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.     )

 

 

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☒		Definitive Proxy Statement
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☐		Soliciting Material under § 240.14a-12

VISTRA ENERGY CORP.

 

(Name of Registrant as Specified in its Charter)

 

 

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

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Notice of 2020 Annual Meeting

of Stockholders and

Proxy Statement

2020 Annual Meeting of Stockholders:

Wednesday, April 29, 2020, at 9:00 a.m. (CT)

Virtual Meeting

(www.proxydocs.com/VST)

 

 

		Vistra Energy Corp. 6555 Sierra Drive Irving, Texas 75039

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

		Place: Virtual Meeting Visit: (www.proxydocs.com/VST)		Time and Date: 9:00 a.m. (CT) Wednesday, April 29, 2020		Record Date: March 16, 2020

To the Stockholders of Vistra Energy Corp.:

The 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”) of Vistra Energy Corp. will be held for the following purposes:

 

1.	To approve an amendment to the Company’s Certificate of Incorporation to declassify the Board of Directors (the “Board”) so that all directors will be elected annually commencing with the 2020 Annual Meeting (the “Charter Amendment”);

 

2.	If the Charter Amendment is approved, to elect the 10 directors named in this proxy statement and nominated by the Board to serve on the Board until the 2021 annual meeting of stockholders (the “2021 Annual Meeting”);

 

3.	If the Charter Amendment is not approved, to elect the four directors named in this proxy statement and nominated by the Board to serve as Class I directors on the Board until the 2023 Annual Meeting;

 

4.	To approve, on an advisory basis, the compensation of the Company’s named executive officers; and

 

5.	To ratify the selection of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for the year ending December 31, 2020.

Additionally, if needed, the stockholders may act upon any other matters that may properly come before the 2020 Annual Meeting (including a proposal to adjourn the meeting to solicit additional proxies) or any reconvened meeting after an adjournment or postponement of the meeting.

Whether or not you will be able to attend the meeting, PLEASE VOTE YOUR SHARES PROMPTLY BY EITHER SIGNING AND RETURNING THE ACCOMPANYING PROXY CARD OR CASTING YOUR VOTE VIA TELEPHONE OR THE INTERNET AS DIRECTED ON THE PROXY CARD.

 

TABLE OF CONTENTS

 

 

PROXY SUMMARY INFORMATION			1
PROPOSALS FOR STOCKHOLDER ACTION			5
PROXY STATEMENT			6
BOARD OF DIRECTORS			13
MANAGEMENT			19
PROPOSAL 1 – CHARTER AMENDMENT TO DECLASSIFY THE BOARD AND PROVIDE FOR ANNUAL ELECTIONS OF ALL DIRECTORS COMMENCING WITH THE 2020 ANNUAL MEETING			22
Charter Amendment			22
Related Bylaw Amendments			23
Additional Information			23
PROPOSAL 2 – ELECTION OF DIRECTORS (IF CHARTER AMENDMENT TO DECLASSIFY THE BOARD IS APPROVED)			24
PROPOSAL 3 – ELECTION OF DIRECTORS (IF CHARTER AMENDMENT TO DECLASSIFY THE BOARD IS NOT APPROVED)			25
Director Nomination Process and Qualification Overview of Directors			25
Corporate Governance Overview			28
Corporate Governance Guidelines			28
Corporate Governance Practices			29
Corporate Governance Documents			29
Meetings of the Board and its Committees			30
Communications with Directors			32
Director Independence			32
Complaint and Reporting Procedures for Accounting and Auditing Matters			32
Business Relationships and Related Person Transactions Policy			33
Charitable Contributions			33
Insider Trading Policy			33
Board Risk Oversight			33
Beneficial Ownership of Common Stock of the Company			36
COMPENSATION DISCUSSION AND ANALYSIS			39
Executive Summary			39
Performance Overview			40
Corporate Governance Practices			42
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			53
COMPENSATION COMMITTEE REPORT			53
PROPOSAL 4 – ADVISORY VOTE ON 2019 COMPENSATION OF NAMED EXECUTIVE OFFICERS			72
AUDIT COMMITTEE REPORT			73
PROPOSAL 5 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT			76
OTHER BUSINESS			78
APPENDIX A – PROPOSED AMENDMENTS TO VISTRA ENERGY CORP.’S CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS			A-1

 

PROXY SUMMARY INFORMATION

 

 

2019 BUSINESS HIGHLIGHTS

Financial Performance

 

•

Delivered Adjusted EBITDA (as such terms are defined in the “Performance Highlights” section on page 41) above the midpoint of financial guidance for the fourth year in a row.

 

•

Delivered Adjusted Free Cash Flow before Growth (as such term is defined in the “Performance Highlights” section on page 41) above the high end of the 2019 guidance range, resulting in an EBITDA to free cash flow conversion ratio of 72%.

 

•

Achieved $565 million of the projected $715 million Dynegy Inc. (“Dynegy”) merger Adjusted EBITDA and Operations Performance Initiative value lever targets by year-end 2019; the $715 million target is an increase of more than 100% from the $350 million per year of EBITDA synergies announced with the Dynegy merger in October 2017.

Value to Our Stockholders

 

•

Increased expected after-tax cash flow synergies from the Dynegy merger by nearly five times to $320 million per year, with $210 million realized in 2019.

 

•

Instituted a dividend program of $0.50 per share on an annualized basis, with management anticipating an annual dividend growth rate of approximately 6–8% per share. In February 2020, announced an 8% increase to the dividend, resulting in an annualized dividend of $0.54 per share.

 

•

Returned approximately $900 million to stockholders through our share repurchase program and quarterly dividends. And, has returned nearly $5 billion to financial stakeholders since emerging from bankruptcy in October 2016.

 

•

Continued rotation of our stockholder base, with traditionally long-term investors now being our two largest stockholders and the last outstanding stockholder’s agreement terminating.

Executing Our Corporate Strategy

 

•

Reduced annualized, after-tax interest expense by approximately $95 million in 2019 via multiple financing transactions, including approximately $600 million of voluntary debt and preferred stock repayments and another approximately $8.3 billion of refinancings; further expanded liquidity in the range of a billion dollars to support our growing business.

 

•

Continued to reduce our net debt to EBITDA ratio (with net debt consisting of indebtedness for borrowed money less cash and cash equivalents, and EBITDA consisting of Adjusted EBITDA after the pro forma effect of any announced acquisitions, dispositions, development projects or other transactions that are reasonably expected by management to alter Vistra Energy’s earnings on a run-rate basis) and achieved an upgrade to one notch below investment grade by Moody’s, reflecting management’s strong focus on fiscal discipline and effective capital allocation.

 

•

Completed the acquisitions of Crius Energy Trust and Ambit Energy, adding strong brands to our retail portfolio; increasing our generation-to-retail match to nearly 60%; making Vistra the largest competitive residential electricity provider in the country, now offering over 40 renewable energy plans; and expanded our operations to 20 states and the District of Columbia.

 

•

Introduced two new retail brands, Brighten Energy and Better Buy, in Illinois, Ohio, and Pennsylvania, and continued to launch innovative and market-leading products through our flagship brand, TXU Energy, including six of the seven competitive power markets in the U.S. and in Canada and Jordan, as well, while growing residential customer counts in the Electric Reliability Council of Texas, Inc. (“ERCOT”).

 

•

Continued to advance our battery storage business in California with the 300-megawatt/1,200-megawatt-hour battery energy storage project currently under construction at our Moss Landing Power Plant site and an agreement executed to develop a 20-megawatt/80-megawatt-hour battery energy storage project at our Oakland site.

 

						2020 Proxy Statement		1

PROXY SUMMARY INFORMATION

 

 

Sustainability: Investing in Our Planet and Our Communities

 

•

Announced greenhouse gas emissions reduction targets of greater than 50% by 2030 and greater than 80% by 2050, each as compared to a 2010 baseline, with aspirations to achieve net-zero emissions by 2050, assuming necessary advancements in technology and supportive market constructs and public policy. At year-end 2018, the Company had already achieved a 31% reduction compared to its 2010 baseline.

 

•

Joined the Climate Leadership Council as a Founding Member to take a leadership role in the promotion of a market-based carbon pricing program with a dividend plan as the most effective and equitable manner of achieving economy-wide decarbonization while preserving the strengths of the U.S. economy.

 

•

Enhanced the governance over the Company’s sustainability policies and practices by expanding the responsibility of the Risk Committee to include sustainability oversight (now the Sustainability and Risk Committee) and naming a chief sustainability officer to oversee the Company’s strategic efforts regarding our environmental, social, and governance activities;

 

•

Developed plans to enhance sustainability reporting in accordance with (i) the Global Reporting Initiative, (ii) the Sustainability Accounting Standards Board, and (iii) the Task Force on Climate-Related Disclosures in 2020.

 

•

Engaged independent audit firm to provide third party verification of the Company’s 2019 CO2 equivalent emissions.

 

•

Continued to transform our generation portfolio to newer, more efficient, and less environmentally impactful technologies with the retirement of four coal plants in downstate Illinois in 2019 and the announcement of a planned retirement for a fifth coal plant in downstate Illinois in 2022.

 

•

Supported the Illinois Coal to Solar and Energy Storage Act to repurchase coal plant sites, reinvest in power plant communities, and assist the state in meeting its renewable energy goals.

 

•

Increased the number of Luminant sites to 11 that have achieved VPP Star status, the Occupational Safety and Health Administration’s highest designation of its Voluntary Protection Programs that officially recognizes the outstanding efforts of employers and employees who achieved exemplary safety and health; and rolled out a new company-wide safety program.

 

•

Contributed nearly 4.650 volunteer hours to the communities where we live and work, engaging more than 1,260 employees at 75 events across the country.

2019 COMPENSATION HIGHLIGHTS

 

•

Based on results relative to our pre-established goals, our annual incentive plan for executives (“EAIP”), achieved a quantitative result equal to 160% of target (with actual payout of 150% of target);

 

•

The Compensation Committee remains committed to performance-based long-term incentive, or LTI, awards to incentivize targeted employees. In 2019, we awarded PSUs, RSUs and Stock Options to eligible employees, including our Named Executive Officers, with the LTI plan program providing balance between performance (through financial measures linked with stockholder value creation), share appreciation, and retention considerations;

 

•

The PSUs granted in late 2017 (covering the 2018–2020 performance period) yielded a two-year result (based on actual 2018 and 2019 performance) of 129% since the applicable performance thresholds were each exceeded, with strong performance across the business, both operationally and financially;

 

•

The PSUs granted in 2019 (covering the 2019–2021 performance period) yielded a one-year result (based on actual 2019 performance) of 122% since the applicable performance thresholds were each exceeded, with strong performance across the business, both operationally and financially;

 

•

Clawback mechanism in place for incentive awards;

 

•

No tax gross-ups for executive officers (other than for relocation expenses under a program that is generally available to all employees);

 

•

Stock ownership guidelines applicable to certain executive officers (i.e., the Chief Executive Officer (“CEO”), each Executive Vice President, and the President Vistra Retail), which includes all of our Named Executive Officers (“NEOs”);

 

•

“Double trigger” change in control and severance benefits that require both the occurrence of a change in control and a qualifying termination of the executive officer, meaning that the executive officers cannot trigger these benefits themselves; and

 

•

Independent compensation consultant hired by and reporting to the Compensation Committee.

 

2		2020 Proxy Statement

PROXY SUMMARY INFORMATION

 

 

RECENT CORPORATE GOVERNANCE DEVELOPMENTS

The following highlights some recent developments in our corporate governance:

 

•

In March 2020, the Board approved an amendment to the Company’s restated bylaws and corporate governance policy to implement majority voting for directors in uncontested elections.

 

-

Effective beginning with the 2020 Annual Meeting, director nominees who receive more votes “for” their election than “against” their election will be elected to the Board.

 

-

Nominees who do not receive more “for” than “against” votes will continue to serve on the Board but will be required to tender their resignations to the Nominating and Governance Committee (the “Nominating Committee”), whereupon the Nominating Committee shall recommend to the Board whether to accept or reject the resignations. Those resignations will be effective upon the Board’s acceptance of the resignations in its sole discretion, which decision shall occur within 90 days following certification of the election results. In the event of a contested election, plurality voting for directors will apply.

 

•

The Board has approved and is recommending amendments to the Company’s charter to declassify the Board and adopt annual elections for directors. See Proposal 1 in this Proxy Statement.

 

•

In February 2020, the Board increased the size of the Board from 11 members to 12 members and appointed Arcilia Acosta and Lisa Crutchfield to the Board, effective immediately. Ms. Acosta fills the vacancy created when Cyrus Madon resigned from the Board in September 2019 and Ms. Crutchfield fills the newly created Board seat.

 

•

In February 2020, Bruce Zimmerman and Geoffrey Strong delivered their resignations from the Board effective immediately prior to the start of the 2020 Annual Meeting. Effective immediately upon the resignations, the Board has decreased the size of the Board from 12 members to 10 members.

CORPORATE GOVERNANCE HIGHLIGHTS

Our corporate governance policies and structures include the following practices:

 

•

Regular meetings of our non-management and independent directors, with 97% of meetings being attended by directors and applicable Committee members;

 

•

Significant Board involvement in strategy development and comprehensive oversight of strategic, operational, and compliance risks;

 

•

Regular executive sessions of independent directors;

 

•

Separation of the Chairman of the Board (the “Chairman”) and CEO positions;

 

•

Policies prohibiting pledging and hedging transactions involving our Common Stock by directors and executive officers without Company approval;

 

•

Stock ownership guidelines applicable to non-employee directors;

 

•

Tracking of Board Education programs attended by directors with a recommendation that each director attend at least one Board Education program every two years;

 

•

Expanding the responsibility of the former Risk Committee in July 2019 to create the Sustainability and Risk Committee, adding a Board source for advice and assistance to management in developing and implementing the Company’s sustainability policies and practices; and

 

•

Naming, in July 2019, a Chief Sustainability Officer to oversee the Company’s strategic efforts regarding our environmental, social, and governance activities.

 

						2020 Proxy Statement		3

PROXY SUMMARY INFORMATION

 

 

DIRECTOR EXPERTISE

Our Director nominees collectively represent an extensive and diverse mix of skills, knowledge and experiences that are well-suited to our business.

 

Corporate Governance / Public Board Experience

10 of 10

Finance / Accounting

10 of 10

Industry Expertise

8 of 10

Public Company Executive

6 of 10

Risk Management / Compliance

9 of 10

Strategy / Transactional

10 of 10

 

4		2020 Proxy Statement

PROPOSALS FOR STOCKHOLDER ACTION

 

 

		For More Information		Board Recommendation
Proposal 1: Charter Amendment to Declassify the Board		Page 22		✓  For
Proposal 2: If the Charter Amendment in Proposal 1 is approved, Election of 10 Directors to serve on the Board until the 2021 Annual Meeting		Page 24		✓  For
Proposal 3: If the Charter Amendment in Proposal 1 is not approved, Election of 4 Directors to serve on the Board as Class I Directors until the 2023 Annual Meeting		Page 25		✓  For
Proposal 4: Advisory Vote on our 2019 Compensation of Named Executive Officers		Page 72		✓  For
Proposal 5: Ratification of Independent Registered Public Accountants for 2020		Page 76		✓ For

ANNUAL MEETING INFORMATION

 

Time, Date and Place:		9:00 a.m. (CT) on Wednesday, April 29, 2020 via a virtual meeting at www.proxydocs.com/VST
Record Date:		March 16, 2020
Voting Methods:		Submit your proxy using the internet (www.proxypush.com/VST) or by telephone (1-866-829-5001)		If you request a printed copy of the proxy materials, complete, sign, date and return the proxy card in the envelope provided
Requesting Copies of Materials:		Current and prospective investors can access our Annual Report, Proxy Statement, notice and other financial information through the Investor Relations section of our website at www.vistraenergy.com. The Company will also provide, without charge, a copy of these materials upon request made by phone at (214) 812-4600 or by writing to the Corporate Secretary of the Company at 6555 Sierra Drive, Irving, Texas 75039.

 

						2020 Proxy Statement		5

PROXY STATEMENT

 

March 30, 2020

GENERAL INFORMATION

Why am I receiving these materials?

The Board of Directors (the “Board”) of Vistra Energy Corp. (the “Company,” “Vistra,” or “Vistra Energy”) has made these materials available to you over the Internet, or has delivered printed versions of these materials to you by mail, in connection with the Board’s solicitation of proxies for use at the 2020 Annual Meeting of Stockholders (“2020 Annual Meeting”). The 2020 Annual Meeting is scheduled to be held on Wednesday, April 29, 2020 at 9:00 a.m., Central Time. You will need the control number provided on your proxy card or voting information form to vote or attend the meeting. This solicitation is for proxies for use at the 2020 Annual Meeting or at any reconvened meeting after an adjournment or postponement of the 2020 Annual Meeting.

What is included with these materials?

These materials are first being mailed or made available to stockholders on or about March 30, 2020, and include the notice, Proxy Statement, and our 2019 Annual Report to Stockholders (the “Annual Report”), which includes our audited consolidated financial statements for the year ended December 31, 2019. If you received printed versions of these materials, a proxy card or voting instruction form (if applicable) for the Annual Meeting is also included.

What items will be voted on at the 2020 Annual Meeting?

 

1.	A proposal to approve an amendment to the Company’s Certificate of Incorporation to declassify the Board so that all directors will be elected annually commencing with the 2020 Annual Meeting (the “Charter Amendment”);

 

2.	If the Charter Amendment is approved, a proposal to elect the 10 directors nominated by the Board to serve on the Board until the 2021 Annual Meeting:

 

3.	If the Charter Amendment is not approved, a proposal to elect the 4 directors nominated by the Board to serve on the Board as Class I directors until the 2023 Annual Meeting;

 

4.	A proposal to approve, on an advisory basis, the compensation of the Company’s named executive officers; and

 

5.	A proposal to ratify the selection of Deloitte as the Company’s independent registered public accounting firm for the year ending December 31, 2020.

Additionally, if needed, the stockholders may act upon any other matters that may properly come before the meeting (including a proposal to adjourn the meeting to solicit additional proxies) or any reconvened meeting after an adjournment or postponement of the meeting.

 

6		2020 Proxy Statement

PROXY STATEMENT

 

 

What are the Board’s voting recommendations?

The persons named as proxies were designated by the Board. Any proxy given pursuant to this solicitation and received prior to the 2020 Annual Meeting will be voted as specified in the proxy card. If you return a properly executed proxy card but do not mark any voting selections, then your proxy will be voted as follows in accordance with the recommendations of the Board:

 

		Board Recommendation
Proposal 1: Charter Amendment to Declassify the Board		✓  For
Proposal 2: If the Charter Amendment in Proposal 1 is approved, Election of 10 Directors to serve on the Board until the 2021 Annual Meeting		✓  For
Proposal 3: If the Charter Amendment in Proposal 1 is not approved, Election of 4 Directors to serve on the Board as Class I Directors until the 2023 Annual Meeting		✓  For
Proposal 4: Advisory Vote on our 2019 Compensation of the Named Executive Officers		✓  For
Proposal 5: Ratification of Independent Registered Public Accountants for 2020		✓ For

Why did I only receive one set of materials when there is more than one stockholder at my address?

If two or more stockholders share one address, only one copy of our Annual Report or Proxy Statement will be delivered unless one or more of the stockholders provides contrary instructions. Stockholders who do not receive a separate copy of our Annual Report or Proxy Statement and want to receive a separate copy may request to receive a separate copy of, or additional copies of, our Annual Report or Proxy Statement via the internet, email or telephone as outlined in the “Requesting Copies of Materials” section on page 5. Stockholders who share an address and receive multiple copies of our Annual Report or Proxy Statement may also request to receive a single copy by following the instructions above.

What is the quorum requirement for the 2020 Annual Meeting?

The presence in person or by proxy of the holders of a majority of the outstanding shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) entitled to vote shall constitute a quorum necessary to transact business at the 2020 Annual Meeting.

Where is the 2020 Annual Meeting?

As permitted by Delaware law and the Company’s restated bylaws, the 2020 Annual Meeting will be held solely as a virtual meeting via the Internet. You may attend the 2020 Annual Meeting virtually via the Internet at www.proxydocs.com/VST.

What is the record date?

The close of business on March 16, 2020 has been fixed as the time as of which stockholders entitled to notice of, and to vote with respect to, the 2020 Annual Meeting and any adjournments thereof shall be determined. At such date, there were outstanding and entitled to vote 488,428,300 shares of Common Stock. Each share of Common Stock is entitled to one vote on all matters submitted to a vote of the stockholders at the 2020 Annual Meeting.

 

						2020 Proxy Statement		7

PROXY STATEMENT

 

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in street name?

 

•

Stockholder of Record. If your shares are registered in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (which may be referred to “AST” in the materials you receive), you are considered the stockholder of record with respect to those shares, and the Proxy Statement, Annual Report and proxy card were sent directly to you by us.

 

•

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker dealer or other similar organization, then you are the beneficial owner of shares held in “street name,” and a voting instruction form was forwarded to you by that organization with copies of the Proxy Statement and Annual Report. The organization holding your account is considered the stockholder of record for purposes of voting at the 2020 Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.

If I am a stockholder of record of Vistra Energy’s shares, how do I vote?

If you are a stockholder of record you may vote over the internet by following the instructions provided in this Proxy Statement, by telephone, or, if you received printed copies of the proxy materials, you may also vote by mail. You may also vote at the 2020 Annual Meeting in person. The Control Number provided on your voting information form or proxy card is necessary to access this site. Please review the materials provided to you and vote as soon as possible.

If I am a beneficial owner of shares held in street name, how do I vote?

If you are a beneficial owner of shares held in street name, please refer to the proxy card or voting information form forwarded to you by your broker or other nominee to see what voting options are available to you. Please review the materials provided to you and vote as soon as possible.

What do I need to attend the 2020 Annual Meeting?

In order to attend the 2020 Annual Meeting, you must register in advance at www.proxydocs.com/VST prior to the deadline of April 22, 2020 at 5:00 pm Eastern Time. Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the meeting and will also permit you to submit questions. Please be sure to follow instructions found on your proxy card and/or voting instruction form and subsequent instructions that will be delivered to you via email.

What if during the check-in time or during the 2020 Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the 2020 Annual Meeting login page.

What happens if I do not give specific voting instructions?

Stockholder of Record. If you are a stockholder of record and you:

 

•

indicate when voting on the internet or by telephone that you wish to vote as recommended by the Board; or

 

•

if you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on Proposals 1, 4, and 5, as well as Proposals 2 or 3, as applicable, in this Proxy Statement, and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the 2020 Annual Meeting.

Beneficial Owner of Shares Held in Street Name; “Broker Non-Votes.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of the New York Stock Exchange (“NYSE”), the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters, as determined by the stock exchange. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform our Inspector of Election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” For example, please note that brokers may not vote your shares on the election of directors, the proposal regarding named executive

 

8		2020 Proxy Statement

PROXY STATEMENT

 

 

officer compensation or the Charter Amendment (Proposals 1, 2, 3 and 4) in the absence of your specific instructions as to how to vote. Please provide your broker with voting instructions as soon as possible so that your vote can be counted.

Which ballot measures are anticipated to be considered “routine” or “non-routine”?

The following chart indicates which matters we believe will be considered routine and which we believe will be considered non-routine.

 

Routine		•  Proposal 5 (Ratification of Appointment of Independent Registered Public Accountants)
Non-Routine		•  Proposal 1 (Charter Amendment)   •  Proposal 2 (Election of Directors if Charter Amendment is Approved)   •  Proposal 3 (Election of Directors if Charter Amendment is Not Approved)   •  Proposal 4 (Advisory Vote on 2019 Compensation of the Named Executive Officers)

A broker will be able to vote “FOR” Proposal 5 in the absence of your voting instructions if you beneficially own your shares in street name. We encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided in this Proxy Statement.

What are the voting requirements for each proposal, and how will abstentions and broker non-votes treated?

For the purpose of determining whether a quorum is present, abstentions and broker non-votes shall be counted in determining the number of outstanding shares represented in person or by proxy for each matter.

The following table sets forth the voting requirement with respect to each of the proposals, including the treatment of abstentions, withhold votes, and broker non-votes:

 

Proposal		Vote Required		Effect of Broker Non-Votes		Effect of Abstentions or Withhold Votes
Charter Amendment to declassify the Board		Affirmative vote of at least a majority of shares of our Common Stock outstanding and entitled to vote thereon		Counted as vote, with the same effect as a vote “Against”		Abstentions counted as vote, with the same effect as a vote “Against”
Election of 10 Directors to serve on the Board until the 2021 Annual Meeting, if the Charter Amendment is approved		Nominees who receive more FOR votes than AGAINST votes will be elected. In a contested election, nominees who receive the most FOR votes among votes properly cast in person or by proxy will be elected.		No effect. Brokers have no discretion to vote		Withholds have no effect
Election of 4 Directors to serve on the Board as Class I directors until the 2023 Annual Meeting, if the Charter Amendment is not approved		Nominees who receive more FOR votes than AGAINST votes will be elected. In a contested election, nominees who receive the most FOR votes among votes properly cast in person or by proxy will be elected.		No effect. Brokers have no discretion to vote		Withholds have no effect
Advisory Vote on our 2019 Named Executive Officer Compensation		Affirmative vote of at least a majority of the voting power represented in person or by proxy at the meeting and entitled to vote thereon		No effect. Brokers have no discretion to vote		Abstentions counted as vote, with the same effect as a vote “Against”
Ratification of Independent Registered Public Accountants for 2020		Affirmative vote of at least a majority of the voting power represented in person or by proxy at the meeting and entitled to vote thereon		Brokers have discretion to vote		Abstentions counted as vote, with the same effect as a vote “Against”

 

						2020 Proxy Statement		9

PROXY STATEMENT

 

 

May I change my vote after I have voted?

You may revoke your proxy and change your vote for the 2020 Annual Meeting by:

 

•

Executing and submitting a revised proxy (including a telephone or internet vote, which must be received prior to the start of the 2020 Annual Meeting);

 

•

Sending written notice of revocation to our Corporate Secretary at the address provided below (which must be received by 5:00 p.m., Central Time, on April 24, 2020); or

 

•

Voting at the 2020 Annual Meeting.

Is my vote confidential?

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Vistra Energy or to third parties, except:

 

•

As necessary to meet applicable legal requirements;

 

•

To allow for the tabulation and certification of votes; and

 

•

To facilitate a proxy solicitation.

Who will count votes at the 2020 Annual Meeting?

We have retained Mediant Communications, Inc. (“Mediant”) to assist as master tabulator and inspector of election for a fee of approximately $17,500, plus out-of-pocket expenses.

Who is paying the cost of this proxy solicitation?

We will bear the cost of soliciting proxies. Proxies may be solicited by mail or facsimile, or by our directors, officers or employees, without extra compensation, in person or by telephone. We have retained D.F. King & Co., Inc. to assist in the solicitation of proxies in connection with the 2020 Annual Meeting. The Company will pay the firm customary fees, expected to be no more than $9,000, plus reasonable out-of-pocket expenses. In addition, if requested, we will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of our Common Stock.

What if I have questions about the proposals?

Questions concerning the proposals to be acted upon at the 2020 Annual Meeting should be directed to:

Vistra Energy Corp.

Attention: Corporate Secretary

6555 Sierra Drive

Irving, Texas 75039

How can I find out if I am a stockholder of record entitled to vote?

For at least 10 days before the 2020 Annual Meeting, a complete list of stockholders of record entitled to vote at the 2020 Annual Meeting will be available during ordinary business hours at our principal executive office, 6555 Sierra Drive, Irving, Texas 75039, for inspection by stockholders of record for proper purposes. The list of stockholders will also be available through the date of the 2020 Annual Meeting via the link www.proxypush.com/VST or by telephone at 1-866-829-5001. The Control Number provided on the proxy card or voting instruction form as part of these proxy materials is necessary to access this site.

 

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PROXY STATEMENT

 

 

Where can I find the voting results of the 2020 Annual Meeting?

We will publish final voting results in a Current Report on Form 8-K that will be filed with the Securities and Exchange Commission (“SEC”) (www.sec.gov) and made available on our website at www.vistraenergy.com within four business days following the 2020 Annual Meeting.

REFERENCES TO VISTRA ENERGY

Unless otherwise indicated, references to “Vistra Energy,” “Vistra,” the “Company,” “we,” “our,” and “us” in the biographical and compensation information for directors and executive officers below refers to Board membership, employment, and compensation with respect to Vistra Energy Corp.

STOCKHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING

Rule 14a-8 Stockholder Proposals. If a stockholder wants us to include a proposal in our proxy statement and form of proxy for presentation at the 2021 Annual Meeting, under the rules of the SEC, the proposal must be received by the Corporate Secretary of the Company at 6555 Sierra Drive, Irving, Texas 75039 on or before the close of business on November 30, 2020 (the 120^th day before the one-year anniversary date of the release of these proxy materials to stockholders). The submission of a stockholder proposal pursuant to Rule 14a-8 does not guarantee that it will be included in the Company’s proxy statement and form of proxy.

Advance Notice Stockholder Proposals or Nominations. The Company’s restated bylaws require advance notice for any business to be brought before a meeting of stockholders. For business, including director nominations, to be properly brought before the 2021 Annual Meeting by a stockholder, written notice of the stockholder proposal must be received by the Corporate Secretary of the Company at 6555 Sierra Drive, Irving, Texas 75039 between close of business on December 30, 2020 (not earlier than the 120^th day before the one-year anniversary date of the 2020 Annual Meeting) and close of business on January 29, 2021 (not later than the 90^th day before the one-year anniversary date of the 2020 Annual Meeting). The stockholder’s notice to the Corporate Secretary must contain a brief description of the business to be brought before the 2020 Annual Meeting and the reasons for conducting such business at the meeting, as well as certain other information set out in the Company’s bylaws.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 29, 2020

The Proxy Statement and Annual Report are available at www.proxydocs.com/VST.

INCORPORATION BY REFERENCE

To the extent that this Proxy Statement is incorporated by reference into any other filing by us under the Securities Act of 1933 (as amended, the “Securities Act”), or the Securities Exchange Act of 1934 (as amended, the “Exchange Act”), the sections of this proxy statement entitled “Compensation Committee Report” and “Audit Committee Report” will not be deemed incorporated unless specifically provided otherwise in such filing to the extent permitted by the rules of the SEC. Information contained on or connected to our website is not incorporated by reference into this Proxy Statement and should not be considered part of this Proxy Statement or any other filing that we make with the SEC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information presented herein includes forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that are presented herein, that address activities, events or developments that may occur in the future (often, but not always, through the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “predict,” “project,” “forecast,” “target,” “potential,” “goal,” “objective,” and “outlook”) are forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. Any such forward-looking statement involves uncertainties and risks that could

 

						2020 Proxy Statement		11

PROXY STATEMENT

 

 

cause results to differ materially from those projected in or implied by any such forward-looking statement, including those additional risks and factors discussed in reports filed with the SEC by the Company from time to time, including the uncertainties and risks discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements” in our most recent annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. Any forward-looking statement speaks only at the date on which it is made, and except as may be required by law, the Company will not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.

 

12		2020 Proxy Statement

BOARD OF DIRECTORS

 

The following table sets forth information regarding our director nominees for election at the 2020 Annual Meeting to serve a one-year term as a director if the Charter Amendment is approved. Ages are as of March 30, 2020.

 

Name 1		Age		Diverse 2		Position / Office
Scott B. Helm 3		55				Director, Chairman of the Board
Hilary E. Ackermann		64		✓		Director, Chair of the Sustainability and Risk Committee
Arcilia C. Acosta		54		✓		Director
Gavin R. Baiera 3		44				Director, Chair of the Compensation Committee
Paul M. Barbas		63				Director, Chair of the Nominating Committee
Lisa Crutchfield		57		✓		Director
Brian K. Ferraioli		64				Director, Chair of the Audit Committee
Jeff D. Hunter		54				Director
Curtis A. Morgan 3		59				President, Chief Executive Officer, and Director
John R. Sult 3		60				Director

 

1	All directors are independent except Mr. Morgan, the President and CEO of the Company.

2	Reflects gender, racial, and/or ethnic diversity.

3	Director nominee at the 2020 Annual Meeting to be a Class I director and serve until the 2023 Annual Meeting if the Charter Amendment is not approved.

Director Nominee Biographies

 

Scott B. Helm Chairman of the Board		Director Since: 2017 Board Committees: None Age: 55
Biographical Information: Mr. Helm has served as Chairman of the Board since October 2017. During the last five years, Mr. Helm has been a private investor based out of Baltimore, Maryland. Previously, Mr. Helm was a founding partner of Energy Capital Partners, a private equity firm focused on investing in North American energy infrastructure. Before that, he served as Executive Vice President and Chief Financial Officer at Orion Power Holdings, Inc., a publicly listed company that owned and operated power plants. Mr. Helm began his career at Goldman, Sachs & Co., first working in the fixed income division, then moving to the investment banking division. Mr. Helm received a bachelor’s degree in business administration from Washington University in St. Louis.   Qualifications: Mr. Helm has extensive financial and industry knowledge. His specific experience in the energy industry and significant financial and executive experience, including his service as a founding partner of an energy infrastructure private equity fund and public company chief financial officer in the utilities sector, allow him to provide valuable guidance and knowledge to the Board and enable him to lead effectively in his capacity as Chairman.

 

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BOARD OF DIRECTORS

 

 

Curtis A. Morgan President and Chief Executive Officer		Director Since: 2016 Board Committees: None Age: 59
Biographical Information: Mr. Morgan has served as the President and CEO of the Company since October 3, 2016. From 2015 until joining the Company, he served as an Operating Partner with Energy Capital Partners, a private equity firm focused on investing in North American energy infrastructure. Prior to that position, from 2010 to 2015, Mr. Morgan served as the CEO and President of EquiPower Resources Corp., a power generation company. Prior to joining EquiPower Resources Corp., he served as an Operating Partner of Energy Capital Partners and as President and Chief Executive Officer of FirstLight Power Enterprises. Mr. Morgan has also held various leadership roles at NRG Energy, Mirant Corporation, Reliant Energy and Amoco Corporation. In addition to his executive experience, Mr. Morgan previously served on the public board of directors of Summit Midstream Partners, LP and is the incoming chair of the board of directors of the Electric Power Supply Association, a national trade organization that represents competitive power suppliers in policy and other matters related to the competitive power generation industry. Mr. Morgan received a bachelor’s degree in accounting from Western Illinois University and a master’s of business administration in finance and economics from the University of Chicago. He is a licensed certified public accountant.   Qualifications: During his 37-year career, Mr. Morgan has held leadership responsibilities in nearly every major U.S. power market including wholesale and retail businesses and nearly all electric generation technologies. In overseeing all aspects of the Company’s strategy, capital allocation and operations as the President and CEO, Mr. Morgan has particular and valuable knowledge about the Company that he brings to the Board. Mr. Morgan has also served on other public company boards.
Hilary E. Ackermann		Director Since: 2018 Board Committees: Sustainability and Risk (Chair) Age: 64
Biographical Information: Ms. Ackermann served as a director of Dynegy Energy Services (“Dynegy”), an energy services company, from October 2012 until Dynegy’s merger with Vistra in April 2018. Ms. Ackermann was Chief Risk Officer with Goldman Sachs Bank USA from October 2008 to 2011. In this role, she managed Credit, Market and Operational Risk for Goldman Sachs’ commercial bank; developed the bank’s risk management infrastructure, including policies, procedures and processes; maintained ongoing relationships with bank regulators, including the New York Fed, New York State Banking Department and the FDIC; chaired Operational Risk, Credit Risk and Middle Market Loan Committees; served as Vice Chair of the bank’s Risk Committee; was a member of Community Investment, Business Standards and New Activities Committees; was a member of GS Group level-Credit Policy and Capital Committees; and chaired the GS Group-level Operational Risk Committee. Ms. Ackermann served as Managing Director, Credit Department of Goldman, Sachs & Co. from January 2002 until October 2008; as VP, Credit Department from 1989 to 2001; and as an Associate in the Credit Department from 1985 to 1988. Prior to joining Goldman, Ms. Ackermann served as Assistant Department Head of the Credit Department of Swiss Bank Corporation from 1981 until 1985. Ms. Ackermann currently serves on the private board of directors and audit committee of Credit Suisse Holdings (USA), Inc. and the private board of directors and the audit and compliance and risk committees of each of Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., The Hartford Mutual Funds, Inc. and The Hartford Mutual Funds II, Inc. She previously served on the public board of directors of Apollo Investment Corporation. Ms. Ackermann received a bachelor’s of science in Russian from Georgetown University.   Qualifications: Ms. Ackermann brings extensive experience assessing credit for major banking institutions, covering a variety of industries, including the power generation, electrical utilities and natural resources sectors, as well as in-depth coverage of commodities trading, including oil, natural gas and power as a risk manager. Ms. Ackerman currently serves as the Chair of the Sustainability and Risk Committee, where she contributes significantly to the review and evaluation of our enterprise risk assessment and risk management goals.

 

14		2020 Proxy Statement

BOARD OF DIRECTORS

 

 

Arcilia A. Acosta		Director Since: 2020 Board Committees: Compensation, Nominating  Age: 54
Biographical Information: Ms. Acosta has served as the President and Chief Executive Officer of CARCON Industries and Construction, specializing in commercial, institutional, and transportation construction, since 2000. In addition to her role at CARCON Industries, Ms. Acosta is the President and controlling principal of Southwestern Testing Laboratories, a position she has held since 2003. In addition to her role at Southwestern Testing Laboratories, she served as a director of LegacyTexas Financial Group, N.A. (“LegacyTexas”), a publicly-traded bank holding company with an asset size of over $10 billion, from 2015 to 2019, when LegacyTexas merged with a private company. Ms. Acosta served as a director of ONE Gas Incorporated, a stand-alone, regulated, publicly-traded natural gas utility and one of the largest natural gas utilities in the United States, from July 2018 through February 2020. In 2017, Ms. Acosta joined the board of Magnolia Oil and Gas, a publicly-traded independent oil producer with assets located in South Texas. Her prior board service includes 10 years as a director of Energy Future Holdings Corp. (the Company’s “Predecessor”). Ms. Acosta received a bachelor’s of arts in Political Science from Texas Tech University and is a graduate of the Harvard University Business School Corporate Governance Program.   Qualifications: Ms. Acosta brings extensive experience in executive management, operations, safety, construction management and engineering management. In addition, she has served on the boards of directors of other publicly traded and private companies, including oversight responsibilities on matters relating to executive compensation, corporate governance, and audit. Ms. Acosta currently serves on the Company’s Compensation and Nominating Committees.

 

Gavin R. Baiera		Director Since: 2016 Board Committees: Compensation (Chair) Age: 44
Biographical Information: Mr. Baiera joined Centerbridge Partners, L.P., a multi-strategy private investment firm, as Senior Managing Director in July 2018 and serves as a portfolio manager for the Firm’s global credit, distressed strategies & special situations investing activities. From June 2008 through July 2017, Mr. Baiera was at Angelo, Gordon & Co. (“Angelo”), a privately-held alternative investment firm, where he was first a managing director, and in November 2015, became the global head of the firm’s corporate credit activities and portfolio manager for its distressed and opportunistic funds. Mr. Baiera was also a member of Angelo’s executive committee. Prior to joining Angelo, Mr. Baiera was the co-head of the strategic finance group at Morgan Stanley, which was responsible for all origination, underwriting, and distribution of restructuring transactions. Prior to that, Mr. Baiera worked at General Electric Capital Corporation (“GE Capital”) concentrating on underwriting and investing in restructuring transactions and began his career at GE Capital in its financial management program. Mr. Baiera has served on numerous boards of directors including, most recently, private company MACH Gen and public companies Orbitz Worldwide and Travelport Worldwide. Mr. Baiera received a bachelor’s of arts degree from Fairfield University and a master’s of business administration from the USC Marshall School of Business.   Qualifications: Mr. Baiera has extensive experience in corporate finance and strategic business planning activities. In addition, he has served on the boards of directors of other publicly traded and private companies, including oversight responsibilities on matters relating to executive compensation and compensation strategy, making him a valuable member of the Board and Chair of the Compensation Committee.

 

						2020 Proxy Statement		15

BOARD OF DIRECTORS

 

 

Paul M. Barbas		Director Since: 2018 Board Committees: Nominating (Chair) Age: 63
Biographical Information: Mr. Barbas served as a director of Dynegy from October 2012 until Dynegy’s merger with Vistra in April 2018. Mr. Barbas was President and Chief Executive Officer of DPL Inc., a regional energy provider, and its principal subsidiary, The Dayton Power and Light Company (“DP&L”), a regulated electric utility, from October 2006 until December 2011. He also served on the board of directors of DPL Inc. and DP&L. He previously served as Executive Vice President and Chief Operating Officer of Chesapeake Utilities Corporation, a diversified utility company engaged in natural gas distribution, transmission and marketing, propane gas distribution and wholesale marketing and other related services from 2005 until October 2006, as Executive Vice President from 2004 until 2005, and as President of Chesapeake Service Company and Vice President of Chesapeake Utilities Corporation from 2003 until 2004. From 2001 until 2003, he was Executive Vice President of Allegheny Power, responsible for the operational and strategic functions of a $2.7 billion company serving 1.6 million customers with 3,200 employees. He joined Allegheny Energy in 1999 as President of its Ventures unit. Mr. Barbas currently serves on the board of public company El Paso Electric Co. and formerly served on the public board of Pepco Holdings, Inc. Mr. Barbas received a bachelor’s of arts in economics from College of the Holy Cross and a master’s of business administration in finance and marketing from the University of Massachusetts.   Qualifications: Mr. Barbas brings extensive utility, management and oversight experience, having served in executive management positions with various utility and other companies. He also has a broad background in finance and marketing and brings a strong understanding of power operations and energy markets. He also brings to the Board substantive knowledge about a variety of issues related to the Company’s business and currently serves as Chair of the Nominating Committee, where he contributes significantly to the oversight responsibilities and strategic direction of the Company’s corporate governance policies.

 

Lisa Crutchfield		Director Since: 2020 Board Committees: Nominating, Sustainability and Risk Age: 57
Biographical Information: Ms. Crutchfield has served as a managing principal at Hudson Strategic Advisors, an economic analysis and strategic advisory firm, since 2012. Previously, Ms. Crutchfield served as the chief regulatory, risk, and compliance officer for the U.K.-based National Grid plc from 2008 to 2012. Ms. Crutchfield has also served in successive executive roles as senior vice president of regulatory and external affairs at PECO, an Exelon Company; vice president and general manager at TIAA-CREF; and vice president of energy policy and strategy with Duke Energy Corporation from 1997 to 2000. She began her career in banking as a commercial and investment banker and served as a commissioner on the Pennsylvania Public Utility Commission from June 1993 to May 1997. In addition to her service as a director, Ms. Crutchfield serves on the boards of two other publicly-traded companies, Fulton Financial Corporation (since 2014) and Unitil Corporation (since 2012). Ms. Crutchfield received a bachelor’s of arts in economics and political science from Yale University and a master’s of business administration from Harvard Business School.   Qualifications: Ms. Crutchfield brings extensive experience leading corporate teams and has extensive knowledge of the financial industry and business practices with expertise in risk mitigation, compliance, and regulatory matters. She has served on the boards of directors of several other publicly traded and privately held companies including on their compensation, governance, and risk committees. Ms. Crutchfield currently serves on the Nominating and Sustainability and Risk Committees.

 

16		2020 Proxy Statement

BOARD OF DIRECTORS

 

 

Brian K. Ferraioli		Director Since: 2017 Board Committees: Audit (Chair) Age: 64
Biographical Information: Mr. Ferraioli serves as an operating partner for Bernhard Capital Partners, a private equity firm, a position he has held since April 2019. In February 2020, he was named the Executive Chairman and Chairman of the Board of Atlas Technical Consultants, Inc., a public company.1 From October 2013 to December 2016, Mr. Ferraioli served as Executive Vice President and Chief Financial Officer of KBR, Inc., a global engineering, construction, and services company supporting the energy, petrochemicals, government services, and civil infrastructure sectors. Prior to KBR, Mr. Ferraioli was Executive Vice President and Chief Financial Officer at The Shaw Group, Inc., an engineering, construction, and fabrication company serving the electric power generation and government services industries from 2007 to 2013. Prior to that, Mr. Ferraioli worked 28 years in various finance and accounting functions with Foster Wheeler AG, a Swiss global conglomerate that provides design, engineering, construction, manufacturing, development, and plant operations. In addition to the Company, Mr. Ferraioli serves on the boards of public companies Team, Inc. and Charah Solutions. He also serves on the board of The Lemoine Company, a privately-held general contracting company majority owned by Bernhard Capital Partners. He previously served on the public company board of Babcock & Wilcox, as well as Adolfson & Peterson, a private construction company. Mr. Ferraioli graduated with a bachelor’s degree in accounting from Seton Hall University and received a master’s of business administration from Columbia University. Mr. Ferraioli is also a licensed certified public accountant and a National Association of Corporate Directors Governance Fellow.   Qualifications: Mr. Ferraioli has 40 years of experience in senior executive financial positions with large public companies and accounting roles in the engineering and construction industry, and also has served on various public and private boards, providing him with significant knowledge of accounting, capital structures, finance, financial reporting, strategic planning and forecasting. Further, his extensive financial and accounting experience qualifies him as an “audit committee financial expert.” He currently serves as the Chair of the Audit Committee, where he contributes significantly to the oversight of the integrity of our financial statements, internal controls and ethics and compliance functions.

 

1	Upon being named to the board of Atlas Technical Consultants, Inc., Mr. Ferraioli was on four public company boards of directors. Mr. Ferraioli has notified the Board that he is in process of reducing his board positions to no more than three public company boards.

 

						2020 Proxy Statement		17

BOARD OF DIRECTORS

 

 

Jeff D. Hunter		Director Since: 2016 Board Committees: Audit, Sustainability and Risk Age: 54
Biographical Information: Mr. Hunter has most recently acted as an independent financial and sector advisor to a number of investment firms on power related matters including Grafton Asset Management of Calgary and EnCap based in Houston, Texas. From 2016 to 2019, Mr. Hunter served as a Senior Managing Director for Quinbrook Infrastructure Partners, an investment company focused exclusively on lower carbon and renewable energy infrastructure investments. Mr. Hunter was a member of the Quinbrook Investment Committee and was responsible for deal origination, portfolio company oversight and asset management for all Quinbrook North America investments. Between 2013 and 2016, he was a managing partner of Power Capital Partners, an energy focused investment firm. Prior to this, he was Executive Vice President and Chief Financial Officer of U.S. Power Generating Company. Mr. Hunter has also held leadership positions at PA Consulting Group and El Paso Merchant Energy and was a consultant for MRP Generating Company, LLC. Mr. Hunter currently serves as the non-executive director on the board of directors of Texas Transmission Holdings, a privately held business.   Qualifications: Mr. Hunter brings to the Board extensive experience in the energy and financial industries, including his experience as a chief financial officer. He also brings to the Board substantive knowledge about a variety of issues related to the Company’s business and currently serves on the Audit Committee and Sustainability and Risk Committee.

 

John R. (JR) Sult		Director Since: 2018 Board Committees: Audit, Compensation Age: 60
Biographical Information: Mr. Sult served as a director of Dynegy from October 2012 until Dynegy’s merger with Vistra in April 2018. Mr. Sult served as Executive Vice President and Chief Financial Officer of Marathon Oil Corporation, an independent global oil and gas exploration and production company, from September 2013 until August 2016. Mr. Sult was Executive Vice President and Chief Financial Officer of El Paso Corporation (“El Paso”) from March 2010 until May 2012, where he served as Senior Vice President and Chief Financial Officer from November 2009 until March 2010, and as Senior Vice President and Controller from November 2005 until November 2009. Mr. Sult also served as Executive Vice President, Chief Financial Officer and director of El Paso Pipeline GP Company, L.L.C., the general partner of El Paso Pipeline Partners, L.P., from July 2010 until May 2012, where he previously served as Senior Vice President and Chief Financial Officer from November 2009 until July 2010, and as Senior Vice President, Chief Financial Officer and Controller from August 2007 until November 2009. Mr. Sult also served as Chief Accounting Officer of El Paso and as Senior Vice President, Chief Financial Officer and Controller of El Paso’s Pipeline Group from November 2005 to November 2009. Prior to joining El Paso, Mr. Sult served as Vice President and Controller of Halliburton Energy Services from August 2004 until October 2005. Prior to joining Halliburton, Mr. Sult was an audit partner with Arthur Andersen LLP. In addition to the Company, Mr. Sult currently serves on the board of directors and chairs of the audit committee of public company Brigham Minerals, Inc. He received a bachelor’s of science with special attainments in Commerce from Washington & Lee University and is a licensed certified public accountant.   Qualifications: Mr. Sult, through his experience in senior executive financial positions with large public companies, brings significant knowledge of accounting, capital structures, finance, financial reporting, strategic planning and forecasting to the Board. Mr. Sult has extensive knowledge of the energy industry. Further, he has served as an audit partner at a major accounting firm, which, in addition to his other experience, qualifies him as an “audit committee financial expert.” He currently serves as a member of the Compensation Committee, where he contributes significantly to the review and evaluation of our compensation policies and practices, and the Audit Committee, where he contributes significantly to the oversight of the integrity of our financial statements, internal controls and ethics and compliance functions.

 

18		2020 Proxy Statement

MANAGEMENT

 

Information about our Executive Officers

The following table and biographies set forth information regarding our current executive officers as of the date hereof, except for Mr. Morgan, whose information is listed above. Ages are as of March 30, 2020.

 

Name		Age				Position / Office
James A. Burke			51			Executive Vice President and Chief Operating Officer
David A. Campbell			51			Executive Vice President and Chief Financial Officer
Carrie Lee Kirby			52			Executive Vice President and Chief Administrative Officer
Stephanie Zapata Moore			46			Executive Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary
Stephen J. Muscato			49			Executive Vice President and Chief Commercial Officer
Scott A. Hudson			56			President of Vistra Retail

 

James A. Burke Executive Vice President and Chief Operating Officer

Mr. Burke has served as the Executive Vice President and Chief Operating Officer of the Company since October 3, 2016. Prior to joining the Company, he served as Executive Vice President of the Predecessor since February 2013 and President and Chief Executive of TXU Energy, a subsidiary of the Company, since August 2005. Previously, Mr. Burke was Senior Vice President Consumer Markets of TXU Energy. Mr. Burke started his career with Deloitte Consulting, and held a variety of roles with The Coca-Cola Company, Reliant Energy and Gexa Energy prior to TXU Energy. Mr. Burke also serves as the Chairman of the board of directors of Marucci Sports, a privately held business, as a board member of United Way Foundation of Metropolitan Dallas and as an advisory board member for the Tulane University Energy Institute. Mr. Burke is a graduate of Tulane University, where he earned a bachelor’s degree in economics and a master’s of business administration in finance and general management. Mr. Burke is a licensed certified public accountant and has also earned the designation as a chartered financial analyst. In addition, Mr. Burke has completed the Massachusetts Institute of Technology Nuclear Reactor Technology Course.

 

David A. Campbell Executive Vice President and Chief Financial Officer

Mr. Campbell has served as Executive Vice President and Chief Financial Officer of the Company since June 2019. Campbell has responsibility for the Company’s accounting, financial, risk, tax, planning, investor relations, strategy, and M&A activities. Mr. Campbell previously served as the President and Chief Executive Officer of InfraREIT, Inc. (“InfraREIT”) and President of Hunt Utility Services (“HUS”) from August 2014 through May 2019, and President and Chief Executive Officer of Sharyland Utilities from November 2016 to May 2019. InfraREIT owned and Sharyland operated electric transmission and distribution infrastructure in Texas, and HUS provided management services to InfraREIT. Prior to his role at InfraREIT and HUS, Mr. Campbell was President and Chief Operating Officer of Bluescape Resources, an energy-focused investment company, from January 2013 to May 2014. Mr. Campbell previously served as Chief Executive Officer of Luminant when it was a subsidiary of the Predecessor. He originally joined TXU Corp. (“TXU”), the entity that preceded the Predecessor, in 2004 as Executive Vice President of Corporate Planning, Strategy and Risk and became Chief Financial Officer of TXU in 2006. Prior to joining TXU, Mr. Campbell was a partner in the Dallas office of McKinsey & Company. Mr. Campbell earned a B.A. from Yale University and a J.D. from Harvard Law School. He also graduated with a master’s degree from Oxford University, where he studied as a Rhodes Scholar.

 

						2020 Proxy Statement		19

MANAGEMENT

 

 

Carrie Lee Kirby Executive Vice President and Chief Administrative Officer

Ms. Kirby has served as the Executive Vice President and Chief Administrative Officer of the Company since October 3, 2016. Prior to this, Ms. Kirby was the Executive Vice President of Human Resources for the Predecessor, leading the human resources functions across the Predecessor and its subsidiaries, Luminant and TXU Energy since 2012. From 2008 to 2012, she was Vice President of Human Resources at TXU Energy, where she was originally recruited in 2006 as a Human Resources Director to support the power generation business in its construction and expansion efforts. Prior to joining TXU Energy, Ms. Kirby was Director of Human Resources at Delinea Corporation, a software services company targeting the energy industry. Before that, she was Director of Human Resources for Netrake, a startup voice-over intellectual property hardware development company. She began her career in the executive search business as a consultant for Ray & Berndtson, supporting the technology practice. In addition to her service at the Company, Ms. Kirby is chair emeritus of the board of the Teaching Trust, an education policy and leadership development organization focused on developing urban school leaders. Ms. Kirby is also a member of the Patient Advocacy Committee for Presbyterian Hospital of Dallas and sits on the executive committee of the Women’s Business Council Southwest. Ms. Kirby received both a bachelor’s degree in marketing and a master’s of business administration from Texas Christian University.

 

Stephanie Zapata Moore Executive Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer

Ms. Moore has served as the Executive Vice President and General Counsel of the Company since October 3, 2016, and as Corporate Secretary and Chief Compliance Officer since April 2019. Prior to joining the Company, Ms. Moore served as Vice President and General Counsel of Luminant, a Company subsidiary, since April 2012. Prior to that, Ms. Moore was Senior Counsel of Luminant from March 2007 to April 2012 and Counsel of a predecessor to Luminant from November 2005 to March 2007. Prior to joining Luminant, Ms. Moore was an associate at Gardere Wynne Sewell LLP (n/k/a Foley Gardere LLP) where she engaged in a corporate and securities practice. Ms. Moore serves as a member of the advisory board of AVANCE-North Texas, Inc. and is a member of the board of directors of Girls Inc. of Metropolitan Dallas. Ms. Moore received an undergraduate degree in English from Duke University and a law degree from William and Mary Law School.

 

Stephen J. Muscato Executive Vice President and Chief Commercial Officer

Mr. Muscato has served as Executive Vice President and Chief Commercial Officer of the Company since February 2020. Prior to that Mr. Muscato served as Senior Vice President of Vistra Corporate Services Company since October 3, 2016, and Chief Commercial Officer of Vistra Corporate Services Company since January 2018. Prior to joining the Company, he served as Senior Vice President and Chief Commercial Officer of Luminant, a Company subsidiary, since 2013, where his responsibilities included optimizing the dispatch and value of Luminant’s power generation fleet, managing the commodity (power, gas, and coal), transportation (rail), and emissions requirements for Luminant’s operating assets, and ensuring development of a distinctive point of view on commodity dynamics in critical markets and geographies. Previously, Mr. Muscato held other senior leadership positions with Luminant, including senior vice president of commercial operations, vice president of gas trading—North America, and vice president of East gas and power trading. Mr. Muscato received both bachelor’s and master’s degrees in electrical engineering from the University of Rochester. He also completed the management leadership program at Columbia Business School.

 

20		2020 Proxy Statement

MANAGEMENT

 

 

Scott A. Hudson President of Vistra Retail

Mr. Hudson has served as the President of Vistra Retail since February 2020. In that role he oversees all of the Company’s retail electricity brands including TXU Energy, Ambit, Value Based Brands, Dynegy Energy Services, Homefield Energy, TriEagle Energy, Public Power and US Gas & Electric. Prior to that, Mr. Hudson served as the Senior Vice President of Vistra Corporate Services Company since October 3, 2016 and President of TXU Energy since March 2017. Prior to joining the Company, he served as Chief Operating Officer of TXU Energy since 2011 with responsibility for sales, marketing, product development, operations, and business technology organizations. Previously, Mr. Hudson held senior leadership positions with MBNA America, ChoicePoint, and LexisNexis and practiced as a commercial lawyer working in the energy industry for Troutman Sanders LLP. Mr. Hudson sits on the board of directors for the United Way of Metropolitan Dallas and the Dallas Regional Chamber, as well as the board for the Dallas Children’s Theatre. Mr. Hudson received a bachelor’s degree in history from Yale University and a law degree from the University of North Carolina at Chapel Hill.

 

						2020 Proxy Statement		21

PROPOSAL 1 – CHARTER AMENDMENT TO DECLASSIFY THE BOARD AND PROVIDE FOR ANNUAL ELECTIONS OF ALL DIRECTORS COMMENCING WITH THE 2020 ANNUAL MEETING

 

We are asking you to approve an amendment to the Company’s Certificate of Incorporation (the “Charter”) to declassify the Board and provide for annual elections of all directors commencing with the 2020 Annual Meeting (the “Charter Amendment”). The Board has unanimously adopted, approved and declared advisable the Charter Amendment and recommends that stockholders approve and adopt the Charter Amendment.

Charter Amendment

Article V of the Charter currently provides that the Board shall be divided into three classes, with members of each class of directors serving a three-year term. As a result, at each annual meeting of stockholders, approximately one-third of our directors stand for election. The current terms of our director classes expire as follows: Class I—the 2020 Annual Meeting; Class II—the 2021 Annual Meeting and Class III—the 2022 Annual Meeting. If the Charter Amendment is adopted and becomes effective, directors will be elected for terms expiring at the next annual meeting of stockholders following their election, and directors appointed to vacant or newly created directorships will also serve for terms expiring at the next annual meeting of stockholders following their appointment as directors.

The Board regularly reviews matters related to the size, structure, composition and functioning of the Board, with assistance from the Nominating Committee. As part of these reviews, the Board has considered arguments in support of annual director elections and classified boards. Many stockholders and other commentators believe that electing all directors annually is a sound corporate governance practice. By contrast, it has been argued that a classified board structure can help to promote stability and continuity of leadership, and to achieve value for stockholders in the event of an unsolicited takeover bid by allowing the board to negotiate on their behalf without the threat of imminent removal of a majority of board members. Following its most recent consideration of the issue, the Nominating Committee recommended to the Board that a proposal to amend the Company’s Charter to provide for annual elections for all directors commencing with the 2020 Annual Meeting be submitted to the stockholders for approval. Upon the recommendation of the Nominating Committee, the Board has determined that declassification of the Board is advisable and in the best interests of the Company and its stockholders.

Under Delaware corporate law, directors of companies that have a classified board structure may be removed only for cause unless the certificate of incorporation provides otherwise. However, directors of companies that do not have a classified board may be removed with or without cause. Accordingly, the Charter Amendment also provides that directors may be removed either with or without cause. Removal will continue to be governed by the default standard under Delaware corporate law, which requires approval by the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon. If the Charter Amendment is approved, it would be easier for one or more stockholders holding a large number of shares, whether an existing or long-term stockholder or one that accumulates a large position in or for a short period of time, to replace the entire Board at once.

If the Charter Amendment to declassify the Board is adopted and approved by our stockholders at the 2020 Annual Meeting, immediately following such vote, we will make the appropriate filing with the Secretary of State of Delaware so that the Charter Amendment to declassify the Board will be in effect immediately upon such filing. We expect to make this filing before the vote is taken to elect directors at the Annual Meeting so that if the Charter Amendment to declassify the Board is adopted it will be effective when the vote is taken to elect directors. Effective immediately prior to the start of the 2020 Annual Meeting, Geoff Strong and Bruce Zimmerman resigned as directors and the Board reduced the number of directors to 10. In addition, the director nominees currently serving in Class II and Class III have tendered contingent resignations from their current three-year terms, conditioned upon the approval of the Charter Amendment. These resignations will take effect immediately upon completion of the vote to elect directors only in the event that the Charter Amendment takes effect. Thus, if the Charter Amendment to declassify the Board in this Proposal 1 is approved, then 10 members of the current Board will be standing for election at the 2020 Annual Meeting and, if elected, will serve for terms expiring at the 2021 Annual Meeting. Alternatively, if the Charter Amendment to declassify the Board in this Proposal 1 is not adopted, then only the four Class I director nominees will be standing for election at the 2020 Annual Meeting and, if elected, will serve on the Board until the 2023 Annual Meeting. In that case, directors still serving in Class II and Class III will continue in office until their respective terms expire, or until their earlier death, resignation, disqualification or removal.

 

22		2020 Proxy Statement

PROPOSAL 1 – CHARTER AMENDMENT TO DECLASSIFY THE BOARD

 

 

Related Bylaw Amendments

In connection with the Charter Amendment, the Board approved conforming amendments to Article III, Sections 3.3 and 3.4 of our Restated Bylaws (“Bylaws”), contingent upon stockholder approval and implementation of the Charter Amendment. The Bylaw amendments provide that directors appointed to fill vacant and newly created directorships will serve for a term that expires at the next annual meeting and that directors may be removed with or without cause upon a vote of holders of a majority of the outstanding shares entitled to vote thereon. If the Charter Amendment is not approved, the Bylaw amendments will not take effect.

Additional Information

The foregoing description of the Charter Amendment is a summary and is qualified by and subject to the full text of the proposed amendment, which is attached to this Proxy Statement as Appendix A. Additions of text to our Charter contained in Appendix A are indicated by double underlining and deletions of text are indicated by strike-outs.

The affirmative vote of a majority of the shares of our common stock outstanding on the Record Date is required for approval of the proposal to amend our Certificate of Incorporation.

 

✔		The Board of Directors recommends that stockholders vote FOR the Charter Amendment to declassify the Board.

 

						2020 Proxy Statement		23

PROPOSAL 2 – ELECTION OF DIRECTORS (IF CHARTER AMENDMENT TO DECLASSIFY THE BOARD IS APPROVED)

 

Director Nominees

If you sign your proxy card or voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board.

Each nominee listed below currently serves as a director of the Board. Effective immediately prior to the start of the 2020 Annual Meeting, Geoff Strong and Bruce Zimmerman resigned as directors and the Board reduced the number of directors to 10. The names of the 10 nominees to serve, if elected, on the Board as directors until the 2021 Annual Meeting and until their successors have been elected and qualified are set forth below:

 

Name		Served as director since
Hilary E. Ackermann		2018
Arcilia C. Acosta		2020
Gavin R. Baiera		2016
Paul M. Barbas		2018
Lisa Crutchfield		2020
Brian K. Ferraioli		2017
Scott B. Helm		2017
Jeff D. Hunter		2016
Curtis A. Morgan		2016
John R. Sult		2018

 

✔		If the Charter Amendment is approved, the Board of Directors recommends that stockholders vote FOR the election of these director nominees to the Board.

 

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PROPOSAL 3 – ELECTION OF DIRECTORS (IF CHARTER AMENDMENT TO DECLASSIFY THE BOARD IS NOT APPROVED)

 

Director Nominees

If you sign your proxy card or voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board.

Each nominee listed below currently serves as a director of the Board. The names of the four nominees to serve on the Board as Class I directors until the 2023 Annual Meeting or until their earlier removal are set forth below:

 

Name		Served as director since
Gavin R. Baiera		2016
Scott B. Helm		2017
Curtis A. Morgan		2016
John R. Sult		2018

 

✔		If the Charter Amendment is not approved, the Board of Directors recommends that stockholders vote FOR the election of these director nominees to the Board.

DIRECTOR NOMINATION PROCESS AND QUALIFICATION OVERVIEW OF DIRECTORS

Director Qualifications

In addition to each director’s individual qualifications, including his or her knowledge, skills and experience mentioned above, the Company believes that each of our directors possesses high ethical standards, acts with integrity, and exercises careful judgment. Each is committed to employing his or her skills and abilities in the long-term interests of the Company and our stockholders. Collectively, our directors are knowledgeable and experienced in business, governmental, and civic endeavors, further qualifying them for service as members of the Board.

Any director nominee is evaluated in accordance with the qualifications set forth in our Corporate Governance Guidelines and the other characteristics that we value as part of our corporate culture. We require that directors possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of our stockholders at large. They must also have an inquisitive and objective perspective, practical wisdom, mature judgment and sufficient personal resources such that any director compensation to be received from the Company would not be sufficiently meaningful to impact their judgment in reviewing matters coming before the Board. Finally, they must be able to work compatibly with the other members of the Board and otherwise have the experience and skills necessary to enable them to serve as productive Board members. Directors also must be willing to devote sufficient time to carrying out their fiduciary duties and other responsibilities effectively and should be committed to serve on the Board for an extended period of time. For additional information, please read our Corporate Governance Guidelines.

In connection with the director nominations for the 2020 Annual Meeting, the Nominating Committee also considered the director nominees’: (1) knowledge of corporate governance issues, coupled with an appreciation of their practical application; (2) service as a director or executive of a publicly traded company and other board experience; (3) experience in the energy and utility industry and understanding of the energy and commodity markets; (4) finance and accounting expertise, including audit, internal controls, risk management and cybersecurity experience; (5) experience in and knowledge of commercial and market risk assessment and management; (6) knowledge in the areas of laws and regulations related to environmental, health, safety, regulatory and other key industry issues; (7) strategic planning skills; and (8) experience in transactional and capital markets matters.

 

						2020 Proxy Statement		25

PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

Each director nominee brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas, including energy, wholesale power generation and marketing, commodities, risk management, strategic planning, legal, corporate governance and board service, executive management, regulatory and policy development, accounting and finance, and operations. For information concerning each director’s various qualifications, attributes, skills and experience considered important by the Board in determining that such nominee should serve as a director, as well as each nominee’s principal occupation, directorships and additional biographical information, please read the section entitled “Director Expertise” on page 4 and “Director Nominee Biographies” beginning on page 13.

Director Selection Process

The Nominating Committee is responsible for identifying individuals qualified to become Board members and recommending to the Board the nominees for election as directors of the Company. The Nominating Committee’s policy is to consider recommendations for such director nominees, including those submitted by current directors, members of management, or by stockholders, on the bases described below. In this regard, stockholders may recommend director nominees by writing to the Nominating Committee c/o the Corporate Secretary of the Company, 6555 Sierra Drive, Irving, Texas 75039. Any such recommendations from stockholders received by the Corporate Secretary of the Company will be promptly provided to the Nominating Committee. Recommendations to be considered by the Nominating Committee for the 2021 Annual Meeting should be submitted as described under “Advance Notice Stockholder Proposals or Nominations” on page 11.

The Nominating Committee annually reviews the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.

Identification of Candidates and Diversity

The Nominating Committee identifies director nominees in various ways. In identifying and evaluating director nominees, the Nominating Committee may consult with members of the Board, Company management, consultants, and other individuals likely to possess an understanding of the Company’s business and knowledge of suitable candidates. In 2019, the Company engaged a search firm to identify and coordinate the interviews of potential directors. In making its recommendations, the Nominating Committee assesses the requisite skills and qualifications of director nominees and the composition of the Board as a whole in the context of the Board’s criteria and needs. Such assessments will be consistent with the Board’s criteria for membership, including: (i) not less than a majority of directors shall satisfy the NYSE’s independence requirements; (ii) all directors shall possess strong judgment, character, integrity, expertise, skills and knowledge useful to the oversight of the Company’s business; business, governmental, civic or other relevant experience; and (iii) consideration will be given to the extent to which the interplay of the director nominee’s qualifications and diversity of cultural background, gender, experience and viewpoints with those of other Board members will build a Board that is effective, in light of the Company’s business and structure. The Nominating Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all Board members. While the Company does not have a formal diversity policy, the Nominating Committee will consider diversity criteria in the context of the perceived needs of the Board as a whole and seek to achieve a diversity of backgrounds and perspectives on the Board. The Board is asked to assess whether the Board is appropriately diverse as part of the annual evaluation of the Board.

Ms. Acosta was appointed to the Board as a Class II director and will stand for election at the 2021 Annual Meeting if the Charter Amendment is not passed. Ms. Crutchfield was appointed to the Board as a Class III director and will stand for election at the 2022 Annual Meeting if the Charter Amendment is not passed. Mses. Acosta and Crutchfield were participants in the director search conducted by a third-party search firm.

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

Board Evaluation Process

The Board recognizes that a rigorous evaluation process is an essential component of strong corporate governance practices and promoting ongoing Board and Committee effectiveness. Consistent with best practice, the Company’s Corporate Governance Guidelines and each of the Committees’ Charters, the Nominating Committee oversees the annual evaluation of the performance of the Board and the Committees, with the Chairman maintaining a substantial role in facilitating discussion among the Board and the Committees.

As part of the evaluation process, the Board and each Committee reviews the following:

 

•

Performance of the Board and each Committee, including areas where the Board and each Committee feels it functions effectively and areas where the Board and each Committee believes it can improve;

 

•

Overall composition of the Board and each Committee, including director tenure, board leadership structure, Committee membership tenure, diversity, and individual skill sets;

 

•

General board best practices, including oversight responsibilities and Committee duties;

 

•

Culture to promote candid discussion within the Board and with senior management;

 

•

Focus on risk management and strategic matters, including evaluation of transactions and emerging technologies, regulatory and legal developments, and commercial and market factors; and

 

•

Ability to ensure the Board serves the best interests of our stockholders and positions the Company for future success.

Additionally, the Board reviews its meeting schedule, the quality and depth of information presented at each meeting, and the organization and operation of the Board and the Committees. The Committees are evaluated on their effectiveness in fulfilling delegated responsibilities, the appropriateness of Committee materials, and the sufficiency of time to deliberate and for robust discussion. The Board and Committee evaluation framework and process is conducted and reviewed annually.

As part of the two-part annual evaluation process involving the full Board evaluation and Committee evaluations, the Board responds to a comprehensive written questionnaire designed to provide a holistic evaluation of the performance of the Board and each Committee in light of the current needs of the Board and the Company. In 2019, 100% of directors participated in the Board and Committee evaluation process. To protect anonymity and the integrity of the evaluation process, an independent third party (the Company’s outside counsel) compiles responses to these evaluations into a report, which is initially provided to the Chairman. The Chairman is provided ample time to further discuss the results with the Company’s outside counsel. The report, including evaluation results and specific areas of focus for each Committee and the Board itself, is then presented to each Committee and the full Board in executive session to encourage candid discussion and feedback, and specific areas are discussed where the Board would like to focus to enhance its effectiveness.

After receiving feedback from the Chairman on any action items resulting from the Board and Committee discussions, the Corporate Secretary utilizes the results of the evaluations and discussions when developing workplans, formulating succession plans, and preparing board candidate evaluations for the upcoming year and thereafter.

 

						2020 Proxy Statement		27

PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

CORPORATE GOVERNANCE OVERVIEW

 

Effective Board Leadership and Independent Oversight		•  9 out of 10 directors standing for election are independent (CEO is sole member of management serving on the Board)   •  All members of the Audit, Compensation, Nominating, and Sustainability and Risk Committees are independent   •  Nominating Committee annually reviews the composition of the Board, ensuring the Board reflects an appropriate balance of knowledge, experience, diversity, skills and expertise   •  Routine assessment by Nominating Committee of overall corporate governance profile and potential enhancements thereto   •  Separate Chairman and CEO roles   •  Annual advisory vote to approve executive compensation   •  Directors will be elected only if they receive the vote of a majority of the voting power represented in person or by proxy at the meeting and entitled to vote thereon   •  If a director does not receive the vote of a majority of the voting power represented in person or by proxy at the meeting and entitled to vote thereon the director is obligated to promptly tender their resignation to the Nominating Committee, which will become effective upon acceptance by the Board in its sole discretion within 90 days following certification of the election results   •  Management proposal (Proposal 1) to declassify the Board and adopt annual elections for directors
Regular Board Engagement		•  Formal in-person Board and Committee meetings each quarter, including an annual strategic planning meeting, and frequent telephonic meetings on emerging matters in the interim   •  Committee Chairs have regular engagement with management liaison (e.g., Audit Chair with Chief Financial Officer, Controller, and Vice President of Internal Audit)

CORPORATE GOVERNANCE GUIDELINES

Our Corporate Governance Guidelines govern the qualifications and conduct of the Board. The Corporate Governance Guidelines address, among other things:

 

•

The independence and other qualifications of Board members;

 

•

The regular meetings of our non-management and independent directors;

 

•

The evaluation of performance of the Board and the Committees;

 

•

Our expectation that the Board members will attend all annual stockholder meetings absent unusual circumstances;

 

•

Our policy that any outside board service requires approval from the Nominating Committee and a limit on the number of total boards on which any director may serve concurrently;

 

•

The separation of the Chairman and CEO positions;

 

•

The requirement that directors who do not receive a majority vote in uncontested elections must deliver resignations to the Nominating Committee that will become effective upon acceptance by the Board in its sole discretion within 90 days following certification of the election results;

 

•

Our prohibition against personal loans or other extensions of credit to or for any director or executive officer;

 

•

Board Compensation that is comparable to peer companies;

 

•

The approval of the CEO’s compensation by the full Board; and

 

•

The review of development and succession plans for the CEO and other executive officers.

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

CORPORATE GOVERNANCE PRACTICES

The Board proactively seeks to identify and implement leading governance practices. Furthermore, the Board follows a series of governance practices that it believes foster effective Board oversight and accountability to you, our stockholders. These practices include:

 

•

Management’s proposal (Proposal 1) to declassify the Board and adopt annual elections for each of our directors;

 

•

Effective beginning with the 2020 Annual Meeting, directors are elected by majority vote in uncontested elections (i.e., directors who receive more FOR votes than AGAINST votes are elected);

 

•

Expanding the responsibility of the former Risk Committee in October 2019 to create the Sustainability and Risk Committee, adding a Board source for advice and assistance to management in developing and implementing the Company’s sustainability policies and practices;

 

•

Our prohibition against directors and executive officers holding our securities in a margin account or pledging our securities, absent Company approval (as further described under “Insider Trading Policy” on page 33 of this Proxy Statement);

 

•

Our prohibition against directors and executive officers engaging in any hedging transaction with respect to our securities held by them (as further described under “Insider Trading Policy” on page 33 of this Proxy Statement);

 

•

Compensation of the Board and stock ownership guidelines for non-employee directors and executive officers;

 

•

Review by the Compensation Committee of performance-based compensation of our executives following a restatement that impacts the achievement of performance targets relating to that compensation, including the ability to require reimbursement to the Company for all or a portion of the payment received;

 

•

Ongoing succession planning for the CEO and other senior management;

 

•

Annual performance evaluations of the Board and each of its standing Committees;

 

•

Director orientation and continuing education program, including Company site visits and information sessions with Company management;

 

•

Access to and engagement of outside advisors and consultants to assist the Board and the Committees in the performance of their duties, as appropriate; and

 

•

Engagement with our stockholders regarding governance practices and other matters, including that, between July 2019 and February 2020, our Chairman met with approximately 85% of the active portfolio managers at Vistra’s top twenty stockholders.

CORPORATE GOVERNANCE DOCUMENTS

The Company maintains certain corporate governance documents on our website at www.vistraenergy.com. The Company’s Corporate Governance Guidelines and charters of the standing Committees of the Board, including the Audit Committee, the Nominating Committee, the Compensation Committee, and the Sustainability and Risk Committee, in each case as currently in effect, can be accessed by selecting the tab labeled “Corporate Governance” on the home page of the Company’s website.

The Company’s Code of Conduct that applies to the Company’s employees, officers, including the CEO and Chief Financial Officer (“CFO”), and directors, is also available on the Company’s website. In accordance with SEC regulations, any amendments to the Code of Conduct will be posted on the Company’s website.

The Board has adopted a written policy regarding transactions with related parties, which is included in the Corporate Governance Guidelines available on the Company’s website.

Printed copies of the corporate governance documents that are posted on the Company’s website are also available to any stockholder upon request to the Corporate Secretary of the Company, 6555 Sierra Drive, Irving, Texas 75039.

 

						2020 Proxy Statement		29

PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

MEETINGS OF THE BOARD AND ITS COMMITTEES

The standing Committees of the Board and the current membership of each Committee are shown below. The Nominating Committee reviews the composition of the committees at least annually and determines if any changes should be recommended to the Board. The Board most recently made changes to the composition of the committees upon the recommendation of the nominating committee in February 2020.

Meeting Attendance and Executive Sessions

In 2019, the directors collectively attended a total of 97% of the meetings of the Board and the Committees on which they serve. In 2019, the Board held a total of 10 meetings and each director attended at least 93% of the meetings held. Non-management directors meet regularly in executive session and the Chairman presides over those executive sessions.

As detailed in our Corporate Governance Guidelines, Board members are expected to attend each annual meeting of stockholders absent unusual circumstances. 9 of 11 directors that were members of the Board at the time attended the 2019 annual meeting of stockholders.

Committee Membership, Independence, and Qualifications

The current membership of the Committees of the Board with respect to the director nominees is shown in the table below.

 

		Audit Committee		Compensation Committee		Nominating and Governance Committee		Sustainability and Risk Committee
Independent Directors:(1)
Hilary E. Ackermann								Chair
Arcilia C. Acosta				Member		Member
Gavin R. Baiera				Chair
Paul M. Barbas						Chair
Lisa Crutchfield						Member		Member
Brian K. Ferraioli(2)		Chair
Scott B. Helm(3)
Jeff D. Hunter(2)		Member						Member
John R. Sult(2)		Member		Member
Employee Directors:
Curtis A. Morgan
Number of Meetings in 2019		6		5		3		4

 

(1)	Ms. Acosta and Ms. Crutchfield were appointed to the Board in February 2020.

(2)	“Audit committee financial expert,” as defined by the SEC and NYSE, and as determined by the Board. Background information on each audit committee financial expert can be found in the director nominee biographies beginning on page 13.

(3)	Mr. Helm serves as Chairman of the Board.

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

Board Committees

The Board has the following four standing Committees: Audit, Compensation, Nominating, and Sustainability and Risk (each, a “Committee”). The functions of each Committee are described below, and membership as of February 2020 is described in the table above.

Audit Committee

Primary Responsibilities: Appoints, retains, oversees, evaluates and compensates the independent auditors; reviews the annual audited and quarterly consolidated financial statements; reviews significant matters regarding accounting principles and financial statement presentations; oversees the performance of the Company’s internal audit function; oversees the system, and annual audit, of internal controls over financial reporting; oversees the system of internal controls over accounting, legal and regulatory compliance, and ethics (including reviewing the Company’s Code of Conduct at least annually).

The Audit Committee is a separately designated standing audit committee as required by SEC regulations and NYSE rules.

For more information about the Audit Committee please see the Audit Committee report on page 73.

Nominating Committee

Primary Responsibilities: Reviews and recommends director candidates to the Board for election at each annual meeting of stockholders, periodically reviews the Corporate Governance Guidelines and Committee charters and recommends changes to the Board, reviews and recommends Committee composition and Chairs and recommends changes to the Board and provides guidance to the Board with respect to governance related matters.

The Nominating Committee (i) identifies individuals qualified to become directors and recommends to the Board the nominees to stand for election as directors; (ii) oversees, and assumes a leadership role in, the governance of the Company including recommending periodic updates to the Corporate Governance Guidelines for the Board’s consideration; (iii) participates with the Chairman in the Board’s annual evaluation of its performance and of the Committees; and (iv) recommends to the Board the director nominees for each annual stockholder meeting and for each Committee.

Compensation Committee

Primary Responsibilities: Reviews and oversees the Company’s overall compensation philosophy, and oversees the development and implementation of compensation programs, policies and programs aligned with the Company’s business strategy.

The Compensation Committee (i) reviews and approves corporate goals and objectives relevant to the compensation of the CEO, evaluates the CEO’s performance in light of those goals and objectives, and determines and recommends to the Board the CEO’s compensation based on this evaluation; (ii) oversees the evaluation of executive officers (and other senior officers and key employees) other than the CEO and reviews, determines and approves their compensation levels; (iii) oversees and makes recommendations to the Board with respect to the adoption, amendment or termination of incentive compensation, equity-based and other executive compensation and benefits plans, policies and practices; (iv) reviews and discusses with the Board executive management succession planning; (v) makes recommendations to the Board with respect to the compensation of the Company’s outside directors; and (vi) produces the Compensation Committee’s report on executive compensation as required by the SEC to be included in the Company’s annual proxy statement.

Sustainability and Risk Committee

Primary Responsibilities: With respect to risk, assists the Board in fulfilling its responsibilities with respect to (i) the oversight of the enterprise risk management process, including coordination, where necessary, with other Committees, (ii) the assessment of certain enterprise risks, and (iii) the review and assessment of market, commercial and risk management matters of the Company.

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

With respect to sustainability, the Committee: (i) reviews and discusses with management the Company’s strategies, policies, and practices to assist in addressing public sentiment and shaping policy to manage the Company’s sustainability efforts; (ii) at least annually, reviews and discusses with management the Company’s assessment of greenhouse gas-related risks, including transition, regulatory, reputational, and/or market risks related to climate change, and management’s process for the identification, evaluation, and mitigation of transition risks related to climate change; (iii) oversees and monitors the Company’s core vision and values and advises the Board and management on sustainability policies, including the Company’s publicly stated targets and aspirational goals for company-wide reductions of greenhouse gas emissions from its power generation operations; and (iv) provides oversight with respect to any sustainability reporting to the public or governmental agencies.

For further discussion of the Committee’s oversight duties related to risk, see the discussion of “Board Risk Oversight” on page 33.

COMMUNICATIONS WITH DIRECTORS

Stockholders and other interested parties may communicate with the directors individually or as a group, including all non-management or independent directors and the Chairman of the Board, by writing to them c/o the Corporate Secretary of the Company, 6555 Sierra Drive, Irving, Texas 75039. The Company’s Corporate Secretary will review each communication received from stockholders and other interested parties and will forward the communication, as expeditiously as reasonably practicable, to the addressees if the communication falls within the scope of matters generally considered by the Board. To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a Committee or to an executive officer of the Company, then the Company’s Corporate Secretary may forward the communication to the executive officer of the Company or the chair of the Committee to which the matter has been delegated.

DIRECTOR INDEPENDENCE

We follow the NYSE’s requirements for determining director independence. These standards can be found on the NYSE’s online manual at https://nyseguide.srorules.com/listed-company-manual. Based on the application of these standards and pursuant to the requirements of the NYSE and the SEC, the Board has determined that:

 

(i)	The following directors are independent: Mses. Ackermann, Acosta, and Crutchfield, and Messrs. Baiera, Barbas, Ferraioli, Helm, Hunter, and Sult. Additionally, during their terms of service, Messrs. Madon, Strong and Zimmerman each qualified as an independent director.

 

(ii)	The Board has determined that Mses. Ackermann, Acosta, and Crutchfield, and Messrs. Barbas, Ferraioli, Helm, Hunter, Sult, and Zimmerman qualify as “Audit Committee Financial Experts” as defined in Item 401(h) of Regulation S-K promulgated under the Securities Act.

 

(iii)

The Board has determined that each member of the Audit Committee (Messrs. Ferraioli, Hunter, Sult, and Zimmerman) possesses the necessary level of financial literacy required to enable each of them to serve effectively as an Audit Committee member and satisfies the heightened independence requirements under NYSE and SEC requirements for Audit Committee members.

 

(iv)	The Board has determined that each member of the Compensation Committee (Ms. Acosta and Messrs. Baiera and Sult) satisfies the heightened independence requirements under NYSE and SEC standards for Compensation Committee members.

COMPLAINT AND REPORTING PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS

Our Whistle Blower Policy provides for (1) the receipt, retention and treatment of complaints, reports and concerns regarding accounting, internal accounting controls or auditing matters, and (2) the confidential, anonymous submission of complaints, reports and concerns by employees regarding questionable accounting or auditing matters, in each case relating to Vistra Energy. Complaints may be made through a “Compliance Helpline” telephone number, operated by an

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

independent third party. Complaints received are logged by our Chief Compliance Officer, investigated and reviewed by Internal Audit, and, if applicable, our Chief Compliance Officer, and communicated to our Audit Committee. In accordance with applicable law, the Whistle Blower Policy and other procedures we use to address complaints prohibit us from taking adverse action against any person submitting a good faith complaint, report or concern. A copy of our Whistle Blower Policy is available on the Company’s website at www.vistraenergy.com/corporate-governance.

BUSINESS RELATIONSHIPS AND RELATED PERSON TRANSACTIONS POLICY

As set forth in the Corporate Governance Guidelines, the Board has adopted a written policy relating to the approval of transactions with related parties. In general, for purposes of our policy, a related party transaction is a transaction to which we are a party, or a material amendment to any such transaction, and with respect to which a related party is directly, or to our knowledge, indirectly, a party. As set forth in our policy, a “related party” is an executive officer, director or nominee for director of ours, a person known to us to be the beneficial owner of more than 5% of our voting securities, an immediate family member of an executive officer, director, nominee for director or 5% stockholder, and any entity owned or controlled by any of the foregoing individuals or in which any such individual serves as an executive officer or general partner or, together with any other such individuals, owns 10% or more of the equity interests of such an entity.

Our policy requires that a related person transaction will only be permitted if: (i) the Audit Committee approves or ratifies the transaction in accordance with the policy (which requires that the transaction be on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party), (ii) the disinterested members of the Board as a whole review and approve the transaction or (iii) the transaction involves compensation approved by the Compensation Committee. In reviewing and approving any related party transaction or material amendments to any such transaction, the Audit Committee must satisfy itself that it has been fully informed as to the related party’s relationship and interest and as to the material facts of the transaction and must determine that the related party transaction is fair to us.

Since January 1, 2019, all related party transactions have been approved or ratified by the Audit Committee or disinterested members of the Board in accordance with our policy. A copy of our related party transactions policy is included in our Corporate Governance Guidelines and is available on the Company’s website at www.vistraenergy.com/corporate-governance.

CHARITABLE CONTRIBUTIONS

During 2019, we did not make any contributions to any charitable organization in which an independent director served as an executive officer in 2019.

INSIDER TRADING POLICY

Under Vistra Energy’s insider trading policy, members of the Board and all of Vistra Energy’s officers and employees, together with their respective related persons, shall not engage, directly or indirectly, in any derivative transactions involving any securities of Vistra Energy, including pledges of Vistra Energy securities as collateral or short sales thereof. This policy includes, without limitation, hedging transactions, pledging Vistra Energy securities as collateral or engaging in short sales of Vistra Energy securities. Any exceptions must be approved by Vistra Energy’s General Counsel on a case-by-case basis, and in no case will an exception be granted in violation of applicable law or if such exception would introduce, in the sole estimation of Vistra Energy’s General Counsel, an unacceptable risk to Vistra Energy.

BOARD RISK OVERSIGHT

In the normal course of business, the Company is exposed to a variety of risks. For a complete description of the risk factors associated with our business, see Part I, Item 1A “Risk Factors” of our 2019 Annual Report on Form 10-K, which is included in our Annual Report.

 

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The Board has ultimate responsibility for protecting stockholder value. Among other things, the Board is ultimately responsible for understanding the risks to which we are exposed, approving management’s strategy to manage these risks, establishing policies and procedures that monitor and manage defined risks and measuring management’s performance against the strategy. The Committees, especially the Audit Committee and Sustainability and Risk Committee (originally constituted as the Risk Committee in July 2018 and expanded to Sustainability and Risk Committee in October 2019), play an important role in support of the Board’s oversight function. Risk oversight includes understanding the material risks to the business and what steps management is taking or should be taking to manage those risks, as well as understanding and determining the appropriate risk appetite for the Company. To define the Company’s risk appetite, the Board reviews and approves the annual business plan, budget and long-term plan, strategic initiatives, acquisitions and divestitures, capital markets transactions, financings, capital allocation and capital structure.

The Board conducts its risk oversight function in several ways. The Board monitors, reviews and responds to strategic, commercial, market, financial, sustainability and corporate risks facing the Company by receiving periodic reports from the management team, and through the Committees. While the Committees each have their delegated responsibilities for identifying and addressing risks, the Board primarily conducts this oversight function through the Sustainability and Risk Committee, which oversees the enterprise risk management process and assesses certain enterprise risks and market, commercial and risk management matters, and the Audit Committee, which oversees risks relating to accounting, internal audit and controls. On an annual basis, the Sustainability and Risk Committee provides, and the Board reviews, a detailed enterprise risk report. Additionally, on a quarterly basis, the Sustainability and Risk Committee reviews an enterprise risk assessment and provides a report thereof to the Board. Further, the Board conducts periodic reviews of risks on an ongoing and as-needed basis and receives updates from management during the year on any particular matters relating to risk management or risk controls that management believes need to be brought to the attention of the Board.

The Board recognizes the importance of maintaining the trust and confidence of our customers and employees. To more effectively prevent, detect and respond to information security threats, the Company has a dedicated Chief Information Officer whose team is responsible for leading enterprise-wide information security strategy, policy, standards, architecture and processes. The Board receives reports on, among other things, the Company’s cybersecurity risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s security program and the emerging threat landscape. Additionally, the Board and Sustainability and Risk Committee monitor the ways in which the Company attempts to prudently minimize risks, to the extent reasonably practicable and consistent with the Company’s long-term strategies.

The table below summarizes the significant role the various Board Committees or similar bodies play in carrying out the risk oversight function.

 

COMMITTEE		RISK OVERSIGHT FOCUS AREA
Audit Committee		Oversees and assesses financial risks, which includes reviewing and discussing with management the Company’s risk disclosures in the Company’s annual reports to the Securities and Exchange Commission; reviewing and discussing the risk of fraud with management, the internal audit executive and the independent auditor and reviewing the implementation of controls to mitigate fraud risks; considering the risk of management’s ability to override the Company’s internal controls; and overseeing significant tax risks and issues affecting the Company.
Compensation Committee		Oversees risks related to our compensation policies and practices and succession planning, with input from management and the Compensation Committee’s independent outside compensation consultant, Willis Towers Watson.
Sustainability and Risk Committee		Oversees (i) greenhouse-gas related risks, including transition, regulatory, reputational, and/or market risks related to climate change, and management’s process for the identification, evaluation, and mitigation of transition risks related to climate change and (ii) certain enterprise risks and other risks related to commercial, credit, liquidity and market risks, including our trading of fuel, transportation, energy and related products and services and regulatory compliance, and the Company’s assessment and management of the risks associated with such activities.

 

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The Chairs of each of the Committees regularly report to the Board on matters reviewed by their respective Committees, thereby providing the Board with the opportunity to identify and discuss any risk-related issues or request additional information from management or the Committees that may assist the Board in its risk oversight role. To this end, risk-related issues presented to the Committees are routinely presented to the full Board to ensure proper oversight.

Additionally, the Company has established a Nuclear Oversight Advisory Board (“NOAB”), which oversees and provides reports to the Board on an as-needed basis, but no less than annually, regarding various risks and strategic considerations related to our ownership and operation, directly or indirectly, of interests in our Comanche Peak nuclear power plant. The NOAB is comprised of Dr. Richard Meserve, Chair, Bill Borchardt, Mr. Morgan and Mr. Burke. Dr. Meserve, who has served as the Chair of the NOAB since 2012, is a former Chairman of the U.S. Nuclear Regulatory Commission (“NRC”). Mr. Borchardt, who has served as a member of the NOAB since 2014, previously held several leadership positions at the NRC including, most recently, as the NRC’s Executive Director of Operations from 2008 to 2013.

In addition to the above-described committee structure, the Company has a Risk Management Policy, which is administered by the Chief Risk Officer, who oversees various risk management efforts and regularly reports to the Sustainability and Risk Committee regarding enterprise risk management and assessment matters. As part of the Risk Management Policy, the Company maintains a Risk Management Committee whose role is to measure and monitor compliance with the Risk Management Policy, and its membership is comprised of various executives from key management positions; namely, the CEO, CFO, Chief Compliance Officer, Chief Operating Officer, Chief Commercial Officer, Chief Risk Officer, President of Retail, Controller, Treasurer, and Vice President of Regulatory Compliance – Trading and Generation. The Risk Management Policy establishes guidelines necessary for the Company to effectively manage the market, credit, operative and regulatory risk of its commodities portfolios.

As outlined in our Risk Management Policy, the Board has established relevant delegation of authority thresholds, which together with our Code of Conduct and other support relationships with members of the External Affairs, Internal Audit, Legal, Human Resources, Technology Services, and Compliance teams, are complementary and critical to the risk management process. In particular, and in addition to the oversight role performed by the Risk Management Committee, the Board has delegated certain authority, subject to various term/tenor and dollar value thresholds, to the Company’s Commitments Committee as further set forth in the Company’s Commitments Policy. The Commitments Policy establishes a framework for the Company to evaluate and approve all significant commitments and transactions made by the Company that have not otherwise been approved by the Board. The Commitments Committee is comprised of the Company’s CEO, CFO, Chief Operating Officer, Chief Administrative Officer, and General Counsel. The Board periodically reviews and revises the delegation of authority thresholds to appropriately balance business needs and its oversight function.

Executive Compensation and Oversight of Risks Related to Compensation Policies

During 2019, the Compensation Committee consisted of three directors: Gavin R. Baiera, Paul M. Barbas, and Jeff D. Hunter (appointed in February 2019). Beginning in February 2020, the Compensation Committee membership was comprised of Mr. Baiera (Chair), Arcilia Acosta, and John R. Sult. The primary responsibilities of the Compensation Committee are to:

 

•

determine and oversee the compensation philosophy, objectives, and program of the Company and our subsidiaries, including making recommendations to the Board with respect to the adoption, amendment or termination of compensation and benefits plans, arrangements, policies and practices;

 

•

evaluate the performance of the Company’s President and CEO, Curtis A. Morgan; James A. Burke, Executive Vice President and Chief Operating Officer; David A. Campbell, Executive Vice President and CFO; Scott A. Hudson, President Vistra Retail; and Stephen J. Muscato, Executive Vice President and Chief Commercial Officer (collectively, the “Named Executive Officers”); and

 

•

recommend the executive compensation of the CEO to the full Board and approve executive compensation of the executive officers (other than the CEO) based on those evaluations.

As described above, the Compensation Committee is responsible for overseeing risks related to our compensation policies, practices, and programs for all employees. To assist the Compensation Committee with determining whether

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

the Company’s compensation policies and practices subject the Company to unnecessary risk or could potentially motivate employees to take excessive risk, the Compensation Committee periodically evaluates, including seeking input from management and our independent compensation consultant, our compensation strategy to ensure:

 

•

base salaries are market-based and a sufficient component of total compensation to discourage risk taking;

 

•

earnings goals under the Company’s EAIP are based upon its audited financial statements and the Company believes that the goals are attainable without the need to take inappropriate risks or make material changes to the Company’s business or strategy;

 

•

Named Executive Officers who receive payment under the EAIP and the Company’s 2016 Incentive Plan may be required to reimburse the Company for all or a portion of the payment (commonly referred to as a “clawback”) if the Company has to prepare an accounting restatement because it is in material noncompliance with any financial reporting requirements;

 

•

the Company uses awards under the 2016 Incentive Plan that are typically based upon factors that affect relative total stockholder return over three-year periods, such as the relative Performance Share Unit (“PSU”) awards, which mitigates short-term risk taking;

 

•

because incentive compensation has a large equity component, value is best realized through long-term appreciation of stockholder value, especially when coupled with the executive stock ownership guidelines, which expose those officers subject to the guidelines—namely the CEO, each Executive Vice President and the President Vistra Retail—to loss of the value of the retained equity if stock appreciation is jeopardized; and

 

•

the use of incentive compensation components that are paid or vest over an extended period mitigates against unnecessary or excessive risk taking.

Board Leadership Structure

As set forth in our Corporate Governance Guidelines, the Board does not have a policy with respect to the separation of the offices of the Chairman and CEO. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination regarding this issue any time it elects a new CEO and thereafter as deemed appropriate.

During 2019, the Company maintained separate CEO and Chairman roles. The Company has determined this to be the appropriate leadership structure at this time to maintain independent Board leadership that can still benefit from the insight of our CEO. If a different determination is made in the future regarding the separation of the Chairman and CEO positions, such that the CEO is the Chairman, a Lead Director shall be elected by the non-management directors of the Board to: (i) serve as a liaison between the Chairman and the independent directors, (ii) lead executive sessions of the Board, (iii) have authority to call meetings of the independent directors, (iv) lead the Board in discussions concerning the CEO’s employment and performance and CEO succession, (v) if requested by major stockholders, be available for consultation and director communication, and (vi) perform such other duties and responsibilities as requested by the Board.

BENEFICIAL OWNERSHIP OF COMMON STOCK OF THE COMPANY

The following table sets forth information, as of March 1, 2020 (unless noted otherwise), regarding the beneficial ownership of our Common Stock by: (1) each of our current directors and nominees for director; (2) each of our current named executive officers; (3) all of our directors and executive officers as a group; and (4) each person or entity we know that beneficially owns more than 5% of our outstanding shares of Common Stock.

Beneficial ownership for the purposes of this table is determined in accordance with the rules and regulations of the SEC. Under such rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and any shares that the stockholder has the right to dispose of or acquire within 60 days of March 1, 2020. Common stock subject to options, regardless of whether such arrangement is currently in the money, that are currently exercisable within 60 days of March 1, 2020, are deemed to be outstanding and beneficially owned by the holder of the options, and Common Stock issuable upon vesting of restricted stock units (“RSUs”) that are vested, or will vest within 60 days of March 1, 2020, is deemed to be outstanding and beneficially owned by the holder of such RSUs. The shares underlying any outstanding options or RSUs, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other stockholder.

 

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Percentages of beneficial ownership are based on 487,945,781 shares of Common Stock outstanding as of March 1, 2020. Except as disclosed in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of Common Stock shown as beneficially owned by the stockholder. All percentages and share amounts are approximate based on current information available to us. The information available to us may be incomplete.

 

		Amount and Nature of  Shares             Beneficially Owned
Name		Number				Percent of     Class
5% Stockholders
Brookfield Asset Management Inc. Managed Entities(1)			47,360,680				9.71%
The Vanguard Group, Inc.(2)			40,724,266				8.35%
FMR LLC(3)			37,295,660				7.64%
BlackRock, Inc.(4)			25,258,765				5.18%
Directors, Director Nominees, and Executive Officers
Hilary E. Ackermann(5)			34,570				*
Arcilia C. Acosta(6)			3,325				*
Gavin R. Baiera(7)			17,359				*
Paul M. Barbas(8)			47,483				*
Lisa Crutchfield(9)			0				*
Brian K. Ferraioli(10)			24,175				*
Scott B. Helm(11)			71,607				*
Jeff D. Hunter(12)			34,502				*
Curtis A. Morgan(13)			832,471				*
Geoffrey D. Strong(14)			0				0%
John R. Sult(15)			47,102				*
Bruce E. Zimmerman(16)			15,374				*
James A. Burke(17)			511,152				*
David A. Campbell(18)			30,000				*
Scott A. Hudson(19)			156,532				*
Carrie Lee Kirby(20)			195,779				*
Stephanie Zapata Moore(21)			164,343				*
Stephen J. Muscato(22)			166,861				*
Christy Dobry(23)			37,534				*
All Directors, Director Nominees and current Executive Officers as a group (19 persons)			2,390,169				0.49%

 

*	Percentage ownership of less than one percent.

 

(1)

Reflects 20,082,625 shares of Common Stock held by entities affiliated with and/or with accounts managed by affiliates of Brookfield Asset Management Inc. The registered holders of shares include BCP Titan Aggregator, L.P., BCP Titan Sub Aggregator, L.P., Brookfield Titan Holdings LP, 11 co-investment limited partnership vehicles of which Titan Co-Investment GP, LLC is the general partner, and Longhorn Capital GS LP (the “Brookfield Investment Vehicles”) and 27,278,055 shares beneficially owned by 15 co-investment limited partnership vehicles of which either Atlas OCM Holdings LLC or Oaktree Capital Group, LLC are the managing member (the “Oaktree Investment Vehicles”).

By virtue of various agreements and arrangements with Seismic Holding LLC (which is 100% indirectly owned by Qatar Investment Authority) (“Seismic” and together with the Oaktree Investment Vehicles, the “investment vehicles”), Brookfield Asset Management Inc. and certain of the Brookfield Investment Vehicles may be deemed to constitute a “group” (within the meaning of the Act and Rule 13d-5 thereunder) with Seismic that beneficially owns 70,241,781 shares of Common Stock (including 22,881,101 shares beneficially owned by Seismic), constituting 14.40% of the outstanding shares of Common Stock. The total number of reported shares does not include the shares beneficially owned by Seismic.

 

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PROPOSALS 2 & 3 – ELECTION OF DIRECTORS

 

 

Brookfield Asset Management Inc. and each of the Brookfield Investment Vehicles expressly disclaims, to the extent permitted by applicable law, the existence of a “group” involving Seismic and beneficial ownership of all any and all shares of Common Stock that Seismic owns or in which Seismic has an interest.

The address of each Brookfield-managed entity (other than Seismic) is c/o Brookfield Asset Management Private Institutional Capital Adviser (Canada), L.P., 250 Vesey Street, 15th Floor, New York, New York 10281.

The address of each Oaktree-managed entity is c/o Oaktree Capital Group, LLC, 333 S. Grand Avenue, 28th Floor, Los Angeles, CA 90071.

The address of Seismic is Q-Tel Tower, 8th Floor, Diplomatic Area Street, West Bay, P.O. Box 23224, Doha, State of Qatar.

 

(2)	Reflects shares of Common Stock held as of December 31, 2019. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19655.

(3)	Reflects shares of Common Stock held as of December 31, 2019. The address of FMR LLC is 245 Summer Street, Boston, MA 02110.

(4)	Reflects shares of Common Stock held as of December 31, 2019. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.

(5)	29,066 of the shares reported are shares of Common Stock owned directly by Ms. Ackermann. 5,504 are unvested RSUs that will vest on May 1, 2020.

(6)	All of the shares reported are shares of Common Stock owned directly by Ms. Acosta.

(7)	11,855 of the shares reported are shares of Common Stock owned directly by Mr. Baiera. 5,504 are unvested RSUs that will vest on May 1, 2020.

(8)	41,979 of the shares reported are shares of Common Stock owned directly by Mr. Barbas as of March 6, 2020. 5,504 are unvested RSUs that will vest on May 1, 2020.

(9)	Ms. Crutchfield does not own any shares of Common Stock.

(10)	18,671 of the shares reported are shares of Common Stock owned directly by Mr. Ferraioli. 5,504 are unvested RSUs that will vest on May 1, 2020.

(11)	63,167 of the shares reported are shares of Common Stock owned directly by Mr. Helm as of March 6, 2020. 8,440 are unvested RSUs that will vest on May 1, 2020.

(12)	28,998 of the shares reported are shares of Common Stock owned directly by Mr. Hunter. 5,504 are unvested RSUs that will vest on May 1, 2020.

(13)	Of these reported shares, 194,276 are shares of Common Stock owned directly by Mr. Morgan as of March 6, 2020, 542,983 are vested stock options owned directly by Mr. Morgan, and 95,212 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(14)

Mr. Strong is associated with Apollo Management, L.P. (“Apollo Management”) and its affiliate, Apollo Management Holdings, L.P. (“Management Holdings”). Affiliates of Apollo Management and Management Holdings directly or indirectly serve as investment managers, portfolio managers, investment advisors, and in some cases serve as general partners of, the Apollo Funds. As such, Management Holdings, Apollo Management and its affiliated investment managers or investment advisors may be deemed to beneficially own the shares of Common Stock held by certain of the Apollo Funds. Mr. Strong disclaims beneficial ownership of all of the shares of Common Stock that may be deemed to be beneficially owned by the Apollo Funds, Apollo Management, Management Holdings or any of their affiliated investment managers or advisors. The address of Mr. Strong is c/o Apollo Management, L.P., 9 West 57th Street, 43rd Floor, New York, New York 10019. Mr. Strong previously resigned from the Board, effective immediately prior to the 2020 Annual Meeting.

(15)	41,598 of the shares reported are shares of Common Stock owned directly by Mr. Sult as of March 6, 2020. 5,504 are unvested RSUs that will vest on May 1, 2020.

(16)	9,870 of the shares reported are shares of Common Stock owned directly by Mr. Zimmerman. 5,504 are unvested RSUs that will accelerate on April 29, 2020, effective immediately prior to the 2020 Annual Meeting, the date and time of Mr. Zimmerman’s previously announced resignation from the Board.

(17)

Of these reported shares, 93,117 are shares of Common Stock owned directly by Mr. Burke as of March 6, 2020, 259 are shares of Common Stock owned indirectly by Mr. Burke, 377,787 are vested stock options owned directly by Mr. Burke, and 39,989 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(18)	All 30,000 shares of Common Stock are owned directly by Mr. Campbell.

(19)	Of these reported shares, 25,143 are shares of Common Stock owned directly by Mr. Hudson as of March 6, 2020, 110,583 are vested stock options owned directly by Mr. Hudson, and 20,806 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(20)	Of these reported shares, 29,981 are shares of Common Stock owned directly by Ms. Kirby as of March 6, 2020, 150,564 are vested stock options owned directly by Ms. Kirby, and 15,234 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(21)	Of these reported shares, 26,845 are shares of Common Stock owned directly by Ms. Moore as of March 6, 2020, 120,360 are vested stock options owned directly by Ms. Moore, and 17,138 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(22)	Of these reported shares, 26,860 are shares of Common Stock owned directly by Mr. Muscato as of March 6, 2020, 119,195 are vested stock options owned directly by Mr. Muscato, and 20,806 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

(23)	Of these reported shares, 6,667 are shares of Common Stock owned directly by Ms. Dobry as of March 6, 2020, 28,776 are vested stock options owned directly by Ms. Dobry, and 2,091 are unvested stock options and unvested RSUs that will vest on March 31, 2020.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

EXECUTIVE SUMMARY

The objectives of our executive compensation program are to align executives’ interests and those of our stockholders in accordance with the Company’s compensation philosophy. This Compensation Discussion and Analysis (“CD&A”) describes the elements, implementation, and 2019 results of our executive compensation program.

At our 2019 Annual Meeting of Stockholders, we received over 98% support for our say-on-pay proposal. As a result, we believe that our stockholders recognize that our compensation philosophy reflects our commitment to pay for performance.

Additionally, we completed several activities to enhance our earnings, expand our geographical footprint, increase our retail marketing channels, reduce and lower the cost of our debt, invest in our communities by enhancing our sustainability efforts, and create significant stockholder value as further described in the section entitled “2019 Business Highlights” beginning on page 1 of this Proxy Statement.

Compensation Philosophy

Vistra Energy has a pay-for-performance compensation philosophy, which places an emphasis on pay-”at-risk”; a significant portion of our executive officers’ compensation is comprised of variable compensation. Vistra Energy’s compensation program is intended to attract and motivate top-talent executive officers as leaders and compensate executive officers appropriately for their contribution to the attainment of Vistra Energy’s financial, operational and strategic objectives. In addition, Vistra Energy believes it is important to retain our top-tier talent and strongly align their interests with our stockholders by emphasizing incentive-based compensation. To achieve the goals of our compensation philosophy, Vistra Energy believes that:

 

•

the overall compensation program should emphasize variable compensation elements that have a direct link to overall corporate performance and stockholder value;

 

•

the overall compensation program should place an increased emphasis on pay-at-risk with increased levels of responsibility;

 

•

the overall compensation program should attract, motivate, engage and retain top-talent executive officers to serve in key roles; and

 

•

an executive officer’s individual compensation level should be based upon an evaluation of the financial and operational performance of that executive officer’s business unit or area of responsibility as well as the executive officer’s individual performance.

2019 Named Executive Officers

 

Name		Title
Curtis A. Morgan		President and Chief Executive Officer (CEO)
James A. Burke		Executive Vice President and Chief Operating Officer
David A. Campbell(1)		Executive Vice President and Chief Financial Officer (CFO)
Scott A. Hudson		President of Vistra Retail
Stephen J. Muscato		Executive Vice President and Chief Commercial Officer
J. William Holden(1)		Former Executive Vice President and Chief Financial Officer

 

(1)	Mr. Holden resigned from his position of Executive Vice President and Chief Financial Officer effective on June 5, 2019, on which date Mr. Campbell assumed this position.

These individuals are Vistra Energy’s Named Executive Officers for 2019—while this Proxy Statement specifically discusses the compensation relating to Vistra Energy’s Named Executive Officers, the practices and programs described herein generally extend more broadly across Vistra Energy’s executive leadership team.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

PERFORMANCE OVERVIEW

In this section, Vistra Energy provides highlights of our performance in 2019, reflecting factors considered by the Compensation Committee in assessing variable pay outcomes for the Named Executive Officers.

SUMMARY OF THE KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

 

We Do...				We Do Not...
✓		Pay for Performance using a compensation structure that includes performance-based Executive Annual Incentive Plan (“EAIP”) and long-term incentive plan awards that are aligned with stockholder interests		×		Offer supplemental executive retirement plan benefits
				×		Engage in option backdating or re-pricing
✓		Provide long-term incentive plan awards that are substantially performance-based and include Performance Share Units		×		Permit hedging or pledging of our Common Stock by Directors or Officers without Company approval
				×		Provide excise tax gross-ups upon a change in control
✓		Have change in control benefits that are subject to “double trigger” provisions, requiring both the occurrence of a change in control event and an involuntary termination		×		Provide any material perquisites to executives, other than reimbursement for relocation expenses, executive physicals, and financial planning and tax advice
✓		Maintain stock ownership requirements for our CEO and other NEOs that require attainment of ownership levels before equity transactions can occur		×		Encourage excessive risk or inappropriate risk taking though our incentive programs; our plans focus on aligning our compensation policies with the long-term interests of our stockholders
✓		Have a clawback mechanism in place		×		Guarantee bonuses
✓		Have an independent compensation consultant that reports directly to the Compensation Committee		×		Provide loans from the Company to any executives or directors
✓		Conduct an annual risk assessment to ensure that the structure and design of our compensation programs are not reasonably likely to result in excessive risk-taking that could have a material adverse impact on the Company

Emphasis on “At Risk” Performance-Based Pay

Base salary and other fixed elements of compensation are essential to any compensation program and relevant to the recruitment and retention of top talent. However, we believe that “at risk” compensation for our most senior executives should represent a significant portion of their pay mix. Our 2019 compensation reflects this philosophy. For 2019, 88% of our CEO’s compensation and 85% of our other Named Executive Officers’ targeted compensation (i.e., base salary, annual short-term incentives and long-term incentives) was “at risk” compensation directly contingent on performance. Actual annual bonus and long-term incentive awards are subject to the achievement of pre-established performance targets and designed to link directly to enhanced shareholder value.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

The following charts illustrate the 2019 pay mix for our CEO and the average pay mix for the other Named Executive Officers.

2019 Named Executive Officer Compensation Overview *

 

Chief Executive Officer Annualized 2019 Targeted Pay Mix		Average Other Named Executive Officers – Annualized 2019 Targeted Pay Mix

 

 

*

Totals reflected in charts exclude other de minimis compensation amounts paid to the Named Executive Officers and amounts paid to Mr. Holden from January 1, 2019 through June 5, 2019. Please see “Summary Compensation Table—2019” beginning on page 54 for details regarding the 2019 compensation of the Named Executive Officers.

Performance Highlights

Vistra Energy’s Executive Annual Incentive Plan places the greatest weighting on a combination of (i) Adjusted EBITDA⁽¹⁾, (ii) total costs and (iii) Adjusted Free Cash Flow before Growth⁽²⁾. Together, these metrics are designed to drive the organization’s focus on achieving business results while exercising discipline in cost decisions. As seen below, Adjusted EBITDA exceeded its target for 2019 while cost management outperformed its target and Adjusted Free Cash Flow before Growth significantly exceeded its target, collectively contributing to strong incentive plan payouts.

 

2019 EAIP Performance Summary; Select Metrics(3)		Target					Actual					Percentage   of Target
Vistra Energy Adjusted EBITDA ($ mm)			$	3,260				$	3,287					100.8	%
Cost Management ($ mm)			$	2,677				$	2,485					107.7	%
Adjusted Free Cash Flow before Growth ($mm)			$	2,055				$	2,231					108.6	%

 

(1)

Adjusted EBITDA means adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as adjusted for unrealized gains or losses from hedging activities, tax receivable agreement impacts, reorganization items, and certain other items described from time to time in Vistra Energy’s earnings releases.

(2)

Adjusted Free Cash Flow before Growth means adjusted free cash flow, which reflects cash from operating activities excluding changes in margin deposits and working capital and adjusted for certain non-standard capital expenditures, including capital expenditures for growth investments, other net investment activities, preferred stock dividends, and other items determined from time to time in Vistra Energy’s earnings releases.

(3)

Additionally, certain adjustments were made to EAIP metric results to drive consistency between metric target levels established at the beginning of the year and actual performance results. The aggregate impact of these adjustments resulted in a reduction to EAIP results. Specific adjustments include: Adjusted EBITDA, Adjusted Free Cash Flow before Growth (FCFbG), and Total Cost metrics exclude net favorable impacts from the mid-year acquisitions of Crius and Ambit; Adjusted EBITDA and Adjusted FCFbG exclude the margin timing impact from signing long-term retail deals at backwardated power curves; Adjusted FCF includes the net unfavorable impact of future payments to third parties related to the transfer of liabilities for several non-operating sites in the Asset Closure Segment (ACS) and the remaining Alternative Minimum Tax (AMT) refund received in February, 2020.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

CORPORATE GOVERNANCE PRACTICES

In this section, Vistra Energy provides details of its corporate governance framework, procedures and practices as they relate to Named Executive Officer compensation.

 

 

Advisors to the Compensation Committee

Independent Advisors

During 2019, Willis Towers Watson provided ongoing advisory services to Vistra Energy and the Compensation Committee on various aspects of Vistra Energy’s executive compensation practices, including, but not limited to, the development of the compensation structure. For fiscal year 2019, the aggregate fees paid to Willis Towers Watson for executive compensation services totaled $207,500. Willis Towers Watson also provided other services to the Company during fiscal year 2019 at the request of Company management. The aggregate fees for the additional services totaled $428,000, primarily related to the legacy Dynegy pension plan.

The Compensation Committee discussed the independence of Willis Towers Watson and whether the provision of the additional services created a conflict of interest. In doing so, the Committee considered each of the factors set forth in Rule 10C-1(b)(4) under the Securities Exchange Act of 1934, as amended, and NYSE rules. As part of its review, the Committee received a letter from Willis Towers Watson that discussed its independence and provided relevant disclosure regarding the SEC and NYSE factors. In accordance with its charter, the Compensation Committee determined that Willis Towers Watson is sufficiently independent to appropriately advise the Compensation Committee on compensation matters and that its relationship with Willis Towers Watson does not give rise to any conflict of interest. Going forward, the Compensation Committee expects that it will continue to engage compensation consultants when and as appropriate and will conduct an assessment of consultants’ independence prior to any such engagement.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

Compensation Elements

Vistra Energy utilizes the following elements of compensation to achieve our compensation objectives:

 

Compensation Element		Summary and Linkage to Philosophy
Base Salary		•  A fixed element of compensation to provide a stable source of income   •  Provides market competitive compensation to attract and retain talent
Annual Incentive		•  A cash-based award that encourages executives to focus on specific corporate, business unit and individual performance goals   •  Earned only if threshold financial, operational and/or strategic objectives are met
Stock Options		•  Rewards long-term stockholder value creation as stock options only provide value when the stock price appreciates   •  Provides wealth-building opportunity and aligns executives with stockholder interests
Restricted Stock Units		•  Rewards long-term stockholder value creation   •  Enhances executive stock ownership and promotes retention
Performance Share Units		•  Rewards long-term stockholder value creation and encourages executives to focus on long-term performance goals   •  Emphasizes long-term view with three-year horizon
Benefits		•  Keeps program competitive and provides protection for executives
Perquisites		•  Perquisites are limited in amount and use

Compensation Determination Process

Use of Market Data

Vistra Energy establishes target compensation levels that are consistent with market practice and internal equity considerations (including position, responsibility and contribution) relative to base salaries, annual incentives and long-term incentives, as well as with the Compensation Committee’s assessment of the appropriate pay mix for a particular position. In order to gauge the competitiveness of our compensation programs, Vistra Energy reviews compensation practices and pay opportunities through the use of energy services industry, including but not limited to independent power producers and utilities, and general industry survey data, as well as data from a selection of our publicly-traded peer companies. Vistra Energy attempts to position itself to attract and retain qualified senior executives in the face of competitive pressures in our relevant labor markets.

Specifically, during 2019, Vistra Energy used information regarding the pay practices of the energy services industry and general industry companies provided by our compensation consultant, regressed to Vistra Energy’s revenue size. Vistra Energy believes that revenue is an appropriate indicator of the size and complexity of an organization, which should be one of the considerations in determining compensation levels. The compensation data resulting from this analysis was a significant factor considered by the Compensation Committee with respect to its executive compensation decisions for the Named Executive Officers.

During 2019, Vistra Energy also utilized a compensation peer group as an additional reference point when determining executive compensation. This peer group consisted of a select group of companies that the Compensation Committee believes are representative of the talent market in which Vistra Energy competes. Vistra Energy’s compensation peer group consisted of the following companies for 2019, which is the same peer group used for 2018:

 

The AES Corporation		Entergy Corporation		FirstEnergy Corp.
NRG Energy, Inc.		PG&E Corporation2		Public Service Enterprise Group Incorporated

 

2	PG&E Corporation was only used as a compensation peer company until its Chapter 11 filing.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

The Compensation Committee does not target any particular level of total compensation or individual component of compensation against the peer group; rather, the Compensation Committee considers the range of total compensation provided by Vistra Energy’s peers, together with information from published surveys, in determining the appropriate mix and level of total compensation for our executives.

Compensation of the CEO

In determining the compensation of the CEO, the Compensation Committee annually follows a thorough and detailed process. At the end of each year, the Compensation Committee reviews an assessment of the CEO, prepared by the Chief Administrative Officer with input from the CEO, regarding the CEO’s performance and the performance of Vistra Energy’s businesses. In addition, the Chair of the Compensation Committee requests a formal written assessment of CEO performance from the remainder of the Board on CEO performance and meets (with and without the CEO) to evaluate and discuss his performance and the performance of Vistra Energy’s businesses.

While the Compensation Committee balances multiple factors in determining the CEO’s compensation, including ensuring that a substantial portion of the CEO’s compensation is directly linked to his performance and the performance of Vistra Energy’s businesses, and that his compensation is competitive with compensation paid to similarly performing executive officers with similar responsibilities in companies that Vistra Energy considers to be our peers.

Compensation of Other Named Executive Officers

In determining the compensation of each of Vistra Energy’s Named Executive Officers (other than the CEO), the Compensation Committee seeks the input of the CEO. At the end of each year, the CEO reviews a self-assessment prepared by each Named Executive Officer and assesses the Named Executive Officer’s performance against business unit (or area of responsibility) and individual goals and objectives. The CEO reviews these assessments with the Compensation Committee and makes recommendations for the compensation of the Named Executive Officers with that context, the Compensation Committee determines and approves the compensation for each Named Executive Officer.

Role of the Compensation Consultant

To add rigor in the review process and to inform the Compensation Committee of market trends, the Compensation Committee’s independent compensation consultant, Willis Towers Watson, analyzes Vistra Energy’s executive compensation structure and plan designs and to assess whether the compensation program is competitive and supports the Compensation Committee’s goal to align the interests of executive officers with those of stockholders. Willis Towers Watson also provides the Compensation Committee with market data and peer analysis, which the Compensation Committee references when determining compensation for executive officers. The Compensation Committee has authorized Willis Towers Watson to interact with Vistra Energy’s management, as needed, on behalf of the Compensation Committee. Willis Towers Watson also provided other services to the Company during the fiscal year 2019 at the request of Company management.

The Compensation Committee has the sole authority to approve the independent compensation consultant’s fees and terms of the engagement. Thus, the Compensation Committee annually reviews its relationship with, and assesses the independence of, Willis Towers Watson to ensure executive compensation consulting independence.

Base Salary

Vistra Energy believes that base salary should reflect the scope and complexity of an executive officer’s position and the level of responsibility required to perform his or her job. It also believes that a competitive level of base salary is required to attract, motivate and retain qualified talent. Vistra Energy wants to ensure our cash compensation is competitive and sufficient to incent executive officers to remain with Vistra Energy, recognizing our high-performance expectations across a broad set of operational, financial, customer service and community-oriented goals and objectives.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

The Compensation Committee regularly reviews base salaries and annually engages Willis Towers Watson to conduct analyses to ensure the base salaries are market-competitive, while also serving as an effective retention tool. The Compensation Committee may also review an executive officer’s base salary from time to time during a year, including if the executive officer is given a promotion or if his or her responsibilities are significantly modified.

In 2019, base salaries for each of Messrs. Morgan, Burke, and Campbell were initially set by their respective employment agreements and base salaries for each of Messrs. Hudson and Muscato were determined based on market data, roles, and responsibilities. Subject to the employment agreements with Messrs. Morgan, Burke, and Campbell, which are described under “Employment Arrangements and Severance Benefits” on page 51, the Compensation Committee may change the base salaries for all of the Named Executive Officers at any time based on updated market data, updated roles and responsibilities and the CEO’s recommendation. Board approval is required to change the base salary for Mr. Morgan.

In May 2018, the Compensation Committee and the Board approved salary increases for Messrs. Morgan, Burke, Muscato, and Hudson to recognize their enhanced roles and responsibilities following the Dynegy merger. There were no changes to those base salaries during 2019. The 2019 base salary for each Named Executive Officer is reflected the table below.

 

Name		2019 Base Salary
Curtis A. Morgan		$	1,130,000
James A. Burke		$	800,000
David A. Campbell		$	690,000
Stephen J. Muscato		$	550,000
Scott A. Hudson		$	525,000

Annual Incentive Plan

Summary

The EAIP provides an annual performance-based cash bonus for the successful attainment of certain financial and operational performance targets that are established annually by the Compensation Committee. Under the terms of the EAIP, performance against these targets, which are set at challenging levels to incentivize exceptional performance (while at the same time balancing the needs for safety and investment in Vistra Energy’s business), drives bonus funding.

Performance Framework

As a general matter, target-level performance is based on Vistra Energy’s board-approved financial and operational plan (the Financial Plan) for each upcoming year. The Compensation Committee sets high expectations for Vistra Energy’s executive officers and therefore annually selects a target performance level that constitutes above average performance for the business, which the Compensation Committee expects the business to achieve during the upcoming year. Threshold and superior levels are for performance levels that are below or above Financial Plan-based expectations, respectively. Based on the level of attainment of these performance targets, an aggregate EAIP funding percentage amount for all participants is determined.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

Target Opportunity (as a % of Salary)

Target cash bonus awards are set for each executive officer as a percentage of their base salary. Performance payouts on financial metrics are equal to, for any particular metric, 100% if the target amount is achieved, 50% if the threshold amount is achieved and 200% if the superior amount is achieved. Actual performance payouts are interpolated on a linear basis, as applicable, with a maximum performance payout for any particular metric being equal to 200%. These results are then adjusted by an individual performance modifier as described below.

 

2019 EAIP Target Opportunities		2019 EAIP Target  %(1)
Curtis A. Morgan President and CEO		125%
James A. Burke EVP and Chief Operating Officer		100%
David A. Campbell EVP and CFO		100%
Stephen J. Muscato EVP and Chief Commercial Officer		85%
Scott A. Hudson President Vistra Retail		85%

 

(1)	Described as a percentage of base salary

Financial and Operational Performance Targets for 2019

The following table provides a summary (including relevant weighting) of the corporate performance targets under the EAIP for Vistra Energy, including the Named Executive Officers:

 

Named Executive Officer Vistra Scorecard Metrics		Weight					Target					Performance					Results Achieved					Actual    Payout
Vistra Energy Adjusted EBITDA ($ m)				20	%			$	3,260				$	3,287					25	%
Total Cost ($ m)				20	%			$	2,677				$	2,485					40	%
Adjusted Free Cash Flow before Growth ($ m)				20	%			$	2,055				$	2,231					40	%
Generation Scorecard Multiplier (%)				20	%				100	%				156	%				31	%
Retail Scorecard Multiplier (%)				20	%				100	%				121	%				24	%
Total				100	%														160	%				150	%

Vistra Energy focuses the majority of our metrics on financial parameters that align with stockholder value: Adjusted EBITDA, Cost Management, and Adjusted Free Cash Flow before Growth. Vistra Energy performed well against each of these metrics in 2019. The target for Adjusted EBITDA was set at the midpoint of guidance in order to drive strong performance. The organization took a disciplined approach to maximizing the combination of these three key financial metrics. In addition to the Vistra Energy financial metrics, the Compensation Committee set goals to ensure that the management team was continuing to drive the performance of each of the key business units, Luminant and Retail. The Luminant Operational and Financial Metrics consist of core processes that lead to consistent and safe operations while also driving the Luminant portion of the Vistra Energy financial metrics. Retail Operational and Financial Metrics focus on core customer operations that drive both high customer satisfaction and high performance of the Retail portion of the Vistra Energy Financial metrics.

The Named Executive Officers achieved scorecard results warranting an annual bonus payout percentage of 160% for the 2019 performance year. The Compensation Committee approved a recommendation by management and elected to use a payment percentage of 150% for Named Executive Officers, based upon key performance factors including an average of business performance relative to the targeted metrics across all business units.

 

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Individual Performance Modifier

After approving actual performance against the applicable targets under the EAIP, and on a basis independent of such target performance calculations, the Compensation Committee and the CEO review the performance of each of Vistra Energy’s executive officers on an individual and comparative basis. Based on this review, which includes an analysis of both objective and subjective criteria, as determined by the Compensation Committee in its sole discretion, including the CEO’s recommendations (with respect to all executive officers other than himself), the Compensation Committee approves an individual performance modifier for each executive officer.

Under the terms of the EAIP, the individual performance modifier can range from an outstanding rating (150%) to an unacceptable rating (0%). To calculate an executive officer’s final annual cash incentive bonus, the executive officer’s corporate/business unit payout percentages are multiplied by the executive officer’s target incentive level, which is computed as a percentage of annualized base salary, and then by the executive officer’s individual performance modifier, subject to the aggregate cap of 200% of such executive officer’s target bonus for executives under employment agreements.

Additionally, certain executives, including the Named Executive Officers, were subject to an “executive limiter” in which the EAIP is capped at 50% of each executive’s target bonus if Vistra’s Energy’s Adjusted EBITDA did not meet the low end of Vistra Energy’s annual 2019 guidance. In the event that such Adjusted EBITDA targets were not met, the Board has complete discretion on any final annual cash incentive bonus paid to such executives subject to the “executive limiter.” In 2019, because Vistra Energy’s Adjusted EBITDA exceeded the low end of guidance, no “executive limiter” was applicable.

Actual Awards

The following table provides a summary of the 2019 performance-based cash bonus for each Named Executive Officer under the EAIP, and the discussion below highlights the key factors used in determining the awards. The Compensation Committee and the Board (as applicable) have now certified financial results for 2019 and approved the individual performance modifiers for all Named Executive Officers. All of the Named Executive Officers earned in excess of 100% of their respective target bonuses and were paid their approved bonuses in March 2020.

Mr. Morgan continued to successfully lead Vistra through transformation in 2019. Notably, the acquisition of two retail companies in Crius and Ambit, made the company the largest retail provider in the country with over 5,000,000 customers. Vistra continued to achieve the synergy targets related to the Dynegy merger while adding synergies from the retail acquisitions. Additionally, Mr. Morgan continued to lead Vistra Energy in its evolution with the closing of four coal plants in the MISO market. He further advanced the Company’s carbon reduction efforts, including setting GHG emissions reduction targets for 2030 and 2050, and becoming a founding member of the Climate Leadership Council to be an active participant in policy setting and stakeholder alignment. Throughout the year, Mr. Morgan continued to share Vistra’s vision of a strong balance sheet and achieving its goals of low debt and strong free cash flow while also returning value to stockholders through a regular dividend, key financing activities that significantly reduced the annualized after-tax interest expense, and other financing activities that expanded liquidity to support growth. Given these and other significant achievements, the Board approved an individual performance modifier that increased Mr. Morgan’s incentive award.

Mr. Burke played a key role in decisions around the generation fleet and the retail business in 2019. Notably, Mr. Burke led the Company’s efforts to acquire Ambit and Crius, while also driving synergies in the generation fleet and working to determine the path to fulfilling the MPS rule requirements in Illinois, resulting in the closing of the four coal plants in the MISO market. The company experienced strong commercial availability across the fleet with a strong safety performance and outstanding outage management. The retail business had another strong year in 2019. In addition to the two acquisitions, the ERCOT business remained strong with increased customer counts and maintained its position as the top-rated large retailer on the Public Utility Commission complaint scorecard, despite an extremely volatile summer driving heightened customer activity across the ERCOT market. Given these and other significant achievements, the Compensation Committee approved an individual performance modifier that increased Mr. Burke’s incentive award.

Mr. Campbell joined Vistra in June of 2019 as the Chief Financial Officer. He played a significant role in both the Crius integration and the Ambit merger that closed in the third quarter of 2019. He also led activities to assess the company’s business portfolio and develop the company’s ten-year fundamental view, and his team oversaw the execution of the company’s capital allocation strategy, including a share repurchase program and approximately $8.3 billion in repricing/refinancing transactions that extended maturities and reduced the company’s annual interest expenses. Mr. Campbell

 

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