Definitive Proxy Statement


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054 9

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

       
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WGL Holdings, Inc.

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  WGL Holdings, Inc.
101 Constitution Ave., N.W.
Washington, D.C. 20080

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

   
DATE: Tuesday, March 3, 2015
   
TIME: 10:00 a.m., Eastern Time
   
PLACE: National Press Club, 529 14th St., N.W., Washington, D.C. 20045

To the Shareholders of WGL

The annual meeting of shareholders of WGL Holdings, Inc. (“WGL Holdings” or the “Company”) will be held at the National Press Club, 529 14th St., N.W., Washington, D.C. 20045, on Tuesday, March 3, 2015 at 10:00 a.m., Eastern Time, for the following purposes, as more fully set forth in the attached proxy statement:

1. To elect the nine directors nominated by our Board of Directors (the “Board”) and named in this proxy statement;
2. To consider and act on an advisory vote approving the compensation paid to certain executive officers;
3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent public accounts for fiscal year 2015; and
4. To transact any other business properly brought before the meeting and any adjournment or postponement thereof.
       
       
Voting can be completed in one of four ways:
       
  returning the proxy card by mail   online at www.proxyvote.com
       
  through the telephone at 1-800-690-6903 attending the meeting to vote IN PERSON
       
         

On January 22, 2015, the Company began delivering proxy materials to all shareholders of record at the close of business on January 5, 2015 (the “Record Date”). On the Record Date, there were 49,721,934 shares of the Company’s common stock outstanding and entitled to vote. Only holders of record of the common stock of WGL Holdings at the close of business on the Record Date will be entitled to vote on each matter submitted to a vote of shareholders at the meeting. To assure your representation at the annual meeting, you are urged to cast your vote, as instructed in the Notice of Internet Availability of Proxy Materials, over the Internet or by telephone as promptly as possible. You may also request a paper proxy card to submit your vote by mail, if you prefer.

Any shareholder of record attending the annual meeting may vote in person, even if he or she has voted over the Internet, by telephone or by returning a completed proxy card. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a valid form issued in your name from that record holder. Each holder of common stock is entitled to one vote for each share of common stock standing in the name of the holder on the records of WGL Holdings at the close of business on the Record Date.

BY ORDER OF THE BOARD OF DIRECTORS

 

Leslie T. Thornton
Senior Vice President, General Counsel and Corporate Secretary

January 22, 2015

IMPORTANT NOTICE: You may vote at www.proxyvote.com or by telephone at 1-800-690-6903. Alternatively, you may request a paper proxy card, which you may complete, sign and return by mail.

ADMISSION TO MEETING: Admission to the annual meeting will be limited to persons who: (a) are listed on WGL Holdings’ records as shareholders as of the Record Date, or (b) bring documentation to the meeting that demonstrates their beneficial ownership of WGL Holdings common stock through a broker, bank or other nominee as of the Record Date.

 
 

Table of Contents

         
PROXY SUMMARY       i
Roadmap of Voting Matters iii   Impact of Company Performance on Long-Term  
Corporate Governance iii   Compensation – Reported and Realized Pay vi
Outreach Following Last Year’s Say-on-Pay Vote iv How Short-Term Incentive Pay is Tied to Individual  
FY 2015 Program Changes iv and Company Performance vii
Key Features of our Executive Compensation Program v   Return to Shareholders viii
         
INFORMATION REGARDING THE ANNUAL MEETING   1
         
PROPOSAL 1 ELECTION OF DIRECTORS       2
         
CRITERIA FOR SELECTION OF BOARD NOMINEES 3
Diversity 3   Director Nominees 4
Shareholder Recommendations 3      
         
CORPORATE GOVERNANCE       10
Governance Practices 10   HR Committee Interlocks  
Board Leadership Structure 10   and Insider Participation 14
Board Oversight of Risk 11   Director Independence and Retirement Age 14
Executive Committee 12   Policies and Procedures for Review, Approval  
Audit Committee 12   or Ratification of Related-Person Transactions 14
Governance Committee 12   No Material Related Person Transactions During  
Human Resources Committee 12   FY 2014 14
      Communications with the Board 14
         
DIRECTOR COMPENSATION       15
Director Annual Retainer and Meeting Fees 15   Director Retirement Plan 17
Non-Employee Director Compensation 16   Donations to Civic Organizations and Charities 17
Director Deferred Compensation Plan 16   Board of Directors Stock Ownership Guidelines 17
Directors’ Stock Plan 17      
         
BENEFICIAL OWNERSHIP       18
Security Ownership of Management and Certain
Beneficial Owners
18   Section 16(a) Beneficial Ownership Reporting Compliance 19
       
         
HUMAN RESOURCES COMMITTEE REPORT       19

 

WGL HOLDINGS, INC. - 2015 Proxy Statement    |    i
 
 
         
COMPENSATION DISCUSSION AND ANALYSIS       20
Program Highlights 20   Long-Term Incentive Compensation 28
Outreach Following Last Year’s Say-On-Pay Vote and FY     Retirement Benefits 31
2015 Program Changes 20   Severance/Change in Control Protections 32
FY 2014 in Review 21   Perquisites 33
What We Pay and Why: Elements of Compensation 22   Timing of Compensation 33
Objectives of Executive Compensation Program 23   Impact of Prior Compensation 33
Elements of Executive Compensation Program 23   Factors Considered in Decisions to Increase or Decrease  
Analysis 23   Compensation Materially 33
Base Salary 26   Role of Executive Officers 34
Omnibus Incentive Compensation Plan 26   Policies Relating to Stock Ownership 34
Short-Term Incentive Compensation 26   Other Compensation Matters 34
      Compensation Risk Evaluation 34
         
COMPENSATION OF EXECUTIVE OFFICERS       35
Summary Compensation Table 35   Option Exercises and Stock Vested in FY 2014 40
Grants of Plan-Based Awards in FY 2014 37   Non-Qualified Deferred Compensation 40
Outstanding Equity Awards at FY 2014 Year-End 39   Pension and Other Retirement Benefits 40
         
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL 44
Change in Control Severance Plan for Certain Executives 44   Incremental Payments Due to Other Terminations 46
Incremental Payments Due to Change-In-Control 45    
         
EQUITY COMPENSATION PLAN INFORMATION       47
         
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION 48
         
AUDIT COMMITTEE REPORT       49
         
FY 2014 AND FY 2013 AUDIT FIRM FEE SUMMARY       50
Services Provided by Deloitte & Touche LLP 50   Pre-Approval Policy for Audit and Non-Audit Services 50
         
PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM 51
         
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING 52
         
HOW DO I VOTE?       55
         
OTHER MATTERS       56
         
Shareholder Proposals for the Next Annual Meeting 56   Householding of Proxy Materials 56

 

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PROXY SUMMARY

This summary highlights information contained elsewhere in this 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. For complete information regarding the Company’s performance in fiscal year 2014

please review the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014 (“FY 2014”).

Capitalized terms used herein have the meanings given to them in the accompanying proxy statement.



Roadmap of Voting Matters

Shareholders are being asked to vote on the following matters at the 2015 annual meeting of shareholders:

   
Our Board’s Recommendation
ITEM 1. Election of Directors (page 2)
The Board and the Governance Committee believe that the combination of the various qualifications, skills and experiences of the director nominees would contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management. FOR
Each Director
Nominee
   
ITEM 2. Advisory Vote to Approve Executive Compensation (page 48)  
The Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its Named Executive Officers as described in the Compensation Discussion and Analysis section beginning on page 20 and the Compensation of Executive Officers section beginning on page 35. The Board values its shareholders’ opinions and the Human Resources Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. FOR
   
ITEM 3. Ratification of the Appointment of Deloitte & Touche LLP as Independent Public Accounting Firm (page 51 )

The Audit Committee has appointed Deloitte & Touche LLP to serve as the independent public

accounting firm for the Company for the fiscal year ending September 30, 2015 (“FY 2015”). As a matter of good corporate governance, shareholders are being asked to ratify the Audit Committee’s selection of the independent public accounting firm for the Company. The Audit Committee and the Board believe that the continued retention of Deloitte & Touche LLP to serve as the independent public accounting firm for the Company is in the best interests of the Company and its shareholders.

FOR
   
     

Corporate Governance (see also page 10)

The Company believes that its corporate governance policies and practices promote the long-term interests of shareholders, strengthen Board and management accountability and help build public trust in the Company. Highlights include:

Annual Election of Directors
Eight out of Nine Director Nominees Independent
Independent Lead Director
Independent Audit, Human Resources and Governance Committees
Risk Oversight by Full Board and Committees
Regular Executive Sessions of Independent Directors
Regular Board and Committee Self-Evaluations
Long-Standing Commitment to Safety, Sustainability and Diversity
Anti-Hedging and Anti-Pledging Policies
Executive Compensation Driven by Pay-For-Performance Philosophy
Share Ownership Guidelines for Executives and Directors
Executive Compensation Clawback Policy
   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |     iii
 
 

Proxy Summary

Outreach Following Last Year’s Say-On-Pay Vote (see also page 20)

At the Company’s 2014 annual meeting of shareholders, shareholders had the opportunity to cast an advisory vote regarding our executive compensation program, i.e., a “say- on-pay” vote. The result was 84% favorable, compared to 96% favorable in the prior year.

To better understand last year’s vote result, we conducted investor outreach with many of our largest institutional shareholders, resulting in meetings with eight shareholders representing in aggregate approximately 29% of our outstanding common stock. In general, the investors with whom we spoke did not express concerns about the size of our actual payouts, the structure of our pay practices, the link between pay and performance or our methods for determining market-based compensation targets. These investors generally encouraged our continued use of Total Shareholder Return (“TSR”) as a

metric that is well-aligned with shareholder interests. Some shareholders suggested incorporating a second performance metric in our long-term incentive program to strengthen our ability to attract and retain talent.

Several of our shareholders did express a desire for expanded disclosure about the link between our performance metrics and strategic goals, the process used to evaluate our annual scorecard results and determine the Corporate Factor (discussed on page vii, below) in our short-term incentive program, and our choice of peer groups for executive compensation, which we refer to as the total compensation peer group for a given fiscal year, and for our long-term incentive program, which we refer to as the long-term incentive peer group for a given performance period. In response, we have expanded our discussion of these items in the Compensation Discussion and Analysis beginning on page 20.



FY 2015 Program Changes (see also page 20)

For FY 2015, we have made two changes to our long-term incentive program that we believe are aligned with investor feedback:

In order to bring the scale in line with those of comparable utility companies and ensure that our compensation program is competitive, we lowered the TSR percentile for which a performance shares and performance units payout could be made under our long-term incentive program; and
We added a dividend growth standard to our long-term incentive program that will, if met, result in a fractional
     
    payout if TSR is below the threshold percentile. We believe that the addition of the dividend growth metric aligns compensation with an important element of investment returns, and the addition of this metric will more closely align our long-term incentive program to compensation programs of comparable utility companies. This change is also responsive to investor feedback, noted above, suggesting that we use a second performance measure in our long-term incentive program in order to improve our ability to attract and retain talent.
   
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Proxy Summary

Key Features of Our Executive Compensation Program

The Human Resources Committee (the “HR Committee”) and management periodically review the compensation and benefit programs for executives and other employees in order to align

them with the Company’s total compensation philosophy. Accordingly, the Company has adopted a number of policies and practices that affect our executive compensation program:

   
What We Do
ü Balance short- and long-term incentives (see pg 23)
ü Drive achievement of our long-term strategy and individual performance by focusing short-term incentives on achievement of our corporate scorecard goals and individual performance goals (see pg 26)
ü Align executive compensation with shareholder returns through long-term incentives (see pg 28)
ü Target total compensation opportunities based on the 50th percentile of market compensation (see pg 25)
ü Include caps on individual payouts in incentive plans (see pgs 26 and 29)
ü Perform an annual “say-on-pay” advisory vote for shareholders (see pg 48)
ü Require clawback of short-term incentive payout based on materially inaccurate financial statements or performance metrics (see pg 28)
ü Set significant stock ownership guidelines for directors and executives (see pgs 17 and 34)
     

 

What We Don’t Do
Make solely time-vested equity awards
Allow hedging or pledging of Company common stock by executives or directors
Pay dividend equivalents on unvested equity awards
Allow new participants in the Defined Benefit Supplemental Executive Retirement Plan
 
   
   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |     v
 
 

Proxy Summary

Impact of Company Performance on Long-Term Incentive Compensation – Reported and Realized Pay (see also page 30)

A portion of the compensation earned by the Named Executive Officers is paid in the form of equity awards, consisting of performance shares and performance units. These grants represent a long-term incentive for future performance, not current cash compensation. The Named Executive Officers will not actually receive this pay for three years, and this pay remains at risk of forfeiture. The amount of the actual payout to the Named Executive Officers will be based on how well the Company’s TSR performs against a long-term incentive peer group and may be considerably more or less than the target award value and the grant date fair value of the awards.

The graph below outlines the aggregate realized long-term incentive earned payouts for the performance periods ended September 30, 2014, 2013 and 2012 in contrast to the target long-term award values for the same periods. The aggregate realized payout value was significantly below the aggregate target award value because our long-term incentives, which are based on our TSR, have paid zero or below target for the past three periods. This table illustrates the pay for performance nature of our executive compensation program.


 

AGGREGATE LONG-TERM INCENTIVE PAYOUTS COMPARED TO AGGREGATE TARGET AWARD VALUE FOR YEARS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

 

 

   
1) Aggregate target award value represents the sum of the target values of performance shares and the target values of performance units vested on September 30, 2014, 2013 and 2012. The target value of performance units is $1 per performance unit, and the target value of performance shares is the closing stock price of WGL Holdings common stock on the day preceding the date of grant (which is the last trading day of the fiscal year preceding the date of grant), in each case, times the target number of performance units or performance shares granted. Target award values are not the same as the grant date fair values of the equity awards (calculated in accordance with FASB ASC Topic 718), which are reflected in the Summary Compensation Table on page 35 (for grants made at the beginning of FY 2014, FY 2013 and FY 2012). Equity awards reflected above were granted at the beginning of the fiscal years ended September 30, 2012, 2011 and 2010.
   
(2) Aggregate realized long-term incentive payout means the sum of cash values of earned performance units and the share values of earned performance shares on the dates of vesting.

 

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Proxy Summary

How Short-Term Incentive Pay Is Tied to Individual and Company Performance (see also page 26)

Our short-term incentive program is designed to reward the level of performance of officers of WGL Holdings and its subsidiaries. We choose to pay it to encourage higher annual corporate and individual performance.

The FY 2014 short-term incentive program set target percentages of base salary that could be earned for the achievement of corporate and individual performance goals. Payouts could be higher or lower than target depending on FY 2014 corporate and individual performance, ranging from 0% to 150% of target.

The HR Committee set FY 2014 target short-term incentive award opportunities for each Named Executive Officer at or near the size-adjusted 50th percentile of short-term incentive opportunities of companies in our total compensation peer group. The short- term incentive opportunities for the executives were: McCallister: 85%; Ammann: 55%; Chapman: 75%; Chandra: 55%; and Thornton: 50%.

The HR Committee also approved FY 2014 corporate performance goals and targets that governed payout under the plan. The corporate performance goals recognize that shareholders in a regulated utility achieve their investing objectives when customers are well served through efficient operations.

The Company’s FY 2014 performance goals are reflected on the Company’s “corporate scorecard” and included multiple metrics in eight corporate performance categories related to: safe delivery, performance improvement, customer value, supplier diversity, sustainability, employer of choice, reliable supply and financial performance. These goals measure the results of short- term activities that drive the long-term strategic objectives of the Company. Performance against these goals resulted in a factor, which we refer to as the Corporate Factor, determined by the HR Committee. The absolute number of scorecard goals for which targets were met or exceeded was one of several factors that

the HR Committee considered when determining the Corporate Factor. Other considerations included the relative strategic importance of various scorecard elements, the margin by which targets were exceeded, and outlier events and intangible factors that the HR Committee determined are important to long-term shareholder value.

The HR Committee also established a consolidated non-GAAP return on equity threshold of 8.7%, which, if not met, would lead to zero payout of the corporate portion of the plan. The return on equity threshold will vary each year as a benchmark in relation to the expected earnings forecast for that year. For FY 2014, the Company exceeded its return on equity threshold and met or exceeded 9 of 13 corporate scorecard goals. Based on this performance, and taking into consideration the strategic importance of the various performance criteria, on November 12, 2014, Mr. McCallister recommended, and the HR Committee approved, a Corporate Factor of 90% for FY 2014.

Named Executive Officers had individual goals for FY 2014 which encompassed their contributions to meeting established corporate and departmental goals, managing resources within established departmental budgets; and effectiveness in areas of leadership, planning and teamwork. After a comprehensive performance appraisal of each executive officer and a review of their achievement of the personal goals which had been set for them, Mr. McCallister recommended, and the HR Committee approved a factor, which we refer to as an Individual Factor, specific to each Named Executive Officer (except for himself) as follows: Chapman: 1.4, Ammann: 1.4, Chandra: 1.2, and Thornton: 1.4. In executive session, the HR Committee developed an Individual Factor of 1.4 for Mr. McCallister. These Individual Factors reflected the personal effectiveness of the executives in achieving the results of the corporate scorecard which are described above.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    vii
 
 

Proxy Summary

Return to Shareholders

The Company has delivered consistent positive return to holders of our common stock over time, has a long history of increasing

common stock dividends, and returned significant cash to holders of common stock in FY 2014 through share repurchases.



Total Shareholder Return*

 

Cash Returned to Shareholders

 

 

  * Return on shares of common stock, assuming daily reinvestment of dividends. Returns calculated based on an investment made on September 30 of the first year of the period indicated and sold on September 30 of the last year of the period indicated.
** The total number of shares of common stock repurchased in FY 2014 was 1,304,504.
   
viii    |   WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

 

WGL HOLDINGS, INC.
101 CONSTITUTION AVE., N.W.
WASHINGTON, D. C. 20080

 
 
PROXY STATEMENT
January 22, 2015
 

INFORMATION REGARDING THE ANNUAL MEETING

This proxy statement is provided in connection with a solicitation of proxies by the Board of Directors (the “Board”) of WGL Holdings, Inc. to be used at the annual meeting of shareholders to be held on Tuesday, March 3, 2015 at 10:00 a.m., Eastern Time, and at any adjournment or postponement thereof. The annual meeting will be held at the National Press Club, 529 14th St., N.W., Washington, D.C. 20045. This proxy statement is first being provided to our shareholders on or about January 22, 2015. Throughout this proxy statement, “WGL Holdings,” the “Company,” “we,” “us” and “our” are intended to refer to WGL Holdings, Inc. and its consolidated subsidiaries, unless specifically indicated otherwise.

You are invited to attend the annual meeting, and we request that you vote on the proposals described in this proxy statement.

You do not need to attend the meeting to vote your shares. If you have received a printed copy of these materials by mail, you may complete, sign and return your proxy card. If you received a printed copy of these materials but prefer to submit your proxy vote over the internet or by telephone, or if you did not receive a printed copy of these materials by mail and are accessing them via the Internet, you may follow the instructions under the heading, “Questions and Answers About the Annual Meeting” beginning on page 52 of this proxy statement to submit your proxy vote via the Internet or by telephone. Also, other information about voting is provided later in this proxy statement under the heading, “Questions and Answers About the Annual Meeting.”

 

Record Date: January 5, 2015

Meeting Webcast: www.wglholdings.com/investorrelations

How to Vote: Voting can be completed in one of four ways:

 

  returning the signed proxy card by mail   online at www.proxyvote.com
       
    through the telephone at 1-800-690-6903   attending the meeting to vote IN PERSON

Important Notice Regarding the Availability of Proxy Materials for WGL Holdings’ annual meeting of shareholders to be held on March 3, 2015.

This notice of annual meeting and proxy statement and WGL Holdings’ Annual Report on Form 10-K for the fiscal year ended September 30, 2014 are available on the Internet at the following website: www.proxyvote.com .

 

WGL HOLDINGS, INC. - 2015 Proxy Statement     |    1
 
 

Election of Directors

PROPOSAL 1 ELECTION OF DIRECTORS

There are nine nominees for election to the Board. Eight of the nine nominees are existing directors that were elected at the 2014 annual meeting of shareholders—Michael D. Barnes, George P. Clancy, Jr., James W. Dyke, Jr., Nancy C. Floyd, Linda R. Gooden, James F. Lafond, Debra L. Lee, and Terry D. McCallister. Nominee Dale S. Rosenthal was elected by the

Board to serve as a director, effective as of October 1, 2014, until the 2015 annual meeting of shareholders. Ms. Rosenthal was recommended to the Governance Committee of the Board (the “Governance Committee”) by a third-party search firm. Each nominee will, if elected, serve on the Board until the 2016 annual meeting of shareholders.



Highlights of Board Nominees

 

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Election of Directors

CRITERIA FOR SELECTION OF BOARD NOMINEES

The Governance Committee is responsible for identifying director nominees for election to the Board. The Governance Committee may consider nominees suggested by several sources, including outside search firms, incumbent Board members and shareholders.

As provided in its charter, the Governance Committee seeks candidates with experience and abilities relevant to serving as a director of the Company and who will represent the best interests of shareholders as a whole, and not any specific interest group or constituency. The Governance Committee, with input from the Chairman of the Board and other directors, evaluates the qualifications of each director candidate in accordance with the criteria described in the director qualification standards section of our corporate governance guidelines. In evaluating the qualifications of director nominees, the Governance Committee considers factors including, but not limited to, the following:

Commitment. Directors should be able to contribute the time necessary to be actively involved on the Board and its decision- making and should be able and willing to prepare for and attend required meetings.

Diversity. Although the Board does not have a formal policy regarding the consideration of diversity in identifying nominees for director, directors should be selected so that the Board is a diverse body. The Board considers the term “diversity” to include differences of viewpoint, professional experience, education, skill and other individual qualities and attributes, as well as differences in race, gender and ethnicity.

Experience. Directors should be or have been in leadership positions in their field of endeavor and have a record of excellence in that field.

Independence. A director should neither have, nor appear to have, a conflict of interest that would impair his or her ability to represent the interests of all the Company’s shareholders and other stakeholders and to fulfill the responsibilities of a director.

Integrity. Directors should have a reputation of integrity and be of the highest ethical character.

Judgment. Directors should have the ability to exercise sound business judgment on a large number of matters.

Knowledge. Directors should have a firm understanding of our operations, business strategy and corporate governance.

Skills. Directors should be selected so that the Board has an appropriate mix of skills in core areas such as: accounting, compensation, finance, government relations, law, management, risk oversight and strategic planning.

The Governance Committee and the Board may take into account such other factors as they consider to be relevant to the success of a publicly-traded company operating in the natural gas utility and energy products and services industries. As part of the annual nomination process, the Governance Committee reviews the qualifications of each director nominee, including currently serving Board members, and reports its findings to the Board. On September 18, 2014, the Governance Committee determined that each Board member satisfied the criteria described above and advised the Board on September 24, 2014 that each of the director nominees listed under “Proposal 1 Election of Directors” was qualified to serve on the Board.



Diversity

The Governance Committee considers diversity in connection with its evaluation of individual potential director nominees, and periodically considers the diversity of the Board as a whole. The Board conducted a self-evaluation during FY 2014 and concluded that its efforts to achieve Board membership diversity

were effective. The Board believes that the directors collectively represent a diverse array of viewpoints, experiences, education, skills and other attributes that contribute to its effectiveness in overseeing the direction of the Company. Three out of nine current directors are African-American and four directors are women.



Shareholder Recommendations

The Governance Committee will consider director nominees recommended by shareholders. Notice of such recommendation should be sent in writing to the Chairman of the Governance Committee, c/o the Secretary of WGL Holdings, Inc.; 101 Constitution Ave., N.W.; Washington D.C. 20080. The recommendation must identify the writer as

a shareholder of the Company and provide sufficient detail for the Governance Committee to consider the recommended individual’s qualifications. The Governance Committee will evaluate the qualifications of candidates recommended by shareholders using the same criteria as used for other Board candidates.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement    |     3
 
 

Election of Directors

Director Nominees

For purposes of the upcoming annual meeting, the Governance Committee has recommended the re-election of each nominee as a director, including the re-election of Dale S. Rosenthal, who was initially elected as a director by the other members of the Board in September 2014. Each nominee has informed the Board that he or she is willing to serve as a director. If any nominee should decline or become unable or unavailable to serve as a director for any reason, your proxy authorizes the persons named in the proxy to vote for a replacement nominee, if the Board names one, as such persons determine in their best judgment.

It is the intention of the proxyholders to vote proxies for the election of the nominees named below, unless such authority is withheld.

The following is a brief description of the age, principal occupation, position and business experience, including other public company directorships, for at least the past five years, and major affiliations of each of the nominees. Each director’s biographical information includes a description of the director’s experience, qualifications, attributes or skills that qualify the director to serve on the Board.

   
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Election of Directors

The Board recommends a vote “FOR” the
election of each of the following nominees:

 

Michael D. Barnes
Age: 71
Director Since: 1991 (Washington Gas Light Company), November 2000 (WGL Holdings)
Board Committees: Governance Committee (Chairman), Executive Committee, Lead Director for the Board
 

Michael D. Barnes , age 71, is a Senior Fellow at the Center for International Policy in Washington, D.C. He was previously Senior Of Counsel to the law firm of Covington & Burling LLP from 2007 through December 2010. He was President of The Brady Campaign and Brady Center to Prevent Gun Violence from 2000 through 2006. He was previously a partner in the law firm of Hogan & Hartson LLP (now Hogan Lovells, LLP). Mr. Barnes was United States Representative from Maryland’s 8th Congressional District from 1979 to 1987. In January 2013, he was appointed to the Board of the Office of Congressional Ethics by Speaker John Boehner and Minority Leader Nancy Pelosi. He has previously served as a director of the Metropolitan Washington Airports Authority, as a director of the Washington Metropolitan Area Transit Authority and Chairman of the Washington Suburban Transit Commission, appointed by Governors of the State of Maryland.

Mr. Barnes has been a director of Washington Gas Light Company since 1991, a director of WGL Holdings since November 2000 and serves as Chairman of the Governance Committee. As Chairman of the Governance Committee, Mr. Barnes also serves as Lead Director for the Board. Mr. Barnes has a B.A. degree from the University of North Carolina and a J.D. degree with Honors from George Washington University.

 

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

With over thirty-five years of legal experience and affiliations, including significant leadership positions, with a diverse array of business, political and philanthropic organizations in the Washington, D.C. metropolitan area, Mr. Barnes brings immense insight to the Board.

 

Risk Management/Assessment

Mr. Barnes’ legal expertise contributes to his skills in the areas of risk management, compliance and internal controls.
 

 

Strategic Planning

Through his extensive involvement in civic, community and charitable activities, Mr. Barnes has gained significant strategic planning and corporate governance experience.

 

Industry Experience

Mr. Barnes’ long tenure as a director of Washington Gas Light Company and WGL Holdings provides him with extensive experience and insights on the issues facing the gas utility and energy products and services industries generally, as well as the Company in particular.

 

George P. Clancy, Jr.
Age: 71
Director Since: December 2000 (Washington Gas Light Company and WGL Holdings)
Board Committees: Audit Committee (Chairman), Executive Committee, HR Committee
Other Public Company Board: Saul Centers, Inc.
 

George P. Clancy, Jr. , age 71, is a retired Executive Vice President and Mid-Atlantic Region Market President of Chevy Chase Bank, a division of Capital One, N.A. (1995-2010). Mr. Clancy has extensive experience in banking which includes serving as President and Chief Operating Officer of The Riggs National Corporation (1985-1986) and President and Chief Executive Officer of Signet Bank, N.A. (1988-1995). Mr. Clancy is a member of the board of directors of Catholic Charities of the Archdiocese of Washington. Mr. Clancy is also on the board of directors of ASB Capital Management, Inc., Chevy Chase Trust Company, Saul Centers, Inc. and the Mary and Daniel Loughran Foundation.

Mr. Clancy has been a director of Washington Gas Light Company and a director of WGL Holdings since December 2000. Mr. Clancy has a B.A. degree in English from the University of Maryland and an M.B.A. degree from Loyola University.

 

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

Mr. Clancy has considerable senior executive level experience in business and management.
 

 

Risk Management/Assessment

Mr. Clancy developed significant skills in risk assessment as a senior executive, making him an important adviser to the Board and the Company.
 

 

Strategic Planning

Mr. Clancy’s experience managing investments and engaging in strategic planning as a senior executive enable him to serve meaningfully and effectively on the Board.

 

High Level Financial Literacy

Mr. Clancy has extensive experience in capital and financial markets, accounting and financial reporting and credit markets. He brings financial expertise and extensive experience in assessing and managing investments.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement    |     5
 
 

Election of Directors

James W. Dyke, Jr.
Age: 68
Director Since: September 2003 (Washington Gas Light Company and WGL Holdings)
Board Committees: Governance Committee, HR Committee, Executive Committee (alternate)
 

James W. Dyke , Jr ., age 68, retired on March 31, 2013 after 20 years as a partner in the Virginia law firm of McGuire Woods LLP, where he specialized in corporate, education, voting rights, government relations and municipal law. On April 8, 2013, he became a Senior Adviser to McGuire Woods Consulting LLC. In addition to his legal career, Mr. Dyke has extensive professional experience in government and public relations. Among other appointments, he served as Secretary of Education for the Commonwealth of Virginia from 1990 to 1993 and as Domestic Policy Adviser to former Vice President Walter Mondale. Mr. Dyke has assumed leadership positions in several business and community organizations, including serving as former Chairman of the Fairfax County, Virginia, Chamber of Commerce, the Northern Virginia Business Roundtable and the Emerging Business Forum. During 2010, Mr. Dyke was also Chair of the Greater Washington Board of Trade and he is a member of the board of directors of the Washington Metropolitan Area Transit Authority (WMATA) and the Commonwealth Transportation Board (CTB).

 

Mr. Dyke has been a director of Washington Gas Light Company and of WGL Holdings since September 2003. Mr. Dyke has B.A. and J.D. degrees from Howard University. In addition, he holds honorary degrees from St. Paul’s College, Virginia State University, the University of Richmond, Randolph-Macon College and the Northern Virginia Community College.

 

Particular experience, attributes or skills that qualify candidate for Board membership:
 

Leadership Experience

Mr. Dyke has over thirty-five years of legal experience and significant leadership positions and deep-rooted affiliations with a diverse array of business and philanthropic organizations in the Washington, D.C. metropolitan area.

 

Risk Management/Assessment

Mr. Dyke’s legal expertise contributes to his skills in the areas of risk management, compliance, internal controls, legislative and administrative issues, and general corporate transactions.

 

Government Experience

Mr. Dyke has significant governmental experience nationally and in the Commonwealth of Virginia that enable him to bring invaluable insight to the Board.

    

Strategic Planning

Mr. Dyke lives and works in the Company’s operating territory and has held leadership positions with several local non-profit organizations and, therefore, has significant community ties within the region. In addition, through his extensive involvement in civic, community and charitable activities, Mr. Dyke has gained additional strategic planning and corporate governance insights.

 

Nancy C. Floyd
Age: 60
Director Since: June 2011 (Washington Gas Light Company and WGL Holdings)
Board Committees: Governance Committee, Executive Committee (alternate)
 

Nancy C. Floyd , age 60, is the founder and managing director of Nth Power, a San Francisco based venture capital firm focused on advanced energy technologies, energy efficiency and sustainability. Nth Power has invested $420 million in 56 companies. Ms. Floyd has served on the boards of the American Council on Renewable Energy and the Center for Resource Solutions. She is an active member of Environmental Entrepreneurs (E2), a national community of individual business leaders who advocate sound environmental policy while building economic prosperity. Prior to founding Nth Power, Floyd launched two high-growth energy and telecommunications companies: NFC Energy Corporation in 1982, an early wind development company, and PacTel Spectrum Services in 1985, both of which were successfully sold. She has also worked on energy and telecommunications issues for the chairman of the Vermont Public Service Board. Ms. Floyd has a B.A. degree in Government from Franklin and Marshall College and an M.A. degree in Political Science from the Rutgers University Eagleton Institute of Politics.

Ms. Floyd has been a director of Washington Gas Light Company and of WGL Holdings since June 2011.

 

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

Ms. Floyd brings many years of key senior management experience to the Board.
 

 

Risk Management / Assessment

Ms. Floyd’s business experience has given her significant risk management experience that provide the Board with a valuable perspective.
 

 

Government Experience

As a result of her past work with the Vermont Public Service Board, Ms. Floyd can provide important insight with respect to regulatory and policy matters relevant to public utilities, which enhances the Board’s overall knowledge and experience.

 

Strategic Planning

Ms. Floyd’s experience as a business founder and manager demonstrates significant strategic planning skills.
 

 

Industry Experience

Ms. Floyd brings a deep understanding of energy efficiency and renewable energy applications. Her comprehensive knowledge of many aspects of the energy industry provides the Board with a valuable perspective.

   
6     |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Election of Directors

 

Linda R. Gooden
Age: 61
Director Since: April 1, 2013 (Washington Gas Light Company and WGL Holdings)
Board Committees: Audit Committee, Executive Committee (alternate)
Other Public Company Board: Automatic Data Processing, Inc.

Linda R. Gooden , age 61, retired in 2013 as Executive Vice President of Lockheed Martin Corp.’s Information Systems & Global Solutions, a $9 billion business with 30,000 employees that provide integrated information technology solutions, systems and services globally for civil, defense, intelligence and other government customers, after more than 20 years with the company. Ms. Gooden was responsible for establishing and managing the first major contractor cyber center in Maryland. She led the development of cyber solutions for federal defense, intelligence, and commercial customers.

 

Ms. Gooden has been inducted into the prestigious Career Communications Hall of Fame. She was named one of Fortune’s 50 Most Powerful Women in Business for three consecutive years and one of the 100 Most Powerful Executives in Corporate America by Black Enterprise magazine in 2009. In 2010, Ms. Gooden was appointed by U.S. President Barack Obama to the National Security Telecommunications Advisory Committee.

 

Ms. Gooden serves on the board of: the Eisenhower Fellowships Board of Trustees; the Armed Forces Communications and Electronics Association (AFCEA) International; TechAmerica; the University Systems of Maryland Board of Regents; and Automatic Data Processing (ADP), Inc. Ms. Gooden has a B.A. degree in Computer Science from Youngstown State and a B.A. degree in Business Administration from the University of Maryland. She also has an M.B.A. degree in Business Administration from the University of Maryland.

 

Ms. Gooden has been a director of WGL Holdings and Washington Gas since April 1, 2013.

 

Particular experience, attributes or skills that qualify candidate for Board membership:
 

Leadership Experience

Ms. Gooden’s experience as a senior executive officer of a Fortune 100 company demonstrates her leadership capability and general business acumen.
 

 

Risk Management / Assessment

In addition to her deep understanding of operations and strategy, Ms. Gooden has sophisticated risk management, cyber-security and information technology experience that is extremely valuable to the decision-making processes of the Board.

 

Government Experience

Ms. Gooden has experience as a presidential appointee to the National Security Telecommunications Advisory Committee.
 

 

Strategic Planning

Ms. Gooden provides the Board with extensive experience in operations and strategic planning. Ms. Gooden’s experience also demonstrates her extensive knowledge of governance and complex financial issues faced by public companies.

 

High Level Financial Literacy

Ms. Gooden provides the Board with extensive experience in corporate finance.
 

 

James F. Lafond
Age: 72
Director Since: September 2003 (Washington Gas Light Company and WGL Holdings)
Board Committees: HR Committee (Chairman), Executive Committee
Other Public Company Board: VSE Corporation
 

James F. Lafond , age 72, is a retired Area Managing partner for the greater Washington, D.C. area for PricewaterhouseCoopers LLP. He is a retired certified public accountant with extensive experience serving in leadership positions with PricewaterhouseCoopers and with its predecessor, Coopers & Lybrand LLP. He has been active in several civic and non-profit organizations, including chairmanship of the INOVA Health System Foundation and the Washington Performing Arts Society. Among other recognitions, he has received the Lifetime Achievement Award from the Leukemia and Lymphoma Society. He is currently a director of VSE Corporation as well as not-for-profit entities.

 

Mr. Lafond has been a director of Washington Gas Light Company and of WGL Holdings since September 2003. Mr. Lafond has a B.S. degree in Accounting and an M.B.A. degree from American International College. Mr. Lafond also has completed the Executive Development program at Dartmouth College.

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

Mr. Lafond gained significant leadership experience as an Area Managing Partner for PricewaterhouseCoopers LLP and in leadership positions in civic and non-profit organizations.

 

Risk Management / Assessment

Mr. Lafond has expertise in risk management processes through his experience as Area Managing Partner for PricewaterhouseCoopers LLP and as an engagement partner for entities in various industries.

 

Strategic Planning

Mr. Lafond’s experience as a member of the nominating and corporate governance committee and chair of the audit committee of the board of directors of another public company allows him to provide particular governance insight to the Board that is essential to strategic planning.

 

High Level Financial Literacy

Mr. Lafond brings many years of audit experience and financial accounting knowledge that are critical to the Board. Mr. Lafond’s experience with accounting principles, financial reporting rules and regulations, evaluating financial results and generally overseeing the financial reporting process of large public companies from an independent auditor’s perspective makes him an invaluable asset to the Board.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    7
 
 

Election of Directors

 

Debra L. Lee
Age: 60
Director Since: July 2000 (Washington Gas Light Company), November 2000 (WGL Holdings)
Board Committees: Audit Committee, Executive Committee (alternate)
Other Public Company Boards: Marriott International, Inc. and Revlon, Inc.
 

Debra L. Lee , age 60, is Chairman and Chief Executive Officer of BET Networks, a global multi-media company which owns and operates Black Entertainment Television and several other ventures. BET Networks is a division of Viacom, Inc. Ms. Lee previously was Executive Vice President and General Counsel of BET Holdings (1992-1995), President and Chief Operating Officer (1995-May 2005), President and Chief Executive Officer (June 2005-January 2006), and was elected to her present position in January 2006. Ms. Lee serves on the board of directors of the Alvin Ailey American Dance Theater and the Paley Center. Ms. Lee is also on the board of directors of Marriott International, Inc. and Revlon, Inc.

 

Ms. Lee has been a director of Washington Gas Light Company since July 2000 and a director of WGL Holdings since November 2000. Ms. Lee has a B.A. degree in Political Science from Brown University, a J.D. degree from the Harvard Law School and an M.P.P. from the Harvard University John F. Kennedy School of Government.

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

Ms. Lee’s experience as a chief executive officer of a major media and entertainment company demonstrates her leadership ability and general business acumen.

 

Risk Management / Assessment

Ms. Lee’s legal expertise contributes to her skills in the areas of risk management, compliance and internal controls.
 

 

Strategic Planning

Through her experience as a chief executive officer and her involvement in civic, community and charitable activities, Ms. Lee has gained significant strategic planning, operational and corporate governance insights. Her extensive experience with consumer marketing is also a significant asset to the Board.

 

High Level Financial Literacy

Ms. Lee provides the Board with extensive experience in corporate finance. In addition, her experience on the board of directors of two other public companies demonstrates her knowledge of complex financial issues faced by public companies.

 

Terry D. McCallister
Age: 59
Director Since: October 2009 (Washington Gas Light Company and WGL Holdings)
Board Committees: Chairman of the Board, Executive Committee (Chairman)
 

Terry D. McCallister , age 59, is Chairman and Chief Executive Officer of WGL Holdings and of Washington Gas Light Company, positions he has held since October 1, 2009. Mr. McCallister previously served as President and Chief Operating Officer of WGL Holdings and Washington Gas Light Company (2001-2009); Mr. McCallister joined Washington Gas Light Company in April 2000 as Vice President of Operations. He was previously with Southern Natural Gas, where he served as Vice President and Director of Operations and with Atlantic Richfield Company, where he held various leadership positions. Mr. McCallister serves on the Board of Directors of the American Gas Association and has been elected Chairman for 2015. He is a past Chairman of the Board of Directors of the Southern Gas Association and is currently Chairman of the Board of Directors of the Gas Technology Institute. Mr. McCallister serves on the National Petroleum Council. He also serves on the boards of several business and community organizations, including, among others, the Greater Washington Board of Trade, the Federal City Council, the Alliance to Save Energy, the Smithsonian National Zoo, the National Symphony Orchestra (President) and the INOVA Health System Foundation (Chairman).

Mr. McCallister has a B.S. degree in Engineering Management from the University of Missouri-Rolla and is a graduate of the University of Virginia’s Darden School of Business Executive Program. 

Particular experience, attributes or skills that qualify candidate for Board membership:

 

Leadership Experience

With over thirty-five years of energy industry experience at several levels of management, Mr. McCallister is well positioned to lead our management team and provide essential insight and guidance to the Board on the day-to-day operations of the Company. Mr. McCallister’s service on the boards of local non-profit and charitable organizations provides an important connection between our Company and the communities we serve.

 

Strategic Planning

Mr. McCallister serves a key leadership role on the Board and provides the Board with in-depth knowledge of each area of our business, the energy industry generally, and the Company’s challenges and opportunities. Mr. McCallister’s leadership roles in key industry organizations provide a unique opportunity to help shape the environment in which the Company can be successful. In addition, through his extensive involvement in civic, community and charitable activities, Mr. McCallister has gained additional strategic planning and corporate governance insights.

 

Industry Experience

Mr. McCallister’s extensive energy experience and comprehensive understanding of many aspects of the natural gas industry provides the Board with crucial insight.

   
8     |      WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Election of Directors

 

Dale S. Rosenthal
Age: 58
Director Since: October 2014 (Washington Gas Light Company and WGL Holdings)
Board Committees: Audit Committee, Executive Committee (alternate)
 

Dale S. Rosenthal , age 58, is Division President of Clark Financial Services Group, where she is setting strategy for Clark’s entry into the alternative energy space, leveraging Clark Construction’s core turnkey construction competence into alternative energy development, finance, and management. She was Clark’s Chief Financial Officer for 8 years, leading all the financial functions of Clark, a multi-billion dollar company. She serves on the board of directors of the Strathmore Foundation for the Performing Arts and on the Greater Washington Board of Trade.

 

Ms. Rosenthal has been a director of Washington Gas Light Company and of WGL Holdings since October 2014. She has a J.D. and M.B.A. from Harvard University and a B.A. in Economics from Cornell University.

 

Particular experience, attributes or skills that qualify candidate for board membership:
 

Leadership Experience

Ms. Rosenthal brings many years of senior management and new business development experience in both the private and non-profit sectors to the board.

 

Risk Management / Assessment

Ms. Rosenthal’s financial and legal background in the construction industry contribute to her skills in risk assessment, mitigation, compliance, and internal controls.

 

Strategic Planning

Ms. Rosenthal’s formal business training, significant experience in business development and experience as a strategist in the alternative energy sector provide her with significant strategic planning skills.

 

Industry Experience

Ms. Rosenthal brings significant business expertise in the alternative energy sector.
 

 

High Level Financial Literacy

Ms. Rosenthal has managed financial budgeting and reporting in corporate and non-profit organizations.
 

   
WGL HOLDINGS, INC. - 2015 Proxy Statement    |     9
 
 

Corporate Governance

CORPORATE GOVERNANCE

Corporate governance is a continuing focus at WGL Holdings, starting with the Board and extending to all employees. In this

section, we describe some of our key governance policies and practices.



Governance Practices

WGL Holdings is committed to maintaining the highest standards of corporate governance, which we believe is essential for sustained success and long-term shareholder value. In light of this goal, the Board oversees, counsels and guides management in the long-term interests of the Company and its shareholders. The Board’s responsibilities include, but are not limited to:

overseeing the management of our business and the assessment of our business risks;
overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics;
reviewing and approving our major financial objectives and strategic and operating plans; and
overseeing our talent management and succession planning.

The Board discharges its responsibilities through regularly scheduled meetings as well as through telephonic meetings, action by written consent and other communications with management as appropriate. WGL Holdings expects directors to attend all meetings of the Board and the Board committees upon which they serve.

During FY 2014, the Board held 12 meetings. The Board has established four standing committees: (i) the Executive Committee; (ii) the Audit Committee; (iii) the Governance Committee, and (iv) the Human Resources Committee (the “HR Committee”).

Each of these committees is described in more detail below.

During FY 2014, the Audit Committee held five meetings; the HR Committee held three meetings; and the Governance Committee held 4 meetings. The Executive Committee did not meet in FY 2014. No director attended fewer than 75% of each of: (1) the total number of meetings of the Board, and (2) the total number of meetings held by all committees of the Board on which he or she served during FY 2014. The Company expects Board members to attend all annual meetings of shareholders at which they are standing for election or re-election as directors, but from time to time, other commitments may prevent all directors from attending each annual meeting. Seventy-five percent of the directors attended the 2014 annual meeting of shareholders.

The Board has long adhered to governance principles designed to assure excellence in the execution of its duties and regularly reviews the Company’s governance policies and practices. These principles are outlined in the WGL Holdings corporate governance guidelines, which, in conjunction with our articles of incorporation, bylaws, Board committee charters and related policies, form the framework for the effective governance of WGL Holdings.

The full text of the corporate governance guidelines, the charters for each of the Board committees, and the Company’s code of conduct are available on WGL Holdings’ website, www.wglholdings.com, under “Corporate Governance.” These materials are also available in print to any person, without charge, upon written request to:

Assistant Secretary

WGL Holdings, Inc.

101 Constitution Ave, N.W.

Washington, D.C. 20080



Board Leadership Structure

 
Combined Chairman of the Board and Chief Executive Officer Position

Terry D. McCallister serves as the Chairman of the Board and Chief Executive Officer. The Board evaluated its leadership structure in 2014 and determined that the use of the Lead Director, as described below, along with the combined Chairman and Chief Executive Officer positions, is an effective leadership structure. Mr. McCallister has over 35 years of experience in a variety of positions of increasing responsibility and leadership in many facets of the utility and energy industry. As the individual primarily responsibility for the day-to-day management of business operations, he is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues. Coupled with an independent Lead Director, this leadership structure allows the Board to exercise independent oversight and enables the Board to have direct access to information related to the day-to-day management of business operations.

The leadership responsibilities of the Board are shared among the Chairman of the Board, the Lead Director and the Chairmen of the Board’s four standing committees. This structure has been developed over time based on the recommendations of the Governance Committee and on the decisions of the full Board. The Board is comprised of eight independent directors within the meaning of the listing standards of the New York Stock Exchange (“NYSE”), and a single management director. Mr. McCallister is the only management director. All members of the Audit, HR and Governance Committees are independent. Mr. McCallister is invited to attend committee meetings, but he does not have a vote on any committee matter. The Board and the Board committees (other than the Executive Committee) regularly meet in executive sessions, at which no management representative is present.

   
10    |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Corporate Governance

 
Lead Director

Our corporate governance guidelines and bylaws establish a Lead Director of the Board and designate the Chairman of the Governance Committee to serve in that position. Among other powers and responsibilities, the Lead Director will:

preside at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the Board;
approve information sent to the Board;
approve meeting agendas for the Board;
approve meeting schedules to assure that there is sufficient time for discussion of all agenda items;
have the authority to convene meetings of the independent directors;
be available to communicate or meet with any shareholder controlling at least five percent of the outstanding voting stock of the Company; and
function as a liaison between the Chairman of the Board and the independent directors, as necessary.

Mr. Barnes served as the Lead Director during FY 2014 and will continue to serve in FY 2015.

The Lead Director presides in executive sessions of the Board. If the executive session includes or is devoted to a report of a Board committee, the Chairman of that committee presides in that portion of the executive session. The Board believes that its leadership structure facilitates proper risk oversight for the Company for a number of reasons, the most significant of which are the following:

A combined Chairman and Chief Executive Officer role allows for more productive meetings. The Chief Executive Officer is the individual selected by the Board to manage the Company on a day-to-day basis, and his direct involvement in our operations makes him best positioned to lead productive Board strategic planning sessions and determine the time allocated to each agenda item in discussions of our short and long-term objectives.
The Board structure provides strong oversight by independent directors. The Lead Director’s responsibilities include leading executive sessions of the Board during which our independent directors meet without management. These executive sessions allow the Board to review key decisions and discuss matters in a manner that is independent of the Chief Executive Officer, and where necessary, critical of the Chief Executive Officer and senior management.

The Lead Director informs the Chairman of the Board and Chief Executive Officer, subject to the discretion of the independent directors, about the substance of the discussions that took place during each executive session meeting of the Board. The Board is aware of the potential conflicts that may arise when an executive officer chairs the Board, but believes these potential conflicts are offset by existing safeguards, including: the designation of a Lead Director, regular meetings of the independent directors in executive session, the fact that management compensation is determined by a committee of independent directors who make extensive use of peer benchmarking and the fact that much of our operations are highly regulated.



Board Oversight of Risk

The Board recognizes that WGL Holdings and its subsidiaries are exposed to certain financial, operational and strategic risks that can affect our earnings and ability to provide value to our shareholders and service to our customers. The Board has delegated certain risk oversight responsibilities to its Audit Committee. In accordance with NYSE requirements and as set forth in its charter, the Audit Committee periodically reviews and discusses our risk management and risk assessment policies with senior management. The Audit Committee incorporates its risk assessment function into its regular reports to the Board. The Audit Committee is directly responsible for overseeing our risk assessment and risk management policies.

At the direction of the Audit Committee and in consultation with the full Board and executive management, the Company created a Risk Management Committee. The Risk Management Committee is comprised of senior members of management, and is chaired by the Senior Vice President and Chief Financial Officer of the Company. The Risk Management Committee is responsible for ensuring that the Company is managing its principal enterprise-wide risks. The Risk Management Committee does this by using an enterprise risk management process (the “ERM process”) which is based on the Company’s risk management policy. The ERM process involves the

application of a well-defined, enterprise-wide methodology that enables our executives to identify, categorize, prioritize, and mitigate the principal risks to the Company such as: business continuity, compliance, credit, environmental, information technology, strategic, financial, operational and reputational risks. In addition to known risks, the ERM process focuses on emerging risks as well as risks that are rare and difficult to predict, but which, if they were to occur, would have a significant impact on the Company. The findings of the ERM process are reported regularly to the Audit Committee by the Chairman of the Risk Management Committee. The Risk Management Committee periodically conducts a full review and update of its assessment of the risks facing the Company and presents the updated assessment to the Audit Committee for its review.

Also, in fulfilling its risk oversight function, the Audit Committee periodically, and as needed, discusses key risks with the Chief Executive Officer, President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, Senior Vice President, General Counsel and Corporate Secretary, internal auditors, and with the Company’s independent registered public accounting firm. The Board evaluated the risk assessment function as part

   
WGL HOLDINGS, INC. - 2015 Proxy Statement    |    11
 
 

Corporate Governance

of its Board evaluation process in 2014 and determined that the Company’s risk management structure (including its risk management policy and risk management committee), plus regular reports to the Board from management and Board committees, enable the Board to perform its risk oversight responsibilities in an appropriate and effective manner.

Additionally, each Board committee oversees risks within its area of responsibility and has principal responsibility for reviewing and discussing with management the risk exposures specified in their charters or identified from time to time by the committees themselves.



Executive Committee

The Executive Committee members are: Terry D. McCallister (Chairman), Michael D. Barnes, George P. Clancy, Jr. and James F. Lafond. Melvyn J. Estrin was on the Executive Committee until his death; no director was elected to take his place. There are six

alternate members: James W. Dyke, Jr., Nancy C. Floyd, Linda R. Gooden, Debra L. Lee and Dale S. Rosenthal. This committee may exercise all of the authority of the Board when the Board is not in session.



Audit Committee

The Audit Committee members are: George P. Clancy, Jr. (Chairman), Linda R. Gooden, Debra L. Lee and Dale S. Rosenthal. Members of the Audit Committee are independent under the rules of the Securities and Exchange Commission (the “SEC”) and the NYSE Listed Company Manual. The Board has determined that Mr. Clancy, Ms. Gooden, Ms. Lee and Ms. Rosenthal meet the qualifications of an “audit committee financial expert,” as that term is defined by rules of the SEC. As provided in its charter, functions of the Audit Committee include:

the appointment, compensation and oversight of independent public accounting firm;
reviewing with management and the independent public accounting firm the financial statements and the accompanying report of the independent public accounting firm; and
reviewing the system of internal controls and the adequacy of the internal audit program.

The Audit Committee also is directly responsible for overseeing the Company’s risk assessment and risk management policies. The report of the Audit Committee, which appears later in this proxy statement, and the Audit Committee charter provide a further description of the responsibilities of this committee.



Governance Committee

The Governance Committee members are: Michael D. Barnes (Chairman), James W. Dyke, Jr. and Nancy C. Floyd. Members of the Governance Committee are independent under the rules of the NYSE Listed Company Manual. As provided in its charter, functions of the Governance Committee include consideration of criteria

for selection of candidates for election to the Board and committees of the Board and adoption of policies and principles concerning Board service and corporate governance. This committee also considers criteria for oversight and evaluation of the Board and management and the adoption of a code of conduct.



Human Resources Committee

General . The HR Committee members are: James F. Lafond, (Chairman), George P. Clancy, Jr. and James W. Dyke, Jr. Members of the HR Committee are independent under the rules of the NYSE Listed Company Manual. The HR Committee discharges the Board’s responsibilities relating to compensation of our executive officers.

As provided in its charter, primary functions of the HR Committee include setting corporate goals and objectives relevant to compensation of the Chief Executive Officer (“CEO”), evaluating the CEO’s performance and setting the CEO’s compensation based on this evaluation. The HR Committee also recommends compensation levels, sets performance targets and evaluates the performance of our other executive officers and determines any incentive and equity-based compensation to be awarded to those officers. The HR Committee also considers succession planning for the Company’s leadership positions.

Under its charter, the HR Committee may delegate authority to act upon specific matters, within specified parameters, to a subcommittee consisting of one or more members or to management. Any such delegates are required to report any action to the full HR Committee at its next meeting. Please see the discussion under the Compensation Discussion and Analysis (“CD&A”) section for information relating to processes and procedures for the consideration and determination of executive compensation.

Governance . The HR Committee focuses on good governance practices in its operation. In FY 2014, this included, among other practices:

reviewing tally sheets prepared by its independent adviser regarding the CEO, Chief Financial Officer and the next three most highly compensated officers (the “Named Executive Officers”). Tally sheets identify the material elements of such executives’ compensation, show the cumulative impact of
   
12    |    WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Corporate Governance

prior grants of long-term incentive awards, and quantify severance and other payouts to which the executive would be entitled under various employment termination scenarios. The HR Committee concluded, based on the tally sheets, that cumulative pay was reasonable and suggested that no changes be made to our pay philosophy;

considering compensation for the executive officers listed in compensation tables of this proxy statement in the context of all of the components of total compensation, and not allowing the sum of the components to exceed market levels of total compensation opportunity;
receiving meeting materials several days in advance of meetings;
conducting regular executive sessions of HR Committee members; and
maintaining direct access to an independent executive compensation adviser.

Compensation Adviser. The HR Committee has the sole authority to retain and terminate any compensation adviser engaged to assist the HR Committee in the evaluation of the compensation of our executive officers and directors. During FY 2014, the HR Committee’s retained adviser was a partner at Meridian Compensation Partners, LLC (“Meridian”). Meridian is an independent firm that provides only executive and director compensation advisory services. The HR Committee’s adviser attended both of the HR Committee meetings held during FY 2014.

The adviser provided data and information to the HR Committee but did not make recommendations with respect to specific levels of compensation. Services provided by Meridian to the HR Committee for FY 2014 included:

•    development of market data in line with the Company’s compensation philosophy (as discussed in the CD&A section of this proxy statement);
•    a dilution study;
•    pay and performance comparisons;
•    tally sheet development;
•    update of the compensation risk review;
•    legislative, regulatory, and market trend updates; and
•    review of the CD&A and other proxy disclosures.

Adviser Independence. The HR Committee concluded that its compensation adviser had no conflicts of interest during FY 2014. In reaching this conclusion, the HR Committee considered all relevant factors, including the six independence factors relating to committee advisers that are specified in SEC Rule 10C-1 and the NYSE’s listing standards. These factors are:

   
(i) the provision of other services to the Company by the adviser’s employer;
   
(ii) the amount of fees received from the Company by the adviser’s employer as a percentage of the total revenue of the adviser’s employer;
   
(iii) the policies and procedures of the adviser’s employer that are designed to prevent conflicts of interest;
   
(iv) any business or personal relationship of the adviser with a member of the HR Committee;
   
(v) any stock of the Company owned by the adviser; and
   
(vi) any business or personal relationship of the adviser or the adviser’s employer with an executive officer of the Company.

In addition, the HR Committee retains the individual adviser as well as the adviser’s firm, and the adviser reports directly to the HR Committee.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement    |    13
 
 

Corporate Governance

HR Committee Interlocks and Insider Participation

The HR Committee currently is composed of three independent, non-employee directors. During FY 2014, no current or former member of the HR Committee was an officer or employee of WGL Holdings or any of its subsidiaries. No former or current member of the Board or the HR Committee has served, at any time since

October 1, 2013, as an executive officer of any entity that at such time had one or more of WGL Holdings’ executive officers serving as a member of that entity’s board of directors or compensation committee.



Director Independence and Retirement Age

The Board has determined that all of the current directors and each of the nominees for election as director, except Mr. McCallister, are independent pursuant to the guidelines set forth by the NYSE. In determining independence, the Board considered the specific criteria for independence as set forth in the NYSE Listed Company Manual and also the facts and circumstances of any other relationships of individual directors with the Company or its affiliates.

The Board has a policy under which directors who are not employees of the Company may not stand for re-election after reaching the age of 75. Also, under this policy, directors who are employees of the Company must retire from the Board upon their retirement from the Company. This policy can be changed at any time by an action of the Board.



Policies and Procedures for Review, Approval or Ratification of Related-Person Transactions

Our policies and procedures for the review, approval or ratification of related person transactions are set forth in our Related Person Transactions Policy. In summary, a related person transaction is a consummated or currently proposed transaction in which we were or are to be a participant and the amount involved exceeds $120,000, and in which a related person ( i.e ., any director, executive officer, nominee for director, beneficial owner of more than 5% of our common stock, or any member of the immediate family of such person) has or will have a direct or indirect material interest.

The Governance Committee is responsible for reviewing and approving all material transactions with any related person. This obligation is set forth in the Governance Committee charter.

To identify related party transactions, each year we submit and require our directors and officers to complete director and officer questionnaires identifying any transactions with us in which the officer or director or their family members have an interest. We also distribute questionnaires to directors, executive officers and others within the Company to identify related party transactions

for purposes of meeting accounting and disclosure requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 850. We review related party transactions due to the potential for a conflict of interest. A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the Company’s interests. Our code of conduct requires all directors, officers and employees who may have a potential or apparent conflict of interest to notify their supervisor or the Company’s Compliance Officer.

We expect our directors, officers and employees to act and make decisions that are in the Company’s best interests and encourage them to avoid situations that present a conflict between our interests and their own personal interests. Our directors, officers and employees are prohibited from taking any action that may make it difficult for them to perform their duties, responsibilities and services to the Company in an objective and fair manner. In addition, we are prohibited from extending personal loans to, or guaranteeing the personal obligations of, any director or officer.



No Material Related Person Transactions During FY 2014

There were no material related person transactions during FY 2014 and no transactions were considered or reviewed for

approval in connection with our Related Person Transactions Policy.



Communications with the Board

Shareholders and all other interested parties may send communications regarding financial accounting, internal accounting controls, auditing, code of conduct or other concerns to non-management Board members by using the

toll-free number established for such purposes, which is

1-800-249-5360.

   
14    |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Director Compensation

DIRECTOR COMPENSATION

Director Annual Retainer and Meeting Fees

Compensation for directors during FY 2014 consisted primarily of an annual retainer, fees for attending meetings, and an annual equity award. Directors were offered the opportunity to receive all of their cash compensation on a deferred basis under the WGL Holdings and Washington Gas Light Company’s Deferred Compensation Plan for Outside Directors described later in this proxy statement. Mr. McCallister, our Chairman and CEO, does not receive compensation for his service as a director.

In addition to a retainer paid in cash, non-employee directors annually receive WGL Holdings common stock under the terms of the WGL Holdings Directors’ Stock Compensation Plan, as amended (the “Directors’ Stock Plan”), which is described below under the heading “Directors’ Stock Plan.”

Non-employee directors of WGL Holdings also serve as directors of its utility subsidiary, Washington Gas Light Company (“Washington Gas”). The directors serve on the same committees of each board of directors. Non-employee directors receive only one cash retainer which is payable by Washington Gas. Usually, the board meetings of WGL Holdings and Washington Gas are held consecutively.

The tables below present the FY 2014 compensation arrangements of non-employee directors of the Company and information regarding the compensation paid during FY 2014 to the non-employee directors.



COMPENSATION ARRANGEMENTS OF NON-EMPLOYEE DIRECTORS IN FY 2014

 

    Washington Gas Dollar   WGL Holdings Dollar  
Description of fees paid to non-employee Directors*   Amount   Amount  
On days when both Boards meet   $ 1,000   $ 500  
On days when both committees meet   $ 1,000   $ 500  
On days when only one Board meets   $ 1,200   $ 1,200  
On days when only one committee meets   $ 1,200   $ 1,200  
Each day a director attends a Director Education Program   $ 1,000   $ 500  
Annual meeting attendance fee   $ 1,000   $ 500  
Annual cash retainer (paid on quarterly basis)   $ 55,000     0  
Annual retainer to chairman of HR Committee   $ 12,500     0  
Annual retainer to chairman of Audit Committee   $ 15,000     0  
Lead Director annual retainer**   $ 15,000     0  
Annual retainer to Chairman of Governance Committee   $ 6,000     0  

 

* Allocation based on approximate time required for board of director responsibilities for each company (1/3 WGL Holdings; 2/3 Washington Gas).
** In accordance with our Corporate Governance Guidelines, the Chairman of the Governance Committee simultaneously serves as Lead Director. The compensation for the Lead Director is separate from and in addition to the compensation for the Chairman of the Governance Committee even though these positions are simultaneously held by the same person. This policy underscores the importance of each respective position. The retainer for the Lead Director for FY 2014 was $15,000 and the retainer for the Chairman of the Governance Committee was $6,000.
   
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Director Compensation

COMPENSATION PAID TO DIRECTORS IN FY 2014

 

                          Change in              
                          Pension              
                          Value and              
                          Non-qualified              
    Fees Earned               Non-Equity   Deferred              
    or Paid in   Stock   Option   Incentive Plan   Compensation   All Other        
    Cash   Awards (1)   Awards   Compensation   Earnings (2)   Compensation   Total  
Name (a)   ($) (b)   ($) (c)   ($) (d)   ($) (d)   ($) (f)   ($) (g)   ($) (h)  
Michael D. Barnes   $ 112,300   $ 85,000   $ 0   $ 0   $ 0   $ 0   $ 197,300  
George P. Clancy, Jr.   $ 103,300   $ 85,000   $ 0   $ 0   $ 60,991   $ 0   $ 249,291  
James W. Dyke, Jr.   $ 97,300   $ 85,000   $ 0   $ 0   $ 0   $ 0   $ 182,300  
Melvyn J. Estrin (3)   $ 87,900   $ 85,000   $ 0   $ 0   $ 103,416   $ 94,871   $ 371,187  
Nancy C. Floyd   $ 87,100   $ 85,000   $ 0   $ 0   $ 0   $ 0   $ 172,100  
Linda R. Gooden   $ 79,600   $ 85,000   $ 0   $ 0   $ 3,804   $ 0   $ 168,404  
James F. Lafond   $ 91,300   $ 85,000   $ 0   $ 0   $ 81,447   $ 0   $ 257,747  
Debra L. Lee   $ 81,300   $ 85,000   $ 0   $ 0   $ 0   $ 0   $ 166,300  
Dale S. Rosenthal (4)   $ 24,250   $ 21,250   $ 0   $ 0   $ 0   $ 0   $ 45,500  

 

(1) On January 2, 2014, each of the non-employee directors other than Ms. Rosenthal received an award of 2,122 shares of WGL Holdings common stock in accordance with the terms of the Directors’ Stock Plan. On October 1, 2014, Ms. Rosenthal received an award of 501 shares of WGL Holdings common stock in accordance with the terms of the Directors’ Stock Plan. The amounts reported for stock awards reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The grant date fair value of each equity award computed in accordance with FASB ASC Topic 718 was $40.06 per share, except that the grant date fair value of the equity award to Ms. Rosenthal was $42.43 per share. For a discussion of assumptions and methodologies used to calculate the amounts in column (c), see Note II (Stock-Based Compensation) to the WGL Holdings consolidated financial statements, included as part of the Company’s 2014 Annual Report on Form 10-K filed with the SEC on November 21, 2014.
   
(2) Amounts in this column only reflect earnings on non-qualified deferred compensation. None of the directors have any retirement benefits, except for Mr. Barnes and Mr. Estrin. As described below under “Director Retirement Plan,” the retirement benefits for these directors are frozen and, therefore, there is no change in value.
   
(3) Melvyn J. Estrin passed away on July 9, 2014. In connection with his service to the Board, Mr. Estrin’s beneficiary was entitled to receive a payment of $94,871 pursuant to the director retirement plan. See “Director Retirement Plan” below.
   
(4) Ms. Rosenthal joined the Board on October 1, 2014.
   

Non-Employee Director Compensation

All non-employee directors are compensated in accordance with the terms of our director compensation program. Usually, the Board reviews the level of compensation it receives for its service every two years. In connection with this review, Meridian conducts a director pay review survey to identify board compensation practices of companies in the total compensation peer group. The most recent study was conducted during FY 2014. The Board takes this survey information into consideration when determining the meeting fees, retainers and other forms of compensation it will be paid.

The Board may take action at any time to amend the amount or type of compensation it receives. Directors who are employed by the Company do not receive compensation for their role as a director. The executive officers of the Company do not have a role in determining or recommending the amount or form of compensation received by directors. Other than conducting the director pay review previously mentioned, Meridian has no role in determining the compensation of the Board.



Director Deferred Compensation Plan

Non-employee directors of the Company are eligible to defer up to 100% of their cash Board compensation under the WGL Holdings and Washington Gas Light Company Deferred Compensation Plan for Outside Directors, as amended and restated (the “Director Deferred Compensation Plan”). This includes the deferral of the payment of annual Board and committee cash retainers, Board and committee meeting fees, fees for attendance at annual and special shareholder meetings and fees paid by us for attending director education programs. Deferrals are set at percentage increments of 10%. Interest is earned on deferred amounts, compounded quarterly.

The interest rate on amounts deferred on or after January 1, 2013 is equal to the weighted average interest rate of all of the Company’s outstanding debt because, in any one year, the liability that the Company has to directors is a consolidation of fees deferred over a number of years by directors. Therefore, the funds displace other long-term borrowings that the Company would have otherwise utilized. The interest rate on amounts that were deferred prior to December 31, 2012 is equal to the weekly average yield to maturity for 10-year U.S. Government fixed interest rate securities issued at the time of the deferral, with a minimum rate of 8% per year.

   
16    |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Director Compensation

The interest rate earned on compensation deferred after January 1, 2013 is determined on January 1 each year. The applicable interest rate for calendar year 2015 is 5.65%.

Directors may elect to defer distribution of their compensation for a minimum period of one year following the end of the year in which compensation is deferred or until the director’s retirement from the Board. Deferred compensation may be distributed earlier than the time period specified by a director in the event of the director’s retirement, disability, death or upon the occurrence of a severe financial hardship. Directors may elect to receive payment of deferred amounts in a lump

sum or in equal annual installments up to a ten-year period. Directors must elect the time and method of distribution at the same time they submit a deferral application. Payments commence within 30 days of the event that triggers payout.

The amount of early withdrawals or accelerated payments made in connection with a severe financial hardship is limited in accordance with applicable tax laws. The administrator of the Director Deferred Compensation Plan has the sole discretion to determine whether such an early withdrawal or accelerated payment in the event of a severe financial hardship will be permitted.



Directors’ Stock Plan

Pursuant to the terms of the Directors’ Stock Plan, shares of WGL Holdings common stock are awarded to each non-employee director annually. The amount of WGL Holdings common stock awarded to each non-employee director for 2014 was equal to $85,000 in value, except that Ms. Rosenthal was awarded common stock equal to $21,250 in value for a partial year

of service. The Directors’ Stock Plan is administered by the HR Committee. Employee directors are not eligible to participate in this plan. The shares of common stock awarded under the plan are immediately vested and non-forfeitable. The Directors’ Stock Plan is unfunded and will expire on March 4, 2020, if not previously terminated by the Board or by shareholders.



Director Retirement Plan

A retirement plan for non-employee directors of Washington Gas adopted in 1995 was terminated by the board of directors of Washington Gas effective January 1, 1998, subject to vesting of benefits earned by the directors as of that date. In FY 2014, the Company paid out approximately $94,871 to Mr. Estrin’s primary beneficiary in accordance with the retirement plan. Of the current directors, only Mr. Barnes has vested benefits under this plan.

The benefits are frozen and will be paid out in a fixed amount per year to Mr. Barnes for a ten-year period commencing after his retirement from the Board. Under the plan, Mr. Barnes will receive $10,200 per year during the ten-year payout period.



Donations to Civic Organizations and Charities

Washington Gas has a long-standing tradition of supporting charitable and civic organizations within the Washington, D.C. metropolitan area by contributing financial donations and

employee volunteer resources. None of these donations in FY 2014 were made in the name of a director of WGL Holdings or Washington Gas.



Board of Directors Stock Ownership Guidelines

The Board has stock ownership guidelines pursuant to which each Board member should own shares of WGL Holdings having a value of at least five times the amount of his or her annual cash retainer (i.e., at least $275,000 during FY 2014). New directors have five years from the date of their election to the Board to

acquire this level of ownership. Based on the closing price of the common stock of WGL Holdings on January 5, 2015, each of the FY 2014 directors was in compliance with the stock ownership guidelines as of that date (or had not yet served for five years and thus was not subject to the minimum ownership guidelines).


 
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Beneficial Ownership

BENEFICIAL OWNERSHIP

Security Ownership of Management and Certain Beneficial Owners

The following table sets forth the information as of January 5, 2015, regarding outstanding common stock of WGL Holdings beneficially owned by each director, each nominee for election as a director, the executive officers named in the Summary Compensation Table in this proxy statement, and all directors,

nominees and executive officers as a group. Each of the individuals listed, as well as all directors and executive officers as a group, beneficially owned less than 1% of the Company’s outstanding common stock.

 

 

  Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1)
Vincent L. Ammann, Jr. 29,289
Michael D. Barnes 15,406
Gautam Chandra 18,135
Adrian P. Chapman 48,671
George P. Clancy, Jr. 22,132
James W. Dyke, Jr. 9,899
Nancy C. Floyd 8,768
Linda R. Gooden 5,224
James F. Lafond 19,252
Debra L. Lee 12,394
Terry D. McCallister 78,647
Dale S. Rosenthal (2) 2,949
Leslie T. Thornton 0
All directors, nominees and executive officers as a group (22 people): 340,234

 

(1) Except as noted below and except for 13,131 shares held indirectly by executive officers in the Washington Gas Light Company Savings Plan for Management Employees, all shares are directly owned by persons shown in this table. None of the individuals listed above nor any other executive officers own stock options.
   
(2) Includes 800 shares held by the Robert Rosenthal Marital Trust.
   

The following table sets forth information as of December 31, 2014 regarding any person who is known to WGL Holdings to be the beneficial owner of more than five percent of WGL Holdings common stock.

 

    Amount and Nature        
Name and Address of Beneficial Owner   of Beneficial Ownership   Percent of Class  
American Century Investment Management, Inc., 4500 Main Street,
9th floor, Kansas City, MO 64111
    4,657,539 (1)   9.37 %
BlackRock, Inc., 40 East 52nd Street, New York, NY 10022     4,407,572 (2)   8.86 %
State Street Corporation, State Street Financial Center, One Lincoln     3,460,878 (3)   6.96 %
Street, Boston, MA 02111      
The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355     3,065,953 (4)   6.17 %

 

(1) This information is based on a Form 13G/A, filed on February 13, 2014, with the SEC by American Century Investment Management, Inc., which reported that it had sole voting authority over 4,497,319 shares and sole investment authority over the shares.
   
(2) This information is based on a Form 13G/A, filed on January 31, 2014, with the SEC by Black Rock, Inc., which reported that it had sole voting authority and sole investment authority over the shares.
   
(3) This information is based on a Form 13G, filed on February 5, 2014, with the SEC by State Street Corporation, which reported that it had shared voting authority and shared investment authority over the shares.
   
(4) This information is based on a Form 13G/A, filed on February 12, 2014, with the SEC by The Vanguard Group, Inc., which reported that it had sole voting authority over 110,291 shares and sole investment authority over 2,992,662 shares.
   
   
18    |    WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Human Resources Committee Report

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors to file reports of securities ownership and changes

in such ownership with SEC. Based on our records and information, all applicable reporting requirements under Section 16(a) were satisfied in FY 2014.



HUMAN RESOURCES COMMITTEE REPORT*

The following Compensation Discussion and Analysis section has been prepared by the management of the Company. The Company is responsible for the Compensation Discussion and Analysis and for the disclosure controls relating to executive compensation. The Compensation Discussion and Analysis is not a report or disclosure of the HR Committee.

The HR Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this proxy statement. Based upon this review and its discussions, the HR Committee recommended to the Board that the following Compensation Discussion and Analysis section be included in this proxy statement.

HUMAN RESOURCES COMMITTEE

James F. Lafond (Chairman)

George P. Clancy, Jr.

James W. Dyke, Jr.



* Notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, that might incorporate other filings with the SEC, including this information statement, in whole or in part, the Human Resources Committee Report shall not be deemed to be incorporated by reference into any such filings.


 
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    19
 
 

Compensation Discussion And Analysis

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) contains a discussion of the material elements of compensation awarded to, earned by, or paid to the principal executive officer, the principal financial officer, and the next three most highly compensated executive officers of WGL Holdings and Washington Gas. These

individuals are listed in the Summary Compensation Table provided later in this proxy statement and are referred to in this CD&A as the “Named Executive Officers.” None of the Named Executive Officers are members of the HR Committee.



Program Highlights

Our executive compensation program is performance-oriented and reasonable, as evidenced by the following:

Our pay philosophy is conservative.
o We have no employment contracts with executives and no guaranteed pay.
o Each component of our program is targeted at the size- adjusted 50th percentile of the utilities marketplace. Use of a utilities market rather than general industry results in lower market benchmarks.
o The HR Committee’s consultant size-adjusts the market data to be appropriate based on our revenues relative to the total compensation peer group. The market capitalizations of peers have no impact on the market data we use to make pay decisions.
o Executive perquisites are few and have low-value.
Our actual pay opportunities are moderate.
o Our FY 2014 target total compensation opportunities for Named Executive Officers were all slightly below market.
o We take retirement benefits into account when comparing target total compensation to the size-adjusted 50th percentile. That is, where retirement benefits are above- market, we reduce long-term incentive opportunities to offset them.
Our short-term incentive program is conservatively designed, has had moderate actual payouts and is regarded favorably by our regulators.
o The plan pays a maximum of 150% of target.
o The Company portion payout was 90% of target for FY 2014 and has averaged 100% of target for the past three fiscal years.
o Our design, which uses 13 performance measures, achieves favorable regulatory treatment due to its high customer orientation.
Our long-term incentives are entirely performance-based and have paid zero or below target for the past three periods.
o Our performance share and performance unit payouts depend on how our 3-year TSR compares to that of utilities deemed most like us. The measure is intended to be a proof of our business strategy and our execution of it. Performance share values also depend on the extent to which our shares appreciate over the performance period.
o The FY 2014 payout scale for our performance shares and performance units has a probabilistic value of slightly less than target.
o Performance share and performance unit payouts for the past three performance periods paid zero or below target, and there were no “make-up” payments to offset these below-target long-term incentive payouts.
o We have not granted time-based restricted stock since 1996 or stock options since 2006.


Outreach Following Last Year’s Say-On-Pay Vote and FY 2015 Program Changes

 
Last Year’s Say-on-Pay Vote Result

At the Company’s 2014 annual meeting of shareholders, shareholders had the opportunity to cast an advisory vote regarding our executive compensation program, i.e. , a “say-

on-pay” vote. The result was 84% favorable, compared to 96% favorable in the prior year.



 
Shareholder Outreach

To better understand last year’s vote result, we conducted investor outreach with many of our largest institutional shareholders, resulting in meetings with eight shareholders representing in aggregate approximately 29% of our outstanding common stock. In these meetings, we learned the following:

The investors with whom we spoke generally did not express concerns about the size of our actual payouts, the structure of our pay practices, the link between pay and performance or our methods for determining market-based compensation targets.
   
20    |    WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Discussion And Analysis

Some shareholders suggested that incorporating a second performance metric in our incentive program would strengthen our ability to attract and retain talent by mitigating the risk of incentive payouts below market levels.
None of these investors took issue with the threshold in our relative TSR plan.
All of these investors seemed to understand and support our approach to size-adjustment of compensation opportunities.
In general, these investors encouraged the use of TSR as a metric that is well-aligned with shareholder interests, and

understood the link between TSR performance and actual compensation over the past few years.

Nevertheless, several of our shareholders did express a preference for expanded disclosure about the link between our short-term performance metrics and our long-term strategic goals, the evaluation of our annual corporate scorecard results for the purpose of determining short-term incentive payouts and our selection of the total compensation peer group and the long-term incentive peer group, which is reflected in the discussion below. In addition, we have included a Proxy Summary section in this proxy statement that summarizes key information relating to our compensation program and other information.


 
FY 2015 Program Changes

For FY 2015 we have made two changes to our long-term incentive program that we believe are aligned with investor feedback:

     
  (i) In order to bring the scale in line with those of comparable utility companies and ensure that our compensation program is competitive, we lowered the percentile at which payouts of performance shares and performance units could be made from 30th percentile TSR to 25th percentile TSR. This change results in a probabilistic value for the scale of exactly 1.0 times target.
     
  (ii) We added a dividend growth standard to our long-term incentive program that applies if TSR is below the 25th

percentile. If met, the dividend growth standard will result in a payout of 25% of target. Dividend growth is highly valued by long-term holders of our common stock and that of comparable utility companies, and we believe that the addition of this metric aligns compensation with an important element of investment returns. Furthermore, the addition of this metric will more closely align our long-term incentive program to compensation programs of comparable utility companies. This change is also responsive to investor feedback that the use of a second performance measure in our long-term incentive program will positively affect our ability to attract and retain talent.



FY 2014 in Review

 
FY 2014 Operating Highlights
WGL Holdings and Washington Gas generated record non- generally accepted accounting principles (“GAAP”) operating earnings for FY 2014.
The Board authorized a $150 million Share Repurchase Program in FY 2014. As of September 30, 2014, WGL Holdings had invested approximately $56 million to repurchase approximately 1.3 million shares of common stock of the Company. In aggregate to date, we have invested approximately $97.6 million to repurchase approximately 2.3 millions shares.
WGL Holdings increased its annual dividend by eight cents, a 4.8% increase, to $1.76. This marks the 38th consecutive year that the Company has increased the dividend on its common stock.
WGL Holdings entered into multi-million dollar agreements related to renewable energy in FY 2014, continuing to add new solar energy and fuel cell projects to its portfolio. As of September 30, 2014, WGL Holdings’ portfolio consists of over 60 megawatts of installed solar capacity and 3.4 megawatts of installed fuel capacity. An additional 40 megawatts of distributed generation is currently under contract or in construction.
WGL Holdings has become a 55% equity owner in a joint venture that owns approximately 39% of the Central Penn Pipeline project, which will be an integral part of Transcontinental Gas Pipeline Company LLC’s recently announced Atlantic Sunrise Project. This pipeline is designed to provide new firm transportation capacity from various supply points in northeast Pennsylvania and extending to Lancaster County, Pennsylvania. Other partners include COG Holdings LLC, Vega Midstream MPC LLC, and River Road Interests LLC.
Washington Gas experienced record cold spikes in its territories, recording nine peak days during FY 2014. The Company’s distribution system operated safely and continuously during these extreme conditions.
Washington Gas also exceeded its new meter additions target for FY 2014, which resulted in the addition of over 13,300 new meters within its service territory, which we believe demonstrates the Company’s successful marketing and sales efforts.
Washington Gas’ employees volunteered more than 11,000 hours of their time to a variety of community service projects in the Washington D.C. metropolitan area.
   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    21
 
 

Compensation Discussion And Analysis

What We Pay and Why: Elements of Compensation

We have three main elements of direct compensation: base salary, annual incentives and long-term equity compensation. The majority of direct compensation is performance-based and not guaranteed. We also provide various retirement and benefit programs and modest business-related perquisites. The dashboard below provides a snapshot and describes why we provide each element.

(PIE CHART)  

                 
Other Elements of Compensation  
   
Benefits   Perquisites   Retirement Programs  
                 
Provide a safety net to protect against financial catastrophes that can result from illness, disability or death.   We believe the benefit the Company receives from providing perquisites significantly outweighs the cost of providing them.   Provide for basic retirement needs and serve as an additional means to attract and retain employees.  
                 
Includes medical, dental, disability and severance plans.   Additional detail and the business rationale for each perquisite are described on page 33.   Include pension plans, retirement savings plans and deferred compensation plans.  
                 
Named Executive Officers generally participate in the same benefit plans as the broader employee population.         For additional details, see “Retirement Benefits” beginning on page 31.  

 

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Compensation Discussion And Analysis

Objectives of Executive Compensation Program

Our executive compensation program is intended to achieve the following fundamental objectives:

attract and retain qualified executives;
focus executives’ attention on specific strategic and operating objectives of WGL Holdings;
align executives’ interests with the long-term interests of WGL Holdings’ shareholders; and
align management’s interests with the customers of its regulated utility company (Washington Gas) by rewarding the

provision of a safe and reliable gas supply to customers at a reasonable cost, and align management’s interests with the customers of its non-utility entities and the communities in which we operate.

To accomplish those objectives, the HR Committee provides the Named Executive Officers competitive total compensation opportunities based on the size-adjusted 50th percentile of the range of compensation paid by similar utility industry companies for positions of similar responsibility. Actual pay reflects WGL Holdings’ short and long-term performance and the individual’s performance.



Elements of Executive Compensation Program

In FY 2014, our compensation program for our executive officers, including the Named Executive Officers, consisted of several compensation elements, each of which is discussed in more detail below. Each element of the executive compensation program is structured to help achieve one or more of the compensation objectives described above. Decisions with respect to one element of pay generally do not impact other elements of pay, with the exception that above-market retirement benefits reduce long-term incentive opportunities so that total target compensation remains near market compensation.

A significant percentage of total compensation is allocated to incentives, both short-term and long-term. Short-term incentives focus on internal performance measures and goals that we set each year, and are paid in cash. Long-term incentives focus on our TSR against peers and are denominated in and paid in a combination of stock and cash.

There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term compensation. Rather, the HR Committee uses market data and its business judgment to determine the appropriate level and mix of incentive compensation.



Analysis

 
Key Analytic Tools

The HR Committee uses specific analytic tools as well as its seasoned business judgment in forming recommendations and decisions on executive compensation matters. To facilitate the HR Committee’s decision-making process for FY 2014, the HR Committee’s independent executive compensation adviser, a partner at Meridian Compensation Partners, LLC (“Meridian” or “the adviser”) prepared: an executive compensation market study, a retirement benefits analysis, compensation tally sheets for each executive, pay and performance comparisons, an incentives risk evaluation and information on executive compensation trends. These materials were delivered to the HR Committee members in advance of HR Committee meetings and were the subject of discussion between HR Committee members and the adviser.

In addition, the HR Committee received and considered comprehensive reports from management on corporate and individual executive performance. Corporate performance was discussed with the HR Committee at the time that our financial results for FY 2014 were being released to the public. The HR Committee considered our corporate performance as measured

by our reported financial results for FY 2014 and by the corporate scorecard for FY 2014.

To determine the Corporate Factor used in the calculation of short-term incentives, the HR Committee evaluates corporate performance based on a holistic review of scorecard results. The absolute number of scorecard goals for which targets are met or exceeded is one of several factors that the HR Committee considers. Other considerations may include (but are not limited to) the relative strategic importance of various scorecard elements, the margin by which the targets are exceeded, and outlier events and intangible factors that the HR Committee determines are important to long-term shareholder value. There were 13 items on the corporate scorecard for FY 2014. Details regarding the targets and results for our corporate scorecard are reported elsewhere in this CD&A.

Individual performance is measured each year by the HR Committee and our management. Every other year, the HR Committee assesses performance in part by the use of a multi-rater survey of our executives. This multi-rater survey is prepared and administered

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    23
 
 

Compensation Discussion And Analysis

by a consultant to the Company and the HR Committee. The HR Committee members also have direct knowledge of the performance of several of the executives through regular and special reports by these executives to the Board and Board committees. In addition, our Chairman and CEO discusses the performance of our other executives in detail with the HR Committee.

Several specific corporate performance factors and individual performance factors were considered by the HR Committee in establishing the compensation of our Named Executive Officers for FY 2014. Those corporate and leadership performance factors are specifically described elsewhere in this proxy statement.

 
Human Resources Committee Decisions

The HR Committee sets the compensation for the Named Executive Officers and certain other senior executives. The

following describes the basis on which the HR Committee made decisions in FY 2014.

 
Market Data and Total Compensation Peer Groups

Our philosophy is to provide pay opportunities for each component of pay and for total compensation at the size- adjusted 50th percentile of the utilities market. In furtherance of that objective, during fiscal year 2013 as background to compensation decisions for FY 2014, the adviser collected and analyzed comprehensive market data on base salary, short and long-term incentives, and the sum of those components. In 2012, the adviser had separately analyzed the market competitiveness of our executive retirement benefits and the prevalence of perquisites. The review of retirement benefits is conducted every two years, as these benefits generally do not vary significantly from year to year.

To develop market information for our executive officers, including the Named Executive Officers, the adviser developed compensation opportunities for comparable positions at comparable companies of comparable revenue size, using statistical techniques to adjust the market data to be appropriate for our particular revenue size. The adviser used all relevant available data for comparable positions in the total compensation peer group. The relative market capitalizations of the Company and our peers do not impact the development of the market benchmarks, given the regression analysis performed by the

adviser to size-adjust the data. The elements of pay were benchmarked both individually and in total to the same peer companies.

The total compensation peer group used as background to FY 2014 pay decisions is shown below. The list is subject to change each year depending on the availability of the companies’ data through the Aon Hewitt Total Compensation Measurement database (used by the adviser for FY 2014), and the continued appropriateness of the companies. All companies were chosen because they are utility companies in a size range reasonably near WGL Holdings. While we periodically review market data of general industry companies, which is generally higher than that of utilities, to date these data have not impacted our actual pay levels or practices.

The total compensation peer group is not the same as the long-term incentive peer group described on page 30. The total compensation peer group is intended to benchmark the market compensation for executives in comparable positions, whereas the long-term incentive peer group is selected to benchmark share performance, as measured by TSR, for comparable investment opportunities.

 
FY 2014 TOTAL COMPENSATION PEER GROUP
AGL Resources Integrys Energy Group Pioneer Natural Resources Co.
Alliant Energy Corp. Laclede Group Portland General Electric Co.
Ameren Corporation MGE Energy PPL Corporation
Atmos Energy New Jersey Resources Public Service Enterprise Group
Black Hills Corporation NiSource Inc. SCANA Corporation
Centerpoint Energy, Inc. Northeast Utilities Sempra Energy
Cleco Corporation Northwest Natural Gas South Jersey Industries
CMS Energy Corporation Northwestern Corp. Southwest Gas
Chesapeake Utilities OGE Energy Corp. UIL Holdings
Consolidated Edison Pepco Holdings, Inc. Vectren Corporation
DTE Energy Company Piedmont Natural Gas  

Some of the companies in the above total compensation peer group are considerably larger than WGL Holdings. We include them in order to have the widest possible data sample. As noted above, we size-adjust the results to be appropriate to WGL Holdings’ revenues size. A 50th percentile “line of best fit” is drawn through the data, and the compensation level on that line that corresponds to our revenues size is treated as the

“market” for purposes of setting compensation. For example, the graph below exhibits the determination of the size-adjusted 50th percentile, or “market”, total cash compensation (corresponding to base salary plus target short-term incentive compensation) for the Chief Executive Officer position (used for FY 2015 compensation decisions) based on compensation data from the total compensation peer group:

 

   
24    |   WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Discussion And Analysis

 

(LINE GRAPH)  

 
Market Percentile for Target Pay and Pay Changes for FY 2014

Target pay levels of executive officers (which includes the Chairman and CEO and the other Named Executive Officers), in FY 2014 and in prior years, were set at a level approximately equal to the size-adjusted 50th percentile of the utility market for officers of similar experience and responsibility. The HR Committee utilized comprehensive executive compensation data provided by its adviser to determine these market levels, which were then used to establish compensation levels for all of our officers.

This approach was taken to place base salaries at overall market rates for base pay, and to leave the opportunity for each officer to achieve, exceed or fall short of total target compensation through incentive pay. This continuing practice is designed to encourage higher levels of performance by the officers. We believe this practice also aligns the interests of the officers of WGL Holdings and Washington Gas with the interests of shareholders, customers and the communities in which our businesses operate.

The compensation data demonstrated a higher level of market base pay and incentive opportunities for the Chairman and CEO position as compared to other executive officers. Therefore, the HR Committee granted Mr. McCallister higher levels of target pay than other officers.

Mr. McCallister, our Chairman and CEO, made specific recommendations for FY 2014 salary adjustments for all officers except himself, considering the data provided by the HR Committee’s adviser on industry compensation levels, the scope of each Named Executive Officer’s role, and the Named

Executive Officer’s sustained individual performance, results and time in position. These recommendations were presented to the HR Committee for discussion and recommendation to the Board at the September 21, 2013 HR Committee meeting and were effective October 1, 2013.

The HR Committee met with its adviser in executive session at that meeting to consider Mr. McCallister’s base salary and target incentives for FY 2014, which it has sole authority to approve. In September 2013, the HR Committee increased Mr. McCallister’s base salary by $5,000 (0.6%), with no increase to short-term incentive or long-term incentive percentage opportunities.

FY 2014 target pay opportunities for all executive officers were established based on considerations of market data and internal pay equity. As a result of these changes, target pay opportunities for the Named Executive Officers ranged from 1% to 12% below market after including the retirement benefits available to each Named Executive Officer. For all Named Executive Officers, above-market retirement benefits served to decrease the long-term incentive grants made, in order to be at or below market for all compensation elements.

The base salary that was paid to each Named Executive Officer in FY 2014 is the amount reported for such officer in column (c) of the Summary Compensation Table that appears later in this proxy statement. Short-term incentive target opportunities are reflected in column (d) of the Grants of Plan-Based Awards Table that appears later in this proxy statement.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    25
 
 

Compensation Discussion And Analysis

Base Salary

Base salary is designed to reward the required day-to-day activities and responsibilities of each position. We choose to pay

it because it is an expected aspect of executive compensation in the marketplace.



Omnibus Incentive Compensation Plan

The WGL Holdings, Inc. Omnibus Incentive Compensation Plan (“Omnibus Plan”) provides the opportunity for short- term and long-term incentive compensation of our executive officers, including the Named Executive Officers. Short-term incentive compensation is “at risk,” in that payment of any of this compensation depends upon performance of the individual

officer and our Company performance. Long-term incentive compensation is also “at risk” in that it relates directly to the performance of WGL Holdings common stock against that of other utilities. Both plans have the potential to pay zero if performance goals are not met.



Short-Term Incentive Compensation

 
Purpose of Short-Term Incentives

The short-term incentive program is designed to reward the level of performance of officers of WGL Holdings and its subsidiaries.

We choose to pay it to encourage higher annual corporate and individual performance.

 
Short-Term Incentive Awards

The FY 2014 short-term incentive program set target percentages of base salary that could be earned for the achievement of corporate and individual performance goals. Payouts could be

higher or lower than target depending on 2014 corporate and individual performance, ranging from 0% to 150% of target per the scale below.

       
Item Corporate Individual Total
Weighting 75% 25% 100%
Corporate or Individual Factor, as applicable maximum 1.5 maximum 1.5
Individual Factor applied again to the corporate portion maximum 1.0
Maximum payout as% of target 112.5% 37.5% 150%

The amounts listed in columns (c), (d) and (e) of the “Grants of Plan-Based Awards” table in this proxy statement show the potential range of short-term cash awards for FY 2014 for each Named Executive Officer.

At its September 18, 2013 meeting, the HR Committee set 2014 target short-term incentive award opportunities for each Named Executive Officer at or near the size-adjusted 50th percentile of the market data provided by the HR Committee’s adviser. It also approved FY 2014 performance goals and targets that governed payout under the plan.

The corporate performance goals, outlined on our FY 2014 corporate scorecard, recognize that shareholders in a regulated utility achieve their investing objectives when customers are well-served through efficient operations. The FY 2014 performance goals, targets and results are set forth below.

The Company’s FY 2014 performance goals included multiple metrics in eight corporate performance categories related to: safe delivery, performance improvement, customer value, supplier

diversity, sustainability, employer of choice, reliable supply and financial performance. These goals measure the results of short- term activities that drive the long-term strategic objectives of the Company. The performance targets are intended to challenge the Company and its executive officers to achieve significant accomplishments in each of these areas. Performance against these goals resulted in a Corporate Factor determined by the HR Committee. The determination of the Corporate Factor is, as discussed above, based on a holistic review of scorecard results that considers the absolute number of targets met or exceeded, the relative strategic importance of various scorecard elements, the margin by which targets are exceeded, and outlier events and intangible factors that the HR Committee determines are important to long-term shareholder value.

The HR Committee also established a consolidated non-GAAP return on equity threshold of 8.7%, which, if not met, would lead to zero payout of the corporate portion of the plan. The return on equity threshold will vary each year as a benchmark in relation to the expected earnings forecast for that year.

   
26    |   WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Discussion And Analysis

FY 2014 Corporate Performance

The table below sets forth the Company’s performance against our performance goals.

             
  Corporate Goals   FY 2014 Target   FY 2014 Results  
1. Safe Delivery          
  Employee Work Safety   Less than or equal to a DART* rate of 1.44   1.61  
  System Safety/Pipeline Integrity   Greater than or equal to 100%   105.1%  
2. Performance Improvement          
  Construction Unit Cost Attainment   Less than or equal to 100% of budget   98.3%  
  O & M Per Customer   Less than or equal $276   $266  
3. Customer Value          
  New meter additions   Greater than or equal to 13,000   13,327  
  Customer Satisfaction   Greater than or equal to 89%   86.5%  
4. Supplier Diversity   Greater than or equal to 19%   22.1%  
5. Sustainability   Greater than or equal to 95%   98.4%  
6. Employer of Choice          
  Employee engagement   Greater than or equal to 96%   100%  
  Community involvement   Greater than or equal to 10,000 hours of community service by Washington Gas employees   11,133  
7. Reliable Supply          
  System Reliability   Less than or equal to 58 outages per 100,000 meters   68.04 outages
per 100,000 meters
 
8. Reward Investors          
  Allowed Utility Return on Equity   Greater than or equal to 9.6% (non-GAAP)   12.0%  
  Non-Utility Earnings   100% of targeted earnings levels from all non-utility operating subsidiaries   83%  

* “DART” refers to Days Away/Restricted or Job Transfer.

Progress in the areas described above strengthens our ability to grow and to provide a competitive return for investors while maintaining a safe, reliable natural gas distribution system that provides sustainable value for our customers. For FY 2014, 9 of 13 scorecard goal targets were met or exceeded.

The Company’s actual FY 2014 non-GAAP return on equity, which is a measurement of the return on equity of WGL Holdings as a consolidated entity, was 10.7%, which exceeded the threshold of 8.7%. The Company determines consolidated non-GAAP return

on equity by adjusting GAAP net income for certain operating earnings and/or losses (non-GAAP adjustments). This amount is then divided by average GAAP equity as adjusted for items included as non-GAAP adjustments.

Based on the Company’s performance, taking into consideration the strategic importance of the various performance criteria, the margin by which targets were exceeded and other considerations, on November 12, 2014, Mr. McCallister recommended, and the HR Committee approved, a Corporate Factor of 90% for 2014.



FY 2014 Individual Performance

Named Executive Officers had individual goals for FY 2014 which encompassed:

their contributions to meeting established corporate and departmental goals;
managing resources within established departmental budgets; and
effectiveness in areas of leadership, planning and teamwork.

After a comprehensive performance appraisal of each Named Executive Officer and a review of their achievement of the individual goals which had been set for them, Mr. McCallister recommended an Individual Factor specific to each Named Executive Officer, except for himself. The HR Committee discussed and approved the Individual Factors recommended by the CEO for these Named Executive Officers. In executive session,

the HR Committee developed an Individual Factor of 1.4 for Mr. McCallister. The other Named Executive Officers received the following Individual Factors: Chapman: 1.4, Ammann: 1.4, Chandra: 1.2, and Thornton: 1.4.

These Individual Factors reflected the personal effectiveness of the executives in achieving the results of the corporate scorecard described above. Mr. McCallister’s Individual Factor in particular reflects achievement of 9 of 13 goals on the corporate scorecard, generating record non-GAAP net income in both WGL Holdings and Washington Gas, adding the highest number of new customer meters since 2007, reducing employee injuries by 50% over the past 5 years, building for future success (including a $410 million pipeline investment), significant FY 2014 shareholder engagement, generating adequate funds for a significant stock buyback, improvement in non-utility operations, providing reliable gas

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |    27
 
 

Compensation Discussion And Analysis

delivery through a record-setting winter, maintaining a strong control environment in the Company, continuing to ensure a strong succession and executive development plan and deploying $120 million of capital for new business opportunities in renewable energy. Mr. McCallister also was selected to chair the Board of Directors for the American Gas Association in 2015, was appointed to the

National Petroleum Council and chairs the Board of Directors for the Gas Technology Institute. Additionally, during FY 2014, Mr. McCallister led the Company in achieving the accomplishments listed under the “FY 2014 in Review – Fiscal Year Operating Highlights” section of this CD&A.

 
FY 2014 Target Opportunities

Target FY 2014 short-term incentive award opportunities were determined primarily considering the market compensation data discussed above, and secondarily considering internal pay equity, i.e., the relationship of target award opportunities of the Named Executive Officers with those of other officers at the same level in

the Company. The amounts listed in columns (c), (d) and (e) of the Grants of Plan-Based Awards Table following this CD&A represent the potential range of short-term incentive awards for 2014 and are based on a percentage of each Named Executive Officer’s base salary at October 1, 2013, as follows:



FY 2014 SHORT-TERM INCENTIVE TARGET OPPORTUNITY

   
Named Executive Officer Target Short-Term Incentive
Compensation as
Percent of Base Salary
McCallister 85%
Ammann 55%
Chapman 75%
Chandra 55%
Thornton 50%

 

For tax purposes, the HR Committee set a limitation on FY 2014 short-term incentive payouts for Messrs. McCallister and Chapman of 0.89% and 0.52% of FY 2014 net income, respectively. The HR Committee then used negative discretion as provided under Section 162(m) of the Internal Revenue Code to arrive at actual, lower FY 2014 payouts based on our performance for the year.

 
The amounts of short-term incentive awards relating to FY 2014 were paid in December 2014 and are set forth under column (g) entitled Non-Equity Incentive Plan Compensation in the Summary Compensation Table in this proxy statement. The amounts of such short-term incentive awards for the Named Executive Officers range from 97.5% to 102.5% of target.
 
Clawback Policy — Forfeiture and Recoupment of Short-Term Incentives

We have a Forfeiture and Recoupment Policy to recoup short- term incentive awards paid to certain officers of the Company and its subsidiaries, including the Named Executive Officers, under certain circumstances. Pursuant to this policy, the Board, upon the recommendation of the HR Committee, may direct that all or a portion of any short-term incentive payout made to these officers be recovered if such payout was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria.

The HR Committee will determine whether such recovery will be effectuated by: (i) seeking repayment from the officer, (ii) reducing the amount that would otherwise be payable to the officer under any compensatory plan, program or arrangement maintained

by the Company, (iii) withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company’s otherwise applicable compensation practices, or (iv) any combination of the foregoing. In each instance in which the potential for recovery of short-term incentives exists, the Company will not seek recovery after a period of 24 months following the first public issuance or filing with the SEC (whichever first occurs) of a financial report containing the materially inaccurate statement or reporting the achievement of the performance metric that is later deemed to have been materially inaccurate.



Long-Term Incentive Compensation

 
Purpose of Long-Term Incentive Awards

The long-term incentive program is designed to reward our performance for shareholders relative to other utilities. It grants performance shares and performance units in a 50%-50% ratio. We choose to provide long-term incentive opportunities to achieve the following goals:

Align executives’ interests with shareholder interests: performance share and performance unit payouts are dependent on WGL Holdings common stock performance compared to peer companies. In addition, performance share
    awards rise and fall in value with the price of our common stock during the performance period.
     
Align the interests of executives and shareholders with utility company customer interests: the Company’s focus on providing safe and reliable gas delivery through its damage prevention, system safety/pipeline integrity, and system reliability programs benefits utility customers and also contributes to the long-term growth of shareholder value.
   
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Compensation Discussion And Analysis

Match market practice: the majority of regulated utility companies use plan designs similar to our performance share and performance unit programs and use similar performance measures.
Promote common stock ownership: payout of earned performance share awards is made 100% in common stock.
Encourage retention: vesting provisions in the performance share and performance unit programs provide incentive for executives to stay with us and manage the Company in the long-term interests of the Company, its shareholders and customers.
 
Award Size Determinations

The target values of the long-term incentive awards for Named Executive Officers are determined by the HR Committee based on the size-adjusted 50th percentile of the market data for total target compensation provided by its adviser, taking into consideration the aggregate amount of base salary, short-term incentive awards and the value of retirement benefits, and considering internal pay equity. To arrive at the actual award size for performance shares and performance units, we divide the executive officer’s target value applicable to performance shares and performance units (for each, 50% of the total long-term incentive award) by the value of one performance share or performance unit, as the case may be, on the

date of grant, as calculated by the HR Committee using the same methodology that was used to develop the market data. Under this methodology, the value of a performance share is equal to the closing price of a share of common stock of WGL Holdings on the last day of the prior fiscal year ($42.71 for FY 2014 grants) and the value of a performance unit is $1, in each case, times a factor (0.777 for FY 2014 grants) that takes into consideration certain risks associated with receiving long-term grants. Comparable elements of long-term compensation of companies in the total compensation peer group were likewise adjusted for these risks for purposes of determining market compensation.

 
Performance Share and Performance Unit Awards

Performance share awards are denominated and are paid out in shares of WGL Holdings common stock. Performance unit awards are denominated in dollars and are paid out in cash. In all other respects, the two awards are the same.

Performance shares and performance units will be paid out at the end of the performance period if certain long-term performance criteria are achieved and the Named Executive Officer remains an employee. If the Named Executive Officer leaves the Company before the performance period has ended, he or she will forfeit any payouts for all open performance periods. Upon retirement,

death or disability, however, the HR Committee has discretion to prorate awards based on the number of months worked in the performance period.

The measure of performance for performance shares and performance units is TSR relative to the long-term incentive peer group for the performance period. TSR is calculated as follows:

   
Total Shareholder Return =  Change in stock price + dividend paid
Beginning stock price

 

Performance/Payout Relationship

The table below shows the performance and payout scale for performance share and performance unit grants made through October 1, 2013.

   
Performance in TSR vs. Peers Payout of Performance Shares or
Performance Units
(% of Target Awarded)
90th percentile+ 200%
70th percentile 150%
50th percentile 100%
30th percentile 50%
Less than 30th percentile 0% (No payout)

 

For grants made on October 1, 2013 or later, in order to smooth end-of-period volatility, the Company’s relative cumulative TSR will be calculated at the end of each fiscal quarter of the third year of the performance period. The hypothetical payouts from these four TSR calculations will be averaged to determine the final payout amount.

Generally, the percentile rank will not fall directly on one of the ranks listed in the left column. When this occurs, performance is interpolated between the percentiles listed in the columns on a straight-line basis as reflected in the graph below.

PAYOUT OF PERFORMANCE SHARES OR PERFORMANCE UNITS

 

  (BAR CHART)

   
WGL HOLDINGS, INC. - 2015 Proxy Statement      |    29
 
 

Compensation Discussion And Analysis

 
Long-Term Incentive Peer Group Selection

To serve as the long-term incentive peer group applicable to determining long-term incentive awards for a particular performance period, the HR Committee chooses companies based on the following criteria:

classification as an energy related company under the Standard Industrialization Classification codes;
public equity ownership and headquarters in the United States;
no announced merger plans;
annual net revenues greater than $175 million;
at least 70% of assets related to U.S. natural gas distribution;
no significant exploration and production or electric generation assets;
no significant energy trading operations; and
an investment grade credit rating by Standard & Poor’s and Moody’s.

Companies that meet most, but not all, of the above criteria are considered and included in the long-term incentive peer group if deemed to be comparable based on other market indicators.

The long-term incentive peer group is not the same as the total compensation peer group discussed on page 24. The total compensation peer group is intended to benchmark market compensation for executives in comparable positions, whereas the long-term incentive peer group is selected to benchmark share performance, as measured by TSR, for comparable investment opportunities.

 
Long-Term Incentive Peer Group and Payout for the 2012-2014 Performance Period

The payout for performance share and performance unit grants for the period from October 1, 2011 through September 30, 2014 (the 2012-2014 period) was zero (i.e., no payout was earned and the awards expired worthless) because our TSR performance was below the 30th percentile.

The long-term incentive peer group for that grant was as shown below. Awards would have been paid out on October 1, 2014 to the extent earned.

     
AGL Resources MGE Energy, Inc. Piedmont Natural Gas
Atmos Energy Corp. New Jersey Resources South Jersey Industries
Centerpoint Energy Northwest Natural Gas Southwest Gas Corp.
CH Energy Group Northwestern Corp. UIL Holdings Corp.
Consolidated Edison, Inc. Pepco Holdings, Inc. Vectren Corporation
Laclede Group Inc.    
 
Long-Term Incentive Peer Group for the 2014-2016 Performance Period

The payout of performance share and performance unit grants made in FY 2014 (i.e., on October 1, 2013) will be based on our 2014-2016 TSR against peer companies during the performance period from October 1, 2013 through September 30, 2016. The

2014-2016 peer companies listed below were approved at the HR Committee’s September 18, 2013 meeting based on the criteria described under the heading, “Long-Term Incentive Peer Group Selection.”

 

     
AGL Resources Laclede Group Inc. Pepco Holdings, Inc.
Atmos Energy New Jersey Resources Piedmont Natural Gas
CenterPoint Energy MGE Energy South Jersey Industries
Chesapeake Utilities Corp. Northeast Utilities Southwest Gas Corp.
Consolidated Edison, Inc. Northwest Natural Gas UIL Holdings Corp.
Integrys Energy Group, Inc. Northwestern Corp. Vectren Corporation
 
Other Prior Year Awards

Performance share and performance unit award grants also were made for the 2013-2015 performance period which runs from

October 1, 2012 through September 30, 2015. The terms of those awards are similar to those described above.

 
Realized Long-Term Incentive Payouts

Compensation granted to the Named Executive Officers and reported in the “stock awards” column of the Summary Compensation Table on page 35 represents a long-term incentive for future performance, not current cash compensation. This long-term incentive pay will not actually be received by the Named Executive Officers for three years and remains at risk of forfeiture. While the amounts shown in the “stock awards” column of the

Summary Compensation Table reflect the grant date fair value of equity awards received by a Named Executive Officer, they do not reflect how the Company’s TSR over the three-year vesting period will impact the actual payout. The individual may be compensated considerably more or less based on how well the Company’s TSR performs against the long-term incentive peer group.

   
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Compensation Discussion And Analysis

The tables and graph below outline the aggregate realized long- term incentive earned payouts for the performance periods ended September 30, 2014, 2013 and 2012 in contrast to the target

long-term award values for the same periods. This table illustrates the pay for performance nature of our executive compensation program.



AGGREGATE LONG-TERM INCENTIVE (“LTI”) PAYOUTS COMPARED TO AGGREGATE TARGET AWARD VALUE FOR YEARS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

      Actual TSR Performance     Payout % of Target  
LTI vested 9/30/12     22nd Percentile     0 %
LTI vested 9/30/13     34th Percentile     61 %
LTI vested 9/30/14     24th Percentile     0 %

 

 

                                                               
                                                               
    McCallister   Ammann   Chapman   Chandra   Thornton  
    Target
Award
Value (1)
  Target
Award
Delivered (2)
  Target
Award
Value (1)
  Target
Award
Delivered (2)
  Target
Award
Value (1)
  Target
Award
Delivered (2)
  Target
Award
Value (1)
  Target
Award
Delivered (2)
  Target
Award
Value (1)
  Target
Award
Delivered (2)
 
LTI vested
9/30/12
  $ 1,087,012   $ 0   $ 450,000   $ 0   $ 525,974   $ 0   $ 277,272   $ 0     n/a     n/a  
LTI vested
9/30/13
  $ 1,372,728   $ 891,994   $ 473,376   $ 307,618   $ 640,910   $ 416,460   $ 358,442   $ 232,928     n/a     n/a  
LTI vested
9/30/14
  $ 1,706,480   $ 0   $ 540.025   $ 0   $ 898,348   $ 0   $ 428,844   $ 0   $ 315,121   $ 0  
TOTAL   $ 4,166,220   $ 891,994   $ 1,463,401   $ 307,618   $ 2,065,232   $ 416,460   $ 1,064,558   $ 232,928   $ 315,121   $ 0  
(1) Target award value represents the sum of the target value of performance shares and the target value of performance units vested on the applicable date. The target value of performance units is $1 per performance unit, and the target value of performance shares is the closing stock price of WGL Holdings common stock on the day preceding the date of grant (which is the last trading day of the fiscal year preceding the date of grant), in each case, times the target number of performance units or performance shares granted. Target award values are not the same as the grant date fair values of the equity awards (calculated in accordance with FASB ASC Topic 718), which are reflected in the Summary Compensation Table on page 35 (for grants made at the beginning of FY 2014, FY 2013 and FY 2012). Equity awards reflected above were granted at the beginning of the fiscal years ended September 30, 2012, 2011 and 2010.
(2) Realized long-term incentive payout (or “total value delivered”) means the cash value of earned performance units and the share value of earned performance shares on the date of vesting.
(3) No values are shown for Ms. Thornton for LTI vested September 30, 2012 or September 30, 2013 because she joined the Company in 2011 and, consequently, did not have any long-term incentive awards that were scheduled to vest before September 30, 2014.

Retirement Benefits

Retirement benefits are designed to reward continued service. We choose to have them to provide post-employment security to our employees and because they are an essential part of a total compensation package that is competitive with those offered by other companies, particularly other gas and electric utilities.

We provide retirement benefits to the Named Executive Officers under the terms of qualified and non-qualified defined-benefit and defined-contribution retirement plans. Retirement benefit programs applicable to the Named Executive Officers are:

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |     31
 
 

Compensation Discussion And Analysis

tax-qualified employee benefit plans that are available to our employees, including the Washington Gas Light Company Savings Plan (“401(k) Plan”), and the Washington Gas Light Company Employees’ Pension Plan (the “Pension Plan”);
the Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”);
the Defined Contribution Supplemental Executive Retirement Plan (“DC SERP”); and
the Washington Gas Light Company Defined Contribution Restoration Plan (the “Defined Contribution Restoration Plan”).

The 401(k) Plan is a tax-qualified retirement plan in which the Named Executive Officers participate on the same terms as our other participating employees.

The Pension Plan is a tax-qualified, non-contributory pension plan covering active employees (including certain executive officers) and vested former employees of Washington Gas and certain affiliates. Effective July 1, 2009, the Pension Plan was closed to new management employee entrants. All employees hired after that date receive an enhanced benefit in the form of an employer contribution under the 401(k) Plan. The enhanced 401(k) benefit consists of a Company contribution between 4%- 6% of base compensation (depending on length of service) to subject employees. Executive officers receive this benefit on the same terms as our other participating employees. The Pension Plan was closed in order to reduce the Company’s risk and to provide a greater degree of predictability regarding the Company’s long-term financial obligations. Each of the Named Executive Officers, except Ms. Thornton, participates in the Pension Plan. Ms. Thornton was hired after July 1, 2009 and, consequently, she receives an enhanced 401(k) benefit.

The DB SERP is a defined benefit plan that allows accrual of a higher benefit than the qualified plan, but vests it more slowly. This plan allows us to: (i) attract mid-career executive hires by replacing foregone pension benefits at former employers, and (ii) be competitive with pensions provided to executives at peer companies which aids in the retention of our executive officers.

On December 18, 2009, the DC SERP was adopted. The DB SERP was closed to new participants on December 31, 2009.

Employees hired or promoted after December 31, 2009 are eligible to participate only in the DC SERP. Those individuals that were executives at that time had a choice of either remaining in the DB SERP or joining the new DC SERP. The closing of the DB SERP to new participants was made for several reasons. By closing the DB SERP to new participants and creating the DC SERP, the Company is able to: (i) reduce its risk, (ii) provide greater predictability of its long-term financial obligations, and (iii) align executive compensation with prevailing market practices.

The benefits provided under the DC SERP were designed to be at the market median and competitive with those offered by other gas and electric utilities. Each of the Named Executive Officers, except Ms. Thornton, is a participant under the DB SERP. Ms. Thornton is a participant under the DC SERP.

The DB SERP and DC SERP include a “clawback” provision that requires a participant to forfeit benefit payments under certain circumstances. Under this clawback provision, if a DB SERP or DC SERP participant willfully performs any act or willfully fails to perform any act, and such act or such failure to act may result in material discredit or substantial detriment to the Company, then upon a majority vote of the Board, the participant, his or her surviving spouse and any beneficiary of those persons, will forfeit any benefit payments owing on and after a date fixed by the Board. After this fixed date, the Company will have no further obligation under the DB SERP or DC SERP to the participant, his or her spouse or any beneficiary. Also, under the clawback provision, if a participant has received a lump-sum benefit, the participant or the surviving spouse would be required to return a proportionate share of that lump sum payment to Washington Gas.

The Defined Contribution Restoration Plan provides supplemental retirement benefits to employees who are not participants in the DB SERP and whose base salary exceeds the limit set forth in the Section 401(a)(17) of the Internal Revenue Code. Of the Named Executive Officers, only Ms. Thornton is a participant under the Defined Contribution Restoration Plan.

See “Pension and Other Retirement Benefits” later in this proxy statement for a discussion of the other aspects of the Pension Plan, the DB SERP, the DC SERP and the Defined Contribution Restoration Plan.



Severance/Change in Control Protections

Severance/change in control provisions are designed to reward executives for remaining employed with us during a time when their prospects for continued employment following the transaction may be uncertain (since many transactions result in significant organizational changes at the senior executive level). We choose to provide severance/change in control protections so that executives will remain focused on shareholders’ and customers’ interests during the change in control. This serves to retain stable executive team during the transition process. Such protections are also helpful in hiring executives from well-compensated positions in other companies or in situations where they are considering attractive opportunities with other companies.

Pursuant to the WGL Holdings, Inc. and Washington Gas Light Company Change in Control Severance Plan for Certain

Executives (the “CIC Plan”), we offer limited severance benefits to executive officers in the event of a change in control of WGL Holdings or Washington Gas. Upon such an event, Named Executive Officers would be provided with severance benefits which include the value of two or three years’ worth of target- level compensation (established based on market data) if their employment were actually or constructively terminated without cause in connection with a change in control.

Named Executive Officers should not be entitled to receive cash severance benefits merely because a change in control transaction occurs. Therefore, the CIC Plan provides for the payment of severance benefits only upon a “double trigger” event.

A “double trigger” event used in this context means that cash payments happen only upon the occurrence of both a change in


   
32     |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Discussion And Analysis

control and either: (i) an involuntary termination of employment or (ii) a voluntary termination with good reason. Further, vesting/ payout of one-half of outstanding long-term incentive awards is also subject to a “double trigger.” The other one-half vests immediately upon a change in control.

Given that none of the Named Executive Officers has an employment agreement that provides for fixed positions or duties, or for a fixed base salary or actual or target annual bonus, we have concluded that a “good reason” termination severance trigger is appropriate to prevent potential acquirers from having an incentive to cause voluntary termination of a Named Executive Officer’s employment to avoid paying any severance benefits at all. Without a “good reason” termination severance trigger, following a change in control, an acquirer could materially demote a Named Executive Officer, materially reduce his or her salary and reduce or eliminate his or her annual bonus opportunity in order to force the Named Executive Officer to terminate his or her own employment and thereby avoid paying severance. Thus, the CIC Plan provides certain benefits for Named Executive Officers in the event of a “qualified termination” which includes voluntary termination for “good reason,” as this term is defined in the CIC Plan.

If a change in control payment exceeds the limit for deductible payments under Section 280G of the Internal Revenue Code by 10% or more, reimbursement will be made for the full amount of any excise taxes (but not income taxes) imposed, and for all taxes due on the amount of that reimbursement. This provision is intended to preserve the level of change-in-control severance protections that we have determined to be appropriate. On November 17, 2010, the Board eliminated the reimbursement by the Company of excise taxes imposed on such severance payments for any executive officers that become covered by the terms of the CIC Plan on or after January 1, 2011. Each of the Named Executive Officers, except Ms. Thornton, was covered by the CIC Plan prior to January 1, 2011.

Levels of change-in-control payments were developed in prior years and were either reaffirmed or adjusted after a thorough reevaluation of such protection by the HR Committee in 2006. That reevaluation included input from the HR Committee’s adviser and considered both market practice and best practice.

See “Potential Payments Upon Termination or Change in Control — Change in Control Severance Plan for Certain Executives” later in this proxy statement for a discussion of the other aspects of the CIC Plan.



Perquisites

Our limited perquisites are not designed to reward any particular performance or behavior. We choose to provide them to Named Executive Officers only when the perquisite provides competitive value and promotes retention of executives, or when the perquisite provides shareholder value.

We have a program of income tax, estate and financial planning services for our executive officers. We pay the actual cost of these services provided to the executive officer up to a pre-determined

ceiling. We also pay the cost of certain other perquisites for executive officers, including parking at our headquarters building, a vehicle allowance and an annual physical examination. Benefits available to the Named Executive Officers are noted in the footnotes to the Summary Compensation Table. The values of perquisites provided to each Named Executive Officer in FY 2014 are reported in Column (i) of the Summary Compensation Table in this proxy statement.



Timing of Compensation

Under our current policy, long-term incentive awards are granted effective each October 1, the first day of the fiscal year. Short- term incentive payouts are generally made in December. The HR Committee has the discretion to make awards at any time.

Following is a discussion of the timing of compensation decisions for FY 2014:

Base salary changes for FY 2014 were determined at the September 18, 2013 HR Committee and September 25, 2013 board meetings;
Short and long-term incentive goals for 2014 were set at the September 18, 2013 HR Committee meeting;
Performance share and performance unit grants were approved at the September 18, 2013 HR Committee meeting for grants effective on October 1, 2013 using the common stock price on that date; and
Short-term incentive payments for FY 2014 were approved at the HR Committee and Board meetings held on November 13, 2014.


Impact of Prior Compensation

Amounts realizable from prior compensation did not serve to increase or decrease FY 2014 compensation amounts. The

HR Committee’s primary focus was on achieving market-level compensation opportunities.



Factors Considered in Decisions to Increase or Decrease Compensation Materially

As described above in this CD&A, market data, retention needs, performance and internal pay equity have been the primary factors considered in decisions to increase or decrease compensation opportunities materially. Corporate

performance and individual performances are the primary factors in determining the ultimate value of those compensation opportunities.

   
WGL HOLDINGS, INC. - 2015 Proxy Statement     |     33
 
 

Compensation Discussion And Analysis

Role of Executive Officers

Mr. McCallister, our Chairman and CEO, recommended to the HR Committee the compensation opportunities for the other Named Executive Officers. Mr. McCallister was not involved in determining his own compensation. In determining short-term

incentive payouts for FY 2014, Mr. McCallister recommended a specific Individual Factor for each Named Executive Officer, except for himself. None of the other Named Executive Officers had any role in determining their executive compensation.



Policies Relating to Stock Ownership

 
Executive Officer Stock Ownership Requirements

Our executive officers are subject to mandatory stock ownership requirements. Under these requirements:

   
(i) the CEO is required to hold 3x base salary in WGL Holdings common stock;
   
(ii) the President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, and the Senior Vice President, General Counsel and Corporate Secretary are each required to hold 2x base salary in WGL Holdings common stock; and
   
(iii) all other executive officers are required to hold 1x base salary in WGL Holdings common stock.

Executive officers must retain performance shares issued through incentive plans (currently the Omnibus Incentive Compensation Plan) net of tax withholding until the threshold holding requirement is met. At the discretion of the CEO, holding requirement waivers may be granted from time to time, if an executive officer is able to demonstrate a financial hardship.

 
Company Policy Regarding Insider Trading

Our code of conduct prohibits executive officers, directors and other individuals who may have access from time to time to material non-public information from engaging in purchases, sales or option exercises with respect to our common stock while in

possession of material non-public information or outside of certain window periods, except in accordance with trading plans that comply with Rule 10b5-1 promulgated under the Exchange Act.

 
Anti-Hedging and Pledging Policy

Effective November 1, 2012, the Company adopted an anti- hedging and pledging policy that prohibits all employees,

including executive officers, and members of the Board from hedging or pledging WGL Holdings common stock.



Other Compensation Matters

We do not have any written or unwritten employment agreements with any of the Named Executive Officers. Each Named Executive Officer is an employee at will. All elements of executive

compensation are regularly benchmarked against executive compensation in peer companies. Base salary, short-term incentive, and long-term incentive compensation are benchmarked annually.



Compensation Risk Evaluation

In FY 2014, Meridian conducted an update of a risk evaluation of the Company’s compensation policies and practices for all employees, including executives, which was initially conducted in 2011. Management reviewed the evaluation results with the HR Committee and Meridian. The goal of the evaluation was to identify any features of the Company’s compensation policies and practices that could encourage excessive risk-taking. The evaluation utilized a process that inventoried existing incentive plans and their salient features and examined design and administrative features of these plans to determine risk aggravating or mitigating factors.

In order to focus employees on performance objectives that promote the best interests of the Company and its shareholders, short-term and long-term incentive-based compensation is linked to the achievement of measurable financial and business goals and, in the case of short-term incentives, individual performance goals. The risk evaluation conducted by Meridian found that these arrangements are coupled with compensation design elements and other controls that discourage business decision-making that is focused solely on the compensation consequences and mitigate risks.

Based on the results of the evaluation, we believe that our executive compensation program reflects an appropriate mix of compensation elements and balances current and long-term performance objectives, cash and equity compensation, and risks and rewards

associated with executive roles. The following features of our executive incentive compensation program illustrate this point:

Our performance goals and objectives reflect a balanced mix of performance measures to avoid excessive weight on a certain goal or performance measure;
Our annual and long-term incentives provide a defined and capped range of payout opportunities;
Total direct compensation levels are heavily weighted on long- term, equity-based incentive awards with vesting schedules that fully materialize over a number of years;
Equity incentive awards are granted annually so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long term; and
We have implemented meaningful executive officer stock ownership requirements so that executive officer personal wealth is significantly tied to the long-term success of our Company.

Based on the above combination of program features, we believe that: (i) our executives are encouraged to manage the Company in a prudent manner, and (ii) our incentive programs are not designed in a manner to encourage our senior business leaders to take risks that are inconsistent with the best interests of the Company’s customers, shareholders and other stakeholders.

 

   
34     |     WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Of Executive Officers

COMPENSATION OF EXECUTIVE OFFICERS

The following tables and related footnotes and discussion present information about compensation for the Named Executive Officers. The “Summary Compensation Table” below quantifies the value of the different forms of compensation awarded to, earned by, or paid to Named Executive Officers in fiscal years 2012, 2013 and 2014.

The Summary Compensation Table should be read in conjunction with the tables and narrative descriptions that follow. The “Grants of Plan-Based Awards in FY 2014” table and the description of the material terms of the performance shares and performance units granted in FY 2014 that follows it, provide information regarding the long-term equity incentives awarded

to Named Executive Officers that are reported in the Summary Compensation Table. The “Outstanding Equity Awards at FY 2014 Year End” and “Option Exercises and Stock Vested in FY 2014” tables provide further information on the Named Executive Officers’ potential realizable value and actual value realized with respect to their equity awards.

The “Pension Benefits” and “Non-Qualified Deferred Compensation” tables and the related description of the material terms of the retirement plans describe each Named Executive Officer’s retirement benefits and deferred compensation to provide context to the amounts listed in the Summary Compensation Table.



Summary Compensation Table

The following table presents information about compensation for the Named Executive Officers. It includes compensation awarded to, earned by or paid to the Named Executive Officers during the fiscal year ended September 30, 2012 (“FY 2012”), the fiscal year ended September 30, 2013 (“FY 2013”) and FY 2014. Each

of the below-named individuals was also an executive officer of Washington Gas, our utility subsidiary.

The compensation shown in the following table was paid to the individual by Washington Gas.

 


                                           
Name and Principal Position (1) (a)   Fiscal
Year
(b)
  Salary
(c)
  Stock
Awards (2)
(e)
  Non-Equity
Incentive
Compensation
($) (3) (g)
  Change in
Pension Value
and
Non-qualified
Deferred
Compensation
Earnings
($) (4) (h)
  All Other
Compensation
($) (5) (i)
  Total
($) (j)
 
Terry D. McCallister     2014   $ 800,000   $ 1,808,991   $ 697,000   $ 2,356,517   $ 36,971   $ 5,699,479  
Chairman of the Board and     2013   $ 795,000   $ 1,747,097   $ 751,772   $ 1,000,442   $ 35,239   $ 4,329,550  
Chief Executive Officer     2012   $ 790,000   $ 1,703,036   $ 703,100   $ 2,800,426   $ 36,996   $ 6,033,558  
Vincent L. Ammann, Jr.     2014     $ 445,000   $ 575,019   $ 250,869   $ 659,124   $ 29,485   $ 1,959,497  
Senior Vice President and     2013   $ 440,000   $ 552,542   $ 281,325   $ 127,161   $ 27,990   $ 1,429,018  
Chief Financial Officer     2012   $ 425,000   $ 538,933   $ 271,734   $ 727,228   $ 27,534   $ 1,990,429  
Adrian P. Chapman     2014   $ 535,000   $ 967,820   $ 411,281   $ 1,205,367   $ 34,624   $ 3,154,092  
President and Chief Operating Officer     2013   $ 530,000   $ 931,788   $ 452,156   $ 251,398   $ 36,082   $ 2,201,424  
      2012   $ 505,000   $ 896,544   $ 393,269   $ 1,635,631   $ 38,269   $ 3,468,713  
Gautam Chandra     2014   $ 400,000   $ 516,873   $ 214,500   $ 579,855   $ 27,204   $ 1,738,432  
Senior Vice President     2013   $ 385,000   $ 435,116   $ 230,278   $ 94,956   $ 28,320   $ 1,173,670  
      2012   $ 375,000   $ 427,970   $ 213,281   $ 588,068   $ 26,702   $ 1,631,021  
Leslie T. Thornton     2014   $ 360,000   $ 395,380   $ 184,500   $ 0   $ 90,189   $ 1,030,069  
Senior Vice President, General Counsel and     2013   $ 345,000   $ 368,269   $ 200,531   $ 0   $ 79,744   $ 993,544  
Corporate Secretary     2012   $ 310,000   $ 314,492   $ 137,240   $ 0   $ 47,332   $ 809,064  
(1) The principal positions shown are as of September 30, 2014. Please note that columns (d) “Bonus” and (f) “Option Awards” have been omitted in accordance with SEC rules because no such compensation was awarded to, earned by, or paid to the Named Executive Officers during FY 2014, FY 2013 or FY 2012.
(2) Stock awards consist of performance shares and performance units. For a description of the vesting conditions of performance shares and performance units, see “Performance Shares and Performance Units” following the Grants of Plan-Based Awards in FY 2014 table. These amounts represent the aggregate grant date fair value of the performance share and performance unit awards computed in accordance with FASB ASC Topic 718 at the target level of payout. The amounts in column (e) include the sum of the values for performance shares and performance units. In FY 2014, the Named Executive Officers were granted performance units having the following grant date fair values: Mr. McCallister — $904,505; Mr. Ammann — $287,503; Mr. Chapman — $483,910; Mr. Chandra — $258,430 and Ms. Thornton — $197,699. In FY 2013, the Named Executive Officers were granted performance units having the following grant date fair values: Mr. McCallister — $873,514; Mr. Ammann — $276,260; Mr. Chapman — $465,874; Mr. Chandra — $217,555 and Ms. Thornton — $184,120. In FY 2012, the Named Executive Officers were granted performance units having the following grant date fair values: Mr. McCallister — $851,534; Mr. Ammann — $269,473; Mr. Chapman — $448,276; Mr. Chandra— $213,993; and Ms. Thornton — $157,245.

 

WGL HOLDINGS, INC. - 2015 Proxy Statement      |     35
 
 

Compensation Of Executive Officers

The values of the awards in column (e), assuming that the highest level of performance conditions are achieved, are as follows: FY 2014: Mr. McCallister — $3,617,982; Mr. Ammann — $1,150,038; Mr. Chapman — $1,935,640; Mr. Chandra — $1,033,746 and Ms. Thornton — $790,760. FY 2013: Mr. McCallister — $3,494,194; Mr. Ammann — $1,105,084; Mr. Chapman — $1,863,575; Mr. Chandra — $870,232 and Ms. Thornton — $736,538. FY 2012: Mr. McCallister — $3,406,072; Mr. Ammann — $1,077,864; Mr. Chapman — $1,793,088; Mr. Chandra — $855,940; and Ms. Thornton — $628,984. For a discussion of the assumptions and methodologies used to calculate the amounts in column (e), see the discussion of performance shares and performance units contained in Note 11 (Stock-Based Compensation) to the WGL Holdings Consolidated Financial Statements, included as part of the Company’s 2014 Annual Report on Form 10-K filed with the SEC on November 21, 2014. There were no forfeitures of performance shares or performance units by any Named Executive Officer in FY 2012, FY 2013, or FY 2014. The actual amount ultimately realized by a Named Executive Officer from the disclosed awards listed under column (e) will likely vary based on a number of factors, including our actual operating performance, stock price fluctuations, and differences from the valuation assumptions used and the timing of applicable vesting.

(3) The amounts shown in column (g) constitute the short-term incentive payouts made to the Named Executive Officers as described in the CD&A. The FY 2014 short-term incentive payout amounts were paid in December 2014.
(4) Column (h) reflects pension accruals for the officers, except Ms. Thornton. Ms. Thornton is not a participant of the Pension Plan. There are no above market or preferential earnings on compensation deferred on a basis that is not tax-qualified, including such earnings on non-qualified contribution plans. The pension accrual amounts represent the difference in present value (measured at the respective fiscal year-end dates shown in the table) based on assumptions shown in the text following the “Pension Benefits” table set forth later in this proxy statement. The amounts shown for Ms. Thornton are those earned as a participant of the DC SERP and the Defined Contribution Restoration Plan.
(5) The amounts in column (i) represent the values of perquisites and matching contributions under the 401(k) Plan and, with respect to Ms. Thornton, the amount of Company contributions under the DC SERP and the Defined Contribution Restoration Plan. The value of perquisites is set forth in the “Perquisites” table. The following Named Executive Officers received the following amounts as matching contributions under the 401(k) Plan during FY 2014: Mr. McCallister — $10,400; Mr. Ammann — $10,400; Mr. Chapman — $10,092, Mr. Chandra — $10,115 and Ms. Thornton— $10,515. The following Named Executive Officers received the following amounts as matching contributions under the 401(k) Plan during FY 2013: Mr. McCallister — $10,200; Mr. Ammann — $10,193; Mr. Chapman — $10,162, Mr. Chandra — $10,069 and Ms. Thornton — $10,864. The following Named Executive Officers received the following amounts as matching contributions under the 401(k) Plan during FY 2012: Mr. McCallister — $9,930; Mr. Ammann — $10,000; Mr. Chapman — $10,100, Mr. Chandra — $9,808; and Ms. Thornton — $8,585. The Company contributions to the DC SERP, the Defined Contribution Restoration Plan and the enhanced benefit under the 401(k) Plan for Ms. Thornton were as follows: FY 2014 – $60,384, FY 2013 – $50,212 and FY 2012 – $23,607.
 
Perquisites

We have a program of income tax, estate and financial planning services for our executive officers. We pay the actual cost of these services provided to the executive up to a pre- determined ceiling depending on the level of the executive officer. The highest amount provided to any executive under the income tax, estate and financial planning program is $10,000 per year. We also pay the cost of certain other

perquisites for executive officers, including: parking at our headquarters building, a vehicle allowance and an annual physical examination.

The following table sets forth the incremental value of perquisites for the Named Executive Officers in FY 2012, FY 2013 and FY 2014 included in the “All Other Compensation” column (i) of the Summary Compensation Table above.



FY 2012, FY 2013 AND FY 2014 INCREMENTAL COST OF PERQUISITES PROVIDED TO NAMED EXECUTIVE OFFICERS  

                                                   
Name and Principal Position   Fiscal
Year
  Tax and
Financial
Counseling
($)
  Vehicle
Allowance
($)
  Parking
($)
  Physical
($)
  Insurance
($)
  Tax
Gross-up
($)
  Total
($)
 
Terry D. McCallister     2014   $ 0   $ 8,400   $ 6,770   $ 1,804   $ 6,512   $ 3,085   $ 26,571  
Chairman of the Board and     2013   $ 0   $ 8,400   $ 6,574   $ 1,697   $ 5,384   $ 2,984   $ 25,039  
Chief Executive Officer     2012   $ 0   $ 8,400   $ 6,574   $ 1,860   $ 6,316   $ 3,916   $ 27,066  
Vincent L. Ammann, Jr.     2014   $ 223   $ 8,400   $ 3,390   $ 2,073   $ 4,358   $ 864   $ 19,085  
Senior Vice President and     2013   $ 0   $ 8,400   $ 3,287   $ 2,038   $ 3,236   $ 836   $ 17,797  
Chief Financial Officer     2012   $ 0   $ 8,400   $ 3,287   $ 1,327   $ 3,460   $ 1,060   $ 17,534  
Adrian P. Chapman     2014   $ 1,225   $ 8,400   $ 6,770   $ 2,282   $ 5,092   $ 1,988   $ 24,532  
President and Chief Operating Officer     2013   $ 2,760   $ 8,400   $ 6,574   $ 1,940   $ 4,323   $ 1,923   $ 25,920  
      2012   $ 3,350   $ 8,400   $ 6,574   $ 3,209   $ 4,518   $ 2,118   $ 28,169  
Gautam Chandra     2014   $ 0   $ 8,400   $ 3,390   $ 1,757   $ 3,058   $ 484   $ 17,089  
Senior Vice President     2013   $ 1,556   $ 8,400   $ 3,287   $ 1,757   $ 2,783   $ 468   $ 18,251  
      2012   $ 0   $ 8,400   $ 3,287   $ 1,708   $ 2,907   $ 592   $ 16,894  
Leslie T. Thornton     2014   $ 0   $ 8,400   $ 3,700   $ 2,300   $ 3,867   $ 1,023   $ 19,290  
Senior Vice President, General Counsel and
    2013   $ 0   $ 8,400   $ 3,287   $ 3,227   $ 2,768   $ 986   $ 18,668  
Corporate Secretary     2012   $ 0   $ 8,400   $ 2,465   $ 3,227   $ 524   $ 524   $ 15,140  

The amounts set forth in the “tax gross-up” column in the above table represent the amount of taxes paid by the Company on behalf of officers relating to life insurance coverage with benefits

in excess of $50,000. We provide the executive officers (and all employees) life insurance equal to one times the employees’ salary. Under the Internal Revenue Code, the cost of the first

 

   
36     |      WGL HOLDINGS, INC. - 2015 Proxy Statement
 
 

Compensation Of Executive Officers

$50,000 of life insurance paid by us is not taxable income to the employee. However, the premiums we paid for insurance in excess of $50,000 is taxable income (imputed income) to the employee. The Company “grosses up” the income of the Named Executive Officers for the taxes on this imputed income (i.e., we pay the taxes for the Named Executive Officers on this imputed

income). The imputed income amount and the amount of the tax gross up are both taxable income to the Named Executive Officer.

The amounts under the column entitled, “insurance” in the above table represent the premiums paid by the Company for the respective Named Executive Officer’s long-term care and imputed income for life insurance.



Grants of Plan-Based Awards in FY 2014

The following Grants of Plan-Based Awards table sets forth information concerning the range of short-term incentive opportunities and opportunities under grants of performance

shares and performance units to our Named Executive Officers during FY 2014. The grants in the following table were made under the Omnibus Incentive Compensation Plan.

                                                   
          Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (1)
  Estimated Future Payouts Under
Equity Incentive Plan Awards (2)
       
Name (a)   Grant Date
(b)
  Threshold
($) (c)
  Target ($) (d)   Maximum
($) (e)
  Threshold
Number
of Shares
of Stock
(#) (f)
  Target
Number of
Shares of
Stock (#) (g)
  Maximum
Number
of Shares
of Stock
(#) (h)
  Grant
Date Fair
Value of
Stock (3)
($) (l)
 
Terry D. McCallister                                                  
Short-term Incentive     N/A   $ 212,500   $ 680,000   $ 1,020,000                  
Performance Share Program     10/01/13                 10,547     21,093     42,186   $ 904,486  
Performance Unit Program     10/01/13   $ 452,252   $ 904,505   $ 1,809,009               $ 904,505  
Vincent L. Ammann, Jr.                                                  
Short-term Incentive     N/A   $ 76,484   $ 244,750   $ 367,125                  
Performance Share Program     10/01/13                 3,353     6,705     13,410   $ 287,516  
Performance Unit Program     10/01/13   $ 143,752   $ 287,503   $ 575,007               $ 287,503  
Adrian P. Chapman                                                  
Short-term Incentive     N/A   $ 125,391   $ 401,250   $ 601,875                  
Performance Share Program     10/01/13                 5,643     11,285     22,570   $ 483,910  
Performance Unit Program     10/01/13   $ 241,955   $ 483,910   $ 967,820               $ 483,910  
Gautam Chandra                                                  
Short-term Incentive     N/A   $ 68,750   $ 220,000   $ 330,000                  
Performance Share Program     10/01/13                 3,014     6,027     12,054   $ 258,443  
Performance Unit Program     10/01/13   $ 129,215   $ 258,430   $ 516,859               $ 258,430  
Leslie T. Thornton                                                  
Short-term Incentive     N/A   $ 56,250   $ 180,000   $ 270,000                  
Performance Share Program     10/01/13                 2,305     4,610     9,220   $ 197,681  
Performance Unit Program     10/01/13   $ 98,849   $ 197,699   $ 395,397               $ 197,699  

Note that columns: (i) “All Other Stock Awards,” (j) “All Other Option Awards: Number of Securities,” and (k) “Exercise Price of Option Awards,” have been omitted in accordance with SEC rules because no such compensation was awarded to, earned by, or paid to the Named Executive Officers during FY 2014.

No consideration was paid by any of the Named Executive Officers for the awards listed in the “Grants of Plan-Based Awards” table.

(1) Amounts in these columns represent the threshold, target and maximum payouts under our performance unit program for the 36-month performance period from October 1, 2013 through September 30, 2016, and the threshold, target and maximum payouts under our short-term incentive program based on FY 2014 performance. Although performance unit grants are considered equity incentive plan awards, the estimated future payouts under these grants are included in these columns because awards are denominated in dollars and paid out in cash, rather than shares of stock.
(2) Amounts in these columns represent the threshold, target and maximum payouts under our performance share program for the 36-month performance period from October 1, 2013 through September 30, 2016.
     
  (3) Amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of performance unit and performance share awards granted in FY 2014 at the target level of payout. The values of these awards, assuming that the highest level of performance conditions is achieved, are as follows: performance shares: Mr. McCallister — $1,808,972; Mr. Ammann — $575,032; Mr. Chapman — $967,820; Mr. Chandra — $516,886; and Ms. Thornton — $395,362; performance units: Mr. McCallister — $1,809,010; Mr. Ammann — $575,006; Mr. Chapman — $967,820; Mr. Chandra — $516,860 and Ms. Thornton — $395,398. For a discussion of the assumptions and methodologies used to calculate the amounts reported, see the discussion of performance shares and performance units contained in Note 11 (Stock Based Compensation) to the Company’s Consolidated Financial Statements, included as part of WGL Holdings’ 2014 Annual Report on Form 10-K filed with the SEC and incorporated herein by reference.

 

WGL HOLDINGS, INC. - 2015 Proxy Statement     |     37
 
 

Compensation Of Executive Officers

 
No Employment Agreements with Named Executive Officers

None of the Named Executive Officers have employment agreements with the Company.

 
Performance Shares and Performance Units

Performance share awards are denominated and paid out in shares of WGL Holdings common stock. Performance unit awards are denominated in dollars and are paid out in cash. In all other respects, the two awards are the same.

The vesting of performance share and performance unit awards is conditioned upon the performance of the Company and the officer’s continued employment. As long as each Named Executive Officer continues to remain an employee, performance shares and performance units become earned and vested based on WGL Holdings’ comparative TSR over a designated three- year performance period. Performance share award grantees do not have the rights of shareholders until the performance shares fully vest. Therefore, performance share grantees do not receive dividends or other earnings on the performance share until it fully vests. Since the performance units pay out in cash once vested, performance unit grantees do not receive dividends or other rights of shareholders.

For further information regarding the long-term incentive peer groups used in determining performance share and performance unit payout and the total shareholder return necessary for the

vesting of performance shares, please see the discussion under the heading, “Long-Term Incentive Compensation-Performance Share and Performance Unit Awards” in the Compensation Discussion & Analysis section of this proxy statement.

Awards are converted to cash for shares to the extent necessary to satisfy minimum tax withholding or any governmental levies. Performance shares and performance units are generally forfeited for no value if a Named Executive Officer’s employment terminates prior to the end of the performance period. However, a Named Executive Officer, subject to the sole discretion of the HR Committee of the Company’s Board, may vest in all or a portion of his or her outstanding performance shares or performance units if his or her employment terminates as a result of retirement, death, or disability. Under certain circumstances, following a change in control, between 50% and 100% of an officer’s outstanding performance share or performance unit awards granted on or after December 15, 2006 would become fully vested at target levels. See “Potential Payments Upon Termination or Change in Control — Change in Control Severance Plan for Certain Executives,” below.

 
Options

The Company has not granted stock options since October 1, 2006 because the Company’s compensation program changed to eliminate granting stock options and to begin granting

performance shares and performance units. None of the Named Executive Officers exercised stock options during FY 2014.

 

   
38     |     WGL HOLDINGS, INC. - 2015 Proxy Statement

 
 

Compensation Of Executive Officers

Outstanding Equity Awards at FY 2014 Year-End

The following table summarizes the equity awards we have made to our Named Executive Officers that were outstanding as of

September 30, 2014. Outstanding equity awards at fiscal year- end consist of performance shares and performance units.

                           
    Stock Awards  
Name (a)   Equity Incentive Plan
Awards: Number of
Unearned Shares or Other
Rights That Have Not
Vested (1) (#)(i)
    Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares
or Other Rights That Have
Not Vested (1) ($)(j)
   Equity Incentive Plan
Awards: Number of
Unearned Shares or Other
Rights That Have Not
Vested (2) (#)(k)
    Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares
or Other Rights That Have
Not Vested (2) ($)(l)
 
Terry D. McCallister                          
Awarded 10-1-11     21,839     $ 919,859       853,240     $ 853,240  
Awarded 10-1-12     21,988   $ 926,135     885,019   $ 885,019  
Awarded 10-1-13     21,093   $ 888,437     900,901   $ 900,901  
Vincent L. Ammann, Jr.                          
Awarded 10-1-11     6,911   $ 291,091     270,013   $ 270,013  
Awarded 10-1-12     6,954   $ 292,902     278,898   $ 278,898  
Awarded 10-1-13     6,705   $ 282,415     286,358   $ 286,358  
Adrian P. Chapman                          
Awarded 10-1-11     11,497   $ 484,254     449,174   $ 449,174  
Awarded 10-1-12     11,727   $ 493,941     472,010   $ 472,010  
Awarded 10-1-13     11,285   $ 475,324     481,982   $ 481,982  
Gautam Chandra                          
Awarded 10-1-11     5,488   $ 231,155     214,422   $ 214,422  
Awarded 10-1-12     5,476   $ 230,649     220,420   $ 220,420  
Awarded 10-1-13     6,027   $ 253,857     257,400   $ 257,400  
Leslie T. Thornton