Check the appropriate box:

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

NiSource Inc.,

801 E. 86^th Avenue, • Merrillville, Indiana 46410 • (877) 647-5990

April 19, 2021

To the Holders of Our Common Stock:

The 2021 annual meeting of stockholders (the “Annual Meeting”) of NiSource Inc., a Delaware corporation, will be conducted in a virtual format only via live audio webcast on Tuesday, May 25, 2021, at 10:00 a.m. Central Time at www.virtualshareholdermeeting.com/NI2021, for the following purposes:

In light of public health concerns regarding the coronavirus pandemic (“COVID-19”), this year’s Annual Meeting will be conducted in a virtual format only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access to our stockholders regardless of geographic location. There is no in-person meeting for you to attend. We designed the format of this year's Annual Meeting to ensure that our stockholders who attend the Annual Meeting will be afforded similar rights and opportunities to participate as they would at an in-person meeting.

All stockholders of record as of the close of business on March 30, 2021, are eligible to vote at the Annual Meeting and any adjournment or postponement thereof.

Your vote is very important. Whether or not you plan to attend the virtual Annual Meeting, please vote at your earliest convenience by telephone, through the Internet or by completing and mailing the enclosed proxy card. If you later choose to revoke your proxy or change your vote, you may do so by following the procedures described in the attached proxy statement. See the section “Attending and Voting During the Virtual Annual Meeting” for specific instructions on voting your shares at the Annual Meeting.

PLEASE VOTE YOUR SHARES AS SOON AS POSSIBLE BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.

Important Notice Regarding the Availability of Proxy Materials For the Annual Meeting

of Stockholders to be Held on May 25, 2021

 

The Proxy Statement, Notice of Annual Meeting and 2020 Annual Report to Stockholders

are available at https://www.nisource.com/filings

This summary highlights information that may be expanded upon elsewhere in this proxy statement (“Proxy Statement”). This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement before voting. The accompanying proxy is solicited on behalf of the Board of Directors of NiSource Inc. (the “Board”) for the 2021 annual meeting of the stockholders (the “Annual Meeting”).

This Proxy Statement and the accompanying proxy card are first being sent to stockholders on April 19, 2021.

*Chair of Committee

 

See “Proposal 1 – Election of Directors” for more information on our director nominees.

See“Corporate Governance” for more information on our corporate governance practices.

We have designed our executive compensation program to meet our business objectives using various compensation elements intended to drive both long-term and short-term performance. We believe that a significant portion of total compensation should consist of at-risk performance-based compensation. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation policy and objectives.

See “Compensation Discussion and Analysis (CD&A)” and “2020 Executive Compensation” for more information on our executive compensation program.

Stock Symbol: NI

Stock Exchange: NYSE

Registrar and Transfer Agent: Computershare Investor Services

State of Incorporation: Delaware

Corporate Headquarters: 801 E. 86^th Avenue, Merrillville, Indiana 46410

Corporate Website: www.nisource.com

We focus our business strategy on providing safe and reliable service through our core, rate-regulated asset-based utilities, which generate substantially all of our operating income. Our utilities continue to move forward on core safety, infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all six states in which we operate. Our goal is to develop strategies that benefit all stakeholders as we address changing customer conservation patterns, align our price structures with our cost structure, and embark on long-term investment programs. These strategies focus on improving safety and reliability, enhancing customer service, lowering customer bills and reducing emissions while generating sustainable returns.

The safety of our customers, communities and employees remains our top priority. Our safety management system (SMS) transitioned in 2020 from an accelerated project launch to an established operating model within NiSource. With the continued support and advice from the Quality Review Board, a panel of third parties with safety operations expertise engaged by management to advise on safety matters, we are continuing to mature our SMS processes, capabilities and talent as we collaborate within and across industries to enhance safety and reduce operational risk.

In its 2018 Integrated Resource Plan submission to the Indiana Utility Regulatory Commission, NIPSCO, our electric business subsidiary, laid out a plan to fully retire the R.M. Schahfer Generating Station by 2023 and Michigan City Generating Station by 2028. These units represent 72% of NIPSCO’s remaining generation capacity. The current replacement plan includes renewable sources of energy, including wind, solar, and battery storage, to be obtained through a combination of NIPSCO investment and power purchase agreements.

Our directors possess the necessary breadth and depth of skills and experience to oversee our business operations and long term strategy as set forth in “Proposal 1 – Election of Directors – Nominee Skills, Demographics and Biographies.”

The accompanying proxy is solicited on behalf of the Board for the Annual Meeting to be held on Tuesday, May 25, 2021 at 10:00 a.m. Central Time, in a virtual format only via live audio webcast at www.virtualshareholdermeeting.com/NI2021. The common stock, $.01 par value per share, of the Company represented by the accompanying proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the Board:

This Proxy Statement and the accompanying proxy card are first being sent to stockholders on April 19, 2021. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile, email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of $9,500, plus reimbursement of expenses. We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held as of 5:00 p.m. Eastern Time on March 30, 2021, the record date for voting.

We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this Proxy Statement to refer to NiSource Inc.

Holders of shares of common stock as of the close of business on March 30, 2021, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 30, 2021, 392,129,866 shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.

If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy in advance of the Annual Meeting using any of the following methods:

All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 24, 2021.

If your shares are held in a brokerage account or by a bank, broker, trust or other nominee (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.

If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent registered public accounting

firm is the only proposal considered a routine matter and, accordingly, at the Annual Meeting, Brokers will only have discretionary authority to vote your shares with regard to Proposal No. 3, the ratification of the appointment of Deloitte as our independent registered public accounting firm for 2021. A “broker non-vote” occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted. Brokers will not have discretionary authority to vote your shares with respect to the other proposals to be presented at the Annual Meeting. Therefore, it is important that you instruct your Broker or other nominee how to vote your shares. If Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting, which are considered “non-routine.”

If you hold your shares of common stock in our 401(k) Plan, those shares are held in the name of Fidelity Management Trust Company (“Fidelity”), the administrator of the 401(k) Plan. You will receive a proxy card that includes the number of shares of our common stock held in the 401(k) Plan. You should instruct Fidelity how to vote your shares by completing and returning the proxy card or by voting your shares by Internet or by telephone, as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares, Fidelity will vote your shares in the same proportion as the shares for which it receives instructions from all other participants, to the extent permitted under applicable law. To allow enough time for Fidelity to vote your shares in accordance with your direction, your voting instructions must be received by Fidelity no later than 11:59 p.m. Eastern Time on May 20, 2021.

Format of Meeting. In light of public health concerns regarding the coronavirus (“COVID-19”) outbreak, this year’s Annual Meeting will be conducted in a virtual format only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access to our stockholders regardless of geographic location. There is no in-person meeting for you to attend. We designed the format of this year's Annual Meeting to ensure that our stockholders who attend the Annual Meeting will be afforded similar rights and opportunities to participate as they would at an in-person meeting.

Attending the Meeting. You are entitled to attend and participate in the Annual Meeting if you were a stockholder of record as of the close of business on March 30, 2021, the record date, or hold a legal proxy for the Annual Meeting provided by your Broker as described below. To attend and participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/NI2021 and enter your 16-digit control number, which can be found on your proxy card, voting instruction form or email you received with your proxy materials. If your shares are held by a Broker and you do not have a control number, please contact your Broker as soon as possible so that you can be provided with a control number.

Voting During the Meeting. You may vote during the Annual Meeting by following the instructions available on the meeting website during the meeting. If your shares are held in street name by a Broker, then, in order to be able to vote at the Annual Meeting, you must obtain an executed legal proxy from the Broker indicating that you were the beneficial owner of the shares on March 30, 2021, the record date for voting, and that the Broker is giving you its proxy to vote the shares. If your shares are held in the 401(k) Plan, you will not be able to vote your shares at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described above under “Voting Your Proxy.” Votes cast at the Annual Meeting or represented by proxy at the Annual Meeting will be tabulated by the inspector of election.

Technical Assistance. The Annual Meeting will begin promptly at 10:00 a.m. Central Time. We encourage you to access the Annual Meeting approximately 15 minutes in advance to allow ample time for you to log in to the meeting and test your computer audio system. We recommend that you carefully review the above procedures needed to gain admission in advance. Technicians will be ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the meeting login page at www.virtualshareholdermeeting.com/NI2021.

Submitting Questions During the Meeting. As part of the Annual Meeting, we will hold a live question and answer session during which we intend to answer questions submitted during the meeting that are relevant to the purposes of the meeting and the Company's business in accordance with the Annual Meeting procedures posted on the meeting website, as time permits. Questions may be submitted by stockholders that have used 16-digit control numbers to enter the meeting at www.virtualshareholdermeeting.com/NI2021. Questions and answers may be grouped by topic and substantially similar questions may be grouped and answered once.

You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send a letter to our Corporate Secretary (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the virtual Annual Meeting and voting during the meeting. Attending the virtual Annual Meeting will not in and of itself revoke a proxy.

A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present during the virtual Annual Meeting or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. Abstentions are counted for purposes of determining whether a quorum is present. As explained above under “Discretionary Voting by Brokers and ‘Broker Non-Votes,’ ” if Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting.

At the recommendation of the Nominating and Governance Committee, the Board has nominated the persons listed below to serve as directors, each for a one-year term, beginning at the Annual Meeting on May 25, 2021, and expiring at the 2022 annual meeting of our stockholders (the “2022 Annual Meeting”) and until their successors are duly elected or appointed and qualified. The nominees include eleven independent directors, as defined in the applicable rules of the NYSE, and our President and Chief Executive Officer (“CEO”). The Board does not anticipate that any of the nominees will be unable to serve, but if any nominee is unable to serve, the proxies will be voted in accordance with the judgment of the person or persons voting the proxies. All of the nominees currently serve on the Board. Set forth below is information regarding all of our nominees (each of whom has consented to being named in the Proxy Statement and to serving, if elected).

In order to be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy will not be counted as a vote cast either “for” or “against” with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be broker non-votes which will have no effect on the vote.

Under our Corporate Governance Guidelines, each nominee will tender a conditional resignation prior to the Annual Meeting, effective only if both (a) the votes “against” a nominee’s election exceed the votes “for” election (a “failed re-election”) and (b) such resignation is subsequently accepted by the Board. Any failed re-election will be referred to the Nominating and Governance Committee, which will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will make a determination and publicly disclose its decision, the rationale for the decision and the directors who participated in the process within 90 days after the election. The Board expects the director who has not been re-elected to abstain from participating in the Nominating and Governance Committee or Board discussion or vote regarding whether to accept his or her resignation offer. A director who has had a failed re-election may participate in discussions or votes with respect to other directors who have had a failed re-election.

Biographical information regarding each director nominee and his or her qualifications to serve as a director is set forth on the succeeding pages.

Our director nominees possess the necessary breadth and depth of skills and experience to oversee our business operations and long-term strategy as shown below:*

* Percentages shown represent the portion of the Board with the indicated skill or experience.

The race/ethnicity and gender of each of our director nominees are set forth below.

 

Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section 303A.02 of the NYSE Listed Company Manual. The Board also has adopted an additional independence standard providing that a director who is an executive officer or director of a company that receives payments from us in an amount which exceeds 1% of such other company’s consolidated gross revenues is not “independent” until three years after falling below such threshold. A copy of our Corporate Governance Guidelines is posted on our website at https://www.nisource.com/investors/governance.

The Board has affirmatively determined that, with the exception of Mr. Hamrock, all of the members of the Board and all nominees are “independent directors” as defined in Section 303A.02 of the NYSE Listed Company Manual and meet the additional standard for independence set by the Board.

We have established policies and procedures with respect to the review, approval and ratification of any transactions with related persons.

Under its charter, the Nominating and Governance Committee reviews reports and disclosures of insider and related person transactions. Under our Code of Business Conduct, the following situations may present a conflict of interest and must be reviewed by the Nominating and Governance Committee to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members) or otherwise present a conflict of interest:

Related person transactions are annually reviewed and, if appropriate, ratified by the Nominating and Governance Committee. Directors, individuals subject to Section 16 (“Section 16 Officer(s)”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and senior executive officers are expected to raise any potential transactions involving a conflict of interest that relate to them with the Nominating and Governance Committee so that they may be reviewed in a prompt manner.

There were no transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1, 2020, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules.

Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows:

NiSource Inc.

Attention: Board of Directors, or any Board member, or non-management directors, or Chair

of the Board

c/o Corporate Secretary

801 East 86^th Avenue

Merrillville, Indiana 46410

NiSource Inc.

Attention: Director, Corporate Ethics

801 East 86^th Avenue

Merrillville, Indiana 46410

We are committed to engaging with our stockholders and soliciting their views and input on important governance, environmental, social, executive compensation and other matters. Our Nominating and Governance Committee is responsible for overseeing the stockholder engagement process and the periodic review and assessment of stockholder input on governance matters. In 2020, management initiated stockholder conversations on a variety of corporate governance topics, including Board composition, the Board’s annual evaluation process, executive compensation and other matters. The information obtained from these stockholders was shared with our Nominating and Governance Committee. We intend to continue stockholder engagement on governance each year outside of the proxy season. Our independent directors are available to engage in dialogue with stockholders on matters of significance in order to understand stockholders’ views. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance and share its perspective on the Company and industry developments.

We have a Code of Business Conduct to promote: (i) ethical behavior, including the ethical handling of conflicts of interest; (ii) full, fair, accurate, timely and understandable financial disclosure; (iii) compliance with applicable laws, rules and regulations; (iv) accountability for adherence to our code; and (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller), as well as to our employees of and our affiliates. A copy of our Code of Business Conduct is available on our website at https://www.nisource.com/investors/governance and also is available to any stockholder upon written request to our Corporate Secretary at the address noted above under the heading “Communications with the Board and Non-Management Directors.”

Any waiver of our Code of Business Conduct for any director, executive officer or Section 16 officer may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted.

The Nominating and Governance Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and submitting any recommended changes to the Board for its approval. A copy of the Corporate

Governance Guidelines can be found on our website at https://www.nisource.com/investors/governance and is also available to any stockholder upon written request to our Corporate Secretary.

Our Corporate Governance Guidelines state that we should remain free to configure leadership of the Board in the way that best serves our interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of Chair and CEO. If the Chair is not an independent director, an independent Lead Director will be chosen annually by the Board, taking into account the recommendation of the Nominating and Governance Committee. The Chair or, if the Chair is not an independent director, the Lead Director will be the presiding director of executive sessions of the Board. To promote open discussion among the non-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its committees.

Since late 2006, the offices of Chair and CEO of the Company have been held by different individuals, with the Chair being an independent director.

The duties of the Chair of the Board are as follows:

The Board periodically reviews the structure and the division of responsibilities between the role of independent Chair and CEO. The structure and division of responsibilities is intended to maintain the integrity of the oversight function of the Board by providing a separate framework of responsibilities for the independent Chair as set forth above.

The Board takes an active role in monitoring and assessing our strategic, compliance, operational and financial risks, as well as cybersecurity risks. The Board administers its oversight function through utilization of its various committees. Our Risk Management Committee, which consists of members of our senior management, is responsible for oversight of our risk management process. Senior management regularly provides reports on our risks to the Board, the Audit Committee and the Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent registered public accounting firm the effect of regulatory and accounting initiatives on our financial statements and is responsible for review and evaluation of our major risk exposures, including cybersecurity and supplier risks, and the steps management has taken to monitor and control such exposures. In addition, the Compensation Committee, the Environmental, Safety and Sustainability (“ESS”) Committee, the Finance Committee and the Nominating and Governance Committee are each charged with overseeing the risks associated with their respective areas of responsibility.

The Board met 18 times during 2020. Each incumbent director attended at least 87% of the total number of meetings of the Board and of the committees of the Board on which he or she served, and in each case, during the periods that he

or she served. Pursuant to our Corporate Governance Guidelines, directors are expected to attend all Board meetings, to spend the time needed to discharge their responsibilities as directors, and to attend the annual meeting of stockholders. All then-serving directors attended the 2020 annual meeting of stockholders.

Pursuant to our Corporate Governance Guidelines, the Board expects that our senior officers will regularly attend Board and Committee meetings, present proposals and otherwise assist in the work of the Board. Members of the Board have direct access to all of our employees, outside advisors and independent registered public accounting firm.

The Board has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Compensation Committee, the ESS Committee, the Finance Committee and the Nominating and Governance Committee. The Board also established a Search Committee, an ad hoc committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. The Search Committee did not meet during 2020. The Board evaluates the structure and membership of its committees on an annual basis, appoints the independent members of the Board to serve on the committees and elects committee chairs following the annual meeting of stockholders. The following table shows the composition of each standing Board committee as of the date of this Proxy Statement. Mr. Hamrock does not serve on any committee, but is invited to attend various committee meetings. Mr. Kabat, Chair of the Board, is invited to attend all meetings of each of the committees.

The summaries below are qualified by reference to the entire charter for each of the Audit, Compensation, ESS, Finance and Nominating and Governance Committees; each of which can be found on our website at https://www.nisource.com/investors/governance and is also available to any stockholder upon written request to our Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules of the NYSE, the federal securities laws and such other requirements applicable to us, delegated to any committee by the Board, or in the case of the Compensation Committee, under any provision of any of our benefit or compensation plans.

The Audit Committee met 10 times in 2020. Our Audit Committee is responsible for the oversight of our internal audit function and financial reporting process. The Audit Committee has the sole authority to appoint, retain or replace our independent registered public accounting firm and is responsible for, among other things:

The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet our additional independence standard set forth in our Corporate Governance Guidelines.

For more information regarding the Audit Committee, see “Audit Committee Report,” “Proposal 3 — Ratification of Independent Registered Public Accounting Firm” and “Independent Registered Public Accounting Firm Fees” below.

The Compensation Committee met eight times in 2020. The Compensation Committee apprises the Board with respect to the evaluation, compensation and benefits of our executives. Its responsibilities include, among others:

The Compensation Committee has authority to delegate its responsibilities to subcommittees as deemed appropriate, provided the subcommittees are composed entirely of independent directors who also meet the other requirements for membership of the Compensation Committee.

All of the directors serving on the Compensation Committee are: (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forth in the Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees and (ii) “non-employee directors” as defined under Rule 16b-3 of the Exchange Act. For additional information regarding the Compensation Committee's principles, policies and practices, please see the discussion under “Compensation Discussion and Analysis (CD&A)”.

The ESS Committee met 11 times during 2020. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. Its responsibilities include, among others:

The Finance Committee met seven times during 2020. Its responsibilities include the following, among others:

The Nominating and Governance Committee met five times in 2020. Its responsibilities include, among others:

The Nominating and Governance Committee, with the assistance of the independent compensation consultant, annually reviews the amount and composition of non-employee director compensation. Please see the discussion under the heading “Director Compensation” for a description of the compensation we provide to our non-employee directors. The Nominating and Governance Committee also leads the processes set forth below.

Director Selection Process.  The Nominating and Governance Committee identifies and screens candidates for director and makes its recommendations for director to the Board. At times the Board may establish an ad hoc search committee to assist the Nominating and Governance Committee in this process. Additionally, the Nominating and Governance Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. The Board established a search committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. The Nominating and Governance Committee has also engaged the firm of Heidrick & Struggles International, Inc. In considering candidates for director, the Nominating and Governance Committee considers the skills, expertise, experience and qualifications that will best complement the overall mix of skills and expertise of the Board in view of the strategy of, and the risks and opportunities that we face, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. In addition, the Nominating and Governance Committee takes into account the racial, ethnic and gender diversity of the Board and actively seeks minority and female candidates.

The Nominating and Governance Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment who have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to us and our stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board, including limiting their service on other boards to a reasonable number. The Nominating and Governance Committee also takes into account the candidate’s level of financial literacy. The Nominating and Governance Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Nominating and Governance Committee also assesses the diversity of the Board as a part of its annual self-assessment process as described in more detail below. The Nominating and Governance Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders as it uses to evaluate the candidates identified by the Board.

The Board has determined that all of the members of the Nominating and Governance Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines.

For information on how to nominate a person for election as a director at the 2022 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 2022 Annual Meeting.”

Board Evaluation Process.  The Nominating and Governance Committee oversees the self-evaluation process, which is used by the Board and by each committee of the Board to determine effectiveness and identify opportunities for improvement. Annually at its meeting in March, the Nominating and Governance Committee initiates the self-evaluation process and approves the form of written evaluation questionnaires that are distributed to each director for completion. The written evaluation questionnaires are updated each year as necessary to reflect changes identified in the prior year, any committee charter changes and any suggestions from the directors. The questionnaires solicit feedback on Board composition, Board meeting mechanics including information received, core responsibilities, relationship with management, committee functioning and other relevant matters. In addition, on an ongoing basis, the Chair meets with each director individually to solicit feedback with respect to both the full Board and any committee on which the director serves, in addition to individual director performance and Board dynamics. Our Board utilizes the results of these

evaluations in making decisions on Board agendas, Board structure, committee responsibilities and agendas, information presented to the Board, and continued service of individual directors on the Board. This information is then shared with the Board, and appropriate actions or changes are then identified.

Retirement Age; No Term Limits.  The Board periodically evaluates the performance and qualifications of individual directors in connection with the nomination process, including the appropriate time for retirement of directors. However, no director after having attained the age of 72 years will be nominated for re-election to the Board unless the Board determines that the nomination is in the best interests of the Company. In addition, although the Nominating and Governance Committee will consider length of service in recommending candidates for re-election, the Board does not believe that adopting a set term limit for directors serves our interests. Such limits may result in the loss of contributions from directors who have been able to develop, over a period of time, increasing insight into our operations and our strategic direction. The Nominating and Governance Committee reviews these policies as part of its annual governance review and will consider modifications to these policies as deemed necessary and in our best interests and the best interests of our stockholders.

Director Compensation.  This section describes compensation for our non-employee directors. To attract and retain highly qualified candidates to serve on the Board, we provide a combination of cash and equity awards. Our non-employee director compensation is reviewed annually by our Nominating and Governance Committee with the assistance of Meridian Compensation Partners, LLC (“Meridian”), the Compensation Committee's independent compensation consultant. The Nominating and Governance Committee, with the assistance of Meridian, reviewed the amount and composition of director compensation for 2020 and recommended no changes as compared to 2019. A full-time employee who serves as a director does not receive any additional compensation for service on the Board. Accordingly, because Mr. Hamrock is also our President and CEO, he does not receive additional compensation for his service as a Board member.

For 2020, each non-employee director received an annual retainer of $235,000, consisting of $97,500 in cash and an award of restricted stock units (“RSUs”) valued at $137,500 at the time of grant. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter.

RSUs are awarded annually, and the number of RSUs is determined by dividing the value of the grant by the closing price of our common stock on the grant date. The RSUs granted following the Company’s 2020 annual meeting of stockholders were granted under the NiSource Inc. 2020 Omnibus Incentive Plan (“2020 Omnibus Plan”), while RSU awards granted prior to the 2020 annual meeting of stockholders were granted under the NiSource Inc. 2010 Omnibus Incentive Plan (“2010 Omnibus Plan”). Unless the non-employee director elects to defer receipt of his or her RSU awards, the RSUs are payable in shares of our common stock on the earlier to occur of: (a) the last day of the director’s annual term for which the RSUs are awarded; or (b) the date that the director separates from the Board due to a “Change-in-Control” (as defined in the 2020 Omnibus Plan or 2010 Omnibus Plan (the “Omnibus Plan”), as applicable); provided, however, that any director that commences service on the Board after the start of an annual term will vest on the first anniversary of the initial grant. The RSU awards also contain pro-rata vesting provisions for a separation from the Board due to retirement, death or disability. RSUs accrue dividends prior to settlement in shares of our common stock. If a non-employee director elects to defer receipt of his or her RSUs, then such deferred stock units will be paid in shares of our common stock upon the non-employee director's separation from the Board or such other date selected by the non-employee director.

Each non-employee director who serves as chair of a Board committee receives compensation for the additional responsibilities associated with such service. The 2020 committee chair fees were $20,000 for each of the standing committees. The Chair of the Board received additional annual compensation of $160,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.

All Other Compensation.  The compensation included under the column “All Other Compensation” in the 2020 Director Compensation Table below consists of matching contributions made by the NiSource Charitable Foundation.

Director Stock Ownership.  The Board maintains stock ownership requirements for directors that are included in our Corporate Governance Guidelines. Within five years of becoming a non-employee director, each non-employee director is required to hold an amount of our stock with a value equal to five times the annual cash retainer paid to directors. Company stock that counts towards satisfaction of this requirement includes shares purchased on the open market,

awards of restricted stock or RSUs, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household. All of the non-employee director nominees are in compliance with the stock ownership guideline or are within the five-year transition period included in the Corporate Governance Guidelines.

Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value. Approximately fifty-nine percent (59%) of a non-employee director’s 2020 annual retainer (valued as of the time of award and excluding committee retainers) consisted of RSUs, which are converted into common stock when vested and distributed to the director.

The table below sets forth all compensation earned by or paid to our non-employee directors in 2020. Our President and CEO did not receive any additional compensation for his service on the Board. His compensation for serving as President and CEO is discussed in the Executive Compensation section of this Proxy Statement.

The following table shows as of March 30, 2021, the number of shares of our outstanding common stock beneficially owned by: (i) each of our directors; (ii) each of the Named Executive Officers; (iii) our directors and executive officers as a group; and (iv) beneficial owners of more than 5% of our outstanding common stock (based solely on the Schedule 13G filings and any amendments thereto filed with the SEC on or before March 30, 2021) except as noted below. None of the Named Executive Officers or directors has any outstanding stock options as of that date. The business address of each of our directors and executive officers is our address.

Fiscal 2020 was an important transitional year for the Company. We kept our focus on execution despite the backdrop of COVID-19 and the sale of the CMA business. This focused execution drove continued investments in our asset modernization programs, enhanced our implementation of a safety management system across all of our operating companies, and advanced our transition to renewable energy generation. Throughout the year, we responded to our customer and community needs as relentless champions of safety, service and comfort. Our operating companies maintained their commitment to delivering safe and reliable utility service, while supporting customers through the challenges of COVID-19 by suspending shut offs, stopping late fees and offering additional flexible payment plans.

Following the closing of the CMA transaction in October, we repositioned our leadership and launched a Company-wide, multi-year initiative to enhance efficiencies and reduce overhead costs as we propel our safety and modernization strategies forward (“NiSource Next”). At the same time, we continued to execute on our environmental, social and governance (“ESG”) strategies, which along with NiSource Next, are designed to deliver sustained value over the long-term to all our stakeholders, including our customers, communities and employees.

Despite significant transitional and operational achievements in 2020, our performance results and stock price were significantly impacted by COVID-19 and the effect of the sale of the CMA business. This resulted in declines in executive pay for 2020 as compared to 2019, as reflected by our short-term cash-based incentive program (“STI”) and performance-based stock unit (“PSU”) incentive program results. For illustrative purposes:

Total shareholder return shown in the chart below reflects growth in the price of a share of our common stock, assuming dividends are reinvested.

 

In January 2021, the Compensation Committee determined that safety will be further emphasized in our 2021 incentive programs by: (1) increasing the weight attributable to safety performance from 10% to 30% in our 2021 STI design; and (2) including a safety performance magnifier in the 2021 PSUs design along with performance magnifiers related to environmental and diversity goals that support our ESG initiatives. Performance related to each magnifier can reduce or increase the ultimate payout of the 2021 PSUs.

To further align executive commitment with stockholder interests, and in light of the value creation that is expected through NiSource Next, the Committee considered the pivotal role the current leadership team will have on our long-term performance. The Committee concluded that a special performance-based equity award was essential to incentivize the achievement of the transformative goals required under NiSource Next. Accordingly, the Compensation Committee awarded special PSUs that can be earned only if RTSR is at or above above a utility peer group median over the next three years. Any earned award is further adjusted by a safety magnifier.

The graphic below shows that a significant portion of our CEO's total target direct compensation was both performance-based and at-risk consistent with our pay for performance philosophy.

Incentive Payouts. The below graphics summarize, by each Compensation Committee approved performance measure, target performance goals, achieved results and percentage of target STI earned in 2020 and 2018 PSUs earned over the 2018-2020 performance period. Prior to the payment of any 2020 STI or any 2018 PSUs, a threshold net operating earnings per share (“NOEPS”) trigger must be met. NOEPS is a non-GAAP measure described later in this CD&A in the section entitled “STI.”

 

 

The Compensation Committee maintains policies and procedures that it believes represent best practices in corporate governance that effectively protect the interests of our stockholders.

We believe highly-qualified executive talent is an essential driver of the successful achievement of our business objectives. The key design priorities of our 2020 executive compensation program were to:

The Compensation Committee believes that our executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives and reward effective leadership decisions that support the creation of value for all our stakeholders: customers, employees, communities and stockholders.

Each year, the Compensation Committee is responsible for reviewing and approving (or, in the case of our CEO, recommending to the independent members of the Board for approval) each element of total target direct compensation for our Named Executive Officers. With respect to each Named Executive Officer, the Compensation Committee’s fiscal year 2020 determinations and recommendations were based primarily on the following factors (“Pay Factors”):

In addition, the Compensation Committee considered compensation recommendations from our CEO, Mr. Hamrock, reflecting his assessment of each Named Executive Officer’s performance (other than his own performance). The Compensation Committee separately evaluated Mr. Hamrock’s performance to develop its compensation recommendation for review and approval by the independent members of the Board. Our CEO is not involved in making recommendations with respect to his compensation.

When making decisions about our executive compensation program, the Compensation Committee takes into account the stockholders’ views of such matters. In 2020, approximately 97% of the votes cast by our investors were voted in favor of our Say-on-Pay Proposal at our 2020 annual meeting of stockholders. No changes were made to the design of our executive compensation program in response to the 2020 Say-on-Pay vote.

The following are principal annual elements of compensation that we provide to our executive officers, including all of the Named Executive Officers:

In addition, during 2020, the Compensation Committee granted special retention awards in the form of RSUs and cash-based awards to certain Named Executive Officers. For more information regarding these awards, see the “Special Retention Awards” section later in this CD&A under “Executive Compensation Elements.”

We generally strive for total target direct compensation (base salary, annual short-term performance-based cash incentives and long-term equity incentive awards) to be competitive with the compensation paid to similarly positioned executives at companies within our compensation peer group (the “Comparator Group”). We do not, however, manage pay to a stipulated percentile of the Comparator Group practices.

For 2020, the Compensation Committee approved a mix of pay that is intended to balance short-term and long-term incentives and to focus the efforts of our Named Executive Officers on the achievement of both short-term business objectives and long-term strategic objectives. The majority of our Named Executive Officers’ compensation is in the form of equity awards to further align the interests of our Named Executive Officers with those of our stockholders.

The following charts show the mix of 2020 total target direct compensation for our CEO, the average total target direct compensation for other Named Executive Officers and the portion that is performance based and/or at-risk. For purposes of these charts, the percentage of total target direct compensation was determined based on the annual base salary and target incentive opportunities applicable to the Named Executive Officer as of December 31, 2020.

 

The following table shows 2020 total target direct compensation and each element of total target direct compensation for each Named Executive Officer based on the annual base salary and target incentive opportunities applicable to the Named Executive Officer as of December 31, 2020.

For 2020, based on its consideration of the Pay Factors as discussed above in the section entitled “Executive Compensation Decision Making,” the Compensation Committee (or, in the case of our CEO, the independent members of the Board) approved increased 2020 base salary levels of approximately three percent for Messrs. Brown and Vegas and four percent for Mses. Hightman and Sistovaris. The Compensation Committee also recommended, and the independent members of the Board approved, a similar three percent 2020 base salary increase for our CEO. These base salary adjustments were to be effective June 1, 2020, however, the Compensation Committee and, in the case of our CEO, the independent members of our Board, rescinded the base salary adjustments in light of the impact of COVID-19 on our annual financial plan.

Our STI provides participants, including the Named Executive Officers, with the opportunity to earn a cash incentive award tied to both Company performance and their individual contributions to our performance over a one-year performance period. For the 2020 performance year, a threshold financial NOEPS trigger was required before any cash award could be paid. Importantly, eligibility for participation in the STI extends to nearly all our employees. Every eligible employee has an incentive opportunity at trigger, target and stretch levels of performance. Once the threshold NOEPS trigger is met, cash incentive awards are paid based on achieved results against one corporate financial performance goal (NOEPS weighted 75%) and goals in operational focus areas designed to measure our progress in delivering on our key business imperatives of safety and customer care (weighted 25%).

The NOEPS financial performance goal is determined based on our annual financial plan, which is approved by the Board, and is designed to support achievement of our goal of creating sustainable stockholder value by growing earnings and providing a strong dividend. The safety and customer care goals are designed to incent achievement of our key business imperatives. In addition, under the terms of the Omnibus Plan, the Compensation Committee retains discretion to adjust STI awards downward, either on a formulaic or discretionary basis.

2020 STI Performance Measures. In January 2020, the Compensation Committee established performance measures and goals to be used to determine the 2020 STI payouts for the Named Executive Officers and all of our other participating employees. For 2020, the Compensation Committee selected the following performance measures for the reasons stated below.

Threshold measure. If the threshold performance level (i.e. “trigger”) level of NOEPS financial performance is met, then the amount of cash incentive award paid to the Named Executive Officers would be based on the achievement of goals relating to the performance measures described below.

Financial measure (75%): The Compensation Committee selected NOEPS as a financial measure because it is (i) viewed by the Board as representative of our fundamental earnings strength, (ii) aligned with stockholder value creation, (iii) used internally for budgeting and reporting to the Board, and (iv) generally consistent with our external reporting of results.

Safety measures (10%): DART rate and National Safety Council Barometer Survey (“NSCBS”) ranking.

Customer Care measures (15%): JD Power Studies and 2020 MSR Group Survey.

For 2020, the performance measures were consistent with the 2019 STI design except that the Compensation Committee refined the Customer Care measure by selecting the JD Power components that more precisely measure customer satisfaction based on customer perception focus areas relating to safety/quality, billing and price, as noted above.

2020 STI Target Opportunity. The Compensation Committee, after taking into account the Pay Factors discussed above in the section entitled “Executive Compensation Decision Making,” approved the following target STI opportunities for each Named Executive Officer, with the independent members of the Board approving the CEO’s target incentive opportunity. In so doing, the Compensation Committee approved increases from 70% to 75% of the target opportunity and from 60% to 65% of the target opportunity for Mses. Sistovaris and Hightman, respectively, noting exemplary leadership during 2019 and to further align their target opportunities with the competitive market. The 2020 target opportunities for the other Named Executive Officers remained the same as compared to 2019.

2020 STI Performance Goals, Achieved Results and Percentage of Target Earned. The chart below shows each performance measure and weight, target performance goal, achieved results and percentage of target earned.

2020 LTI Objectives. Our LTI is designed to align executives with stockholders and promote decision making that is consistent with our long-term business objectives. The Compensation Committee believes that our LTI awards:

2020 LTI Awards. The 2020 LTI awards were equity-based comprised of PSUs (80% of the 2020 target LTI award) and RSUs (20% of the 2020 target LTI award). The PSUs are eligible to vest based on financial performance and progress with respect to several key business imperatives that we believe build value for our customers, communities, employees and stockholders, subject to the achievement of a threshold cumulative financial trigger. The RSUs will vest after the completion of a multi-year service condition. The 2020 LTI award program is designed to:

2020 LTI Award Target Values. In January 2020, the Compensation Committee approved 2020 LTI awards to senior executives, which includes the Named Executive Officers. The Compensation Committee (or, in the case of our CEO, the independent members of the Board) set the 2020 LTI target award values for each Named Executive Officer at the amounts shown below. The actual value of the 2020 LTI awards, if any, will depend upon Company performance relative to pre-established performance measures and our stock price at the time the awards are settled.

Based on its consideration of the Pay Factors as discussed above in the section entitled “Executive Compensation Decision Making,” the Compensation Committee approved an increase in the 2020 LTI award target values as compared to 2019 LTI award target values for Messrs. Brown and Vegas and Ms. Sistovaris. Additionally, the Compensation Committee recommended to the independent members of the Board an increase in the 2020 LTI award target value as compared to 2019 LTI award target value for Mr. Hamrock. The independent members of the Board considered and approved the recommendation of the Compensation Committee. In doing so, the Compensation Committee considered the Pay Factors as discussed above in the Section entitled “Executive Compensation Decision Making.”

In particular, in considering increases for Messrs. Brown and Vegas and Ms. Sistovaris, and making its recommendation to the independent members of the Board with respect to Mr. Hamrock, the Compensation Committee considered the Pay Factors and the executives’ sustained strong performance in 2019. With respect to Ms. Sistovaris, the Compensation Committee approved an increase of approximately 13%, taking into account the need to further align her pay with: (i) the competitive market; (ii) the other Named Executive Officers; and (iii) the long-term nature of the expectations for her role. No change was made with respect to Ms. Hightman as her LTI award value remained aligned with market levels.

2020 PSUs Overview. The 2020 PSUs (80% of the 2020 target LTI award) are eligible for vesting only if a cumulative NOEPS performance trigger is met over a three-year performance period. In addition, vesting of the PSUs is tied to the executive’s continued employment through February 28, 2023, subject to special vesting rules in the event of death, retirement, disability or a qualifying termination following a change-in-control of the Company prior to the vesting date. Termination for any other reason prior to February 28, 2023 will result in forfeiture of the 2020 PSUs.

Threshold measure. A threshold financial trigger of cumulative NOEPS must be met before any PSUs vest and are paid to the Named Executive Officers. If met, then the number of PSUs that vest and are paid to the Named Executive Officers would be based on achievement against goals relating to the performance measures described below.

Three-year cumulative NOEPS. If the NOEPS performance trigger is achieved, 80% of the target PSUs (65% of the 2020 target LTI award) are eligible to vest based on NOEPS performance with our RTSR performance used as a modifier that may reduce or increase the number of PSUs that vest. The Compensation Committee selected this measure because it: (i) aligns the interests of our Named Executive Officers with those of our stockholders; and (ii) supports the creation of sustainable stockholder value by growing earnings and providing a strong dividend. The NOEPS result will generally be calculated as discussed above in the section entitled “2020 STI Performance Measures.”

2020 Customer Value Framework. The Compensation Committee continued its practice of supplementing the NOEPS measure with additional operational performance measures. If the NOEPS vesting trigger is achieved, the remaining 20% of the target PSUs (15% of the 2020 target LTI award) are eligible to vest based on the Company’s successful execution of the Customer Value Framework, with each category of the Customer Value Framework weighted equally.

For 2020, the Compensation Committee generally retained the measures used for the 2019 Customer Value Framework, except it eliminated the cost containment measure, reducing the measures from five to four in order to increase the emphasis on the achievement of the remaining non-financial operational performance measures.

The 2020 Customer Value Framework consists of the following performance measures:

The Compensation Committee utilized the above measures in the Customer Value Framework portion of the 2020 LTI in addition to the 2020 STI to emphasize the significance of these areas of operational focus.

The Customer Value Framework is designed to be achievable with strong management execution of the Company’s strategic objectives with respect to safety, customer care, organizational culture improvement and environmental impact. These objectives represent important enterprise-wide value initiatives, the achievement of which requires the coordinated, cross functional efforts of the Named Executive Officers. We believe the Customer Value Framework measures our success building value for our customers, communities, employees and stockholders and strikes an appropriate balance with respect to incentivizing earnings growth, non-financial business imperatives and stockholder returns over both the short-term and long-term time horizons.

The performance measures and goals for the 2020 PSUs are shown below.