PNM Resources’ Board of Directors is composed of eight individuals, which include three women and one minority. The Board has four committees: Audit & Ethics, Compensation and Human Resources, Nominating & Governance and Finance.
Corporate Governance Principles
In recognition of the importance of governance to the proper management of the Company, the Board has organized the various governance policies adopted and practiced over the years into a consolidated Corporate Governance Principles document so that investors, employees, customers, regulators and the community may be aware of the policies followed by the Company. These principles have been approved by the full Board after analysis of policy considerations and peer benchmarks. With the goal of incorporating evolving best corporate governance principles, the Board requires the Nominating Committee to review the principles at least annually and recommend changes from time to time for consideration and adoption by the full Board.
The principles document sets forth key practices and addresses the following:
Responsibilities of the Board
Process for Director Nominations
Stock Ownership Guidelines
Conflicts of Interest
Code of Ethics
The Company has adopted a code of ethics, Do The Right Thing: Principles of Business Conduct, which applies to all directors, officers (including the principal executive officer, principal financial officer and principal accounting officer) and employees. Do the Right Thing is available in print to any shareholder who requests it by writing to the Ethics and Governance Department, PNM Resources, Inc., 414 Silver Avenue SW, MS-1285, Albuquerque New Mexico 87102-3289.
Concerns relating to financial statement disclosures, accounting, internal accounting controls, or auditing matters and other matters involving violations of law are handled in accordance with the complaint procedures, adopted by the Audit Committee. The Company also established an anonymous/confidential hotline through which employees and others may report concerns about the Company's business practices.
In accordance with the Company's Corporate Governance Principles, the Board has affirmatively determined that all current directors are independent of PNM Resources and its management (with the exception of Ms. Patricia K. Collawn). Ms. Collawn is considered an inside director because of her employment as the President and CEO of the Company.
In determining the independence of the non-employee members of the Board, the Board examined all direct and indirect relationships of these non-employee directors with the Company and determined that all such relationships complied with the specific independence criteria under applicable law, including the NYSE listing standards. In addition, the only direct or indirect relationships between PNM Resources and each current non-employee director consist of service on the Board or a Board committee, and being a shareholder or a retail utility customer of the Company.
Majority Voting for Directors
Our articles of incorporation and bylaws provide for the annual election of directors. Each director must receive the affirmative vote of a majority of our shares of common stock represented at the meeting and entitled to vote on the election.
Our Corporate Governance Principles also provide that any nominee in an uncontested election who does not receive the required affirmative majority vote must promptly submit his or her resignation for consideration by the Nominating Committee which shall make a recommendation to the full Board within a reasonable period of time. The director whose resignation is under consideration will abstain from participating in the Nominating Committee's recommendation and the Board's decision on this matter. If a resignation is not accepted by the Board, the director may continue to serve. Directors added to the Board during the course of the year will stand for election at the next annual meeting of shareholders.
In addition to the annual election of directors, the Board's accountability to shareholders is enhanced by:
- the rigorous nomination process conducted by the Nominating Committee (which includes consideration of director candidates proposed by shareholders) and
- the Board's policy that a substantial majority of the Board be independent and that all Board committees consist of independent members.
Board Leadership Structure and Lead Director
We believe the Company and its shareholders are best served by a Board that has the flexibility to establish a leadership structure that fits the needs of the Company at a particular point in time. Under the Company's Corporate Governance Principles and bylaws, the Board has the authority to combine or separate the positions of Chairman and CEO, as well as to determine whether, if the positions are separated, the Chairman should be an employee, non-employee, or an independent director.
The Board believes the most effective leadership structure for the Company at this time is one with a combined Chairman and CEO coupled with an independent lead director. The Chairman is Patricia K. Collawn, our President and CEO. Combining the roles of Chairman and CEO: (1) enhances the Board's ability to provide strategic direction and communicate clearly and effectively with management; and (2) avoids creating a structure that would effectively duplicate the work of our lead director. Ms. Collawn's knowledge of our utilities and of the significant risks, challenges, and opportunities for our industry, including climate change, technological innovation, cybersecurity and regulatory outcomes, make her best suited to serve as Chairman and CEO and provide strong unified leadership for PNM Resources. Chairman Collawn brings contemporary industry insights to the Board as a result of her leadership role in leading industry organizations, such as the Electric Power Research Institute and the Edison Electric Institute, both of which are instrumental in addressing policy, operational, and technological issues facing the utility industry.
The position of lead director and role of our Board committees (comprised entirely of independent directors) are designed to promote strong, independent oversight of our management and affairs. Our lead director performs the following functions:
- approves Board meeting agendas and information sent to the Board;
- approves meeting schedules to ensure sufficient time for discussion of all agenda items;
- chairs all meetings of the independent directors, including executive sessions of the independent directors, and presides at all meetings of the Board in the absence of the Chairman;
- works with committee chairs to ensure coordinated coverage of Board responsibilities;
- ensures the Board is organized properly and functions effectively, independent of management;
- in consultation with the Board, is authorized to retain independent advisors and consultants on behalf of the Board;
- facilitates the annual self-evaluation of the Board and Board committees;
- serves as a liaison for communications between (1) management and the independent directors, and (2) the Board and the Company's shareholders and other interested parties; and
- performs such other duties as the Board may from time to time delegate.
The lead director is elected by the independent directors, who review the role and functions of the lead director on an annual basis.
The lead director, with the above described duties, facilitates independent oversight of management. The balance of the lead director and combined Chairman/CEO positions ensures that the Board receives the information, experience and direction to effectively govern. Further, the Board believes that having Ms. Collawn serve in the combined role of Chairman and CEO is in the best interests of our shareholders because:
- Ms. Collawn's thorough understanding of the particular challenges facing the regulated utility industry and the need to balance various stakeholder interests is critical at both the management and Board level and she is uniquely qualified to identify key strategic risks; and
- Ms. Collawn's combined role promotes unified leadership and direction and conveys the Board's confidence in her leadership to shareholders, customers and other stakeholders.
Board's Role in Risk Oversight
PNM Resources' management is responsible for
managing risk and bringing to the Board’s attention the most significant
risks facing the Company. The Board has oversight
responsibility for the processes established to identify, assess, mitigate, and
monitor these risks. Throughout the year, the Board reviews information regarding the potential significant risks
facing the Company. Each significant strategic risk is overseen by the
full Board in order to facilitate more effective integrated risk and strategy
oversight. Board oversight includes consideration of the various challenges and opportunities
presented by these risks, plans to mitigate the risks, and the impact these
risks may have on the Company’s strategy.
For the past several years, management has
identified and reported to the Board on multiple risks and opportunities
related to climate change, including potential environmental regulation,
technological innovation, and availability of fuel and water for operations. These significant risks are overseen by the full Board. In addition, the Board approves certain
Company investments in environmental equipment and grid modernization
technologies. Other significant risks overseen by
the full Board include safety, New Mexico stakeholder relationships, physical security,
The Board also allocates responsibility for oversight of other risks among the committees of the Board. Over the past several years, Board committees have played an important role in risk oversight. For example, the Finance Committee reviews and recommends to the
full Board the Company’s capital
structure and oversees the Company’s management of risks associated with capital availability,
liquidity and costs thereof. In addition, the Finance Committee monitors the execution of the Company’s energy supply, sales, and hedging programs. The Audit Committee plays a central role in overseeing the
integrity of the Company’s
financial statements and reviewing and approving the performance of the Company’s internal audit function and independent auditors.
The Audit Committee also is regularly briefed
on the Company’s North American Electric Reliability Corporation risks and risk
mitigation programs. While the full
Board annually reviews the CEO succession planning process, the Nominating
Committee oversees risks related to succession planning for the Board, and the
Compensation Committee oversees risks related to succession planning for
Company officers. In addition, the Compensation Committee considers risks related to
the attraction and retention of talent and risks related to the design of
compensation programs and arrangements. In doing so, the Compensation Committee
monitors the design and administration of the Company’s overall incentive programs to ensure that they incentivize strong
individual and group performance and include appropriate safeguards to avoid unintended
or excessive risk-taking by Company employees.
In executing its risk oversight duties, the Board can and does access extensive internal and external expertise regarding the Company’s challenges and opportunities, including those related to climate change. For instance, the Board’s Chairman, Ms. Collawn also serves on the board of the Electric Power and Research Institute (“EPRI”), a non-profit research institute engaged in researching innovative climate change related technology and policy matters for the power industry. In addition, the Company is actively involved in multiple EPRI programs and has representatives on various committees of the Edison Electric Institute focused on environmental risks and technological innovation.
does not believe that its leadership structure (i.e., combining the Chairman
and CEO roles, coupled with an independent lead director) affects its ability
to effectively oversee risk management because a substantial majority of the
Board is comprised of independent directors, each committee is comprised
entirely of non-management independent directors, and the roles of the lead
director and committees are designed to provide effective oversight of
Communication with the Board
Shareholders and other interested parties wishing to communicate directly with the lead independent director or with the non-management or independent directors as a group may do so by writing to Lead Independent Director, c/o Corporate Secretary, PNM Resources, Inc., 414 Silver Avenue SW, MS-1245, Albuquerque, New Mexico 87102-3289.
Director Service Policy
Our Director Service Policy provides that directors will not serve more than 12 years on the Board absent certain conditions. The policy requires directors serving more than 12 years, employee directors who leave the Company and directors who undergo a significant change in their business or professional career to submit resignations to the Board for acceptance at such time as the Board deems appropriate.
Equity Compensation Awards Policy
The Board adopted the Equity Compensation Awards Policy to govern the granting of all forms of equity compensation. The policy provides that equity compensation awards shall only be made in compliance with the Company's performance equity plan (the “PEP”), which covers incentive compensation awards to certain employees and non-employee directors, and applicable laws and regulations. The PEP prohibits option repricing, incorporates, as a general rule, a “double trigger” vesting rule in connection with a change in control, and contains a “clawback” provision subjecting all awards issued under the PEP to potential forfeiture or recovery to the fullest extent called for by any clawback policy that may be adopted by the Company. The Equity Compensation Awards Policy provides that equity compensation awards are prospective only and sets forth additional good governance procedures for making equity awards when the regular schedule for the grant of equity compensation falls within a black-out period for trading in the Company's securities under PNM Resources' Insider Trading Policy.
The Company conducts an annual review of equity compensation awards to ensure compliance with the requirements of the Equity Compensation Awards Policy.
Related Person Transaction Policy
The policy provides that all transactions with executive officers, directors or greater than 5% shareholders or any immediate family member of any of the foregoing (collectively referred to as “related persons”), where the aggregate amount involved is expected to exceed $120,000 per year, are subject to pre-approval or ratification by the Nominating Committee, or by the Board or another committee in the normal fulfillment of their respective charters and responsibilities. In determining whether to approve such transactions, the Nominating Committee will consider, among other factors, the extent of the related person's interest in the transaction; the availability of other sources of comparable products or services; whether the terms are no less favorable than terms generally available in unaffiliated transactions under like circumstances; the benefit to the Company; and the aggregate value of the transaction at issue. Since January 1, 2016, PNM Resources has not participated, and has no current plans to participate, in any transactions in which any related person has a material interest that would be subject to pre-approval under this policy or otherwise be reportable under applicable SEC Rules.
Insider Trading Policy Includes No Hedging or Pledging
The Company’s Insider Trading Policy prohibits all employees, officers and directors from engaging in short sales of Company securities and states that speculative trading in Company stock is considered to be improper and inappropriate. In addition, the policy prohibits all directors, officers and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sales contracts, or transactions that allow a person to lock in much of the value of his or her Company securities. Further, our Insider Trading Policy prohibits all directors and executive officers, including the named executive officers, from pledging Company securities as collateral for a loan.
The Company intends to adopt a clawback policy that will be fully compliant with future NYSE listing standards. Accordingly, the PEP provides that every award issued under the plan is subject to potential forfeiture or recovery to the fullest extent called for by any future clawback policy. In addition, the PEP and/or related award documents provide that (1) all unvested and unpaid awards are subject to forfeiture for conduct which is demonstrably and materially injurious to the Company and (2) a recipient will forfeit unvested and unpaid incentive compensation awards for any manipulation or attempted manipulation of the performance results for personal gain at the expense of customers, shareholders, other employees or the Company.