing under the caption Executive Compensation.
AUDIT COMMITTEE REPORT
The following table shows the number of shares of our common stock beneficially owned at March 31, 2008 by each of our directors, by each of our executive officers named in the executive compensation tables in this proxy statement, and by all of our directors and executive officers as a group. These shares, upon giving effect to the exercise of exercisable options, total approximately 1.7% of our outstanding shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH
OF ITS EIGHT NOMINEES FOR ELECTION TO THE BOARD
Nominees for election for terms expiring in 2009:
Proposal 2: Ratification of Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as the independent registered public accounting firm to audit our financial statements and the effectiveness of our internal controls over financial reporting for 2008. Representatives of Deloitte & Touche are expected to attend the Annual Meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions from shareholders.
The following table shows the fees that we paid Deloitte & Touche for 2007 and 2006.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
Proposal 4: Approval of Amended and Restated Articles of Incorporation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
Proposal 5: Shareholder Proposal Entitled Shareholder Say On Pay
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 5
COMPENSATION COMMITTEE REPORT
Summary Compensation Table
We summarize below the compensation of our five most highly compensated executive officers for the last two years.
The following tables show 2007 and 2006 compensation expense for restricted stock and stock options granted in those years and prior years.
For additional information regarding stock awards and option awards, please see Notes B and C below and the discussions under Grants of Plan-Based Awards and Outstanding Equity Awards at Year-End of Executive Compensation Compensation Tables.
The fair value per share of the 2004 service-based restricted stock award to Mr. Schmale was $63.15.
In accordance with Securities and Exchange Commission rules, the 2006 decrease in Mr. Guiles pension benefits has not been reflected in the Summary Compensation Table.
For additional information regarding pension benefits and deferred compensation, please see the discussions under Pension Benefits and Non-Qualified Deferred Compensation of Executive Compensation Compensation Tables.
Amounts shown in the Other column consist of our contributions to charitable, educational and other non-profit organizations to match the personal contributions of executive officers on a dollar-for-dollar basis; financial and estate planning services; car allowances and the incremental cost to us (mileage at Internal Revenue Service reimbursement rates and the hourly rate of drivers) of commuting and other personal use of company cars and drivers; residential security alarm services; and holiday, business meeting and event gifts and mementos. They do not include parking at company offices and the occasional personal use by executive officers of company property or services (including club memberships and tickets for sporting and entertainment events which at the time of personal use would not otherwise be used for the business purposes for which they are provided) for which we incur no more than nominal incremental cost or for which we are reimbursed by the executive for the incremental cost of personal use.
Grants of Plan-Based Awards
Our executive officers participate in shareholder-approved incentive compensation plans that are designed to encourage high levels of performance on both a short term and a long term basis. Shorter-term incentives, typically annual performance-based cash bonuses, are provided under our Executive Incentive Plan. Longer-term incentives, typically performance-based restricted stock and service-based stock options, are provided under our Long Term Incentive Plan.
We summarize below our 2007 grants of plan-based awards for our executive officers named in the Summary Compensation Table.
Bonus guidelines for 2007 were based on earnings excluding (i) any one-time extraordinary gains or losses related to the California energy crisis and (ii) 90% of gains or losses related to asset sales and impairments, with no bonuses payable for earnings of less than $936 million and maximum bonuses payable for earnings of $1.144 billion. Bonuses for targeted earnings performance of $1.04 billion were set at levels ranging from 100% of base salary for the Chairman and Chief Executive Officer to 60% of base salary for the Executive Vice President and General Counsel, with maximum bonuses ranging from 200% to 120% of base salary. Earnings for the year for bonus purposes were $1.152 billion. Accordingly, in February 2008, the Compensation Committee authorized the payment of bonuses to the executive officers at the maximum amounts estimated at the beginning of 2007. These bonuses are reported in the Summary Compensation Table as non-equity incentive plan compensation earned in 2007.
The forfeiture conditions on restricted stock granted in 2007 will terminate at the beginning of 2011 if we have then achieved a cumulative total return to shareholders for a four-year performance period that places us among the top 50% of the companies in the S&P 500 Utilities Index or the S&P 500 Index. If neither of these performance criteria is satisfied, the forfeiture conditions will terminate as to 80% of the shares for performance among the top 55% of the companies in the S&P 500 Utilities Index with the percentage of shares as to which the restrictions may terminate declining ratably to 20% for performance among the top 70% of the companies in the S&P 500 Utilities Index. Any restricted stock for which performance criteria are not satisfied at the end of the four-year performance period will be forfeited to the company. Due to the nature of the performance criteria, we are unable to determine a target payout and have reported as the target payout the entire number of shares subject to each grant.
Outstanding Equity Awards at Year-End
We summarize below our grants of equity awards that were outstanding at December 31, 2007 for our executive officers named in the Summary Compensation Table. These grants consist solely of stock options and restricted stock.
We have reported the entire number of the shares subject to the awards and the market value of the shares at December 31, 2007 based upon performance during the portion of the applicable performance period ended at that date.
Option Exercises and Stock Vested
We summarize below the stock options that were exercised and restricted stock that vested during 2007 for our executive officers named in the Summary Compensation Table.
Our Supplemental Executive Retirement Plan provides our executive officers with retirement benefits based upon final average earnings (average base salary for the 24 consecutive months of highest base salary prior to retirement plus the average of the three highest annual bonuses during the ten years prior to retirement), years of service and age at retirement. Benefits begin to vest after five years of service and attainment of age 55 with full vesting when age plus years of service total 70 or the executive attains age 60.
Upon normal retirement at age 62, the annual benefit (as a percentage of final average earnings) in the form of a 50% joint and survivor annuity is 20% after five years of service, 40% after ten years of service, 50% after 15 years of service, 60% after 20 years of service, 62.5% after 30 years of service, and 65% after 40 years of service. Reduced benefits based on age and years of service are provided for retirement as early as age 55 and the completion of five years of service.
Benefits payable under the Supplemental Executive Retirement Plan are reduced by benefits payable under our Cash Balance and Excess Cash Balance Plans in which our executives also participate. Our Cash Balance Plan is a broad-based tax-qualified retirement plan supplemented by an Excess Cash Balance Plan that restores benefits lost due to Internal Revenue Service limitations on pay and benefits under tax-qualified pension plans. Under the Cash Balance and Excess Cash Balance Plans, we annually credit to a notional account for each participant an amount equal to 7.5% of the participants salary and bonus. Account balances earn interest and are fully vested after five years (three years effective in 2008) of service.
Retiring employees may elect to receive the retirement date present value of their vested accumulated retirement benefits in a single lump sum payment. Alternatively, they may elect an annuity that provides the actuarial equivalent of the lump sum benefit in monthly payments over a fixed term, for the life of the retiree, or the life of the retiree and the retirees spouse.
We summarize below the present value of accumulated benefits under our various retirement plans at December 31, 2007 for our executive officers named in the Summary Compensation Table.
Amounts shown for the Cash Balance and Excess Cash Balance Plans are based on the greater of the amounts payable under those plans or the sum of the present value of the accumulated benefit payable under a frozen predecessor plan plus future cash balance accruals. The amount shown for the Excess Cash Balance Plan is the present value of the incremental benefit over that provided by the Cash Balance Plan, and the amount shown for the Supplemental Executive Retirement Plan is the present value of the incremental benefit (based on a 50% joint and survivor annuity) over that provided by both the Cash Balance Plan and the Excess Cash Balance Plan.
Nonqualified Deferred Compensation
Our nonqualified deferred compensation plans permit executives to elect on a year-by-year basis to defer the receipt of all or a portion of their annual salary and bonus for payment in installments or in a lump sum at a future date selected by the executive at the time of the deferral election. Deferred amounts are fully vested and earn interest at a rate reset annually to the higher of 110% of the Moodys Corporate Bond Yield Average Rate or the Moodys Rate plus 1% (7.29% for 2007) or, at the election of the executive, are deemed invested in investment accounts that mirror the investment accounts available under our tax-qualified 401(k) Savings Plans in which all employees may participate.
We summarize below information regarding the participation in our nonqualified deferred compensation plans by our executive officers named in the Summary Compensation Table.
Severance and Change in Control Benefits
We have a severance pay agreement with each of our executive officers named in the Summary Compensation Table. Each agreement is for a term of two years and is automatically extended for an additional year upon each anniversary of the agreement unless we or the executive elect not to extend the term.
The severance pay agreements provide executives with severance benefits in the event that we were to terminate the executives employment during the term of the agreement for reasons other than cause, death or disability or the executive were to do so for good reason as defined in the agreement. The nature and amount of the severance benefits varies somewhat with the executives position, and increased benefits are provided if the executive enters into an agreement with the company to provide consulting services for two years and abide by certain covenants regarding non-solicitation of employees and information confidentiality. Additional benefits are also provided if the termination of employment were to occur within two years of a change in control of the company. In addition, our stock option and restricted stock agreements provide that all stock options would become immediately exercisable and all forfeiture and transfer conditions on restricted stock would immediately terminate upon a change in control of the company, whether or not accompanied or followed by a termination of the executives employment.
The definitions of cause and good reason vary somewhat among the severance pay agreements and whether the termination of employment occurs before or after a change in control of the company. However, cause is generally defined to include a willful and continued failure by the executive to perform his duties to the company, and good reason is generally defined to include adverse changes in the executives responsibilities, compensation and benefit opportunities, and certain changes in employment location.
A change in control is defined in the agreements to include the acquisition by any person or group of securities representing 20% or more of the voting power of our outstanding securities, the election of a new majority of the board comprised of individuals who are not approved or recommended for election by two-thirds of the current directors or successors to the current directors who were so approved or recommended for election, certain mergers, consolidations or sales of assets that result in our shareholders owning less than 60% of the voting power of the company or of the surviving or purchasing entity or its parent, and approval by our shareholders of the liquidation or dissolution of the company.
Below we summarize the benefits each of our executive officers named in the Summary Compensation Table would have been entitled to receive had we terminated his employment (other than for cause, death or disability) at December 31, 2007 or had the executive done so for good reason, and the benefits each executive would have been entitled to receive had the termination occurred within two years following a change in control of the company. These amounts assume the executive had entered into a two-year consulting, non-solicitation and confidentiality agreement providing for enhanced severance benefits and the enhanced benefits would not be subject to excise taxes for which the executive would be entitled to reimbursement. We also show the benefits