Proposals 4 and 5 are proposals we received from our shareholders. If the proponents of these proposals, or representatives who are qualified under state law, are present at our Annual Meeting of Shareholders and submit the proposals for a vote, then the proposals will be voted upon. The shareholder proposals, including any supporting statements, are included exactly as submitted to us by the proponents of these proposals. The Board of Directors recommends voting “AGAINST” each proposal.
Proposal 4: Shareholder Proposal Regarding Elimination of Supermajority Voting Provisions in Duke Energy Corporation’s Certificate of Incorporation
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, owner of no fewer than 50 shares of Duke Energy common stock, submitted the following proposal:
Proposal 4 – Simple Majority Vote
RESOLVED, Shareholders request that our board take the steps necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. This proposal includes that our board fully support this proposal topic and spend up to $10,000 or more to solicit the necessary support to obtain the exceedingly high super majority vote needed for passage. With a $50 billion market capitalization our company can afford $10,000.
This proposal topic received 20‑times more yes‑votes than no‑votes at our company 2012 annual meeting. However the 20‑to‑one ratio was not enough because passage requires the extremely high 80% support of all shares outstanding. If more shares vote at the annual meeting this proposal will pass. And our management can do more to get out the required vote. It could even cost less for management to do a special solicitation than to repeatedly put this proposal topic up for a vote.
Shareowners are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements, the target of this proposal, have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Hard Law School. Supermajority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management.
This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw‑Hill and Macy’s. The proponents of these proposals included Ray T. Chevedden and William Steiner. Currently a 1%‑minority can frustrate the will of our 79%‑shareholder majority. In other words a 1%‑minority could have the power to prevent shareholders from improving our corporate governing documents.
Please vote to enhance shareholder value:
Simple Majority Vote – Proposal 4
Opposing Statement of the Board of Directors:
Your Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:
The Board believes that adopting this proposal is not in the best interests of Duke Energy or its shareholders as it would allow certain fundamental issues to the Corporation to be decided without requiring a broad consensus among shareholders.
In most instances, an amendment to Duke Energy’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) requires only a majority vote of Duke Energy’s shareholders, which is consistent with the recommendation in Proposal 4. However, the Certificate of Incorporation requires the approval of a supermajority of Duke Energy’s shareholders to amend the Certificate of Incorporation in a few specific instances: (i) to change the size limits of the Board; (ii) to allow Board vacancies to be filled by other than a majority of the remaining directors; and (iii) to amend the provision in the Certificate of Incorporation that requires supermajority approval to amend the previously discussed provisions. The Board believes that the supermajority voting requirement is appropriate in these instances to insure that a broad consensus of Duke Energy’s shareholders is obtained prior to making such fundamental governance changes. The supermajority vote standard in these limited circumstances also protects shareholders, particularly minority shareholders, from the potentially self‑interested actions of short‑term shareholders. Without these provisions, it would be possible for a group of short‑term shareholders to approve governance measures that are not in the long‑term best interest of all of Duke Energy’s shareholders.
Duke Energy’s Board of Directors believes that good corporate governance is extremely important to the success of the Corporation. As such, the Corporate Governance Committee regularly considers corporate governance developments and recommends changes when appropriate to the Corporation’s governing documents to the Board. Duke Energy’s outstanding corporate governance is without question. In recent years, the Board has amended its governing documents to provide for proxy access, majority voting for the election of directors, allowing shareholders the right to call a special meeting and allowing shareholders the right to act by less than unanimous written consent. Additionally, Institutional Shareholder Services (“ISS”) has consistently rated Duke Energy’s overall corporate governance with ISS’ best possible score and currently rates Duke Energy its second best rating. The Board believes that implementation of this proposal would adversely impact Duke Energy’s carefully considered corporate governance practices and, therefore, is not necessary or in the best interests of Duke Energy and its shareholders.
After careful consideration of this proposal, the Board has determined that the supermajority voting requirements in the Certificate of Incorporation continue to be in the best interests of Duke Energy and are in line with the Corporation’s commitment to strong corporate governance and the protection of the interests of all of Duke Energy’s shareholders.
For the Above Reasons, the Board of Directors Recommends a Vote “AGAINST” This Proposal.
Proposal 5: Shareholder Proposal Regarding Lobbying Expenses Disclosure
Mercy Investment Services, Inc., 2039 North Geyer Road, St. Louis, Missouri 63131‑3332, owner of 45 shares of Duke Energy common stock, and the Benedictine Sisters of Virginia, Saint Benedict Monastery, 9535 Linton Hall Road, Bristow, Virginia 20136‑1217, owner of 1500 shares, submitted the following proposal:
Whereas, we believe in full disclosure of our company’s direct and indirect lobbying activities and expenditures to assess whether our company’s lobbying is consistent with Duke Energy’s expressed goals and in the best interests of shareholders.
Resolved, the shareholders of Duke Energy Corporation (“Duke Energy”) request the preparation of a report, updated annually, disclosing:
- Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.
- Payments by Duke Energy used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.
- Duke Energy’s membership in and payments to any tax‑exempt organization that writes and endorses model legislation.
- Description of management’s and the Board’s decision making process and oversight for making payments described in sections 2 and 3 above.
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Duke Energy is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on Duke Energy’s website.
As shareholders, we encourage transparency and accountability in Duke Energy’s use of corporate funds to influence legislation and regulation. Duke Energy spent $11.86 million in 2013 and 2014 on federal lobbying (opensecrets.org). These figures do not include lobbying expenditures to influence legislation in states, where Duke Energy also lobbies but disclosure is uneven or absent. For example, Duke Energy spent over $800,000 lobbying in North Carolina for 2014 (http://www.secretary.state.nc.us/lobbyists/). Duke Energy’s lobbying against EPA greenhouse gas regulations has attracted media attention (“Half a Billion Dollars Gets You a Gentler Climate Plan, “Bloomberg, Aug. 5, 2015).
Duke Energy is listed as a member of the Business Roundtable and the Edison Electric Institute, which together spent over $45 million lobbying in 2013 and 2014. Duke Energy does not disclose its memberships in, or payments to, trade associations, or the portions of such amounts used for lobbying. Transparent reporting would reveal whether company assets are being used for objectives contrary to Duke Energy’s long‑term interests.
Duke Energy does not disclose membership in or contributions to tax‑exempt organizations that write and endorse model legislation, such as being a member of the America Legislative Exchange Council (ALEC). Duke Energy’s ALEC membership has drawn press scrutiny (“Advocacy Group Rips Duke Energy as Leading Opponent of Solar Power,” Charlotte Business Journal, Oct. 15, 2015). More than 100 companies have publicly left ALEC, including 3M, Ameren, BP, ConocoPhillips, PG&E, Shell and Xcel Energy.
We urge support for this proposal.
Opposing Statement of the Board of Directors
Your Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:
Duke Energy is committed to adhering to the highest standards of ethics in engaging in any lobbying activities. As a public utility holding company, the Corporation is highly regulated. As such, the Board of Directors believes that it is in Duke Energy’s and our shareholders’ best interests to participate in the political process to ensure that local, state and federal lawmakers understand and consider the interests of the Corporation, our customers, employees, shareholders, communities and other stakeholders. The Corporation does this through a government relations program and memberships in trade organizations. Duke Energy’s lobbying activities and expenditures are overseen by the Corporate Governance Committee of the Board of Directors, in accordance with the Committee’s Charter as well as Duke Energy’s Political Activity Policy.
The Corporation recently enhanced oversight over our lobbying activities.
In 2015, Duke Energy updated its Political Activity Policy and enhanced the governance around the Corporation’s lobbying activities and expenditures. These changes were a direct result of discussions with our shareholders, representing approximately 25 percent of the Corporation’s outstanding shares of common stock.
A summary of the Political Activity Policy is disclosed on the Corporate Governance page of our website at www.duke‑energy.com/corporate‑governance/politicalactivity.asp. Pursuant to the Political Activity Policy as well as the Charter of the Corporate Governance Committee, the ultimate oversight of the Corporation’s policies, practices and strategy with respect to lobbying expenditures is the responsibility of the Corporate Governance Committee.
In addition to the oversight of the Corporate Governance Committee of the Board of Directors, the Corporation enhanced our governance of lobbying activities and political expenditures in 2015. A tiered governance process has been adopted that requires increasing levels of authority within the Corporation depending on the dollar amounts of the lobbying or other political expenditure being proposed. Furthermore, a new Political Expenditures Committee comprised of senior executives has been formed to review and provide a Corporation political expenditure strategy and monitor and track corporate political expenditures (the “Political Expenditures Program”). As part of our oversight, the Board’s Corporate Governance Committee also reviews periodically the strategy, policies and practices of the corporate Political Expenditures Program.
Duke Energy has historically made certain lobbying related information publicly available and has recently enhanced such disclosures.
The Corporation’s corporate contributions and lobbying activities are also subject to regulation by the state and federal government, including detailed disclosure requirements which are publicly available. Duke Energy is fully compliant with all federal and state laws governing lobbying activities. As a result of the feedback we received from our shareholders during the shareholder corporate governance engagement program, the Corporation has also made changes to how it reports on lobbying activities. Beginning in 2016, all reported lobbying expenses, DUKEPAC contributions and corporate contributions are now disclosed in the aggregate by category and posted directly on our website at www.duke‑energy.com/corporate‑governance/politicalactivity.asp so that they may be more easily accessed and viewed by our shareholders. The Corporation’s lobbying activities and expenditures are also discussed in our annual Sustainability Report, available at http://sustainabilityreport.duke‑energy.com/.
Accordingly, because the Corporation is fully compliant with all federal and state regulations regarding lobbying related expenditures and disclosure and, based on shareholder engagement and feedback, has supplemented our compliance with improved governance and website disclosure, the Board of Directors believes that the additional report requested in the proposal would result in an unnecessary and unproductive use of the Corporation’s resources.