DEF 14A
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UNITED STATES

Securities and Exchange Commission

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant  x                              Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12

SPECTRA ENERGY CORP

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x No fee required.
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To Our

Shareholders

 

 

 

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Dear Shareholders,

 

In 2014, Spectra Energy delivered strong financial and business results and remained committed to creating value for our investors. We will again highlight some of those results during our Annual Meeting of Shareholders in Houston on April 28, 2015, and invite you to attend either in person or via our webcast.

 

Our financial and strategic plans, reviewed and approved by our directors, support continued earnings, cash and dividend growth. We have expanded our portfolio of assets, which helped in securing $3.5 billion of new growth projects supported by firm, fee-based contracts.

 

We have been rigorous in our assessment of both the opportunities and risks facing our business in the current and longer-term environment. We have worked diligently to buffer your company from the volatility that accompanies commodity, currency and economic cycles.

 

We believe the primary fundamentals driving the current period of midstream infrastructure build-out are still strong: increasing supplies of natural gas, natural gas liquids and crude oil require paths to growing markets. Our expansive North American asset footprint allows us to efficiently connect supply to demand, customers to service and solutions, and investors to value growth.

 

The directors, executives and employees of Spectra Energy are dedicated to serving our investors’ needs and expectations with excellence over the long term.

 

Sincerely,

 

LOGO

 

Gregory L. Ebel

 

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

LOGO

 

Dear Shareholders,

 

Spectra Energy is a company deeply grounded in sound governance principles. Those principles are designed and continually assessed to ensure that we operate our business responsibly, ethically and in a manner aligned with the interests of our investors and stakeholders.

 

The governance structure of our board is focused within four committees: audit, compensation, corporate governance, and finance and risk management – all comprised solely of independent directors.

 

The rapidly shifting dynamics of our business and world make risk management a key imperative, and each year the board reviews prioritized risks across four areas: financial, strategic, operational and legal. Additionally, at every meeting, the board is updated on risk trends, changes to previously identified risks and emerging risks.

 

Spectra Energy’s Audit Committee oversees the quality and integrity of the Company’s financial statements and internal controls and compliance with legal and regulatory requirements.

 

The Compensation Committee of the board ensures that Spectra Energy executives are compensated in a manner that is fair, equitable, performance-based and guided by the long-term interests of investors.

 

Through our Corporate Governance Committee, we continuously review and refine the structure, composition, principles and guidelines of our board to serve your needs now and into the future. The Finance and Risk Management Committee provides oversight of the company’s financial affairs and risk management, and oversight on environmental, health, safety and sustainability issues affecting the company.

 

As Lead Director, it is my privilege to work alongside committed and engaged board members who bring exceptional knowledge, perspective and accountability to their roles, and oversee Spectra Energy’s talented executive team.

 

Sincerely,

 

LOGO

F. Anthony Comper

 

LEAD DIRECTOR

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Notice of Annual Meeting

of Shareholders

 

 

         
 

 

Where:

 

Spectra Energy Corp

Headquarters

5400 Westheimer Court

Houston, Texas 77056

 

When:

Tuesday, April 28, 2015

10:00 a.m. Central Time

At our Annual Meeting, shareholders will:

 

u Vote on the election of all directors for the coming year

 

u Vote to approve the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2015

 

u Vote on an advisory resolution to approve our executive compensation

 

u Vote on the two shareholder proposals described in this proxy statement, if properly presented at the meeting

 

u Transact other business that may properly come before the meeting

 

 
       

You are entitled to vote if you were a shareholder of record at the close of business on March 2, 2015. Even if you plan to attend the Annual Meeting in person, please cast your vote as soon as possible. You may vote by Internet, by telephone, or by completing and mailing your proxy card. If you attend the Annual Meeting and wish to change your vote at that time, you will be able to withdraw any previously submitted proxy and vote in person.

By Order of the Board of Directors

 

LOGO

Patricia M. Rice

Vice President, Deputy General Counsel and Secretary

March 19, 2015

Houston, Texas

For specific voting information, see “Annual Meeting Information” beginning on page 59 of this proxy statement.

 

Your vote is important. Please complete, sign, date and return your proxy or submit your vote by telephone or the Internet. See page 1 for the weblink and the toll-free telephone number for shareholder voting.

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Table of Contents

 

Notice of Annual Meeting of Shareholders      
Proxy Summary   1   
Proposal 1: Election of Directors   4   
Information on our Nominees   4   
Corporate Governance   10   
Independent Directors   10   
Board Leadership Structure   10   
Risk Oversight   11   
Board Meetings and Attendance   11   
Board Committees   12   
Board and Committee Performance Evaluations   13   
Transactions with Related Persons   14   
Report of the Corporate Governance Committee   15   
Director Compensation   18   
Stock Ownership Information   19   
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2015   20   
Report of the Audit Committee   22   
Proposal 3: Advisory Vote Approving
Executive Compensation
  23   
Report of the Compensation Committee   24   
Compensation Discussion and Analysis   25   
2014 Summary   25   
Summary of Compensation Philosophy   25   
Compensation-Setting Process   27   
Factors Considered in Determining Total Compensation   29   
Elements of Our Compensation Program   30   
2014 Compensation   32   
Retirement and Other Benefits   40   
Other Compensation Policies   41   
Compensation Tables   43   
Shareholder Proposals   53   
Proposal 4: Political Contributions   53   
Proposal 5: Lobbying Disclosures   55   
Other Information   57   
 

 

Annual Meeting Information

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 28, 2015. The proxy statement, our 2014 Annual Report to Shareholders and our 2014 Annual Report on Form 10-K are available at www.proxyvote.com.

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Unless stated otherwise or the context otherwise requires, all references in this proxy statement to “us,” “we,” “our,” “Company” or “Spectra Energy” are to Spectra Energy Corp.

Proxy Summary

In this summary, we highlight certain information you will find in this proxy statement. Please review the entire proxy statement carefully before casting your vote. Distribution of this proxy statement and form of proxy to shareholders began on or about March 19, 2015.

 

Spectra Energy 2015 Annual Meeting of Shareholders

 

Tuesday, April 28, 2015

10:00 a.m. Central Time

Spectra Energy Corp Headquarters

5400 Westheimer Court

Houston, Texas 77056

Who May Vote: You are entitled to vote if you held Spectra Energy shares as of the record date for this meeting, which was March 2, 2015.

Admission to the Meeting: Spectra Energy shareholders as of the record date are entitled to attend the Annual Meeting. In accordance with our security procedures, you must present a government-issued photo identification to attend the meeting.

If your shares are held in the name of your broker, bank or other nominee and you wish to vote at the Annual Meeting, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares as of March 2, 2015.

Meeting Webcast: If you cannot attend in person, we invite you to access a live webcast of the meeting via the Investors section of Spectra Energy’s website. You may also listen in by conference call at 888-252-3715 (United States or Canada) or 706-634-8942 (international callers). The conference code is 6697521. Please call 5 to 10 minutes prior to the scheduled start time.

 

 

VOTING RECOMMENDATIONS

 

Proposal
Number
   Subject of Proposal   Recommended Vote    For details
see pages
starting on
1   

Election of directors for the coming year

 

FOR the proposal

   4
2   

Approval of the Board’s selection of independent auditor

 

FOR the proposal

   20
3   

Non-binding approval of executive compensation

 

FOR the proposal

   23
4   

Shareholder proposal – political contributions

 

AGAINST the proposal

   53
5   

Shareholder proposal – lobbying disclosures

 

AGAINST the proposal

   55

 

                 
         

Your vote is important, so please

cast your vote as soon

as possible by:

  LOGO  

 

Internet at

  www.proxyvote.com  

 

  LOGO  

 

 Toll-free call from the
United States

or Canada at

1-800-690-6903

  LOGO  

 

  Mailing your signed  

proxy or voting

instruction form

  LOGO  

 

  Scanning this QR code  

to vote with your

mobile device

                 

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT      1


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PROXY SUMMARY

 

   
   
   
   
   
   

Board Nominees

 

Name    Principal Occupation    Director Since    Committee Service

Gregory L. Ebel

Chairman

  

President and Chief Executive Officer,

Spectra Energy Corp

   2008   

W

 

W

F. Anthony Comper

Independent Lead Director

  

Retired President and Chief Executive Officer,

BMO Financial Group

   2007   

Audit

 

Corporate Governance

Austin A. Adams

  

Retired Executive Vice President and Chief

Information Officer, JPMorgan Chase & Co.

   2007   

Audit

 

Corporate Governance

Joseph Alvarado

   Chairman, President and Chief Executive Officer, Commercial Metals Company    2011   

Compensation

 

Finance and Risk Management

Pamela L. Carter

   President, Cummins Distribution Business    2007   

Compensation

 

Corporate Governance (Chair)

Clarence P. Cazalot Jr

   Retired Executive Chairman, President and Chief Executive Officer, Marathon Oil Corporation    2013   

Compensation

 

Finance and Risk Management

Peter B. Hamilton

   Retired Senior Vice President and Chief Financial Officer, Brunswick Corporation    2007   

Audit (Chair)

 

Corporate Governance

Miranda C. Hubbs*

   Former Executive Vice President and Managing Director, McLean Budden      —   

W

 

W

Michael McShane

   Former Chairman, President and Chief Executive Officer, Grant Prideco, Inc.    2008   

Audit

 

Finance and Risk Management  (Chair)

Michael G. Morris

   Retired Chairman, President and Chief Executive Officer, American Electric Power    2013   

Compensation

 

Finance and Risk Management

Michael E.J. Phelps

   Chairman, Dornoch Capital Inc.    2006   

Compensation (Chair)

 

Finance and Risk Management

*   First-time director nominee.

     

Governance Highlights

We are committed to strong and sustainable corporate governance, which promotes the long-term interests of our shareholders, strengthens Board and management accountability, and helps build public trust in the Company. Highlights of our commitment to strong corporate governance include:

 

  Annual Election of all Directors

 

  Majority Voting for Directors

 

  10 out of 11 Director Nominees are Independent

 

  Independent Lead Director

 

  Independent Audit, Compensation and Corporate Governance Committees

 

  Independent Financial and Risk Management Committee
  Regular Executive Sessions of Independent Directors

 

  Risk Oversight by Board and Committees

 

  Annual Board and Committee Self-Evaluations

 

  Annual Shareholder Advisory Approval of Executive Compensation

 

  Political Contributions Policy

 

  Long-standing Active Shareholder Engagement
  Transparent Public Policy Engagement

 

  Executive Compensation Driven by Pay-For Performance Philosophy

 

  Share Ownership Guidelines for Directors and Executives

 

  Equity Awards with Clawback Provisions

 

  No Shareholder Rights Plan or “Poison Pill”

 

  Initiatives on Sustainability, Environmental Matters and Social Responsibility
 

 

 

2      SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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PROXY SUMMARY

 

Performance Overview

 

 

2014 Highlights

 

    Exceeded earnings targets

 

    Continued increase in annual dividend

 

    More than 10% increase in quarterly dividend effective in the last quarter

 

    Placed $800 million of growth projects into service

 

    Secured $3.5 billion of new growth projects

 

    Growth projects supported by firm, fee-based contracts

 

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SPECTRA ENERGY CORP 2015 PROXY STATEMENT      3


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Proposal 1:

Election of Directors

Based on recommendations from the Corporate Governance Committee, our Board has nominated the following 11 individuals for election to the Board:

 

  Gregory L. Ebel, our Chairman, President and Chief Executive Officer;

 

  F. Anthony Comper, our Lead Director (independent); and

 

  our other independent nominees: Austin A. Adams, Joseph Alvarado, Pamela L. Carter, Clarence P. Cazalot Jr, Peter B. Hamilton, Miranda C. Hubbs, Michael McShane, Michael G. Morris and Michael E. J. Phelps.

Presently, the size of our Board is fixed at 10 members. Prior to the Annual Meeting, the Board will amend the Company’s By-Laws to increase the size of the Board to 11 members. All the nominees (other than Ms. Hubbs) are current members of our Board. Each nominee is standing for election to a one-year term that will expire at the 2016 Annual Meeting. If any nominee is unable to stand for election, the Board may either reduce the number of directors or designate a substitute. If the Board chooses to designate a substitute, shares represented by proxies may be voted for that substitute. We do not expect that any nominee will be unavailable or unable to serve.

Information on our Nominees

We believe that all nominees are well qualified to fulfill their responsibilities. Their qualifications include strong leadership ability, global business experience, financial and industry expertise and experience in law and public policy. The characteristics we look for in any director candidate include intelligence, perceptiveness, good judgment, maturity, high ethical standards, integrity and fairness, professional compatibility with our other directors and executives, and diversity that enhances the perspective and experience of our Board.

This year, our nominees include Ms. Hubbs, a seasoned financial services professional in the Canadian energy industry. Ms. Hubbs brings significant financial and business experience to our Board, having served as an Executive Vice President and Managing Director of a large Canadian financial services company.

 

 

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Gregory L. Ebel    Chairman, President and Chief Executive Officer, Spectra Energy

 

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SKILLS AND QUALIFICATIONS:

  Serves as our Chairman, President and CEO

 

  Served as our Chief Financial Officer and in other leadership positions in operations, strategic development, and government and investor relations

  Served as President of Union Gas Limited, one of our Canadian subsidiaries

 

Age 50

KEY EXPERIENCE:

 

Director since

2008

Before assuming his current position on January 1, 2009, Mr. Ebel had served as Spectra Energy’s Group Executive and Chief Financial Officer since January 2007. Prior to that time, he served as President of Union Gas Limited from January 2005 until January 2007, and Vice President, Investor & Shareholder Relations of Duke Energy Corporation from November 2002 until January 2005. Mr. Ebel joined Duke Energy in March 2002 as Managing Director of Mergers and Acquisitions in connection with Duke Energy’s acquisition of Westcoast Energy Inc. Mr. Ebel is Chairman, President and Chief Executive Officer of our master limited partnership, Spectra Energy Partners, LP (“SEP”), and he is also a director of our joint venture entity, DCP Midstream, LLC.
   
 

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

 

The Mosaic Company (current).

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Information on Our Nominees

 

 

 

F. Anthony Comper    Retired President and Chief Executive Officer, BMO Financial Group
   

LOGO

 

Age 69

SKILLS AND QUALIFICATIONS:

  Experience as both chairman and CEO of a large global financial institution

 

  Financial expertise, including extensive experience with capital markets transactions and risk management

  Significant knowledge of the Canadian marketplace and Canadian political and regulatory environments

 

  Has served as Lead Director of Spectra Energy since 2014

KEY EXPERIENCE:

 

Director since

2007 and

Lead Director since

2014

Mr. Comper is the retired President and Chief Executive Officer and former director of BMO Financial Group, a diversified financial services organization and one of the largest banks in North America. He was appointed to those positions in February 1999 and served as Chairman from July 1999 to May 2004. He previously served on the Board of Directors of BMO Financial Group.

 

Austin A. Adams     Retired Executive Vice President and Chief Information Officer, JPMorgan Chase & Co.
   

LOGO

 

Age 71

SKILLS AND QUALIFICATIONS:

  Expertise in information technology and security, risk management and strategy, and human resources

 

  Experience leading and collaborating with senior management teams

 

  Strategic expertise, including extensive involvement with mergers and acquisitions

  Experience that enables him to help the Audit Committee and Board assess technology, security and other types of risk, which is particularly helpful given the importance of these issues in our daily operations

   

Director since
2007

KEY EXPERIENCE:

Mr. Adams is the retired Executive Vice President and Chief Information Officer of JPMorgan Chase & Co., a global financial services firm. He assumed that role upon the 2004 merger of JPMorgan Chase and Bank One Corporation and served in that position until he retired in October 2006. Before joining Bank One in 2001, Mr. Adams served as Chief Information Officer at First Union Corporation, now Wells Fargo Corp.
   
 

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

 

Dun & Bradstreet Corporation (current); CommScope Holding Company, Inc. (current); First Niagara Financial Group (current); and CommunityONE Bank, N.A. (former).

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS 

Information on Our Nominees 

 

 

 

Joseph Alvarado     Chairman, President and Chief Executive Officer, Commercial Metals Company
   

LOGO

 

Age 62

SKILLS AND QUALIFICATIONS:

  Current CEO of Commercial Metals Company, a major corporation with international operations

 

  Variety of executive management positions provide our Board excellent perspective

  As an active CEO, deals with many of the same issues we face at Spectra Energy, including highly competitive industries, operational and manufacturing issues, safety, and diverse and changing regulatory environments

   

Director since

2011

KEY EXPERIENCE:

  Mr. Alvarado is Chairman, President and Chief Executive Officer of Commercial Metals Company (“CMC”), a manufacturer, recycler and marketer of steel and other metals and related products. Mr. Alvarado joined CMC in April 2010 as Executive Vice President and Chief Operating Officer, was named President and Chief Operating Officer in April 2011, and became President and CEO in September 2011. He has been a member of CMC’s board since September 2011 and Chairman since January 2013. Prior to joining CMC, he was President and Chief Operating Officer of Lone Star Technologies, Inc. from 2004 to 2007. In 2007, following the acquisition of Lone Star Technologies, Inc. by United States Steel Corporation, Mr. Alvarado was named President of U.S. Steel Tubular Products, Inc., a division of United States Steel Corporation.
   

 

Pamela L. Carter     President, Cummins Distribution Business
   

LOGO

 

Age 65

SKILLS AND QUALIFICATIONS:

  A diverse background that includes experience in law, government, politics and business

 

  Knowledge of macro-economic global conditions

 

  A valuable and dynamic international business perspective

  First woman and first African-American to serve as Attorney General of Indiana

 

  Significant experience in, and insight into, global operations, government relations, governance and public policy issues (especially valuable in her role as Chair of our Corporate Governance Committee)

   

Director since

2007

KEY EXPERIENCE:

  Ms. Carter is President of Cummins Distribution Business, a division of Cummins Inc., a global manufacturer of diesel engines and related technologies, a position she assumed in 2008. She previously served as President – Cummins Filtration, then as Vice President and General Manager of Europe, Middle East and Africa business and operations for Cummins Inc. since 1999. Ms. Carter served as Vice President and General Counsel of Cummins Inc. from 1997 to 1999. Prior to joining Cummins Inc., she served as the Attorney General for the State of Indiana from 1993 to 1997. In 2010, Ms. Carter was appointed to the Export-Import Bank of the United States’ sub-Saharan Africa Advisory Council.
   
 

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

 

CSX Corporation (current).

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS 

Information on Our Nominees 

 

 

 

Clarence P. Cazalot Jr    Retired Executive Chairman, President and Chief Executive Officer, Marathon Oil Corporation
   

LOGO

 

SKILLS AND QUALIFICATIONS:

  A highly respected energy executive with more than 40 years of industry experience

 

  Extensive exploration and production expertise (a valuable addition as we establish a strong footprint in the transportation and storage of crude oil)

  Experience as a board member of public companies with international operations

   

Age 64

 

KEY EXPERIENCE:

Director since

2013

Mr. Cazalot is the retired Executive Chairman, President and Chief Executive Officer of Marathon Oil Corporation (“Marathon”). He was Executive Chairman of Marathon from August 2013 to December 2013; Chairman from 2011 to 2013; and President, Chief Executive Officer and director from 2002 to August 2013. From 2000 to 2001, he served as Vice Chairman of USX Corporation and President of Marathon. Mr. Cazalot held various executive positions with Texaco Inc. from 1972 to 2000. He is a member of the Advisory Board of the James A. Baker III Institute for Public Policy, the Board of visitors of Texas M.D. Anderson Cancer Center, the Memorial Hermann Health Care Systems Board and the LSU Foundation.
   
 

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

 

Baker Hughes Incorporated (current) and FMC Technologies (current).

 

 

Peter B. Hamilton    Retired Senior Vice President and Chief Financial Officer, Brunswick Corporation
   

LOGO

 

Age 68

SKILLS AND QUALIFICATIONS:

  An experienced senior executive with sound business acumen and experience that includes legal and regulatory matters, finance and operations

 

  Well-versed in the operations of a large diversified corporation, with a particular focus on manufacturing, operations, supply chain, labor relations and customer issues

  His experience in finance and public-company governance enables him to make valuable contributions to our Board’s Audit and Corporate Governance committees (especially valuable in his role as Chair of our Audit Committee)

   

Director since

2007

KEY EXPERIENCE:

  Mr. Hamilton is the retired Senior Vice President and Chief Financial Officer of Brunswick Corporation, a global designer, manufacturer and marketer of recreation products. He held that position from September 2008 to February 2013. He previously served as a director of Brunswick Corporation. He retired from the Brunswick Corporation Board in 2007. He was Vice Chairman of Brunswick Corporation from 2000 to January 2007; President – Brunswick Boat Group in 2006; President – Life Fitness Division from 2005 to 2006; and President – Brunswick Bowling & Billiards from 2000 to 2005.
   
 

OTHER PUBLIC DIRECTORSHIPS DURING PAST FIVE YEARS:

 

SunCoke Energy, Inc. (current) and Oshkosh Corporation (current).

 

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT      7


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PROPOSAL 1: ELECTION OF DIRECTORS 

Information on Our Nominees 

 

 

Miranda C. Hubbs    Former Executive Vice President and Managing Director, McLean Budden
   

 

LOGO

 

SKILLS AND QUALIFICATIONS:

  Significant financial, accounting and business experience in Canadian energy markets

 

  Former Executive Vice President and Managing Director of a large Canadian financial services company

  Former energy research analyst and investment banker with a large Canadian brokerage firm

Age 48

 

 

KEY EXPERIENCE:

Director Nominee

Ms. Hubbs is a former Executive Vice President and Managing Director of McLean Budden, one of Canada’s largest institutional asset managers, with over $30 billion in assets under management prior to its sale in 2011 to Sun Life Financial. Before joining McLean Budden in 2002, she served as an energy research analyst and investment banker with Gordon Capital, a large Canadian brokerage firm. Ms. Hubbs received Brendan Wood International TopGun Awards in 2010 as one of the Top 50 Portfolio Managers in Canada and in 2011 as one of the TopGun Investment Minds in Oil and Gas in Canada.

 

Ms. Hubbs is a member of the Canadian Red Cross National Audit and Finance Committee as well as a founding member and the National Co-Chair of the Canadian Red Cross Tiffany Circle Society of Women Leaders.

   

 

Michael McShane    Former Chairman, President and Chief Executive Officer, Grant Prideco, Inc.
   

LOGO

 

Age 60

SKILLS AND QUALIFICATIONS:

  A seasoned leader and chief financial officer within the energy industry, with expansive knowledge of the oil and gas sectors

 

  Relationships with chief executives and other senior management at oil and natural gas companies and oilfield service companies around the world

 

  Former chairman and CEO of a leading North American drill bit technology and drill pipe manufacturer

  Brings to the Board a producer perspective that enhances strategic discussions

 

  His significant financial and accounting experience makes him highly qualified to serve on our Audit Committee and as Chair of our Finance and Risk Management Committee

 

Director since

2008

 

KEY EXPERIENCE:

  Mr. McShane served as a director and as President and Chief Executive Officer of Grant Prideco, Inc. from June 2002 and assumed the role of Chairman of the Board of Grant Prideco beginning in May 2004. Mr. McShane retired from Grant Prideco following its acquisition by National Oilwell Varco, Inc. in April 2008. Prior to joining Grant Prideco, Mr. McShane was Senior Vice President-Finance and Chief Financial Officer and director of BJ Services Company LLC beginning in 1998. Mr. McShane serves as an Advisor to Advent International Corporation, a global private equity firm. Mr. McShane also serves as an advisor to TPH Asset Management, LLC.
   
 

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

 

Superior Energy Services, Inc. (current); Forum Energy Technologies Inc. (current); and Oasis Petroleum Inc. (current).

 

 

 

8      SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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PROPOSAL 1: ELECTION OF DIRECTORS 

Information on Our Nominees 

 

 

 

Michael G. Morris    Retired Chairman, President and Chief Executive Officer, American Electric Power

Company, Inc.

   

LOGO

 

SKILLS AND QUALIFICATIONS:

  A seasoned executive responsible for the management of complex, regulated business operations, with significant experience in areas relevant to our business

 

  Considerable knowledge of the energy industry

  Extensive experience in corporate governance and leadership

 

  Experience as a senior executive with multi-state gas and electric utility companies

   

Age 68

KEY EXPERIENCE:

 

Director since

2013

Mr. Morris is the retired Chairman, President and Chief Executive Officer of American Electric Power Company, Inc. (“AEP”). He retired as Chairman of AEP in December 2013 and as Chief Executive Officer of AEP in November 2011. He served as a director of AEP until April 2014. Mr. Morris joined AEP as Chairman, President and Chief Executive Officer in January 2004. Prior to joining AEP, Mr. Morris was Chairman, President and Chief Executive Officer of Northeast Utilities System from 1997 to 2003. Prior to joining Northeast Utilities, Mr. Morris was President and Chief Executive Officer of Consumers Energy, a principal subsidiary of CMS Energy, and President of CMS Marketing, Services and Trading. He was previously President of Colorado Interstate Gas Co. and Executive Vice President of marketing, transportation and gas supply for ANR Pipeline Co., both subsidiaries of El Paso Energy.
   
 

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

 

 

Alcoa Inc. (current); L Brands, Inc. (current); and The Hartford Financial Services Group (current).

 

Michael E.J. Phelps    Chairman, Dornoch Capital Inc.
   

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SKILLS AND QUALIFICATIONS:

  Extensive management, finance and industry experience

 

  Deep knowledge of the North American energy industry and the political/regulatory environment

 

  Energy-development experience in Indonesia, China and Mexico

 

  Prior experience as chairman and CEO of Westcoast Energy Inc., a Canadian subsidiary of Spectra Energy, is valuable in the development of our business in North America and internationally and in managing cross-border relationships

 

  Appointed by the Government of Canada to chair a committee to review the regulation of securities markets.

Age 67

 

Director since

2006

  Brings a valuable Canadian perspective that is particularly helpful since a substantial portion of our assets and employees are in Canada

   
 

KEY EXPERIENCE:

  Mr. Phelps is Chairman and founder of Dornoch Capital Inc., a private investment company. Prior to forming Dornoch in 2002, he served as President and Chief Executive Officer, and as Chairman and Chief Executive Officer, of Westcoast Energy Inc., Vancouver, BC. He previously served as a director of Canadian Imperial Bank of Commerce, Duke Energy Corporation, Prodigy Gold Incorporated (formerly Kodiak Exploration Ltd.) and Canadian Forest Products. Mr. Phelps has been actively involved in the Interstate Natural Gas Association of America, the North American association representing interstate and interprovincial natural gas pipeline companies.
   
 

OTHER PUBLIC COMPANY DIRECTORSHIPS DURING PAST FIVE YEARS:

 

 

Marathon Oil Corporation (current) and Canadian Pacific Railway Company (former).

 

 

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Corporate Governance

Our Board recognizes that excellence in corporate governance is essential to carrying out its responsibilities to our shareholders. The framework for our corporate governance can be found in our Principles for Corporate Governance, our Code of Business Ethics, and the charters of the Audit Committee, the Compensation Committee, the Corporate Governance Committee and the Finance and Risk Management Committee. You can access these governance materials on our website at http://investors.spectraenergy.com. Click on the “Corporate Governance” link. You can receive printed copies upon request.

Independent Directors

In exercising their duties to our shareholders, our Board members should not be conflicted in any way. To minimize potential conflicts, the only member of our Board who is not independent is our Chairman, President and Chief Executive Officer.

In accordance with the standards for companies listed on the New York Stock Exchange (“NYSE”), the Board considers a director to be independent if it has affirmatively determined that the director has no material relationship with Spectra Energy or its consolidated subsidiaries, either directly or as a shareholder, director, officer or employee of an organization that has a relationship with us or our subsidiaries. The Board makes independence determinations when it approves director nominees for election at the Annual Meeting and also whenever a new director joins the Board between Annual Meetings.

For 2014, the Board determined that none of Spectra Energy’s independent directors and Ms. Hubbs as an independent director nominee, nor any member of their immediate families, had a material relationship with our Company or its subsidiaries. All of these independent director nominees (Messrs. Adams, Alvarado, Cazalot, Comper, Hamilton, McShane, Morris, Phelps, and Mses. Carter and Hubbs) are therefore independent under the NYSE’s listing standards. In reaching this conclusion, the Board considered all transactions and relationships between each such nominee (or any member of his or her immediate family) and our Company and its subsidiaries.

To assist in its independence determinations, the Board has adopted specific standards under which certain relationships are deemed not to impair a director’s independence. Please see “Other Information” beginning on page 57 of this proxy statement for more details.

Board Leadership Structure

One of the Board’s key responsibilities is determining the appropriate leadership structure for the Board, which helps ensure its effective and independent oversight of management on behalf of the Company’s shareholders. The Board has chosen one independent director, F. Anthony Comper, to serve as its Lead Director, while our President and Chief Executive Officer, Gregory L. Ebel, serves as Chairman of the Board.

We believe that our Board leadership structure is appropriate for Spectra Energy because it allows one person to speak for and lead both the Company and the Board, while also providing for effective oversight by an independent board through an independent lead director. The Board reviews its leadership structure and has the flexibility to revise it at any time as it deems appropriate.

In his role as Lead Director, Mr. Comper has broad authority and responsibility over Board governance and operations. His responsibilities, described in our Principles for Corporate Governance, include:

 

  presiding at Board meetings at which the Chairman is not present, including executive sessions of the independent directors, which are held after each Board meeting;

 

  consulting with the Chairman on Board meeting agendas;

 

  calling meetings of independent directors and setting agendas for executive sessions;

 

 

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CORPORATE GOVERNANCE 

Risk Oversight 

 

 

  serving as a liaison between the Chairman and the independent directors;

 

  approving meeting schedules to ensure that there is sufficient time for discussions; and

 

  representing the Board from time to time in consultations or direct communications with shareholders.

Risk Oversight

The Board is responsible for overseeing our risk management process. Acting as a whole, the Board exercises its oversight responsibility with respect to certain business risks that we face, including strategic and competitive risks and risks related to succession of our Chief Executive Officer and other members of management. The Board exercises additional risk oversight responsibilities through its committees, which are comprised solely of independent directors. Each such committee has primary risk oversight responsibility with respect to all matters within the scope of its duties as contemplated by its charter and as described in the table below.

 

Board Committee   Areas of Risk Oversight    Additional Information

Audit Committee

  Financial reporting, internal control, legal, compliance and technology risks    Receives regular reports from management regarding risks faced in our business, including operational and project risks. As noted below, the Finance and Risk Management Committee also receives these types of reports.
Compensation Committee   Compensation programs    Management has undertaken, and the Compensation Committee has reviewed, an evaluation of any incentives created by our compensation programs that may encourage our employees to take risks. Based upon that evaluation, the Committee has concluded that Spectra Energy’s compensation programs do not encourage unnecessary or excessive risks that are reasonably likely to result in a material adverse effect on the Company.
Finance and Risk Management Committee   Credit, commodity, environment, health & safety, financial risks; and overseeing company-wide risk management and risk management governance structure    Together with the Audit Committee, receives regular reports from management regarding risks our business faces, including operational and project risks.

Board Meetings and Attendance

Our Board held seven meetings during 2014 and the committees of the Board met a total of 26 times. All of the directors attended at least 90% of the meetings of the Board and meetings of the committees on which they served during fiscal year 2014. Directors are encouraged to attend the Annual Meeting, and all Board members attended our 2014 Annual Meeting.

 

 

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CORPORATE GOVERNANCE 

Board Committees 

 

 

 

Board Committees

The Board has four standing committees – Audit; Compensation; Corporate Governance; and Finance and Risk Management. Each committee operates under a written charter adopted by the Board. The charters are posted on our website at http://investors.spectraenergy.com in the “Corporate Governance” section. The charters are available in print to any shareholder upon request.

 

Audit Committee
   

Chair

Hamilton

 

Other Members

Adams

Comper

McShane

 

9 Meetings

Held in 2014

 

The Audit Committee’s responsibilities include:

 

 

  selecting and hiring an independent public accounting firm to conduct audits of our accounting and financial reporting activities and those of our subsidiaries

 

  approving all audit and permissible non-audit services that our accounting firm provides

 

  reviewing with the accounting firm the scope and results of its audits

 

  reviewing with the accounting firm our accounting procedures, internal controls, and accounting and financial reporting policies and practices, as well as those of our subsidiaries

 

  reporting and making recommendations to the Board as it deems appropriate

 

  providing oversight for all matters related to the security of information technology systems and procedures

 

  overseeing our ethics and compliance activities

 

 

 

See page 21 for additional information on the Audit Committee’s pre-approval policy.

 

The Board has determined that each member of the Audit Committee is “independent” under the NYSE’s listing standards, applicable securities regulations, and the Company’s categorical standards for independence. The Board has also determined that Messrs. Comper, Hamilton and McShane are “audit committee financial experts” as defined by the Securities and Exchange Commission (“SEC”).

 

 

Compensation Committee
   

Chair

Phelps

 

Other Members

Alvarado

Carter

Cazalot

Morris

 

5 Meetings

Held in 2014

 

The Compensation Committee’s responsibilities include:

 

 

  establishing and reviewing our overall executive compensation philosophy and approving changes to our compensation program

 

  reviewing and approving corporate goals and objectives relevant to our CEO’s compensation and evaluating his performance in light of those goals and objectives

 

  reviewing and approving annual salaries, short-term and long-term incentive opportunities, and results and other benefits for our CEO and other executive officers

 

  reviewing and approving any agreement that we enter into with an executive officer

 

  approving equity grants under our Long-Term Incentive Plan

 

  reviewing and discussing with management our compensation-related disclosures

 

 

The Board has determined that each member of the Compensation Committee is “independent” under the NYSE’s listing standards and the Company’s categorical standards for independence, a “non-employee director” under the Securities Exchange Act Rule 16b-3, and an “outside director” as defined in Section 162(m) of the Internal Revenue Code.

 

 

 

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CORPORATE GOVERNANCE 

Board and Committee Performance Evaluations 

 

 

Corporate Governance Committee
   

Chair

Carter

 

Other Members

Adams

Comper

Hamilton

 

5 Meetings

Held in 2014

 

The Corporate Governance Committee’s responsibilities include:

 

 

  making recommendations on the size and composition of the Board and its committees

 

  making recommendations on the compensation of independent directors

 

  recommending potential CEO candidates as part of our succession-planning process

 

  recommending qualified and suitable individuals to fill Board vacancies when they occur (and hiring external search firms or other third parties to help identify and evaluate potential nominees)

 

  recommending the slate of director nominees for each year’s Annual Meeting, including any nominees recommended by shareholders

 

  overseeing the self-evaluation of the Board and its committees

 

  reviewing any conflict of interest involving  officers and directors

 

 

The Board has determined that each member of the Corporate Governance Committee is “independent” under the NYSE’s listing standards and the Company’s categorical standards for independence.

 

 

Finance and Risk Management Committee
   

Chair

McShane

 

Other Members

Alvarado

Cazalot

Morris

Phelps

 

6 Meetings

Held in 2014

 

The Finance and Risk Management Committee’s responsibilities include:

 

 

  reviewing our overall financial and fiscal affairs and making recommendations to the Board regarding dividends, financing and fiscal policies

 

  reviewing our financial exposure and the strategies used to mitigate risk

 

  reviewing our risk exposure as it relates to earnings and to the overall corporate portfolio

 

  reviewing the financial impacts of major transactions such as mergers, acquisitions, reorganizations and divestitures

 

  overseeing enterprise risk management

 

  overseeing management of environmental, health and safety matters

   

Board and Committee Performance Evaluations

In 2014, as they do each year, the Board and its standing committees conducted self-evaluations of their performance. The Corporate Governance Committee oversaw these performance evaluations, which were also discussed with the full Board. These self-evaluations did not suggest a need for any material changes to the processes and governance procedures of the Board or its Committees.

 

 

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CORPORATE GOVERNANCE 

Transactions with Related Persons 

 

Transactions with Related Persons

The Board is responsible for the oversight and approval (or ratification) of any “related-person transactions.” These are transactions, relationships or arrangements involving the Company in which any “related person” has a direct or indirect material interest. For this purpose, the following persons are considered “related” to the Company:

 

  our directors, director nominees, executive officers, and their immediate family members;

 

  beneficial owners of more than 5% of our common stock and their immediate family members; and

 

  entities in which a person described above is employed, has a substantial interest, or holds a position such as general partner or principal.

Under the Board’s written procedures for the reporting, review and approval of related-person transactions, the Corporate Governance Committee evaluates these transactions and approves only those that it believes are consistent with the best interests of the Company and its shareholders as the Committee determines in good faith. The Committee bases this evaluation on all relevant factors, including:

 

  the benefits of the transaction to the Company;

 

  the terms of the transaction and whether they were made on an arm’s-length basis and in the ordinary course of the Company’s business;

 

  the direct or indirect nature of the related person’s interest in the transaction;

 

  the size and expected term of the transaction; and

 

  other facts and circumstances that bear on the materiality of the transaction under applicable laws and listing standards.

 

 

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Report of the Corporate Governance Committee

The following report of the Corporate Governance Committee describes its philosophy, its responsibilities, and certain of its policies relating to the Board.

Philosophy

The Corporate Governance Committee believes that sound corporate governance has three components:

 

  Board independence;

 

  processes and practices that foster solid decision-making by both management and the Board; and

 

  balancing the interests of all of our stakeholders – our investors, customers, employees, the communities we serve and the environment.

The Committee’s charter is available on our website at http://investors.spectraenergy.com/ in the “Corporate Governance” section. The Committee’s charter is summarized below.

Membership

The Corporate Governance Committee must have three or more members, all of whom must qualify as independent directors under the listing standards of the NYSE and other applicable rules and regulations.

Responsibilities

The Committee’s responsibilities include, among other things:

 

  implementing policies regarding corporate governance matters;

 

  assessing the Board’s membership needs and recommending nominees;

 

  recommending to the Board those directors to be selected for membership on, or removal from, the various Board committees and those directors to be designated as chairs of Board committees;

 

  recommending compensation of independent directors;

 

  reviewing or approving related party transactions; and

 

  sponsoring and overseeing performance evaluations for the various Board committees, the Board as a whole, and the directors and management, including the Chief Executive Officer.

The Committee may conduct or authorize investigations or studies of matters within the scope of the Committee’s duties and responsibilities, and may retain, at the Company’s expense and at the Committee’s sole discretion, consultants and attorneys to assist in such work as the Committee deems necessary. In addition, the Committee has the sole authority to retain or terminate any search firm to be used to identify director candidates, including the sole authority to approve the search firm’s fees and other retention terms, with such fees to be borne by the Company. Finally, the Committee conducts an annual self-evaluation of its performance.

 

 

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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE 

Director Candidates 

 

 

Director Candidates

Profile

While the Committee has not prescribed standards for considering diversity, as a matter of practice, the Committee looks for diverse nominees who can enhance perspective and experience through diversity in gender, ethnic background, geographic origin and professional experience. The Committee looks for the following characteristics in any candidate for nominee to serve on our Board:

 

  fundamental qualities of intelligence, perceptiveness, good judgment, maturity, high ethics and standards, integrity and fairness;

 

  a genuine interest in the Company and a recognition that, as a member of the Board, one is accountable to the Company’s shareholders as a whole;

 

  a background that includes broad business experience or demonstrates an understanding of business and financial affairs and the complexities of a large, multifaceted, global business organization;

 

  experience as a present or former chief executive officer, chief operating officer, or substantially equivalent level executive officer of a highly complex organization such as a corporation, university or major unit of government, or as a professional who regularly advises such organizations;

 

  no conflict of interest or impediment that would interfere with the duty of loyalty owed to the Company and its shareholders;

 

  the ability and willingness to spend the time required to function effectively as a director;

 

  compatibility and ability to work well with other directors and executives in a team effort with a view to a long-term relationship with the Company as a director;

 

  independent judgment and willingness to express views in a constructive manner; and

 

  diversity and the extent to which the nominee would fill a present need on the Board.

Identifying Nominees

As noted above, the Committee may engage a third party from time to time to assist it in identifying and evaluating new director candidates. Based on surveys of the then-current Board members and the profile described above, the Committee will advise the third party of the characteristics, skills and experiences that may complement those of our existing members. The third party will then recommend nominees having such attributes. All of the nominees on the proxy card are current members of our Board and were recommended by the Committee, except for Ms. Hubbs, who was nominated by the Committee for her initial election at the Annual Meeting. Ms Hubbs was recommended by a current member of the Board.

Nominations by Shareholders

The Committee considers nominees recommended by shareholders on a similar basis as it does nominees recommended by other third parties, taking into account, among other things, the profile criteria described above and the nominee’s experiences and skills. In addition, the Committee considers the shareholder nominee’s independence with respect to both the Company and the nominating shareholder. Shareholders interested in submitting nominees for the Board will need to provide timely written notice to the Corporate Governance Committee, c/o Corporate Secretary, Spectra Energy Corp, 5400 Westheimer Court, Houston, Texas 77056. Our Corporate Secretary must receive this notice not less than 90 or more than 120 days prior to the anniversary of the Annual Meeting.

Under our By-Laws, the notice must include certain information about the nominee. You can access the By-Laws on our website at http://investors.spectraenergy.com. Click on the “Corporate Governance” link.

 

 

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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE 

Resignation Policy 

 

 

Resignation Policy

In an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election is required to tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee is then required to make recommendations to the Board with respect to any such letter of resignation. The Board is required to take action with respect to this recommendation and to disclose its decision-making process. Full details of this policy are set out in our Principles for Corporate Governance, which is posted on our website at http://investors.spectraenergy.com/ in the “Corporate Governance” section.

Communications with Directors

Interested parties can communicate with any of our directors by writing to our Corporate Secretary at the following address:

Corporate Secretary

Spectra Energy Corp

5400 Westheimer Court

Houston, TX 77056

Our Corporate Secretary will distribute communications to the Board, to an individual director or to selected directors, depending on the content of the communication. In accordance with rules of the NYSE, interested parties wishing to communicate only with the non-management or independent directors can address their communications to “Independent Directors, c/o Corporate Secretary” at the above-mentioned address. In that regard, the Board has requested that certain items that are unrelated to the duties and responsibilities of the Board be excluded, such as: spam; junk mail and mass mailings; service complaints; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, obscene or similarly unsuitable will be excluded. However, any communication that is so excluded remains available to any director upon request.

Corporate Governance Committee

Pamela L. Carter (Chair)

Austin A. Adams

F. Anthony Comper

Peter B. Hamilton

 

 

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Director Compensation

Compensation Structure for Non-Employee Directors

We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our Board. In making its recommendation on independent director compensation, the Corporate Governance Committee considers peer and general industry data, including an analysis of director compensation provided by an independent consultant. Under our stock ownership policy, outside directors are required to own 15,000 shares of the Company’s common stock (or common stock equivalents) within five years after becoming subject to the policy. At the end of 2014, all directors had met the targeted ownership level, except for Messrs. Alvarado and Cazalot, who are on track to reach the targeted ownership level within the five-year period. Our Chairman, President and Chief Executive Officer does not receive compensation for his services as a director.

2014 DIRECTOR COMPENSATION STRUCTURE

 

Type    Amount
Annual retainer for all non-employee directors   

$120,000 in Spectra Energy shares*

$105,000 in cash

Retainers for Committee Chairs   

Corporate Governance Committee: $10,000 (cash)

All other committees: $15,000 (cash)

Retainer for Lead Director

  

$30,000 (cash)

 

* Valued at the NYSE closing price on the date of grant.

Charitable Giving Program. Under the Spectra Energy Foundation Matching Gifts Program, the Company will match contributions to qualifying institutions of up to $7,500 per director per calendar year. In 2014, the Spectra Energy Foundation made matching charitable contributions on behalf of Messrs. Adams, Alvarado, Comper, Esrey, Hamilton, Morris and Phelps, respectively.

Expense Reimbursement. The Company reimburses non-employee directors for expenses they reasonably incur in connection with attending and participating in Board and Committee meetings, director education conferences and seminars, and special functions.

2014 COMPENSATION OF NON-EMPLOYEE DIRECTORS

 

Name   

Fees Earned or
Paid in Cash

($)

     Stock Awards
($)(2)
     Options Awards
($)
    

Change in
Pension Value and
Nonqualified Deferred

Compensation Earnings

($)

     All Other
Compensation
($)(3)
   

Total

($)

 

A. Adams

     105,000         120,006                         4,000        229,006   

J. Alvarado

     105,000         120,006                         4,500        229,506   

P. Carter

     115,000         120,006                                235,006   

C. Cazalot

     105,000         120,006                                225,006   

F. Comper

     125,000         120,006                         5,000        250,006   

W. Esrey(1)

     118,333                                 610,750 (4)      729,083   

P. Hamilton

     120,000         120,006                         4,750        244,756   

D. Hendrix(1)

     35,000                                        35,000   

M. McShane

     120,000         120,006                                240,006   

M. Morris

     105,000         120,006                         5,000        230,006   

M. Phelps

     120,000         120,006                         15,000 (5)      255,006   
(1) Messrs. Esrey and Hendrix retired from the Board at the 2014 Annual Meeting.
(2) This column reflects the aggregate grant date fair value of the stock awarded, computed in accordance with FASB ASC Topic 718.
(3) This column reflects matching charitable contributions made in 2014 pursuant to the Spectra Energy Foundation Matching Gifts Program, which matches contributions made by our directors to qualifying institutions up to $7,500 per director per calendar year.
(4) $601,000 of which relates to a charitable contribution made on behalf of Mr. Esrey under the Director’s Charitable Program upon his retirement. Under this program, the Company could make charitable donations of up to $1,000,000 upon Mr. Esrey’s death, or at Mr. Esrey’s request, during his lifetime. The maximum donation made upon his retirement was reduced to an actuarially-determined net present value basis.
(5) $7,500 of which related to a 2013 charitable contribution.

The value of all perquisites and other personal benefits or property received by each non-employee director in 2014 was less than $5,000 and is not included in the above table.

 

 

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Stock Ownership Information

The following table shows, as of January 31, 2015, the amount of our common stock beneficially owned by our directors, the executive officers listed in the Summary Compensation Table under “Compensation Tables” on page 43 (referred to as the “Named Executive Officers”), and by all directors and executive officers as a group. The table also shows the number of common units of SEP beneficially owned by these individuals. SEP is a publicly traded master limited partnership in which Spectra Energy Corp owns approximately 82% of the outstanding equity interest.

 

Name or Beneficial Owner    Number of
Shares Held
     Number of
Shares Acquirable
within 60 days
    

Total Shares

Beneficially Owned

    Percent of
Class
     Total Units of SEP
Beneficially Owned
 

Dorothy M. Ables

     138,328         41,500         179,828        *         4,353   

Austin A. Adams

     46,676                 46,676        *         909   

Joseph Alvarado

     14,215                 14,215        *           

Pamela L. Carter

     32,344                 32,344        *         909   

Clarence P. Cazalot Jr

     4,941                 4,941        *           

F. Anthony Comper

     34,151                 34,151        *         348   

Gregory L. Ebel

     207,921         131,672         339,593 (1)      *         5,766   

Peter B. Hamilton

     31,374                 31,374        *         909   

Reginald D. Hedgebeth

     107,795         11,600         119,395        *           

Miranda C. Hubbs

                                       

Michael McShane

     25,257                 25,257        *           

Michael G. Morris

     16,287                 16,287        *         11,900   

Michael E. J. Phelps

     86,716                 86,716        *           

J. Patrick Reddy

     85,502         13,200         98,702 (1)      *           

William T. Yardley

     53,020         32,300         85,320        *         540   

Directors and executive
officers as a group

     884,527         230,272         1,114,799        *         25,634   

 

* Represents less than 1%.

 

(1) Messrs. Ebel and Reddy beneficially own additional 1,400 and 88,801 shares, respectively, in a Company-sponsored deferred compensation plan. Generally, those shares will be paid out six months following their separation from service.

The following table lists the beneficial owners of more than 5% of the outstanding shares of Spectra Energy common stock as of March 10, 2015. This information is based on the most recently available reports filed with the SEC.

 

      Shares of common stock  
Name and Address of Beneficial Owner    Beneficially Owned      Percentage  

The Vanguard Group(1)

100 Vanguard Blvd., Malvern, PA 19355

     37,111,669         5.53%   

BlackRock, Inc.(2)

55 East 52nd Street, New York, NY 10022

     42,464,367         6.3%   

 

(1) According to the Schedule 13G filed on February 11, 2015 by The Vanguard Group, these shares are beneficially owned by its clients, and it has sole voting power with respect to 1,194,838 shares, sole dispositive power with respect to 36,025,350 shares and shared dispositive power with respect to 1,086,319 shares.
(2) According to the Schedule 13G/A filed on February 9, 2015 by BlackRock Inc., these shares are beneficially owned by its clients, and it has sole voting power with respect to 36,396,747 shares and sole dispositive power with respect to all the shares.

 

 

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Proposal 2:

Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2015

Although our By-Laws do not require that the Company’s shareholders ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm, the Board is submitting the appointment of Deloitte & Touche LLP to the Company’s shareholders for ratification as a matter of good corporate governance. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Deloitte & Touche LLP.

Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions.

The following table presents fees for professional services rendered by Deloitte & Touche LLP, and the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, “Deloitte”) to the Company for 2014 and 2013:

 

Type of Fees (in millions)    2014      2013  

Audit Fees(a)

     $8.4         $8.2   

Audit-Related Fees(b)

     $0.8         $1.7   

Tax Fees(c)

     $1.0         $1.7   

All Other Fees(d)

     $0.1         $0.1   

Total

     $10.3         $11.7   

 

(a) Audit Fees are fees billed or expected to be billed by Deloitte for professional services for the audit of our Consolidated Financial Statements (including associated fees for our consolidated master limited partnership, SEP) included in our Annual Report on Form 10-K and review of financial statements included in our quarterly reports on Form 10-Q, services that are normally provided by Deloitte in connection with statutory, regulatory or other filings or engagements or any other service performed by Deloitte to comply with generally accepted auditing standards. Audit Fees also include fees billed or expected to be billed by Deloitte for professional services for the audit of our internal controls under the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations.

 

(b) Audit-Related Fees are fees billed by Deloitte for assurance and other services that are reasonably related to the performance of an audit or review of our financial statements, including assistance with acquisitions and divestitures, and internal control reviews. Audit-Related Fees also include comfort and consent letters in connection with SEC filings and financing transactions.

 

(c) Tax Fees are fees billed by Deloitte for tax-return assistance and preparation, tax-examination assistance, and professional services related to tax planning and tax strategy.

 

(d) All Other Fees are fees billed by Deloitte for any services not included in the first three categories, primarily translation of audited financials into foreign languages.

 

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT 

REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2015 

 

 

 

 

To safeguard the continued independence of our independent auditor, our Audit Committee adopted a policy that prevents our independent auditor from providing services to us and our subsidiaries that are prohibited under Section 10A(g) of the Securities Exchange Act of 1934 (“Exchange Act”). This policy also provides that the independent auditor is only permitted to provide services to us and our subsidiaries that have been pre-approved by our Audit Committee or the Audit Committee of SEP. Pursuant to the policy, all audit services require advance approval by these audit committees.

Our Audit Committee’s Charter

describes its responsibilities and

is available on our website at

http://investors.spectraenergy.com/

in the “Corporate Governance” section

 

All other services by the independent auditor that fall within certain designated dollar thresholds, both per engagement as well as annual aggregate, have been pre-approved under the policy. Different dollar thresholds apply to the three categories of pre-approved services specified in the policy (Audit-Related services, Tax services and Other services). All services that exceed the dollar thresholds must be approved in advance by our Audit Committee or the Audit Committee of SEP. Pursuant to applicable provisions of the Exchange Act, the audit committees have delegated approval authority to the Chairman of each audit committee. The Chairman has presented all approval decisions to the full audit committee. All engagements performed by the independent auditor were approved by the audit committee pursuant to its pre-approval policy.

 

 

 

 

 

 

 

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Report of the Audit Committee

The Audit Committee assists the Board in its general oversight of the Company’s financial reporting, internal controls and audit functions. Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion on the effectiveness of internal control over financial reporting.

In this context:

 

    the Audit Committee has reviewed and discussed with management and Deloitte the Company’s audited financial statements for the year ended December 31, 2014 and Deloitte’s evaluation of the Company’s internal controls over financial reporting;

 

    the Audit Committee has discussed with Deloitte the matters that are required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standards No. 16, Communications with Audit Committee;

 

    Deloitte has provided the Audit Committee with written disclosures and the PCAOB-required letter regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Deloitte that firm’s independence; and

 

    the Audit Committee has concluded that Deloitte’s provision of audit and non-audit services to the Company and its affiliates is compatible with Deloitte’s independence.

Based on the review and discussions referenced above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s 2014 Annual Report on Form 10-K, for filing with the SEC.

This report is provided by the following independent directors who comprise the Audit Committee:

Peter B. Hamilton (Chair)

Austin A. Adams

F. Anthony Comper

Michael McShane

 

 

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Proposal 3:

Advisory Vote Approving Executive Compensation

As required by Section 14A of the Exchange Act, we are asking our shareholders to provide an advisory, non-binding vote to approve the compensation of our Named Executive Officers. We conduct an advisory vote approving executive compensation at each year’s Annual Meeting. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and our compensation-related policies and practices as described in this proxy statement.

We ask that, as you consider your vote, you review the Compensation Discussion and Analysis on the following pages and the compensation tables that begin on page 43. We designed our compensation programs to attract, retain and incentivize executives of high caliber who create value for our shareholders.

We therefore ask that you vote to approve the compensation of our Named Executive Officers as disclosed in this proxy statement. This vote is advisory and not binding on the Company, the Compensation Committee or the Board. However, the Board and the Compensation Committee value the opinions of the Company’s shareholders and expect to consider the outcome of the vote, along with other relevant factors, when considering future executive compensation decisions.

RESOLVED, that the shareholders approve the compensation awarded to the Company’s Named Executive Officers for 2014, as disclosed under SEC rules, including the Compensation Discussion and Analysis, the Compensation Tables and related material included in this proxy statement.

 

 

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Report of the Compensation Committee

The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. This report is provided by the following independent directors who comprise the Compensation Committee:

Michael E. J. Phelps (Chair)

Joseph Alvarado

Pamela L. Carter

Clarence P. Cazalot Jr

Michael G. Morris

 

 

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Compensation Discussion and Analysis

In this section, we describe the design and purpose of the compensation programs that apply to the executive officers of Spectra Energy who are listed in the Summary Compensation Table on page 43. We refer to these officers as our Named Executive Officers. They are:

 

  Gregory L. Ebel, Chairman, President and Chief Executive Officer

 

  J. Patrick Reddy, Chief Financial Officer

 

  Reginald D. Hedgebeth, General Counsel and Chief Ethics & Compliance Officer

 

  William T. Yardley, President, U.S. Transmission

 

  Dorothy M. Ables, Chief Administrative Officer

2014 Summary

 

u    Target pay opportunities for our executives are established within range of the median of Peer Group information and the markets in which we compete for talent.

 

u    Our direct compensation program consists of 1) base salary, 2) short-term incentives and 3) long-term incentives, with the incentive compensation elements representing a clear alignment with pay for performance.

 

u    The financial and operating objectives in our short-term incentive program focus management on critical performance levers that drive shareholder value. For 2014, we exceeded all of our short-term objectives by generating strong earnings and cash flows from our fee-based assets, executing on capital expansion plans, operating our assets reliably and achieving an all-time
   

high in our safety results. Please see pages 34-37 for more information about our short-term incentive objectives and results.

 

u    In spite of excellent 2014 financial and operational results, our share price was more sensitive to energy price volatility than many of our peers and in the last quarter of 2014, total shareholder return for our 2012-2014 long-term performance cycle fell from 41.42% to 34.60%. This last quarter change resulted in goal achievement moving from an above-target payout of approximately 140% to no payout for performance shares.

 

u    As a result, consistent with our pay for performance philosophy and alignment with our shareholders, we achieved above-target payout on short-term incentives and zero payout on performance shares.
 

 

Summary of Compensation Philosophy

We believe that the successful execution of our strategy should result in enhanced shareholder value. Our executive compensation programs are designed to attract and retain executives who are highly qualified to carry out our strategy and to create incentives that link to our strategic direction.

To achieve these objectives, we design compensation opportunities for executives based on the following principles:

 

u    Compensation programs should support the accomplishment of our strategic goals.

 

u    The majority of compensation available for our Named Executive Officers should be contingent on the Company’s attainment of pre-established performance objectives, both short-term and long-term.

 

u    Compensation opportunities should be aligned with the interests of shareholders, and incentive programs should be designed in consideration of their impact on shareholders, both immediately and in the long-term.
u    Compensation opportunities – as measured by the sum of salary, short-term cash incentive target, and the targeted value of long-term compensation awards – should be sufficiently competitive (in relation to the median of the markets in which we compete for executives) to attract, retain and incentivize Spectra Energy’s executives.

 

u    Fringe benefits, perquisite programs and other forms of indirect compensation should be minimized.
 

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Summary of Compensation Philosophy 

 

 

Overview of 2014 Company Performance

Throughout 2014, we continued to successfully execute the long-term strategies we outlined for our shareholders – meeting the needs of our customers, generating strong earnings and cash flows from our fee-based assets, executing capital expansion plans that underlie our growth objectives, and maintaining a strong balance sheet. Again in 2014, these results, combined with future growth opportunities, led our Board of Directors to approve an increase in our quarterly dividend effective with the last quarter of 2014 to $0.37 per share, or $1.48 per share annually. The new dividend level represents an increase of more than 10% from the previous quarter.

Many additional accomplishments marked our success in 2014. We successfully delivered a slate of new projects into service. In total during 2014, we placed $800 million of growth projects into service. Also, we supplemented our backlog of new projects by securing $3.5 billion in new fee-based projects with long-term contracts.

Successful execution of our 2014 projects allowed us to continue to achieve aggregate returns over the last eight years consistent with our targeted return on capital employed or ROCE range, having invested $2.3 billion of capital and investment expenditures in 2014, including $1.5 billion of expansion capital expenditures. We delivered EPS, earnings before interest taxes depreciation and amortization (“EBITDA”) and ROCE that exceeded our targeted amounts under our 2014 Short-Term Incentive Plan as well as exceeded the target for our operational and project results. We are pleased with our record of operating our assets reliably and safely, achieving an all-time record result for safety in 2014.

Therefore, the 2014 Short-Term Incentive Plan payouts were awarded to our Named Executive Officers at a range of 158% to 179% of target amounts. Please see “– 2014 Compensation – Short-Term Incentive Opportunities” for a discussion of how we set our target levels. In spite of these accomplishments in 2014, our stock performance was impacted by the rapid drop in commodity prices at the end of 2014. Up until the last quarter of 2014, our three-year total shareholder return (“TSR”) was 41.42% and would have resulted in an above-target payout of our performance share units. However, some of our peers were not as impacted by the energy price volatility in the market, which caused our TSR for the three-year period ending December 31, 2014 to be 34.60%. This TSR was at the 19.1 percentile of the 18 peer companies in our 2012 LTI peer group, which was below our targeted minimum payout level. As a result, consistent with our pay for performance philosophy and alignment with our shareholders, there is no payout to our Named Executive Officers for performance units awards granted for the 2012-2014 performance cycle. Please see “– Factors Considered in Determining Total Compensation – Peer Group Comparison” and “– 2014 Compensation – 2014 Long-Term Incentive Opportunities,” respectively, for a discussion of how we set our peer group and target levels.

Role of Performance Measures in Our Compensation Program

Each year the Committee establishes financial and operational objectives for each Named Executive Officer that are linked to our strategic goals. Our compensation plans are designed to reduce compensation below targeted payouts if these objectives are not realized. Alternatively, in the event we exceed our objectives, these plans are designed to compensate executives at above-target levels.

As noted above, providing safe and reliable operations continues to be a foundational strategy of our business. Although safe and reliable operations benefit the Company and its shareholders in the long-term, the Compensation Committee believes that this goal is best measured in the short-term. The Compensation Committee also believes it is important to link compensation opportunities for our executives to our stock performance over the long-term. Given these considerations, the Committee links compensation incentive opportunities with meeting financial targets while providing safe and reliable operations in the short-term, and enhancing shareholder return over the long-term.

Consistent with this philosophy, the Committee has structured our annual short-term incentive program to provide our Named Executive Officers with substantial incentives to reach short-term strategic objectives that are aligned with the Company’s long-term strategic plan. Short-term cash payouts are tied to specific financial and operational goals at the

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Compensation-Setting Process 

 

 

corporate and business unit level, where appropriate, that align with our strategic objectives and our shareholders’ interests:

 

  70% of each executive’s short-term cash incentive opportunity is based upon targets for our EPS, Spectra Energy Transmission EBITDA and ROCE of our core businesses.

 

  The remaining 30% is based upon achieving operational, safety and capital project objectives.

Please see pages 34-36 to learn more about these performance measures and why the Committee chose them.

In our long-term incentives, the Committee emphasizes TSR. A substantial portion of the compensation opportunities for our Named Executive Officers consists of long-term equity-based incentives that are designed both to align our executives’ interests with our shareholders’ long-term interests and to provide meaningful performance and retention incentives:

 

  60% of the long-term incentive grants made to our Named Executive Officers vest based on TSR measured over a three-year period.

 

  40% of the grants are subject to vesting requirements at the end of three years.

Please see pages 37-39 for more detail about our long-term incentives.

2014 Shareholder Advisory Vote on Compensation

We have traditionally received very strong support for our executive compensation practices. In an advisory vote held at the 2014 Annual Meeting, our shareholders voted in strong support of the executive compensation programs and on the compensation earned by our Named Executive Officers, with a vote of over 95% in favor.

Compensation-Setting Process

Compensation Committee

The Compensation Committee’s responsibilities include:

 

  establishing and reviewing the Company’s overall compensation philosophy;

 

  reviewing the effectiveness of our compensation program on a regular basis and approving changes to the program;

 

  reviewing and approving the salaries and other compensation of all our executive officers, including the Named Executive Officers, and any agreements with executive officers regarding their compensation;

 

  with input from the Board, performing an annual evaluation of our Chief Executive Officer’s performance; and

 

  making recommendations to the Board on targeted compensation levels for our Chief Executive Officer.

The Compensation Committee operates under a written charter adopted by the Board, which you may view in the Corporate Governance section of our website at http://investors.spectraenergy.com. For more information about the Committee and its responsibilities, see page 12.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Compensation-Setting Process 

 

 

Five independent directors make up our Compensation Committee: Michael E. J. Phelps (Chair), Joseph Alvarado, Pamela L. Carter, Clarence P. Cazalot Jr and Michael G. Morris. Each has had significant responsibility for the design and administration of executive compensation programs, having served either on other public company compensation committees or as the senior executive of a business unit.

 

COMPENSATION COMMITTEE MEMBERS: RELEVANT EXPERIENCE

Mr. Phelps

(Chair)

  over 10 years as a member and chairman of the compensation committees of the Canadian Imperial Bank of Commerce, Canadian Pacific Railway Company, Fairborne Energy Ltd. and Prodigy Gold Incorporated and currently Chairman and founder of Dornoch Capital Inc. and a director of Marathon Oil Corporation

  also served as Chairman, President and Chief Executive Officer of Westcoast Energy Inc. (a company later acquired by a predecessor of Spectra Energy)

Mr. Alvarado

  currently serves as Chairman, President and Chief Executive Officer and a director of Commercial Metals Company

Ms. Carter

  serves as President of a business unit at Cummins Inc., a global manufacturer of diesel engines and related technologies, and is a director of CSX Corporation

Mr. Cazalot

  previously served as Chairman, President and Chief Executive Officer of Marathon Oil Corporation, and is also a director of Baker Hughes Incorporated and FMC Technologies

Mr. Morris

  previously served as Chairman, President and Chief Executive Officer of American Electric Power Company, Inc. and is also a director of Alcoa Inc., L Brands, Inc. and The Hartford Financial Services Group

  also serves on the compensation and benefits committee of the Board of Alcoa Inc.

It is expected that the Compensation Committee will meet as often as is necessary to perform its duties and responsibilities. In 2014, the Committee met five times. Our Chief Executive Officer and other members of management may attend Compensation Committee meetings, as invited. The Compensation Committee also meets in executive session without the presence of management or its consultant.

The Chair of the Compensation Committee works with management to establish meeting agendas. The Committee receives and reviews materials in advance of each meeting; these may include information that management believes will be helpful to the Compensation Committee, as well as materials the Committee has specifically requested. In 2014, these materials addressed matters such as (1) the competitiveness of executive compensation programs based on market data; (2) total compensation provided to Spectra Energy executives; (3) trends and legislative activity in executive compensation and/or benefits; (4) executive stock ownership levels; and (5) corporate financial and operational performance compared to predetermined objectives.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is or has been an officer or employee of Spectra Energy. In addition, during the last fiscal year, none of our executive officers served as a member of the board or the compensation committee of any entity in which a Spectra Energy Board or Compensation Committee member is an executive officer.

Committee Advisors

Since 2007, the Compensation Committee has retained ExeQuity, LLP as its independent compensation consultant. ExeQuity reports directly to the Compensation Committee on matters related to executive compensation, advises it on best practices, and analyzes meeting materials prepared by management. It confers, independently of management, with the Committee’s Chair and with the full Committee, although it may discuss compensation matters with management on a limited basis at the Committee’s direction. As needed, ExeQuity meets with the Committee in executive sessions at which no one from Spectra Energy’s management is present. ExeQuity performs no other services for the Company.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS  

Factors Considered in Determining Total Compensation  

 

In 2014, ExeQuity prepared materials for the Compensation Committee, reviewed materials provided to the Compensation Committee by management, consulted with the Chair prior to meetings regarding agenda items, and attended Committee meetings.

In retaining ExeQuity, the Compensation Committee considered the six factors set forth in Section 303A.05(c)(iv) of the NYSE Listed Company Manual concerning potential conflicts of interest. In addition, after a review of information provided by each member of the Compensation Committee, as well as information provided by ExeQuity, the Compensation Committee determined that there are no conflicts of interest raised by ExeQuity’s work with the Compensation Committee.

Role of Management

Members of Spectra Energy’s management, including our Chief Executive Officer, participate in certain aspects of the compensation-setting process, including:

 

  recommending compensation programs, compensation policies, compensation levels and incentive opportunities;

 

  compiling, preparing and distributing materials for Compensation Committee meetings, including market data;

 

  recommending performance targets and objectives; and

 

  evaluating employee performance (other than the performance of our Chief Executive Officer, whose performance is reviewed by the independent members of the Board).

In 2012, management hired the consulting firm of Aon Hewitt. As management’s consultant, the firm assists management in developing its recommendations regarding compensation and may be asked to attend the Compensation Committee meetings from time to time to discuss research and reports that it prepares at management’s request.

Factors Considered In Determining Total Compensation

 

Peer Group Comparison

 

             

The Compensation Committee sets salaries and short-term and long-term Incentive target

levels based in part on what it determines to be the market median of compensation

available to our executives in the market. The market for highly talented executives is

competitive, and we believe our success depends on our ability to attract and retain

executives who are qualified to successfully execute our short-term and long-term

objectives. We believe that our hiring objectives cannot be achieved unless we offer

compensation opportunities that are competitive in the marketplace.

 

We would prefer to define the market median based on the practices of a sizeable peer

group of companies with market capitalizations and revenues comparable to ours and with

lines of business similar to ours. However, there are not enough companies meeting this

description to allow us to assemble such a peer group. Therefore, in setting compensation

targets, the Compensation Committee considers data from published compensation

surveys as well as information from the public filings of representative companies in the

markets where we compete for executive talent and capital – which we refer to as the
Peer Group. Companies included in the Peer Group are shown to the right.

   

 

      Peer Group*

 

        CenterPoint Energy, Inc.

 

        Consolidated Edison, Inc.

 

        Dominion Resources, Inc.

 

        DTE Energy Company

 

        Enbridge Inc.

 

        EQT Corporation

 

        Kinder Morgan, Inc.

 

        National Fuel Gas Company

 

        NiSource Inc.

 

        ONEOK, Inc.

 

        PG&E Corporation

 

        Public Service Enterprise Group Inc.    

 

        Sempra Energy

 

        TransCanada Corporation

 

        Williams Companies, Inc.

 

        Xcel Energy Inc.

 

         
             

 

* In prior years, we distinguished between a “Compensation Peer Group” and an “LTI Peer Group.” The Compensation Peer Group provided an informal benchmark of compensation practices of companies with which we compete for executive talent and was considered when setting compensation targets for our Named Executive Officers, while the LTI Peer Group provided a measure of our performance compared to companies with which we compete for capital and was used to determine the appropriate payout percentage for our performance share units at the end of each performance period. For 2014, the Compensation Committee has determined that a single Peer Group can be used for both purposes. Questar Corporation, which was part of the 2013 Compensation and LTI Peer Groups, and Ameren Corporation, which was part of the 2013 LTI Peer Group, have been removed from the Peer Group primarily because they were significantly smaller than Spectra Energy in size.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Elements of Our Compensation Program 

 

 

The Compensation Committee also considers trends in the broader market as
shown in general industry surveys. Specifically, the Compensation Committee has
used the Aon Hewitt Total Compensation Management Database because it
believes this survey provides a reliable indication of compensation practices in
companies with revenues comparable to ours.
  Our total incentive opportunities
emphasize long-term goals to drive
long-term decision-making and
shareholder alignment.

External Market Conditions and Individual Factors

In addition to using benchmark survey data, the Compensation Committee takes into account external market conditions and individual factors when establishing the total compensation of each Named Executive Officer. Individual factors include the executive’s performance, level of experience, tenure, responsibilities and position. External market conditions include competitive pressures for the executive’s particular position within the industry, economic developments, the condition of labor markets, and the financial and market performance of the Company. To assist in its evaluation, the Compensation Committee uses tally sheets that assign a dollar amount to each of these elements and provide the details of an executive’s historical and proposed compensation. Finally, the Compensation Committee considers internal equity when evaluating the compensation of our Named Executive Officers relative to one another.

Risk Considerations in Our Compensation Program

In addition to reviewing market factors, the Compensation Committee reviews the alignment of the executive compensation program components with the interests of our shareholders. The overall mix and design of our executives’ short- and long-term incentive compensation opportunities are balanced to mitigate undue risk and promote the health of the Company.

To drive long-term decision-making, our total incentive opportunities place greater emphasis on long-term goals. In our short-term program, no more than 25% of a Named Executive Officer’s targeted award is dependent on any one performance measure. Our short-term measures are chosen to balance the importance of generating short-term earnings and cash with the efficiency and effectiveness of our employed capital. Sixty (60) percent of each executive’s long-term opportunity is contingent on the performance of our stock relative to that of our peers, and each executive is required to own certain amounts of Spectra Energy stock, which provides continued alignment with our shareholders’ interests in the long-term growth of the Company.

Elements of Our Compensation Program

The objective of our compensation program is to link total compensation to individual and company performance on both a short-term and long-term basis. To carry out this objective, the program is structured to include short-term incentives that reward the achievement of predetermined performance objectives and long-term incentives that reward positive stock performance and encourage our executives to align their interests with those of shareholders.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Elements of Our Compensation Program 

 

 

PRINCIPAL COMPENSATION COMPONENTS FOR NAMED EXECUTIVE OFFICERS

 

Component    Rationale    Structure

Salary

  

  Provides compensation for performing day-to-day responsibilities

 

  Creates a framework for incentive awards, which are structured as a percentage of base salary

   Paid in cash at regular intervals throughout the year.

 

Short-Term

Incentive

 

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  Makes significant percentage of cash compensation contingent on specific financial targets and operational performance goals.

 

  Employs performance goals that are appropriate short-term measures of the business imperatives necessary to build financial success and operational excellence in the long term.

  

Annual cash payment based on the achievement of defined financial and operational performance goals:

 

  70% based on financial goals (EPS, EBITDA and ROCE) for our core businesses

 

  30% based on operational/safety/project goals

 

Long-Term

Incentive

 

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  Aligns the interests of executives with those of shareholders by rewarding
long-term Company stock performance

 

  Builds our executives’ equity ownership stake and provides a retention incentive

  

Performance share units (60% of target award value)

 

  Payouts depend on TSR compared with our LTI peer group, measured three years from grant date

 

  Payouts can range from 0% to 200% of target

 

  Once earned, the units are converted to common stock

 

  Dividend equivalents are accumulated from grant date but paid only upon vesting

 

Phantom units (40% of target award value)

 

  Time-based; vest after three years

 

  Once earned, units are paid in cash

 

  Dividend equivalents are accumulated from grant date but paid only upon vesting

Retirement

  

  Provides retention incentives, rewards service through retirement-related payments, and provides savings opportunities

 

  Comparable to market; important tool
for attracting and retaining executives

   Company-sponsored retirement and savings plans (401(k), deferred compensation, defined-benefit plans)

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

Component    Rationale    Structure

Severance

  

  Promotes management continuity and focus on best results for shareholders in the event of a change of control of the Company

 

  Incorporates features that limit the circumstances in which payout can occur and the amount paid (e.g., double-trigger, no tax gross-ups)

   Agreements that provide benefits upon termination following a change of control of the Company.

2014 Compensation

Pay Mix

An executive’s total compensation opportunity is the sum of annual base salary, annual cash incentive target, and the target value of his or her annual long-term incentive grant. The opportunity established for each of our Named Executive Officers is intended to provide total target compensation that falls in the median range for individuals who hold comparable positions in the markets in which we compete for executive talent.

For 2014, the total target pay opportunity, in aggregate, was at the market median for our Named Executive Officers.

Consistent with the pay-for-performance objectives of our compensation program, 84% of our Chief Executive Officer’s total target pay opportunity, and an average of 68% of all other Named Executive Officers’ total target pay opportunity, was in the form of short-term and long-term incentives.

The following charts show the mix of total target compensation for our Chief Executive Officer and for the other Named Executive Officers.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

Salary and Total Pay Opportunities

Chief Executive Officer

In determining Mr. Ebel’s 2014 total compensation opportunity, in February 2014 the Compensation Committee reviewed his 2013 performance and that of the Company; the Company’s long-term performance; market survey data; and Peer Group data.

Among the Company’s performance results and other factors the Committee considered were the following:

 

  In 2013, $7 billion of new, fee-based projects with long-term contracts was secured and $6 billion of capital was placed into service through both expansion of our asset footprint, such as the New Jersey-New York pipeline, and strategic acquisitions, including the Express-Platte Pipeline System. This growth is a record achievement for Spectra Energy.

 

  One of the largest fee-based master limited partnerships in North America was created with a major dropdown of assets into our master limited partnership.

 

  During the five-year period under Mr. Ebel’s leadership and tenure as Chief Executive Officer, Spectra Energy’s total assets increased by 63% and a 182% return to shareholders was achieved.

 

  Mr. Ebel’s 2013 total compensation opportunity was below the median of our Peer Group and below the general industry survey data, while the Company’s performance, based on TSR, was above the Peer Group median from both a 1-year and 5-year perspective.

After considering this record of achievement, the Compensation Committee deemed it appropriate to increase Mr. Ebel’s long-term incentive target from 325% to 425%. This level of long-term incentive aligns him with the overall general industry survey data as well as our Peer Group and continues to place emphasis on long-term performance. Mr. Ebel also received a 3% increase to his base salary for 2014.

Other Named Executive Officers

In February 2014, the Compensation Committee reviewed the 2013 salaries of our Named Executive Officers and approved salary adjustments based on job responsibilities, levels of experience, individual performance, the salaries of executives in comparable positions as obtained from market surveys, and internal comparisons. The Compensation Committee also reviewed the 2013 total target pay opportunities for our executives to see how those opportunities compare with pay opportunities at companies with which we compete for talent.

To ensure that their salaries remain competitive with the marketplace, Mr. Reddy, Mr. Hedgebeth and Ms. Ables received a 3% base salary adjustment for 2014. In addition, to align incentives with market-competitive levels, Mr. Reddy’s long-term incentive target was increased from 170% to 180%.

The following table shows the 2014 target pay opportunities for each Named Executive Officer.

 

2014 TARGET PAY OPPORTUNITIES                                
Name    Salary*      STI Target Opportunity      LTI Target Opportunity      Total Target
Pay Opportunity
 

Gregory L. Ebel

     $1,133,000         $1,133,000 (100%)         $4,815,250 (425%)         $7,081,250   

J. Patrick Reddy

     $609,400         $457,050 (75%)         $1,096,920 (180%)         $2,163,370   

Reginald D. Hedgebeth

     $554,200         $387,940 (70%)         $831,300 (150%)         $1,773,440   

William T. Yardley

     $413,400         $227,370 (55%)         $578,760 (140%)         $1,219,530   

Dorothy M. Ables

     $463,925         $324,748 (70%)         $579,906 (125%)         $1,368,579   

 

* Base salary effective March 1, 2014

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

Short-Term Incentive Opportunities

The 2014 short-term incentive opportunities under the Spectra Energy Executive Short-Term Incentive (“STI”) Plan were designed to compensate executives based on the Company’s 2014 financial and operational performance against goals set at the beginning of the year, and also on each executive’s overall individual performance during the year. The Committee established threshold, target and maximum incentive opportunities for each participant, expressed as a percentage of base salary. Target STI awards for our Named Executive Officers in 2014 are reflected in the 2014 Target Pay Opportunities table above.

Under guidelines adopted for the 2014 STI program, the Compensation Committee set a maximum payment opportunity on 2014 short-term incentive payments for all of our executives equal to 200% of their STI target. In order to meet requirements relating to the Company’s tax deduction under Section 162(m) of the Internal Revenue Code, annual incentive payouts are initially set at this maximum level to the extent that performance against any one of the Spectra Energy, Spectra Energy Transmission or business unit financial goals meets the threshold level of performance. To determine actual payouts, however, the Compensation Committee applies the following framework (in conjunction with actual performance against the Company’s financial and operational measures and individual performance evaluations in order to determine appropriate payout levels):

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

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Spectra Energy Ongoing EPS is one of the primary measures the investment community uses to value the Company. We define this measure as earnings per share adjusted for the per-share impact of discontinued operations and certain charges and credits that we believe will not be recurring on a regular basis. As shown to the right, the actual 2013 EPS result was $1.64 and the

 

EPS target for 2014 was set at $1.40. The EPS target for 2014 was set lower than the actual 2013 EPS result because approximately 18% of SEP’s earnings are being distributed to the holders of SEP’s publicly traded common units as a result of the major dropdown of assets into SEP in 2013. The EPS amount necessary to achieve the maximum payout was set at $1.70, or about 22% above the target, an earnings level that was judged to be possible if financial performance was far superior to our original expectation.

 

Spectra Energy Transmission EBITDA is a measure of the effectiveness of the core business’s ability to generate cash without depreciation, interest or taxes, excluding our joint

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venture, DCP Midstream, LLC (“DCP Midstream”). This measure is important, given the major dropdown of assets into our master limited partnership in 2013. In determining this measure, we have eliminated the impact of certain factors in order to make this measure a clearer gauge of the performance of our four core business units, including among others, the elimination of the effect of commodity price changes, the effect of exchange rate fluctuations in Canadian currency and the impact of weather at our distribution business unit. Target performance was set at a level that matched our corporate forecasts. Maximum performance was set at a level judged to be difficult to achieve, and minimum performance was set at the lowest level that would justify a payout.

Spectra Energy Transmission / U.S. Transmission ROCE reflects the efficiency and effectiveness of capital deployment in our core business. Our business is capital-intensive and depends on the effective execution of our projects. Our ability to achieve our targeted returns on these projects is vital to the success of our business. Spectra Energy Transmission ROCE is one of the 2014 STI performance measures used for all of our Named Executive Officers, except Mr. Yardley, for whom U.S. Transmission ROCE is used. We define Spectra Energy Transmission ROCE as our EBIT (excluding results from DCP Midstream) divided by our annual average total debt plus equity minus cash on hand and our investment in DCP Midstream. We define U.S. Transmission ROCE as EBIT divided by annual average total debt plus equity minus cash on hand for our U.S. Transmission business unit. Target performance was set at a level consistent with corporate forecasts. Similar to other measures, maximum and minimum performance were set, respectively, at levels deemed by the Compensation Committee to be significant challenges or minimally acceptable.

Given the importance of safe and reliable operations, two scorecards were designed to provide alignment and a common culture in all our field and office locations. The first scorecard is the Environmental, Health and Safety Scorecard, which consists of several industry-leading and lagging indicators that promote leadership, continuous improvement and a culture of zero injury or illness. Annual targets in these areas are set to achieve incremental improvement in performance over prior years’ results.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

To promote leadership in enhancing a safety culture, management employees conducted stand-up-for-safety meetings, senior management conducted safety tours, and employees were required to complete all applicable environmental, health and safety training.

We emphasized the importance of a zero-injury culture in two areas: our people and our environment. With respect to our people, we measured improvement in frequency rates for recordable employee and contractor injury, for employee lost and restricted work incident frequency, and for preventable vehicle incidents. With respect to our environment, we focused on: ensuring that corrective actions and root cause analyses are developed for recordable incidents, increased reporting of non-recordable incidents, increased fuel efficiency for fleet vehicles, and minimized impacts on our environment.

The second scorecard is the Operations Scorecard, which consists of several goals designed to ensure effective management of efficient operations. These measures consisted of effectively managing operational and maintenance costs, measuring the reliability of performance at our compressor stations and processing plants, measuring the compliance of our pipelines with prescribed inspection and maintenance work, and maintaining the integrity of our pipelines.

We also have a third scorecard, which is the Project Scorecard. This consists of two goals designed to ensure effective management of budget and schedule for our capital expansion projects. These measures consisted of: meeting budgeted capital expenditures and achieving budgeted internal rates of return on these projects.

Determination of 2014 Short-Term Incentive Payments

At the end of the 2014 cycle, management prepared a report on the achievement of the financial and operational goals under our STI plan. The Compensation Committee reviewed and approved these results in February 2015, along with any proposed adjustments based on individual performance for each Named Executive Officer. In the case of Named Executive Officers other than our Chief Executive Officer, the Chief Executive Officer made recommendations to the Committee regarding any adjustments based on individual performance. In the case of our Chief Executive Officer, the Committee reviewed and approved his performance against financial and operational objectives and his overall individual performance. Following this process, the Compensation Committee approved the final performance results and payment of incentives to all Named Executive Officers.

The table below shows the level of performance needed to achieve the threshold, target and maximum payouts established for each financial goal, as well as the actual 2014 results and actual payout percentages. As discussed above, for each goal, achievement of the threshold, target and maximum amounts would result in corresponding payout percentages of 50%, 100% and 200%, respectively, of the target level.

For example, an executive’s short-term incentive payment associated with our Spectra Energy Ongoing EPS results was calculated as 25% of the executive’s target cash incentive opportunity (25% being the weighting assigned to the EPS measure) multiplied by the actual 2014 payout percentage for the EPS measure, which was 173.33%.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

In determining the final award amount for Mr. Yardley, the Compensation Committee also considered other factors driving the Company’s strong performance in 2014, such as securing $2.4 billion in new, fee-based projects with long-term contracts and achieving an all-time record on safety results.

 

2014 STI AWARDS            
Name   

Actual Short-Term

Incentive Payout

  

Payout as a Percent of

STI Target Opportunity

Gregory L. Ebel

   $1,784,594    158%

J. Patrick Reddy

   $719,902   

158%

Reginald D. Hedgebeth

   $611,046   

158%

William T. Yardley

   $408,013    179%

Dorothy M. Ables

   $511,511    158%

2014 Long-Term Incentive Opportunities

We provide long-term incentive opportunities to our executive officers to achieve an alignment of executive and shareholder interests. These opportunities are designed to incentivize executives to achieve strategic goals that will maximize long-term shareholder value.

The Compensation Committee decided that our long-term incentive program should consist of both a time-based element and a performance-based element. It believes that combining these two forms of awards, with a heavier weighting on the performance element, is an effective means of creating a focus on shareholder return and helping us retain our executive talent in a competitive market. We therefore award performance share units, which generally vest when certain specific performance goals are achieved, in combination with phantom units that generally vest over a three-year period if the grantee remains continuously employed by the Company/affiliates.

Phantom units

Phantom units make up 40% of the annual LTI grant value. These units vest at the end of three years (assuming the executive is still employed with us), at which time they are paid in cash, based on the fair market value of Spectra Energy common stock at the time of vesting. Dividend equivalents are accumulated from the date of grant and paid (in cash) only on the number of phantom units that actually vest.

Performance share units

For 2014, performance share unit awards continued to make up the remaining 60% of the target value of annual long-term compensation. These units are earned based on how the Company performs over a three-year period relative to our Peer Group. Please see “– Factors Considered in Determining Total Compensation – Peer Group Comparison” for more information regarding the Peer Group.

The vesting of performance share unit awards depends on how the TSR of our common stock (a performance metric under our long-term incentive program) compares to TSR results of our Peer Group over a three-year measurement period, as shown below:

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

The Compensation Committee approved these percentages after reviewing similar plans adopted by many of the companies in the Peer Group, reviewing the historical returns of the Peer Group as well as indices that track energy company performance, and consulting with its independent compensation consultant.

Once earned, the performance share units are converted to shares of Spectra Energy common stock at the time of vesting. This payout design for the performance share units, in combination with the payout design for the phantom units, is intended to provide for stock accumulation while also allowing for investment diversification. Dividend equivalents are accumulated from the date of grant and paid (in cash) only on the number of performance share units that actually vest.

For the purpose of determining the number of performance share units and phantom units granted, we use Aon Hewitt’s Total Compensation Management valuation model. Based on this model, adjustments are made to reflect the risk associated with the performance and time vesting conditions, resulting in discounts to 88.76% and 93.76% for performance share units and phantom units, respectively.

We use this expected value methodology in determining awards because this valuation method represents the benefit or opportunity to the employee. It assigns a prospective dollar value to long-term incentives for various compensation-related purposes including comparison of compensation across companies in a peer group. The value shown in the Summary Compensation Table is calculated using standard accounting methodologies. Under the accounting rules, use of a relative TSR performance measure generally produces higher accounting expense than awards that vest based on other measures or solely on service.

We believe in strong alignment of executive pay with TSR. This alignment provides competitive long-term incentive opportunities and incentivizes management to focus on the critical value of shareholder returns. Even though it produces higher accounting expense, we have a heavier weighting on relative TSR as a performance metric than the majority of our peers, as we believe it has the strongest alignment with returns our shareholders realize.

The table below shows long-term incentive awards granted to our Named Executive Officers in 2014:

 

2014 LTI GRANTS                       
Name    Expected Value of LTI/Equity Grants
(as a % of Base Salary)
    Number of Performance
Share Units Granted
    

Number of Phantom

Units Granted

 

Gregory L. Ebel

     425     90,500         57,100   

J. Patrick Reddy

     180     20,600         13,000   

Reginald D. Hedgebeth

     150     15,600         9,900   

William T. Yardley

     140     10,900         6,900   

Dorothy M. Ables

     125     10,900         6,900   

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

2014 Compensation 

 

 

Determination of 2012-2014 Performance Share Unit Awards

The 2012 performance unit cycle commenced on January 1, 2012 and ended on December 31, 2014. Performance share units vest based on our TSR for this three-year period as compared to the TSR for companies in our 2012 LTI Peer Group (which was the same as the 2014 Peer Group shown on page 29, except that it also included Ameren Corporation and Questar Corporation). As of September 30, 2014, our TSR was 41.42% for the performance period, which was at the 61.7 percentile of our peer group and equated to a goal achievement of approximately 140%. However, performance results changed in the last quarter, as our stock performance was negatively impacted by energy price volatility in the market more than some of our peers while some of our utility peers were positively impacted by lower interest rates. Our final TSR for the three-year period was 34.60%, which is at the 19.1 percentile of the 2012 LTI Peer Group. In accordance with our pay for performance philosophy, because this three year period did not achieve at least the 30th percentile of our peer group, this resulted in no payout and no dividend equivalents for this award. Therefore, the following performance shares that were granted for the 2012-2014 performance period and the associated grant values originally shown in the 2013 proxy statement and included in the 2012 Stock Award value shown in the Summary Compensation Table on page 43 were not realized by our Named Executive Officers:

 

      Original 2012 PSU Grant      Vested PSU /
Compensation Realized
from Award
 
Name    # Shares at
Target
     Value of Grant     

Gregory L. Ebel

     82,200       $ 3,369,378         $0   

J. Patrick Reddy

     21,100       $ 864,889         $0   

Reginald D. Hedgebeth

     18,600       $ 762,414         $0   

William T. Yardley

     10,500       $ 430,395         $0   

Dorothy M. Ables

     13,000       $ 532,870         $0   

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Retirement and Other Benefits 

 

 

Retirement and Other Benefits

Retirement Benefits

We provide our executives with retirement benefits under the Spectra Energy Retirement Savings Plan, the Spectra Energy Executive Savings Plan, the Spectra Energy Retirement Cash Balance Plan and the Spectra Energy Executive Cash Balance Plan. The Compensation Committee has determined that, based on market surveys, these plans are comparable to the benefits provided by our peers and provide an important tool for attracting and retaining our executives. Please refer to “Compensation Tables” beginning on page 43 for disclosure of the amounts paid to our Named Executive Officers under these plans.

The Spectra Energy Retirement Savings Plan, a “401(k) plan,” is generally available to all our employees in the United States. It is a tax-qualified retirement plan that provides a means for employees to save for retirement on a tax-deferred basis and to receive an employer matching contribution. Earnings on amounts credited to the plan depend on each participant’s investment choices (which may include a Spectra Energy common stock fund).

The Spectra Energy Executive Savings Plan enables executives to defer compensation, and receive employer matching contributions, in excess of the limits of the Internal Revenue Code that apply to qualified retirement plans such as the Spectra Energy Retirement Savings Plan. Investment choices under this plan are similar to those offered to all employees under the Spectra Energy Retirement Savings Plan.

The Spectra Energy Retirement Cash Balance Plan provides a defined benefit beginning at retirement, the amount of which is based on a participant’s cash balance account balance, which grows with monthly pay and interest credits.

The Spectra Energy Executive Cash Balance Plan provides executives with the retirement benefits to which they would be entitled under the Spectra Energy Retirement Cash Balance Plan in the absence of the Internal Revenue Code limits.

Perquisites and Personal Benefits

At the direction of the Board, Mr. Ebel uses the Company aircraft for personal travel in limited circumstances, primarily for business efficiency. Mr. Ebel’s family and guests may accompany him on business and personal trips. Other executive officers are not allowed to initiate personal trips on corporate or chartered aircraft. However, they are permitted to invite their spouses or guests to accompany them on business trips when space is available. When an executive officer’s use of aircraft or a guest’s travel does not meet the Internal Revenue Service’s standard for business use, the cost of that travel is imputed as income to the officer even if it did not result in incremental cost to the Company.

Severance

The Compensation Committee believes that change-in-control severance arrangements serve shareholders’ best interests by diminishing the potential distraction created by the personal uncertainties and risks that may affect our executives’ focus in the context of a potential corporate restructuring or change-in-control transaction. These protections also help ensure continuity of management in the event of certain corporate transactions.

However, the Committee believes that executives should not be unduly enriched if change-in-control severance arrangements are triggered. Accordingly, each Named Executive Officer has entered into an agreement with the Company that defines the circumstances under which severance benefits would be paid.

The Compensation Committee approved the terms of these agreements after consultation with its independent compensation consultant and with outside counsel. The agreements include the provisions listed below, which the Compensation Committee considered to be sufficient to achieve its objectives. See also – “Compensation Tables – Potential Payments upon Termination of Employment or Change in Control.”

 

  Agreements are triggered only if there is both a change in control of the Company and a qualifying termination of employment. This feature is commonly called a “double trigger.”

 

  Cash severance benefits are limited to two times annual salary plus two times annual target cash incentive.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Other Compensation Policies 

 

 

 

  Medical, dental and life insurance are continued during the two years following severance.

 

  A lump-sum payment is provided for company savings-plan and pension-plan contributions.

 

  There is no provision to gross-up excise taxes that may be triggered under Section 4999 of the Internal Revenue Code. However, severance payments may be reduced to a level that does not trigger the excise tax if this results in greater net after-tax benefits for the executive than if severance benefits were not reduced and excise tax was paid.

 

  Executives are subject to certain non-competition and non-solicitation provisions.

Other Compensation Policies

Clawback Policy

In December 2014, we adopted a policy on recovery of executive compensation (“Clawback Policy”). Our executive officers who are subject to Section 16 of the Exchange Act are subject to the Clawback Policy (each, a “Covered Person”). If our financial results are significantly restated due to fraud or intentional misconduct and a Covered Person is found to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement, the Clawback Policy permits seeking recoupment of incentive, equity and/or performance-based compensation amounts awarded and paid to such Covered Person during the three-year period preceding the date of the restatement. Determinations of whether or not to seek such recoupment will be made, with respect to our Chief Executive Officer, at the sole discretion of our Board, and with respect to other Covered Persons, at the sole discretion of the Compensation Committee.

Stock Ownership Policy

We have adopted a stock ownership policy for executive officers and other key employees who receive long-term incentives. We believe that our executives should be required to own shares of Spectra Energy in order to establish an alignment between their interests and the interests of our shareholders. The employee is required to satisfy the ownership target within five years after becoming subject to the policy. To reinforce the importance of stock ownership, employees who do not achieve their ownership targets by a preset date become ineligible for future long-term incentives unless they apply all short-term incentive payments to the purchase of our common stock until the ownership target is achieved.

The following table summarizes our stock ownership policy for our executive officers. All Named Executive Officers have exceeded their aggregate stock ownership requirement under this policy.

 

STOCK OWNERSHIP REQUIREMENTS        
Position    Number of Shares  

Chairman, President and Chief Executive Officer

     200,000   

Other Named Executive Officers

     70,000   

All Other Executives Subject to Guidelines

     2,000-30,000   

Derivative Transactions

Our stock trading policy applies to transactions in any securities that derive their value from our common stock or any of our debt securities. To avoid even the appearance of insider trading, this policy permits trading by our directors and executives in our securities only during a 30-day window following our quarterly or annual earnings release and only after obtaining preclearance from our Chief Executive Officer or General Counsel. In addition, because of the inherent potential for abuse, this policy restricts our directors and executives from entering into short-swing transactions, short sales, or the use of derivative securities, hedging transactions or margin accounts when such accounts or transactions relate to our securities.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS 

Other Compensation Policies 

 

 

Tax and Accounting Implications of Our Compensation Program

Deductibility of Executive Compensation

The Compensation Committee reviewed and considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company generally may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to certain employees. However, the $1 million limit does not apply to performance-based compensation that is paid pursuant to shareholder-approved plans and is approved by directors who qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code.

The Compensation Committee generally structures and administers executive compensation plans and arrangements so that they will not be subject to the 162(m) deduction limit. However, to maintain flexibility in structuring appropriate compensation programs in the interest of shareholders, the Committee may from time to time approve payments that cannot be deducted. For example, phantom units awarded to certain employees under our Long-Term Incentive Plan may not be deductible for federal income tax purposes, depending on the amount and type of other compensation these employees receive.

Accounting for Stock-Based Compensation

In accounting for employee awards, equity classified stock-based compensation cost is measured at the grant date based on the fair value of the award and is generally recognized as expense over the period beginning on the date the award is granted and ending on the earlier of the date the award vests or the date the employee becomes retirement-eligible. For accounting purposes, awards granted to retirement-eligible employees are deemed to vest on the grant date and their cost is recognized at that time. Liability classified stock-based compensation cost is re-measured at each reporting period and is recognized as expense over the requisite service period.

Internal Revenue Code Section 409A

To the extent we permit executives to defer compensation or we commit to deliver compensation at a later date than when earned and vested, we endeavor to ensure that, if applicable, the requirements of Section 409A of the Internal Revenue Code are satisfied. Failure to satisfy the Section 409A requirements could subject the executives receiving such nonqualified deferred compensation to a 20% excise tax.

 

 

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Compensation Tables

This section provides information regarding the compensation of our Named Executive Officers for 2012 through 2014.

 

Summary Compensation Table                                                   
Name and Principal Position   Year    

Salary

($)

    Bonus
($)
    Stock
Awards
($)(1)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)(2)
   

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($)(3)

    All Other
Compensation
($)(4)
   

Total

($)

 

Gregory L. Ebel(5)

President and Chief Executive Officer

    2014        1,127,500               6,285,224               1,784,594        756,627        311,110        10,265,055   
    2013        1,094,167               4,841,116               1,941,204        249,233        175,023        8,300,743   
    2012        1,056,667               4,964,770               798,753        1,191,361        214,406        8,225,957   

J. Patrick Reddy

Chief Financial Officer

    2014        606,443               1,430,768               719,902        164,158        95,228        3,016,499   
    2013        588,788               1,363,936               681,388        99,231        67,069        2,800,412   
    2012        571,188               1,276,201               323,117        132,272        88,747        2,391,525   

Reginald D. Hedgebeth

General Counsel and Chief Ethics & Compliance Officer

    2014        551,507               1,675,599               611,046        139,007        71,549        3,048,708   
    2013        535,428               1,093,921               493,452        78,983        64,905        2,266,689   
    2012        519,421               1,123,870               384,654        123,948        64,693        2,216,586   

William T. Yardley

President, U.S. Transmission

    2014        409,500               1,195,083               408,013        115,176        56,167        2,183,939   

Dorothy M. Ables

Chief Administrative Officer

    2014        461,673               757,848               511,511        167,068        64,481        1,962,581   
    2013        448,223               763,169               413,084        85,836        47,492        1,757,804   
    2012        434,825               785,266               213,182        195,822        62,757        1,691,852   

 

(1) Stock Awards column reflects the aggregate grant date fair value of performance share units and phantom units awards granted each year as shown in the “2014 Grants of Plan-Based Awards” table on page 44, and computed in accordance with the provisions of FASB ASC Topic 718. The aggregate dollar amount was determined without regard to any estimate of forfeitures related to service-based vesting conditions. See Note 24 of the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2014 regarding assumptions underlying the valuation of equity awards. See page 38 for determination of units granted and variance with accounting values shown above. If the performance share units vested at the maximum level, the following represents the maximum value that would be payable on the performance share units granted in 2014, based on the closing stock price of our common stock on the grant date of these awards for Messrs. Ebel, Reddy, Hedgebeth and Yardley and Ms. Ables: $6,704,240; $1,526,048; $1,155,648; $807,472; and $807,472, respectively.

 

(2) Non-Equity Incentive Plan Compensation column includes amounts payable under the Spectra Energy Executive STI Plan with respect to the 2014, 2013 and 2012 performance periods. Unless deferred, these amounts were paid, respectively, in March 2015, February 2014 and March 2013.

 

(3) Change in Pension Value and Nonqualified Deferred Compensation Earnings represents the change in value during the twelve-month period ending on December 31 of each year. These changes were as follows for each Named Executive Officer:

 

     Gregory L. Ebel
($)
   

J. Patrick
Reddy

($)

   

Reginald D.
Hedgebeth

($)

    William T.
Yardley
($)
    Dorothy M.
Ables
($)
 
Change in actuarial present value of accumulated benefit under the Spectra Energy Retirement Cash Balance Plan     41,234        30,099        31,467        44,404        59,628   
Change in actuarial present value of accumulated benefit under the Spectra Energy Executive Cash Balance Plan     390,663        134,059        107,540        70,772        107,440   
Change in actuarial present value of accumulated benefit under the Pension Choices Plan for Employees of Westcoast Energy Inc. and Affiliated Companies     (11,552                            
Change in actuarial present value of accumulated benefit under the Spectra Energy Supplemental Pension Plan     336,282                               

Total

    756,627        164,158        139,007        115,176        167,068   

 

 

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COMPENSATION TABLES 

2014 Grants of Plan-Based Awards 

 

 

 

(4) All Other Compensation column includes the following for 2014:

 

    

Gregory L. Ebel

($)

   

J. Patrick
Reddy

($)

   

Reginald D.
Hedgebeth

($)

   

William T.
Yardley

($)

   

Dorothy M.
Ables

($)

 
Matching contributions under the Spectra Energy Retirement Savings Plan     15,600        15,600        15,600        15,600        15,600   
Make-whole matching contribution credits under the Spectra Energy Corp Executive Savings Plan     168,522        61,670        47,098        30,400        36,885   
Premiums for life insurance coverage provided under life insurance plans     2,622        7,524        1,710        2,112        4,496   
Matching charitable contributions made in the name of the executive under Spectra Energy’s matching gift policy     7,000        7,500        4,380        3,200        7,500   
Personal use of Company aircraft     106,410        2,934        2,761        4,855          
Tax-return preparation services     10,956                               

Total

    311,110        95,228        71,549        56,167        64,481   

 

  The amounts shown as “Personal use of Company aircraft” reflect the personal use of the Company’s aircraft by the Named Executive Officers. When travel costs did not meet the IRS standard for “business use,” income was imputed to the officer even though such travel may not have resulted in incremental cost to Spectra Energy. The methodology used to compute the incremental cost of this benefit was based on the hourly variable cost for the use of the aircraft, plus any tax-deduction disallowance.

 

(5) A portion of Mr. Ebel’s pension value for 2014, 2013 and 2012 was provided in Canadian dollars and has been converted to U.S. dollars using the Bloomberg spot rate of $.8605 on December 31, 2014, $0.9414 on December 31, 2013 and $.9921 on December 31, 2012.

 

2014 Grants of Plan-Based Awards                                                 
   

Grant

Date

   

Committee

Approval

Date

        Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
        Estimated Future Payouts Under
Equity Incentive Plan  Awards(2)
   

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units

(#)(2)

   

Grant

Date Fair

Value of

Stock and

Option

Awards

($)(3)

 
Name          

Threshold

($)

   

Target

($)

   

Maximum

($)

       

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

     

Gregory L. Ebel

                        566,500        1,133,000        2,266,000                                               
    2/18/2014        2/17/2014                                        45,250        90,500        181,000              $ 4,170,240   
      2/18/2014        2/17/2014                                                                57,100      $ 2,114,984   

J. Patrick Reddy

                        228,525        457,050        914,100                                               
    2/18/2014        2/17/2014                                        10,300        20,600        41,200              $ 949,248   
      2/18/2014        2/17/2014                                                                13,000      $ 481,520   
Reginald D. Hedgebeth(4)                         193,970        387,940        775,880                                               
    2/18/2014        2/17/2014                                        7,800        15,600        31,200              $ 718,848   
    2/18/2014        2/17/2014                                                                9,900      $ 366,696   
      7/1/2014        6/16/2014                                                                13,900      $ 590,055   

William T. Yardley(4)

                        113,685        227,370        454,740                                               
    2/18/2014        2/17/2014                                        5,450        10,900        21,800              $ 502,272   
    2/18/2014        2/17/2014                                                                6,900      $ 255,576   
      7/1/2014        6/16/2014                                                                10,300      $ 437,235   

Dorothy M. Ables

                        162,374        324,748        649,495                                               
    2/18/2014        2/17/2014                                        5,450        10,900        21,800              $ 502,272   
      2/18/2014        2/17/2014                                                                6,900      $ 255,576   

 

(1) This column shows the potential payout opportunities established for the 2014 performance period under the terms of the Spectra Energy Executive STI Plan. The actual amounts paid to each executive under the plan for 2014 are disclosed in the Summary Compensation Table.

 

(2) Awards were made in units of Spectra Energy common stock and were granted under the terms of the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated.

 

(3) All awards reflected in this column were computed in accordance with FASB ASC Topic 718. The per-share full grant date fair value of the phantom units and performance share units granted on February 18, 2014 were $37.04 and $46.08, respectively. The per-share full grant date fair value of the phantom units granted on July 1,2014 was $42.45.

 

 

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COMPENSATION TABLES 

2014 Option Exercises and Stock Vested 

 

 

 

(4) The Spectra Energy Compensation Committee, at its meeting on June 16, 2014, approved retention grants of phantom units to Messrs. Hedgebeth and Yardley. At the time of these awards, there was an increasingly high demand for recognized executive leadership in the energy industry. These key executives possess highly marketable skills in positions of strategic importance as the Company executes on its growth strategy. The Committee sought to ensure that these executives would continue to be integral to Spectra Energy’s succession plan.

 

Outstanding Equity Awards at 2014 Fiscal Year-End                    
     Option Awards          Stock Awards  
Name  

Number of

Securities
Underlying

Unexercised

Options

(#) Exercisable

   

Number of

Securities
Underlying

Unexercised

Options

(#) Unexercisable

  Option
Exercise
Price
($)(1)
    Option
Expiration
Date
        

Number of

Shares or

Units of Stock

That Have

Not Vested

(#)(2)

   

Market Value

of Shares or

Units of Stock

That Have

Not Vested

($)

   

Equity Incentive
Plan Awards:

Number of

Unearned
Shares, Units or
Other Rights
That Have

Not Vested

(#)(3)

   

Equity Incentive
Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units or
Other Rights
That Have

Not Vested

($)

 

Gregory L. Ebel

    76,700          $ 25.64        2/27/2017            163,700      $ 5,942,310        178,500      $ 6,479,550   

J. Patrick Reddy

                                    41,800      $ 1,517,340        45,400      $ 1,648,020   

Reginald D. Hedgebeth(4)

                                    47,900      $ 1,738,770        35,500      $ 1,288,650   

William T. Yardley(4)

    25,800          $ 25.64        2/27/2017            32,200      $ 1,168,860        24,300      $ 882,090   

Dorothy M. Ables

    33,400          $ 25.64        2/27/2017            23,700      $ 860,310        24,800      $ 900,240   

 

(1) For options expiring on February 27, 2017, the exercise price is equal to the closing price of our common stock on the date of grant.

 

(2) Messrs. Ebel, Reddy, Hedgebeth and Yardley and Ms. Ables received Spectra Energy phantom units on February 18, 2014, February 19, 2013 and February 21, 2012 which, subject to certain exceptions, vest on the third anniversary of the date of grant.

 

(3) Messrs. Ebel, Reddy, Hedgebeth and Yardley and Ms. Ables received performance share units on February 18, 2014 and February 19, 2013 which, subject to certain exceptions, are eligible for vesting on December 31, 2016 and December 31, 2015, respectively. As directed by Instruction 3 to Item 402(f)(2) of the SEC’s Regulation S-K, performance share units are listed at the targeted number of units.

 

(4) Messrs. Hedgebeth and Yardley received grants of 13,900 and 10,300 phantom units, respectively, on July 1, 2014 which, subject to certain exceptions, vest on the third anniversary of the date of grant.

 

2014 Option Exercises and Stock Vested  
Name    Option Awards           Stock Awards  
   Number of Shares
Acquired on Exercise
(#)
     Value Realized on Exercise
($)
           Number of Shares
Acquired on Vesting
(#)
    

Value Realized on Vesting

($)(1)

 

Gregory L. Ebel

                          53,900         2,217,446   

J. Patrick Reddy

                          18,820         772,246   

Reginald D. Hedgebeth

                          13,400         551,276   

William T. Yardley

                          7,100         292,094   

Dorothy M. Ables

                          9,300         382,602   

 

(1) Calculated based on the closing price of a share of common stock on the respective vesting date; includes the following cash payments for dividend equivalents on earned phantom units, which were paid upon vesting: $188,650 to Mr. Ebel; $72,839 to Mr. Reddy; $46,900 to Mr. Hedgebeth; $24,850 to Mr. Yardley; and $32,550 to Ms. Ables.

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT      45


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COMPENSATION TABLES 

Pension Benefits 

 

 

Pension Benefits

This section contains information regarding benefits available to our Named Executive Officers under the Company’s pension and retirement plans.

Spectra Energy Retirement Cash Balance Plan and Executive Cash Balance

We provide pension benefits that are intended to assist our retirees with their retirement income needs. This section contains a detailed description of the plans that make up our pension program.

Each of the Named Executive Officers actively participated in pension plans sponsored by us or an affiliate in 2014. This included the Spectra Energy Retirement Cash Balance Plan (“RCBP”), a noncontributory, defined-benefit retirement plan that is intended to qualify under Section 401(a) of the Internal Revenue Code. The RCBP generally covers non-bargaining employees of the Company and its affiliates, and provides benefits under a “cash balance account” formula.

Each of the Named Executive Officers who participates in the RCBP has satisfied the requirements for receiving his or her account benefit upon termination of employment. The RCBP benefit is payable in the form of a lump sum in the amount credited to the hypothetical account at the time of benefit commencement. Payment is also available in the form of an annuity based on the actuarial equivalent of the account balance.

The amount credited to the hypothetical account is increased with monthly pay credits, as follows:

 

Age and service    Percentage of eligible monthly compensation*  

Participants with combined age and service of less than 35 points

     4%   

Participants with combined age and service of 35 to 49 points

     5%   

Participants with combined age and service of 50 to 64 points

     6%   

Participants with combined age and service of 65 or more points

     7%   

 

* For the RCBP, eligible monthly compensation is equal to Form W-2 wages, plus elective deferrals under a 401(k) or cafeteria plan. It does not include severance pay (including payment for unused vacation), expense reimbursements, allowances, cash or noncash fringe benefits, moving expenses, bonuses for performance periods in excess of one year, transition pay, long-term incentive compensation (including income resulting from any stock-based awards such as stock options, stock appreciation rights, phantom stock or restricted stock) and certain other compensation items.

If the participant earns more than the Social Security wage base, the account is credited with additional pay credits equal to 4% of eligible compensation above the Social Security wage base. Interest credits are credited monthly. The interest rate is determined quarterly based upon the 30-year Treasury rate, but with a 4% minimum and a 9% maximum.

A participant’s RCBP benefit may not be less than the amount determined under certain prior benefit formulas (including optional forms). In addition, the benefit is subject to benefit and compensation limits under the Internal Revenue Code.

Each of our Named Executive Officers was also eligible to participate in the Spectra Energy Executive Cash Balance Plan (“ECBP”), a noncontributory, defined-benefit retirement plan that is not intended to satisfy the requirements for qualification under Section 401(a) of the Internal Revenue Code. Benefits earned under the ECBP are attributable to (a) compensation in excess of the Internal Revenue Code’s annual compensation limit ($260,000 for 2014) for the determination of pay credits under the RCBP; (b) restoration of benefits in excess of a defined-benefit plan maximum annual benefit limit ($210,000 for 2014) under the Internal Revenue Code that applies to the RCBP; and (c) supplemental benefits granted to a particular participant. Generally, benefits earned under the RCBP and the ECBP vest upon completion of three years of service and, with certain exceptions, vested benefits generally become payable upon termination of employment with the Company.

We have established a grantor trust that is subject to the claims of our creditors into which funds related to the ECBP are deposited. Funds deposited into the trust are managed by an independent trustee subject to guidelines provided by the Company.

 

 

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COMPENSATION TABLES 

Pension Benefits 

 

 

Pension Choices Plan for Employees of Westcoast Energy Inc. and Spectra Energy Supplemental Pension Plan

Mr. Ebel participated in the Pension Choices Plan for Employees of Westcoast Energy Inc. and Affiliated Companies (“Pension Plan”) and the Spectra Energy Supplemental Executive Retirement Plan (“SERP”) while he resided in Canada prior to 2007. The Pension Plan is registered under the Income Tax Act and under the Pension Benefits Act (Ontario). The executive component of the Pension Plan is a non-contributory defined-benefit plan that provides a pension based on 2% of the annualized average of the executive’s highest consecutive 36 months’ salary and cash incentive multiplied by his or her years of service while located in Canada. The Income Tax Act imposes a limit on the amount of benefits that can be paid from a registered pension plan.

The SERP is primarily intended to restore benefits under the Pension Plan to the level that would be available absent this limit. Mr. Ebel’s benefit accruals related to the Duke SERP were transferred to the Spectra Energy SERP effective with the spin-off. SERP benefits are paid from the general revenues of Spectra Energy as a life annuity. Effective with his transfer to the United States, Mr. Ebel began participating in the Spectra Energy RCBP, and his active participation in the Pension Plan was suspended, although compensation (but not additional service) with Spectra Energy will be used in the calculation of his Pension Plan and SERP benefit. The table below provides information, determined as of December 31, 2014, about each plan that provides for payments or other benefits to our Named Executives Officers at, following or in connection with retirement:

 

PENSION BENEFITS TABLE                             
Name   Plan Name    Number of
Years of
Credited
Service (#)
    

Present

Value of

Accumulated
Benefit($)

    

Payments
During Last

Fiscal Year
($)

 

Gregory L. Ebel

  Spectra Energy Retirement Cash Balance Plan      17.00         262,436           
  Spectra Energy Executive Cash Balance Plan      17.00         1,202,836           
  Pension Choices Plan for Employees of
Westcoast Energy Inc.
     6.48         173,051           
    Spectra Energy Supplemental Pension Plan      6.48         2,725,494           

J. Patrick Reddy

  Spectra Energy Retirement Cash Balance Plan      6.00         145,251           
    Spectra Energy Executive Cash Balance Plan      6.00         516,895           

Reginald D. Hedgebeth

  Spectra Energy Retirement Cash Balance Plan      5.76         135,166           
    Spectra Energy Executive Cash Balance Plan      5.76         391,973           

William T. Yardley

  Spectra Energy Retirement Cash Balance Plan      14.13         348,307           
    Spectra Energy Executive Cash Balance Plan      14.13         299,958           

Dorothy M. Ables

  Spectra Energy Retirement Cash Balance Plan      29.36         683,612           
    Spectra Energy Executive Cash Balance Plan      29.36         768,876           

Spectra Energy Executive Savings Plan

Under the Spectra Energy Executive Savings Plan, participants can elect to defer a portion of their base salary, short-term incentive compensation and long-term incentive compensation (other than stock options). Participants also receive a company matching contribution in excess of the contribution limits prescribed by the IRS under the Spectra Energy Retirement Savings Plan. In general, payments are made following termination of employment or death in the form of a lump sum or installments, as selected by the participant. Participants may request an accelerated distribution upon an “unforeseeable emergency.” In general, participants may direct the deemed investment of base salary deferrals, short-term incentive deferrals and matching contributions among investment options available under the Spectra Energy

 

 

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COMPENSATION TABLES 

Potential Payments Upon Termination of Employment or Change in Control 

 

 

Retirement Savings Plan, including in a Spectra Energy Common Stock Fund. Deferrals of equity awards are credited with earnings and losses based on the performance of the Spectra Energy Common Stock Fund. We have established a grantor trust that is subject to the claims of our creditors into which funds related to the Spectra Energy Executive Savings Plan are deposited; an independent trustee manages these funds under guidelines provided by the Company.

 

NONQUALIFIED DEFERRED COMPENSATION                                        
Name   

Executive

Contributions
in Last FY

($)(1)

    

Company

Contributions
in Last FY

($)(2)

    

Aggregate

Earnings
in Last FY

($)

    

Aggregate
Withdrawals/

Distribution
($)

    

Aggregate
Balance at
Last FYE

($)

 

Gregory L. Ebel

     292,457         168,522         67,656                 2,213,710   

J. Patrick Reddy

     1,582,484         61,670         141,209                 4,256,384   

Reginald D. Hedgebeth

     66,181         47,098         31,318                 641,978   

William T. Yardley

     23,000         30,400         10,403                 245,126   

Dorothy M. Ables

     29,485         36,885         74,568                 1,271,872   

 

(1) The table reflects contributions made to the Spectra Energy Executive Savings Plan. Executive contributions credited to the plan in 2014 include amounts reported as “Salary” in the Summary Compensation Table as well as “Non-Equity Incentive Plan Compensation” paid in 2014 but reported in the table as compensation earned in 2013. Amounts may also include elective deferrals of awards earned under our Long-Term Incentive Plan and payable in 2014.

 

(2) Reflects matching contribution credits made in 2014 under the plan with respect to elective salary deferrals made by executives during 2014.

Potential Payments upon Termination of Employment or Change

in Control

Under certain circumstances, each Named Executive Officer would be entitled to compensation if his or her employment were to terminate. The amount of compensation is contingent upon a variety of factors, including the circumstances of the termination. The agreements and terms of awards affecting this type of compensation are described below, followed by a table that estimates the amount that would become payable to each Named Executive Officer as a result of a change in control or a termination of employment, assuming a termination was effective as of December 31, 2014. The actual amounts that would be paid can be determined only at the time of the Named Executive Officer’s termination of employment.

 

 

48       SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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COMPENSATION TABLES 

Potential Payments Upon Termination of Employment or Change in Control 

 

 

Effect of Termination on Long-Term Incentive Awards

The following table summarizes the consequences that would occur in the event of a change in control or the termination of employment of a Named Executive Officer under our long-term incentive award agreements, without giving effect to the change in control agreements described below.

 

Event    Consequences

Change in Control

  

Phantom Units – continue to vest

 

Performance Share Units – award vests based on target performance

Termination with cause

   Phantom and Performance Share Units – executive’s right to unvested portion of award terminates immediately

Voluntary termination (not retirement eligible)

   Phantom and Performance Share Units – executive’s right to unvested portion of award terminates immediately
Involuntary termination without cause (not retirement eligible)   

Phantom Units – prorated portion of award vests

 

Performance Share Units – prorated portion of award vests based on actual performance after performance period ends

Voluntary termination or involuntary termination without cause (retirement eligible)   

Phantom Units – prorated portion of award continues to vest

 

Performance Share Units – prorated portion of award vests based on actual performance after performance period ends

Involuntary termination after a Change in Control

  

Phantom Units – award vests

 

Performance Share Units – award vests based on target performance

Termination due to Death or Disability

  

Phantom Units – award vests

 

Performance Share Units – award vests based on target performance

Change in Control Agreements

Each Named Executive Officer has entered into a change in control agreement with the Company. The agreements have an initial term of two years, and automatically extend for a year starting on the first anniversary of the date of the agreements. The Company or the Named Executive Officers can terminate the agreements following the initial two-year term, after providing 6 months advance written notice.

The change in control agreements provide for payments and benefits to the executive in the event of termination of employment within two years after a “change in control” of the Company, other than termination: (1) by the Company for “cause;” (2) by reason of death or disability; or (3) of the executive for other than “good reason” (each such term as defined in the agreements).

Payments and benefits include:

 

  a lump-sum cash payment equal to a pro-rata amount of the executive’s target cash incentive for the year in which the termination occurs;

 

 

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Potential Payments Upon Termination of Employment or Change in Control 

 

 

 

  a lump-sum cash payment equal to two times the sum of the executive’s annual base salary and target annual cash incentive opportunity in effect immediately prior to termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting “good reason”;

 

  continued medical, dental and basic life insurance coverage for a two-year period (which can also be provided through a third-party insurer); and

 

  a lump-sum cash payment representing the amount the Company would have allocated or contributed to the executive’s qualified and nonqualified defined-benefit pension plan and defined contribution savings plan accounts during the two years following the termination date, plus the unvested portion, if any, of the executive’s accounts as of the date of termination that would have vested during such two-year period.

In addition, under certain circumstances, the agreements may provide for continued vesting of certain long-term incentive awards for two additional years.

Under the change in control agreements, each Named Executive Officer also is entitled to reimbursement of up to $50,000 for the cost of certain legal fees incurred in connection with claims under the agreements. In the event that any of the payments or benefits provided for in the change in control agreement otherwise would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code), the amount of payments or benefits would be reduced to the maximum level that would not result in excise tax under Section 4999 of the Internal Revenue Code, if this reduction would cause the executive to receive a larger after-tax amount than if no reduction were made. In the event a Named Executive Officer becomes entitled to payments and benefits under a change in control agreement, he or she would be subject to a one-year non-competition and non-solicitation provision from the date of termination, in addition to certain confidentiality and cooperation provisions.

Potential Payments Upon Termination of Employment or a Change in Control Table

The amounts listed in the following table have been estimated based on a variety of assumptions, and the actual amounts to be paid out can only be determined at the time of each Named Executive Officer’s termination of employment. Amounts shown do not include compensation to which each Named Executive Officer would be entitled without regard to his or her termination of employment, including (a) base salary and short-term incentives that have been earned but not yet paid, and (b) amounts that have been earned, but not yet paid, under the terms of the plans listed under the “Pension Benefits” and “Nonqualified Deferred Compensation” tables.

 

 

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COMPENSATION TABLES 

Potential Payments Upon Termination of Employment or Change in Control 

 

 

With respect to a Named Executive Officer who is covered by a change in control agreement, the amounts shown do not reflect any reduction in payments that might be made so that the excise tax under Section 4999 of the Internal Revenue Code would not apply.

 

Name and Triggering Event(1)  

Cash Severance
Payment(2)

($)

   

Incremental

Retirement Plan

Benefit(3)

($)

   

Welfare and Similar

Benefits(4)

($)

   

Stock Awards(5)

($)

   

Option Awards

($)

   

Total

($)

 

Gregory L. Ebel

                                               

Change in Control

                         6,775,190               6,775,190   

Voluntary termination or termination with cause

                  43,577                      43,577   

Involuntary termination without cause

                  43,577        3,996,515               4,040,092   

Involuntary or good reason termination after a CIC

    4,532,000        783,091        79,942        13,080,902               18,475,935   

Death or Disability

                  43,577        13,080,902               13,124,479   

J. Patrick Reddy

                                               

Change in Control

                         1,726,236              
1,726,236
  

Termination with cause

                  82,035                      82,035   

Voluntary or involuntary termination without cause

                  82,035        1,079,604               1,161,639   

Involuntary or good reason termination after a CIC

    2,132,900        363,301        114,900        3,338,492               5,949,593   

Death or Disability

                  82,035       
3,338,492
  
           3,420,527   

Reginald D. Hedgebeth

                                               

Change in Control

                         1,350,445              
1,350,445
  

Voluntary termination or termination with cause

                  21,315                      21,315   

Involuntary termination without cause

                  21,315        955,270               976,585   

Involuntary or good reason termination after a CIC

    1,884,280        300,103        57,680        3,178,072               5,420,135   

Death or Disability

                  21,315        2,749,430               2,770,745   

William T. Yardley

                                               

Change in Control

                         924,112               924,112   

Voluntary termination or termination with cause

                  15,900                      15,900   

Involuntary termination without cause

                  15,900        603,077               618,977   

Involuntary or good reason termination after a CIC

    1,281,540        207,487        40,559        2,149,365               3,678,951   

Death or Disability

                  15,900        1,831,738               1,847,638   

Dorothy M. Ables

                                               

Change in Control

                         943,407               943,407   

Termination with cause

                  62,451                      62,451   

Voluntary or involuntary termination without cause

                  62,451        626,549               689,000   

Involuntary or good reason termination after a CIC

    1,577,345        266,092        88,349        1,858,842               3,790,628   

Death or Disability

                  62,451        1,858,842               1,921,293   

 

 

SPECTRA ENERGY CORP 2015 PROXY STATEMENT      51


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COMPENSATION TABLES 

Potential Payments Upon Termination of Employment or Change in Control 

 

 

 

(1) Amounts in the table represent obligations of the Company under agreements currently in place, and valued as of December 31, 2014.

 

(2) Amounts payable under the terms of the Named Executive Officer’s change in control agreement, not including accrued salary and cash incentive payments earned but not paid through December 31, 2014 (these amounts are reflected in the Summary Compensation Table, however ).

 

(3) Pursuant to the Named Executive Officers’ change in control agreements, this column represents the additional amounts that would be credited and vested in respect of the Spectra Energy Retirement Cash Balance Plan, Spectra Energy Executive Cash Balance Plan, Spectra Energy Retirement Savings Plan and the Spectra Energy Executive Savings Plan if the Named Executive Officer continued to be employed by Spectra Energy for two additional years, at his or her rate of base salary plus target bonus percentage as in effect on December 31, 2014.

 

(4) Amounts include the maximum accrued vacation allowed under Company policy and the amount that would be paid to each Named Executive Officer who has entered into a change in control agreement in lieu of providing continued welfare benefits for 24 months.

 

(5) Amounts that would result from the acceleration of the vesting of previously awarded stock and any associated dividend equivalent payments due upon vesting. For Mr. Reddy and Ms. Ables, who are retirement eligible, amounts also include the continued vesting of previously awarded phantom units after the applicable termination event.

The amounts shown above with respect to the Company’s outstanding stock awards were calculated based on a variety of assumptions, including the following: (a) the Named Executive Officer terminated employment on the last day of 2014; (b) a stock price for our common stock equal to $36.30, which was the closing price on the last trading day of 2014; (c) the continuation of our dividend at the rate in effect on December 31, 2014; and (d) performance at the target level with respect to performance share units.

Current Equity Compensation Plan Information

The following table contains information, as of December 31, 2014, about securities to be issued upon the exercise of outstanding options, warrants and rights under our equity compensation plans, along with the weighted-average exercise price of the outstanding options, warrants and rights and the number of securities remaining available for future issuance under the plans.

 

Plan Category   

Number of securities to be
issued upon exercise of
outstanding options,
warrants and  rights

     Weighted-average
exercise price of
outstanding options,
warrants and rights
     Number of securities
remaining available
under equity
compensation plans
(excluding  securities
reflected in column(1)
 

Equity compensation plans approved by security holders

     1,102,312         25.36         11,690,255   

Equity compensation plans not approved by security holders

                       

Total

     1,102,312         25.36         11,690,255   

 

(1) Represents shares available for issuance for awards of phantom unit awards, performance share unit awards or options under the Spectra Energy Corp 2007 Long-Term Incentive Plan, as amended and restated. In the case of performance share units, amounts assume target performance.

 

 

52       SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Shareholder Proposals

Proposal 4: Shareholder Proposal-Political Contributions

The Nathan Cummings Foundation (the “Foundation”), located at 475 Tenth Avenue, 14th Floor, New York, New York 10018, has notified Spectra Energy that it intends to present the resolution set forth below at the Annual Meeting for action by the shareholders. The Foundation was the beneficial owner of the Company’s common stock as of November 3, 2014, with a market value in excess of $2,000. The Foundation’s supporting statement for the resolution, along with the Board’s statement in opposition is set forth below.

Resolved: That the shareholders of Spectra Energy (“Company”) hereby request that the Company provide a report, updated semiannually, disclosing the Company’s:

 

1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.

 

2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:

 

  a. The identity of the recipient as well as the amount paid to each; and

 

  b. The title(s) of the person(s) in the Company responsible for decision-making.

The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website.

Supporting Statement: As long-term shareholders of Spectra Energy, we support transparency and accountability in corporate spending on political activities. These include any activity considered intervention in a political campaign under the Internal Revenue Code, such as direct and indirect political contributions to candidates, political parties, or political organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.

Disclosure is in the best interest of the Company and its shareholders and critical for compliance with federal ethics laws. Moreover, the Supreme Court’s Citizens United decision recognized the importance of political spending disclosure for shareholders when it said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Gaps in transparency and accountability may expose the Company to reputational and business risks that could threaten long-term shareholder value.

We note that Spectra Energy provides a brief policy statement on political spending on its website. However, this does not include any information regarding to whom the Company gave, either directly or indirectly. Indeed, Spectra Energy placed near the bottom of the 2014 CPA-Zicklin Index of Corporate Political Accountability and Disclosure, receiving just 33 points out of 100.

We ask the Company to disclose all of its political spending, including payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a growing number of leading companies that support transparency and present this information on their websites, including Noble Energy, ConocoPhillips, and Exelon Corporation.

The Company’s Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.

 

 

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SHAREHOLDER PROPOSALS 

Proposal 4: Political Contributions 

 

 

 

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    Opposition Statement of the Company

 

This proposal is identical to a proposal that was submitted twice by the same shareholder proponent and was included in our 2013 and 2014 Proxy Statements. Supporting the Board’s opposition to the Proposal each time it was submitted, a significant majority of our shareholders voted against this Proposal.

Our approach to political engagement and related governance practices continues to be guided by what we believe is in the best interests of our shareholders, the Company, its employees, customers and other key stakeholders. These interests are best served when we engage constructively in the political process to support policies that create shareholder value and further our business interests. We continue to be committed to the highest standards of ethical conduct and to compliance with applicable laws in our involvement in the political process. Likewise, we are committed to providing shareholders and other interested parties with information about our political activity.

Following considerable engagement with our shareholders, including The Nathan Cummings Foundation, the proponent of this Proposal, in February 2013, we enhanced and published our political contributions policy on our website at http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-govHighlights. The political contributions policy was again enhanced in January 2015, to provide additional disclosures on our lobbying activities. The political contributions policy, as well as our Code of Business Ethics, which is also available on our website at http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-govHighlights, set out the governance principles and standards for participation in the political process by the Company and its employees and substantially address the concerns raised by this Proposal.

In our sustainability report, we regularly publish the details of the Company’s public policy positions, advocacy priorities and aggregate political contribution amounts, among other information, which we believe fulfill the proponent’s request for transparency and accountability. Our 2013 Sustainability Report, published in May 2014, is available at www.spectraenergy.com/sustainability.

As expressly stated in our political contributions policy, we follow Federal laws in both Canada and the United States which place limits on a company’s ability to participate in the political process, and as such, we do not contribute corporate funds directly to federal political candidates, committees or parties in either jurisdiction. On a limited basis, we may use corporate funds in the United States to make contributions to 527 organizations (tax-exempt organizations that engage in political activities).

We also participate in business and industry forums, such as trade associations, which provide an appropriate and cost-effective means to share our perspective on matters important to our business and our shareholders’ interests. The trade associations where we have a greater level of participation are listed in our sustainability report and are on our website. In all of these efforts, we advocate for our industry by lending our resources, knowledge and influence to encourage understanding and appreciation for the important role natural gas, natural gas liquids and oil are playing in achieving North America’s energy, environmental and economic goals – and to spur positive policy and action toward that end.

Our governance practices ensure accountability for the Company’s political activity. All of our proposed political contributions are reviewed and approved by a senior business unit government affairs officer and, in some instances, by the President of the relevant business unit or our Chief Executive Officer. Our political spending policies and practices, as well as our public policy positions, advocacy priorities and aggregate political contributions also are reviewed annually by our Board.

We believe that the disclosure enhancements we made in 2013 and 2015 are responsive to the request made in the Proposal and represent corporate best practices. We continue to provide ample disclosure about our participation in the political process, and our internal governance practices ensure accountability for the Company’s political contributions and related expenditures.

 

 

 

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SHAREHOLDER PROPOSALS 

Proposal 5: Lobbying Disclosures 

 

 

Proposal 5: Shareholder Proposal — Lobbying Disclosures

The Unitarian Universalist Association, located at 24 Farnsworth Street, Boston, MA 02210-1409, has notified Spectra Energy that it intends to present the resolution set forth below at the Annual Meeting for action by the shareholders. As of November 6, 2014, The Unitarian Universalist Association owned the Company’s common stock having a market value in excess of $2,000.

Whereas, corporate lobbying exposes our company to risks that could adversely affect the company’s stated goals, objectives, and ultimately shareholder value, and

Whereas, we rely on the information provided by our company to evaluate goals and objectives, and we, therefore, have a strong interest in full disclosure of our company’s lobbying to assess whether our company’s lobbying is consistent with its expressed goals and in the best interests of shareholders and long-term value.

Resolved, the shareholders of Spectra Energy Corp (“Spectra Energy”) request the Board authorize the preparation of a report, updated annually, disclosing:

 

1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.

 

2. Payments by Spectra Energy used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.

 

3. Spectra Energy’s membership in and payments to any tax-exempt organization that writes and endorses model legislation.

 

4. Description of the decision making process and oversight by management and the Board for making payments described in section 2 and 3 above.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Spectra Energy is a member.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels. Neither “lobbying” nor “grassroots lobbying communications” include efforts to participate or intervene in any political campaign or to influence the general public or any segment thereof with respect to an election or referendum.

The report shall be presented to the Audit Committee or other relevant oversight committees and posted on the company’s website.

Supporting Statement

As shareholders, we encourage transparency and accountability in the use of staff time and corporate funds to influence legislation and regulation both directly and indirectly. Spectra Energy does not comprehensively disclose its memberships in, or payments to, trade associations, or the portions of such amounts used for lobbying. Absent a system of accountability, company assets could be used for objectives contrary to Spectra Energy’s long term interests.

Spectra Energy spent $2.67 million in 2012 and 2013 on direct federal lobbying activities (opensecrets.org). These figures do not include lobbying expenditures to influence legislation in states, where Spectra Energy also lobbies. And Spectra Energy does not disclose membership in or contributions to tax-exempt organizations that write and endorse model legislation, such as the company’s $5,000 contribution to the 2011 annual meeting of the American Legislative Exchange Council (ALEC). At least 90 companies have publicly left ALEC, including ConocoPhillips, Entergy, and Occidental Petroleum.

We urge support for this proposal.

 

 

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SHAREHOLDER PROPOSALS 

Proposal 5: Lobbying Disclosures 

 

 

 

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    Opposition Statement of the Company

 

As we stated in our response to Proposal 4, our approach to political engagement and related governance practices are guided by what we believe is in the best interests of our shareholders, the Company, its employees, customers and other key stakeholders. Our approach to political engagement, including lobbying activities, supports our belief in strong governance practices that ensure transparency with respect to our public policy involvement. Our political engagement and advocacy priorities are published in our sustainability report and are on our website. We believe that ensuring transparency in this area should be a continuing process that is assessed in light of the changing environment and what is in the best interest of our stakeholders.

In January 2015, we enhanced our political contributions policy to specifically include discussing our lobbying activities and our public disclosure of those activities. The policy now includes a section entitled “Lobbying” which sets forth why we employ and engage lobbyists, how we select lobbyists and a description of the approval and oversight process with respect to the lobbyists that we engage. We have also set forth in the policy a detailed description of the public disclosure related to our lobbying activities in both the U.S. and Canada.

As set forth in the policy, we file lobbying reports with the U.S. Congress, the Government of Canada, state and provincial agencies on a regular basis, disclosing information about lobbying activities. The reports include information on the issues lobbied, the agencies contacted and the expenditures made, and are available for public review in the United States on the websites of the U.S. House of Representatives (http://www.house.gov) and the U.S. Senate (http://www.senate.gov), and in Canada on the websites of Office of the Commissioner of Lobbying of

Canada, as noted below. In many cases, state and provincial reports are made available for review on the applicable state or provincial agency website.

 In the U.S., we maintain and file Lobbying Disclosure Act Registration and Reports (Form LD-2) with the U.S. Congress. These reports detail the particular bills and issues on which individual lobbyists had activity, as well as the total lobbying expenses incurred during each calendar quarter. The Lobbying reports may be found at: http://www.senate.gov/legislative/ Public_Disclosure/LDA_reports.htm.

 In the U.S., Spectra Energy and its registered federal lobbyists must also file semi-annual reports detailing, among other things, Spectra-DCP PAC disbursements and personal and/or direct contributions to federal candidates. These forms (LD-203) are viewable by using the following link: http://www.senate.gov/legislative/ Public_Disclosure/LDA_reports.htm.

 In Canada, Spectra Energy’s registered consultants and in-house lobbyists must file monthly reports detailing communications with designated public office holders. These forms are publically available at: http://ocl-cal.gc.ca/eic/site/012.nsf/eng/home.

We believe our enhanced policy directly responds to this Proposal and sets forth a more comprehensive system of accountability than sought by the Proposal.

 

 

 

56       SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Other Information

NYSE Listing Standards

Because our common stock is listed on the New York Stock Exchange, we are subject to the NYSE’s regulations regarding corporate governance and other matters. As of the date of this proxy statement, we are in compliance with all applicable NYSE regulations.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons owning more than 10% of our common stock, to file with the SEC initial reports of beneficial ownership of the Company’s equity securities and of certain changes in that beneficial ownership. We prepare and file these reports on behalf of our directors and executive officers. To our knowledge, all Section 16(a) reporting requirements applicable to our directors and executive officers were complied with during 2014 with the exception of one late filing for Mr. Guy G. Buckley.

Proposals and Business by Shareholders

If you wish to submit a proposal for inclusion in the proxy statement for our 2016 Annual Meeting of Shareholders, we must receive it by November 20, 2015.

In addition, if you wish to introduce business at our 2016 Annual Meeting (other than proposals to be included in the proxy statement), you must send us written notice of the matter. Your notice must comply with the requirements of our By-laws, and we must receive it no earlier than December 30, 2015 and no later than January 29, 2016. The individuals named as proxy holders for our 2016 Annual Meeting will have discretionary authority to vote proxies on matters of which we are not properly notified and also may have discretionary voting authority under other circumstances.

Your proposal or notice should be mailed to our Corporate Secretary at 5400 Westheimer Court, Houston, Texas 77056.

Director Independence Standards for Relationships Deemed Immaterial

As noted on page 10, the Board has adopted categorical standards under which certain relationships are deemed not to impair a director’s independence. Those standards are as follows:

 

Relationship    Requirements for Immateriality of Relationship
Personal Relationships   
The director or an immediate family member resides within a service area of, and is provided with utility service by, Spectra Energy or its subsidiaries.   

 Utility services must be provided in the ordinary course of the provider’s business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm’s-length terms.

The director or an immediate family member holds securities issued publicly by Spectra Energy or its subsidiaries.   

 The director or immediate family member can receive no extra benefit not shared on a pro rata basis.

The director or an immediate family member receives pension or other forms of deferred compensation for prior service, or other compensation unrelated to director or meeting fees, from Spectra Energy or its subsidiaries.   

 The compensation cannot be contingent in any way on continued service, and

 

 

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OTHER INFORMATION 

Director Independence Standards for Relationships Deemed Immaterial 

 

 

Relationship    Requirements for Immateriality of Relationship
    

  The director has not been employed by Spectra Energy or any company that was a subsidiary of Spectra Energy at the time of such employment for at least three years, or the immediate family member has not been an executive officer of Spectra Energy for at least three years and any such compensation that is not pension or other forms of deferred compensation for prior service cannot exceed $10,000 per year.

A director’s immediate family member is an employee (other than an executive officer) of a company that does business with Spectra Energy or its subsidiaries, or in which Spectra Energy or its subsidiaries have an equity interest.   

  If the immediate family member lives in the director’s home, the business must be done in the ordinary course of Spectra Energy’s or its subsidiary’s business and on arm’s-length terms.

The director and his or her immediate family members together own 5% or less of a company that does business with Spectra Energy or its subsidiaries, or in which Spectra Energy and its subsidiaries have an equity interest.   

  None; relationship is considered immaterial.

Business Relationships

 

  
Payments for property or services are made between Spectra Energy or its subsidiaries and a company associated* with the director or immediate family member who is an executive officer of the associated company.   

  Payment amounts must not exceed the greater of $1 million or 2% of the associated company’s revenues in any of its last three fiscal years, and

 

  Relationship must be in the ordinary course of Spectra Energy’s or its subsidiary’s business and on arm’s-length terms.

Indebtedness is outstanding between Spectra Energy or its subsidiaries and a company associated* with the director or immediate family member.   

  Indebtedness amounts must not exceed 5% of the associated company’s assets in any of its last three fiscal years, and

 

  Relationship must be in the ordinary course of Spectra Energy’s or its subsidiary’s business and on arm’s-length terms.

The director or immediate family member is a non-management director of a company that does business with Spectra Energy or its subsidiaries or in which Spectra Energy or its subsidiaries have an equity interest.   

  The business must be done in the ordinary course of Spectra Energy’s or its subsidiary’s business and on arm’s-length terms.

Charitable Relationships

 

  
Charitable donations or pledges are made by Spectra Energy or its subsidiaries to a charity associated* with the director or immediate family member.   

  Donations and pledges must not result in payments exceeding the greater of $100,000 and 2% of the charity’s revenues in any of its last three fiscal years.

A charity associated* with the director or immediate family member is located within a service area of, and is provided with utility service by, Spectra Energy or its subsidiaries.   

  Utility service must be provided in the ordinary course of the provider’s business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm’s-length terms.

Payments for property or services are made between Spectra Energy or its subsidiaries and a charity associated* with the director or immediate family member.   

  Relationships must be in the ordinary course of Spectra Energy’s or its subsidiary’s business and on arm’s-length terms or subject to competitive bidding.

 

* An “associated” company is one (a) for which the director or immediate family member is a general partner, principal or employee, or (b) of which the director and immediate family members together own more than 5%. An “associated” charity is one for which the director or immediate family member serves as an officer, director, advisory board member or trustee.

 

 

58       SPECTRA ENERGY CORP 2015 PROXY STATEMENT


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Annual Meeting Information

About this Proxy Statement

We are furnishing this proxy statement in connection with the solicitation by our Board of Directors of proxies to be voted at our 2015 Annual Meeting of Shareholders. It contains important information for you to consider when deciding how to vote your shares at the Annual Meeting, so we ask that you read it carefully.

You received this proxy statement and you are eligible to vote at this year’s Annual Meeting because you owned our common stock at the close of business on March 2, 2015. We refer to this date as the “record date.”

 

How We Furnish Proxy Materials To Shareholders

 

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Electronic and Paper Delivery

 

We use an “e-proxy” process to furnish these important proxy materials to our shareholders in order to reduce the cost and lessen the environmental impact of our proxy distribution. This means that if you are eligible to vote, we sent you a Notice by mail informing you where to go online to access the proxy statement, our 2014 Annual Report to Shareholders and our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. We have also mailed paper copies to shareholders who requested them.

 

To request a paper copy of the current proxy statement: notify Investor Relations by phone at 713-627-4606, by e-mail at investorrelations@spectraenergy.com, or by mail at Spectra Energy Corp, c/o Investor Relations, 5400 Westheimer Court, Houston, Texas 77056.

 

To enroll in electronic delivery of proxy materials going forward: go to http://enroll.icsdelivery.com/SE and follow the instructions. You will need to enter a valid email address along with your social security number.

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Multiple Shareholders in the Same Household

 

Under a procedure approved by the Securities and Exchange Commission, when more than one shareholder reside at the same address, those shareholders can consent to receive a single copy of Spectra Energy’s annual report and proxy statement. Shareholders will still receive separate proxy cards so that they can cast their own votes. This “householding” procedure reduces printing costs and fees. However, if any shareholder within a household does not consent to “householding,” we will mail these documents separately to that shareholder.

 

Note that “householding” applies only to proxy materials and annual reports; it does not affect the mailing of dividend checks or Stock Purchase and Dividend Reinvestment Plan statements.

 

If you have consented to “householding” but wish to receive separate annual reports and proxy statements in the future, notify Investor Relations by phone at 713-627-4606, by e-mail at investorrelations@spectraenergy.com or by mail at Spectra Energy Corp, c/o Investor Relations, 5400 Westheimer Court, Houston, Texas 77056. You will be removed from the “householding” program within 30 days after we receive your notice. If your household received a single mailing this year and you would like to receive additional copies of our 2014 Annual Report to Shareholders and our 2015 proxy materials, Investor Relations can promptly handle that request for you as well.

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Multiple Proxy Cards

 

You may receive multiple proxy cards if you own Spectra Energy common stock through multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted at the Annual Meeting.

 

 

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ANNUAL MEETING INFORMATION 

About Proxy Voting 

 

 

 

About Proxy Voting

 

What is a proxy?

 

Because most shareholders are not able to vote in person at the Annual Meeting, we ask that they designate another person to vote their shares at the meeting in accordance with their instructions. That person is called a “proxy.” If you designate someone as your proxy in a written document, that document is also called a “proxy” or a “proxy card.”

 

If you mail us your properly completed and signed proxy card, or you vote by telephone or Internet, your shares of our common stock will be voted according to the choices that you specify.

 

What happens if I don’t provide a proxy or I don’t give voting instructions on all matters?

 

The answer depends on whether you hold your shares in your own name or in the name of a brokerage firm, bank or other holder of record.

 

If you hold your shares directly in your own name, your shares will not be voted unless you provide a proxy or vote in person. If you sign and mail your proxy card without marking any choices, your proxy will be voted:

 

  FOR the election of all nominees for director;

 

  FOR the ratification of the appointment of Deloitte & Touche LLP as Spectra Energy’s independent registered public accounting firm for fiscal year 2015;

 

  FOR the approval, on an advisory, non-binding basis, of the compensation of our Named Executive Officers; and

 

  AGAINST each of the two shareholder proposals described in this proxy statement, if properly presented.

 

If your shares are held through a brokerage firm or bank,
in the absence of instructions from you, the brokerage firm or bank can vote your shares only on Proposal 2 – the selection of

Deloitte & Touche LLP as our independent registered public accounting firm. This is because Proposal 2 is considered to be a “routine” matter under the rules that govern the annual meeting process. The other proposals on this year’s agenda are not considered routine matters,

 

 

How to Vote

 

By Proxy

 

Before the Annual Meeting, you can give a proxy to vote your shares of our common stock in one of the following ways:

 

 

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by telephone – shareholders located in the United States can vote by calling 1-800-690-6903 toll-free and following the instructions on the proxy card;

 

 

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by Internet – you can vote over the Internet at www.proxyvote.com by following the instructions on the proxy card; or

 

 

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by mail – if you received your proxy materials by mail, you can vote by completing and signing your proxy card and mailing it in time to be received prior to the Annual Meeting.

 

   

Scan this QR code

to vote with your

mobile device

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During the telephone and Internet voting process, you will confirm your identity, give your voting instructions, and receive verification that your instructions have been properly recorded.

 

In Person

 

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You may come to the Annual Meeting and cast your vote there. If your shares are held in the name of your broker, bank or other nominee and you wish to vote at the Annual Meeting, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares at the close of business on March 2, 2015. You will need a current government-issued photo identification (such as a driver’s license or a passport) to enter the Annual Meeting.

 

and therefore your broker will not be able to vote on any of those proposals without your instructions. This is called a “broker non-vote.”

 

However you hold your shares, we urge you to exercise your voting rights as a shareholder and vote at the Annual Meeting.

 

 

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ANNUAL MEETING INFORMATION 

About Proxy Voting 

 

 

What if proposals that weren’t listed on my proxy are put to a vote at the Annual Meeting?

We do not expect that any additional matters will be brought before the Annual Meeting. However, you should be aware that by giving your proxy, you appoint the persons named as proxies as your representatives at the Annual Meeting. Therefore, if an issue comes up for a vote at the Annual Meeting that is not included in this proxy statement, the proxy holders will vote your shares in accordance with their best judgment.

Voting Shares in Your Spectra Energy Retirement Savings Plan Account

If you participate in the Spectra Energy Retirement Savings Plan, you have the right to provide voting directions to the plan trustee for those shares of our common stock that are allocated to your plan account. Plan participant proxies are treated confidentially.

If you elect not to provide voting directions to the plan trustee, the trustee will vote the Spectra Energy shares allocated to your plan account in the same proportion as those shares for which the plan trustee has received voting directions from other plan participants, unless it determines that to do so would be contrary to the Employee Retirement Income Security Act of 1974. Because the plan trustee must process voting instructions from participants before the date of the Annual Meeting, you are urged to deliver your instructions well in advance of the Annual Meeting so that the instructions are received no later than April 23, 2015.

Changing Your Vote

You may change your vote or revoke your proxy by:

 

  notifying our Corporate Secretary in writing that you are revoking your proxy;

 

  providing another signed proxy that is dated after the proxy you wish to revoke;

 

  using the telephone or Internet voting procedures; or

 

  attending the Annual Meeting and voting in person.

How Voting Works

Quorum requirement

In order to conduct the Annual Meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a “quorum.” If you submit a properly executed proxy card or vote by telephone or on the Internet, you will be considered part of the quorum.

Abstentions and “broker non-votes” will be counted as present and entitled to vote for purposes of determining whether there is a quorum at the Annual Meeting.

A “broker non-vote” occurs when, as discussed above, a bank or broker holds shares for another person, has not received voting instructions from that person, and does not have discretionary authority to vote the shares on a proposal because the proposal is not considered to be routine.

 

 

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ANNUAL MEETING INFORMATION 

About Proxy Voting 

 

 

As of the record date, 671,320,402 shares of our common stock were issued and outstanding and entitled to vote at the Annual Meeting. Each share of our common stock has one vote.

 

REQUIRED VOTES FOR EACH PROPOSAL            
Proposal    Votes required    What happens if you abstain or you do not
give voting instructions to your broker

Proposal 1 (Election of Directors)

   A director will be elected if the
number of shares voted FOR
the director exceeds the
number of votes AGAINST
that director
   Abstentions: No effect on outcome

 

No instructions to broker: Results
in a “broker non-vote,” which has
no effect on the outcome

Proposal 2 (Ratification of Appointment of Independent Registered Public Accounting Firm)    Adoption requires the
affirmative vote of a majority
of the shares that are present
at the meeting in person or by
proxy and are entitled to vote
on Proposal 2
   Abstentions: same effect as votes
AGAINST

 

No instructions to broker: Broker
may vote FOR or AGAINST, or may
choose not to vote. If it chooses
not to vote, this results in a
“broker non-vote,” which has the
same effect as votes AGAINST

Proposal 3 (Advisory Vote Approving Executive Compensation)    Adoption requires the
affirmative vote of a majority
of the shares that are present
at the meeting in person or by
proxy and are entitled to vote
on Proposal 3
   Abstentions: same effect as votes
AGAINST

 

No instructions to broker: Results
in a “broker non-vote,” which has
no effect on the outcome

Proposal 4 (Shareholder Proposal-Political Contributions)    Adoption requires the
affirmative vote of a majority
of the shares that are present
at the meeting in person or by
proxy and are entitled to vote
on Proposal 4
   Abstentions: same effect as votes
AGAINST

 

No instructions to broker: Results
in a “broker non-vote,” which has
no effect on the outcome

Proposal 5 (Shareholder Proposal-Lobbying Disclosures)    Adoption requires the
affirmative vote of a majority
of the shares that are present
at the meeting in person or by
proxy and are entitled to vote
on Proposal 5
   Abstentions: same effect as votes
AGAINST

 

No instructions to broker: Results
in a “broker non-vote,” which has
no effect on the outcome

Effect of Voting on Certain Matters

Election of Directors

In any uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election is required to tender his or her resignation. The Corporate Governance Committee must then make recommendations to the Board with respect to the resignation, and the Board is required to make a decision on this recommendation and to disclose its decision-making process. Full details of this policy are set out in our Principles for Corporate Governance, which is posted on the Corporate Governance section of our website at http://investors.spectraenergy.com/.

 

 

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ANNUAL MEETING INFORMATION 

About Proxy Voting 

 

 

Advisory vote approving executive compensation

As required by SEC rules, we are asking our shareholders to provide an advisory, nonbinding vote to approve the compensation awarded to our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and Spectra Energy’s philosophy, policies and procedures relating to executive compensation described in this proxy statement.

Cost of Proxy Solicitation

The Spectra Energy Board of Directors is requesting your proxy for the Annual Meeting and will pay all the costs of requesting shareholder proxies. We have hired Broadridge Financial Solutions, Inc. to assist in mailing proxy materials, providing electronic access to the proxy materials and requesting proxies. Broadridge’s fee for these services is approximately $65,000 plus out-of-pocket expenses. We have also hired Morrow & Co., LLC to assist in the solicitation of proxies for a fee of $12,000.

We can request proxies through the mail or personally by telephone, fax or other means. We can use our directors, officers and other employees to request proxies. These people do not receive additional compensation for these services. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation materials to the beneficial owners of our common stock.

 

 

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Spectra Energy

 

Awards & Recognition

 

At Spectra Energy, we

pride ourselves on

creating a world-class

work environment

and offering the most

advanced, sustainable

energy solutions. Here

are some of our most

recent awards.

Fortune Magazine’s

FORTUNE 500

   Annual ranking of America’s largest corporations: 2008-2014

Corporate Responsibility Magazine’s 100 Best

Corporate Citizens List

   Named to the 100 Best Corporate Citizens List: 2011-2014

   Recognized as the best corporate citizen among utilities: 2012-2014

Ethisphere Institute’s

World’s Most Ethical Companies List

   Recognized for leadership in promoting ethical business standards, exceeding legal minimums for compliance and introducing innovative ideas: 2012-2014

Dow Jones Sustainability Indexes

   Dow Jones Sustainability World Index: 2010-2014

   Dow Jones Sustainability North America Index: 2008-2014

RobecoSAM

   Received RobecoSAM Industry Leader and Gold Class Sustainability Awards: 2014-2015

   Received RobecoSAM Bronze Class Sustainability Award: 2011-2013

CDP Indexes

   CDP Global 500 Climate Disclosure Leadership Index: 2009, 2012-2013

   S&P 500 Climate Disclosure Leadership Index: 2008-2014

 

   CDP Global 500 Climate Performance Leadership Index: 2013

   S&P 500 Climate Performance Leadership Index: 2010, 2013-2014

STOXX® ESG Leaders Indexes

   Named to the STOXX® Global ESG Leaders Index, which assesses corporate environmental, social and governance performance: 2011-2014

NYSE Euronext Vigeo

Indexes

   NYSE Euronext Vigeo World 120 Index: 2013-2014

   NYSE Euronext Vigeo US 50 Index: 2013-2014

Newsweek’s

Green Rankings

   Named to Newsweek’s list of the world’s largest companies ranked in terms of corporate sustainability and environmental impact: 2010-2012, 2014

   Ranked 87th in the U.S. and 157th in the world: 2014

Platts Top 250 Global Energy Company Rankings

   Included in the Platts Top 250 Global Energy Company Rankings based on asset worth, revenues, profits and return on invested capital: 2007-2014

Platts Global Energy Awards

   New Jersey-New York Expansion Project recognized as a Premier Construction Project: 2014

American Gas Association