Proposal 4: Advisory Vote on the Frequency of the Vote on Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act also requires that we provide our shareholders with the opportunity to vote every six years, on a nonbinding, advisory basis, for their preference as to how frequently we should seek future advisory say-on-pay votes on the compensation of our named executive officers. This advisory vote last occurred in 2011. This year we are once again asking our shareholders to indicate, on a nonbinding, advisory basis, whether they would prefer an advisory say-on-pay vote on the compensation of our named executive officers to occur every one, two or three years. Shareholders also may, if they wish, abstain from casting a vote on this proposal.
Our Board of Directors has determined that an advisory say-on-pay vote on the compensation of our named executive officers that occurs on an annual basis is the most appropriate alternative for Duke Energy. Accordingly, our Board of Directors recommends that the advisory vote on the compensation of our named executive officers occur every one year. Our Board of Directors believes that an annual advisory say-on-pay vote will allow our shareholders to provide timely, direct input on Duke Energy’s executive compensation philosophy, policies and practices as disclosed in the proxy statement each year.
You may cast your vote by choosing the option of one year, two years, three years or abstain from voting in response to the following resolution:
“RESOLVED, that the shareholders determine, on an advisory basis, whether the preferred frequency for holding an advisory vote on the compensation of Duke Energy’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in the proxy statement, should be every year, every two years or every three years.”
The option (i.e., one year, two years or three years) that receives the highest number of votes cast by shareholders will be considered to be the shareholders’ preferred frequency for the advisory vote on the compensation of our named executive officers. Because the vote is advisory, however, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Board of Directors may decide, in its sole discretion, that it is in the best interests of Duke Energy and its shareholders to hold an advisory say-on-pay vote on the compensation of our named executive officers more or less frequently than the option receiving the most votes cast by our shareholders.
The Board of Directors Recommends a Vote for the Option of Every “1 YEAR” as the Preferred Frequency for Holding an Advisory Vote on Executive Compensation.
Proposal 5: Amendment to the Amended and Restated Certificate of Incorporation of Duke Energy Corporation to Eliminate Supermajority Requirements
The Board of Directors has unanimously approved, and recommends that shareholders approve, an amendment to the Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate”), substantially in the form attached to this proxy statement as Appendix A, to eliminate the current requirement in the Certificate for an affirmative vote of the combined voting power of 80% of the outstanding shares of all classes of Duke Energy entitled to vote in the election of directors to approve certain actions.
At the 2016 Annual Meeting, Duke Energy’s shareholders voted on a shareholder proposal requesting that our Board of Directors take the steps necessary to eliminate the supermajority requirements in Duke Energy’s Certificate. The shareholder proposal was approved by approximately 53% of the votes cast.
In determining whether to recommend the amendment to the Certificate to the Corporation’s shareholders at the 2017 Annual Meeting, the Corporate Governance Committee and the Board discussed both the arguments against the amendment as well as those for.
In advocating against the shareholder proposal to eliminate the supermajority requirements in the Certificate of Incorporation at the 2016 Annual Meeting, the Board explained its concern that the supermajority requirements in the Corporation’s Certificate were limited to the few specific instances discussed below, and that a supermajority requirement was appropriate during those instances to safeguard that a broad consensus of Duke Energy’s shareholders was obtained prior to making those fundamental governance changes and to protect minority shareholders from the actions of potentially self-interested short-term shareholders.
However, weighing heavily on the Corporate Governance Committee and Board’s ultimate decision to recommend this amendment were the results of the shareholder proposal which passed at the 2016 Annual Meeting and the discussions about the amendment that were had with shareholders during the course of the Corporation’s corporate governance engagements with shareholders. These shareholders advocated that elimination of supermajority approval standards in the Certificate would provide shareholders greater ability to participate in the corporate governance of the Corporation rather than the current percentage required. The Board also recognized that supermajority requirements are viewed by many corporate governance experts as overly burdensome and not in line with the best principles in corporate governance.
After careful consideration of the vote results at the 2016 Annual Meeting and the Corporation’s discussions with shareholders, the Board decided to recommend an amendment to our Certificate to reduce the voting requirements for the actions described below from 80% of the outstanding shares of all classes of Duke Energy stock, to 51% of the outstanding shares of all classes of Duke Energy stock.
The proposed amendment to the Certificate to eliminate these supermajority requirements is described in more detail below. A draft Certificate containing the text of the proposed amendment is set forth in Appendix A attached hereto.
Certificate of Incorporation
Article Seventh of the Certificate currently requires the affirmative vote of the combined voting power of 80% of the outstanding shares of all classes of Duke Energy to approve, among other things, the following actions:
- amend the provision which provides for the method to amend the Amended and Restated Certificate of Incorporation (Article Seventh);
- change the number of directors that constitute the Corporation’s Board of Directors (Article Fifth, section (b));
- change the method by which vacancies resulting from death, resignation, disqualification, removal or other cause can be filled on the Board of Directors (Article Fifth, section (d)) and;
- change the method by which directors shall be elected and hold office until the next Annual Meeting (Article Fifth, section (d)).
Upon the approval by our shareholders of the proposed amendment, Article Seventh of our Certificate would be amended as follows, with the proposed deletion stricken through and proposed addition underlined:
“The Corporation reserves the right to supplement, amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware and this Certificate of Incorporation, and all rights conferred upon stockholders, directors and officers herein are granted subject to this reservation. Notwithstanding the foregoing, this ARTICLE SEVENTH and sections (b) and (d) of ARTICLE FIFTH may not be supplemented, amended, altered, changed, or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such supplement, amendment, alteration, change or repeal is approved by the affirmative vote of the holders of at least
80% 51% of the combined voting power of the then outstanding shares of stock of all classes of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
The affirmative vote of holders of at least 80% of the outstanding shares of Duke Energy common stock, the only class of stock outstanding and entitled to vote in the election of directors, is required to approve the amendment to our Certificate described herein.