PROPOSAL 3: APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(PROPOSAL 3 on your Proxy Card)
Shareholders will be given the opportunity to vote on the following advisory resolution (commonly referred to as Say-on-Pay):
“RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s 2025 Annual Proxy Statement pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis section, the compensation tables and the accompanying footnotes and narratives within the Executive Compensation section of the proxy statement).”
Background on Proposal
In accordance with Section 14A of the Exchange Act, shareholders are being given the opportunity to vote at the Annual Meeting on this advisory resolution regarding the compensation of our NEOs.
As described in the Compensation Discussion and Analysis, which begins on page 36, we believe attracting, motivating and retaining talented executives is critical to the achievement of our financial and strategic objectives. Our executive compensation program is designed with that premise in mind. Our basic philosophy is that our NEOs should be paid for performance, as determined by a combination of corporate performance measures and individual performance. For a comprehensive description of our executive compensation program, philosophy and objectives, including the specific elements of executive compensation that comprised the program in 2024, please refer to the CD&A. The 2024 NEO Compensation Information, including the Summary Compensation Table and other executive compensation tables (and accompanying narrative disclosures) that follow the CD&A, beginning on page 54, provide additional information about the compensation that we paid to our NEOs in 2024.
Section 14A also requires that, at least once every six years, shareholders be given the opportunity to vote on an advisory basis regarding the frequency (i.e., annually, every two years, or every three years) of future shareholder advisory votes on the compensation of our NEOs. At the 2023 annual meeting, the shareholders indicated a preference for holding Say-on-Pay advisory votes on an annual basis as recommended by the Board. Thus, the advisory vote in Proposal 3 reflects the approved annual frequency.
Effects of Advisory Say-on-Pay Vote
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our NEOs and will not be binding on the Board or the Compensation and HC Committee. However, the Compensation and HC Committee will consider the outcome of the vote when making future executive compensation decisions. The next shareholder advisory vote on compensation of our NEOs is expected to occur at the 2026 annual meeting.
The Board of Directors unanimously recommends a vote FOR approval of the
advisory resolution set forth above approving the compensation of our named executive officers.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following CD&A should be read together with the SCT and other tables that are presented beginning on page 54. Please note that this CD&A contains information about our corporate goals. We have included this information for the limited purpose of enabling investors and other readers of this CD&A to better understand our executive compensation philosophy, policies, programs, practices and results. This information should not be understood to represent our management’s estimates, of our future results or other guidance, and we specifically caution investors and other readers not to apply this information to other contexts.
This CD&A informs our shareholders about our compensation philosophy and decision-making process. It also explains the compensation-related actions taken, and factors considered, with respect to 2024 compensation for the NEOs. Based on 2024 positions and compensation levels, our NEOs are:
•Patricia K. Collawn, Chair and CEO
•Joseph D. Tarry, President and COO
•Elisabeth A. Eden, SVP & Chief Financial Officer
•Brian G. Iverson, General Counsel, SVP, Regulatory & Public Policy (hired September 16, 2024)
•Patrick V. Apodaca, SVP, General Counsel and Secretary through September 15, 2024 and
SVP, Principal Legal Advisor September 16, 2024 through his retirement on October 2, 2024.
The Compensation and HC Committee is composed entirely of independent directors and is responsible for approving and overseeing our executive compensation philosophy, policies, programs and practices. The Compensation and HC Committee also reviews and approves the Company’s succession plans for our CEO and other senior Officers, reviews and monitors the Company’s Affirmative Action and other DEI programs and oversees various other aspects of managing the Company’s human capital resources in coordination with our management team.
OVERVIEW
2024 Performance and Resulting Performance-Based Compensation
Our 2024 performance demonstrates continued alignment of our strategic goals with an executive compensation strategy grounded in pay for performance. As the holding company of two electric utilities operating in Texas (TNMP) and New Mexico (PNM), our short-term and long-term incentive compensation performance goals are aligned with our commitment to preparing our workforce with the knowledge and skills to thrive; delivering an intentional customer experience that exceeds our evolving customer and stakeholder expectations; enabling an environmentally sustainable future and deploying technologically advanced solutions that empower and benefit customers; demonstrating the relationship between customer excellence and our dedicated focus on financial strength.
In conjunction with these objectives, we remain focused on three financial goals:
•Earning authorized returns on our regulated businesses
•Delivering at or above industry-average long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings
•Maintaining investment grade credit ratings
AIP Performance for 2024
The three weighted performance measures for the 2024 AIP were: Incentive EPS (60%) and two operational goals, reliability (20%) and customer satisfaction (20%). These three AIP metrics aligned with our strategic goal of earning authorized returns on regulated businesses while delivering reliable and superior utility services to our customers. NEOs received annual cash incentive awards at 101% of target because the Company achieved:
•Between target and maximum performance of 2024 Incentive EPS at $2.74 per share;
•Below threshold performance of the reliability metric;
•Threshold performance of the New Mexico-based customer satisfaction metric; and
•Between target and maximum performance of the Texas-based customer satisfaction metric.
As in previous years, the 2024 AIP specifies that no awards would be made unless the Compensation and HC Committee determined that the Company achieved the applicable threshold level of performance for Incentive EPS and annual incentive awards, if earned, are capped at the maximum opportunity. Incentive EPS is a non-GAAP performance metric designed to measure the financial performance of the Company’s core business by making certain adjustments as reflected in the definition of Incentive EPS as explained in the Glossary of Terms Used in this Proxy and as discussed on page 52 under Adjustments for Certain Items.
For additional information about the AIP performance metrics and 2024 results, see NEO Incentive Goals and Results on page 45 and the Cash Compensation-Annual Incentive Awards section of Elements of Executive Compensation beginning on page 43.
LTIP Performance for 2022-2024 under the 2022 LTIP
Long-term incentive awards under the 2022 LTIP were to be delivered 70% in PSs and 30% in RSAs. PS awards are tied to three-year performance goals and RSAs were, consistent with past practice, to be granted following the end of the 2022-2024 performance period and then vest over a three-year period to promote an appropriate focus on creating sustainable shareholder value. As described in 2025 Compensation Actions beginning on page 49, RSAs were granted in February 2025 under the 2025 LTIP (versus the 2022 LTIP) and will vest over a three-year period thereafter.
The weighted performance metrics for the PS awards under the 2022 LTIP were: Earnings Growth (75%) and FFO/Debt Ratio (25%). The Earnings Growth metric encourages our executives to deliver at or above industry-average earnings for our shareholders in a sustainable manner while the FFO/Debt metric promotes maintaining solid investment grade ratings. For the 2022 LTIP, NEOs received PS awards at 71% of target because the Company achieved:
•Between threshold and target performance of Earnings Growth, which was 3.8% over 2022-2024, compared to a target performance of at least 4.0% and a threshold performance of at least 2%; and
•Below threshold performance of the FFO/Debt Ratio, a metric relating to investment grade ratings, which was 12.6% for 2024, compared to a target performance of at least 14% and a threshold performance of at least 13%.
For additional information on the 2022 LTIP performance metrics and 2022-2024 results, see NEO Incentive Goals and Results on page 45, Equity Compensation-Long-Term Incentive Awards section of Elements of Executive Compensation beginning on page 45, and Adjustments for Certain Items on page 52.
Return to Shareholders
The Company is committed to achieving financial results that consistently provide a positive return to shareholders over time. In accordance with SEC requirements, the Company prepares a performance graph each year for inclusion in the materials provided to shareholders. The performance graph below is provided because of its relevance to the Company’s performance and is also being provided with the annual shareholder letter from our Chair and CEO. The performance graph illustrates how a $100 investment in the Company’s common stock on December 31, 2019 would have grown to $113.12 by December 31, 2024, with all dividends reinvested. The chart also compares the TSR on the Company’s common stock to the same investment in the S&P 500 Index and the EEI Index. The S&P 500 Index is provided for general comparison purposes, as it is in the annual performance graph, but it is not used by the Compensation and HC Committee for any compensation decisions, benchmarking or determination of incentive awards. Beginning with the 2019 LTIP, the PS awards were earned based on the Company’s TSR performance relative to the EEI Index. In light of the then-contemplated Merger, the Company did not use TSR as a performance measure for the 2022 or 2023 LTIPs. For further discussion of the LTIP, please refer to the Equity Compensation-Long-Term Incentive Awards section of Elements of Executive Compensation. Please note that the performance graph is not intended to forecast or be indicative of possible future performance of our common stock.
Compensation Philosophy and Objectives
Our long-term success depends upon our ability to provide safe, reliable, affordable, environmentally responsible and sustainable energy and services to our customers and invest wisely for present and future shareholder returns. Achievement of these outcomes depends upon our success in attracting, motivating and retaining highly talented professionals.
Our executive compensation program is designed to attract, retain and motivate our Officers to support the overall objective of enhancing shareholder value. Our compensation philosophy is designed to:
•Attract and retain highly qualified, motivated and experienced executives,
•Provide total compensation opportunities that are market competitive and reflect the size of our Company,
•Pay our NEOs for performance based on corporate and business area measures,
•Link corporate compensation goals to the interests of our shareholders, and
•Recognize and reward outstanding Company and individual performance.
The Company’s compensation strategy is grounded in pay for performance, which is reflected in the way we have structured base pay, short-term incentives and long-term incentives. This philosophy applies to all employees, with a more significant level of variability and compensation at risk for Officers. As illustrated below, the TDC target opportunity for NEOs primarily comprises short-term and long-term incentive compensation that is “at risk.” These charts illustrate the mix of pay opportunity for 2024 for our CEO and the weighted average opportunity for our other NEOs, in each case assuming these NEOs were paid under our incentive compensation plans at the target level for 2024. These amounts do not include the amounts paid or payable pursuant to the retention agreement entered into with Mr. Tarry or the sign-on equity award made to Mr. Iverson on September 16, 2024, as noted on the Grants of Plan Based Awards in 2024 section beginning on page 56, as they were non-recurring components of their 2024 compensation.
The Compensation and HC Committee also considers other factors in determining the compensation of our NEOs, such as their respective qualifications, experience, expertise, performance and results of their business areas, as well as the market competitiveness of the compensation opportunity. The relative importance of these factors may vary from year to year and from NEO to NEO. As a result, the Compensation and HC Committee evaluates each component of pay in the context of each NEO’s total compensation.
TXNM Peer Group
Our peer group has been consistent from year to year and adjusted as needed for changes within the peer group due to mergers and acquisitions. The TXNM Peer Group was developed to reflect similarly sized utility companies that reflect the competitive market in which we might compete for talent. Prior to setting compensation levels for 2024, the Compensation and HC Committee determined that the TXNM Peer Group continued to be an appropriate peer group, based on the following criteria:
| | | | | |
| 1. | Ownership structure (publicly-traded), |
| 2. | Business focus (electric or natural gas utility and multi-utility companies), |
| 3. | Size (between one-third and three times the Company’s size in terms of revenues), |
| 4. | Organizational complexity, |
| 5. | Operational characteristics (such as nuclear generation ownership, multi-state regulated utilities), and |
| 6. | Likely competition for executive talent. |
The following table lists the companies that comprised the TXNM Peer Group used in the 2024 Benchmark Data to set 2024 compensation levels.
TXNM PEER GROUP
| | | | | | | | |
| ALLETE, Inc. | IDACORP, Inc. | ONE Gas, Inc. |
| Alliant Energy Corporation | MDU Resources Group, Inc. | Pinnacle West Capital Corporation |
| Avista Corporation | New Jersey Resources Corporation | Portland General Electric Company |
| Black Hills Corporation | NorthWestern Energy Group, Inc. | Southwest Gas Holdings, Inc. |
| Hawaiian Electric Industries, Inc. | OGE Energy Corporation | |
EXECUTIVE COMPENSATION PRACTICES & RESULTS
The Compensation and HC Committee strives to ensure that we compensate our NEOs consistent with shareholder interests. Highlights of our practices to sustain good governance alignment with shareholder interests include the following:
What We Do
•Pay for Performance – TXNM’s pay for performance philosophy is emphasized through the use of variable compensation. Generally, a significant portion of executive pay is considered “at risk” and is based on actual Company performance against both short-term and long-term performance goals. TDC varies depending on the
Company’s achievement of financial and non-financial objectives and long-term incentive compensation is designed to closely align with shareholders’ interests.
•Independent Compensation and HC Committee – The Compensation and HC Committee is composed entirely of independent directors. Year-end results and related performance-based pay are reviewed and approved by the Compensation and HC Committee for the NEOs while the independent members of the Board review and approve the CEO’s compensation.
•Independent Compensation Consultant – The Compensation and HC Committee uses an independent compensation consultant, Pay Governance, to regularly review and evaluate the Company’s compensation plans and programs. This includes a periodic review of the TXNM Peer Group and regular briefings regarding key trends and pending regulations. Pay Governance only provides services to the Board and its committees. No other services are provided to the Company by Pay Governance.
•Capped Incentive Award Opportunity – Awards are capped at a maximum payout under both our AIP and LTIPs.
•Reasonable Change in Control Severance Provisions (Retention Plan) – We have maintained change in control provisions for our executives that we believe are reasonable and customary. The change in control provisions provide for benefits under the Retention Plan only if a change in control actually occurs and the executive’s employment is terminated (i.e., double trigger). More discussion appears in the Payments Made Upon a Change in Control section of 2024 NEO Compensation Information.
•“Double Trigger” Change in Control Equity Vesting – The PEP generally provides for double trigger vesting following a change in control. More discussion appears in the Payments Made Upon a Change in Control section of 2024 NEO Compensation Information.
•Clawback Provisions – 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) the LTIPs and AIPs provide that a recipient will forfeit unvested and unpaid incentive compensation awards issued under the PEP for any manipulation or attempted manipulation of the performance results for personal gain at the expense of customers, shareholders, other employees or the Company. In addition, under the Company’s Clawback Policy, amended as of December 1, 2023 and described more fully on pages 11 and 50 of this proxy statement, incentive compensation awarded to Officers is subject to recoupment in the event of certain accounting restatements or if the Officer engaged in improper conduct.
•Hiring and Retention of High-Achieving Executives – The Compensation and HC Committee balances objectives of performance and retention to ensure that high-achieving, marketable executives remain motivated and committed to the Company.
•Tally Sheets – The Compensation and HC Committee reviews tally sheets of compensation, which includes retirement and other benefits, for our NEOs prior to making annual executive compensation decisions.
•Mitigation of Undue Risk – Management and the Compensation and HC Committee evaluate, through an annual risk assessment process, whether the Company’s compensation programs for employees, including NEOs, create risks that are reasonably likely to have a material adverse effect on the Company. Based on the risk analysis undertaken in 2024, the Compensation and HC Committee does not believe that the Company’s compensation programs, policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. Examples of the features that assist in mitigating risk include the Clawback Policy, the PEP forfeiture provisions noted above and the Company’s stock ownership holding guidelines. More discussion appears in the Board’s Role in Risk Oversight section on page 9.
•Conservative Perquisites – Perquisites for our Officers are modest and serve a reasonable business purpose.
•Equity Ownership Holding Guidelines – The Compensation and HC Committee believes that rewarding the NEOs with equity compensation supports retention and helps align management with the best interests of our shareholders, our customers and the Company. Therefore, the Company has stock ownership holding guidelines for all NEOs requiring that they hold from three (3) to five (5) times base salary in TXNM shares depending on the NEO’s position. See the Equity Ownership Guidelines section of Additional Information.
•Minimal Dilution – As the Company’s practice is to only use shares that are acquired on the open market to satisfy awards under the PEP, our equity compensation practices result in minimal dilution. More discussion appears in the Equity Compensation section of Elements of Executive Compensation.
What We Don’t Do
•No employment contracts with our CEO or other NEOs.*
•No individual change in control agreements with our CEO or other NEOs.
•No discounted stock options or SARs.
•No excise tax gross-ups.
•No repricing of stock options or SARs without prior shareholder approval.
•No share recycling of stock options or SARs.
•No evergreen provisions within the PEP.
•No dividends or dividend equivalents on unvested RSAs or unearned PSs.
•No hedging or monetization transactions (such as zero-cost collars and forward sales contracts, which would allow for locking in much of the value of Company securities) permitted by Officers, directors or employees.
•No short sales of Company securities by any Officer, director or employee.
•No pledging of Company securities by our executive officers, including NEOs, or directors.
* Other than special retention agreements entered into with certain NEOs as previously detailed in the 2024 proxy statement.
Results of 2024 Say-on-Pay Shareholder Advisory Vote
Our shareholders cast an advisory Say-on-Pay vote on executive compensation at the June 2024 annual meeting. The holders of 84.0% of the shares, present in person or by proxy and entitled to vote at the 2024 annual meeting, approved, on an advisory basis, the compensation of our NEOs disclosed in our 2024 proxy statement. The Compensation and HC Committee reviewed the outcome of the 2024 Say-on-Pay advisory vote and determined that significant changes to our executive compensation programs were not warranted and accordingly our current compensation philosophy remains consistent with the prior year. At our 2025 Annual Meeting, shareholders will again have the opportunity to cast an advisory Say-on-Pay vote regarding the compensation of our NEOs, as disclosed in this CD&A and the accompanying tables.
Furthermore, we continue to engage with our shareholders on a variety of topics, including executive compensation. The Compensation and HC Committee considers shareholder feedback in making its compensation decisions.
ELEMENTS OF EXECUTIVE COMPENSATION
Our executive compensation program is generally designed to maintain an appropriate and competitive balance between fixed pay (base salary) and variable pay or “at risk” incentives (annual and long-term incentives) under our AIP and LTIPs, respectively. The program typically consists of three core elements that comprise TDC – base salary, AIP and LTIP awards that are targeted around the median level of compensation paid to executive officers of similar companies in the 2024 Benchmark Data (as described in the Role of the Independent Compensation Consultant section of Administration and Resources). The annual and long-term incentives are structured to reward the achievement of strategic, financial and operational performance goals. As the NEO with the highest level of responsibility, the CEO generally has the greatest variability in TDC. The targeted level of each element of compensation is independently set at approximately the market median range and then appropriate adjustments are made based on each NEO’s performance, experience and strategic role to the Company. If the Compensation and HC Committee increases an NEO’s base salary, it also considers the resulting impact on annual and long-term performance-based incentive compensation levels and benefits. Following is a summary of compensation and benefits provided to our Officers.
| | | | | | | | |
Compensation Component | Key Characteristics | Purpose |
Base Salary | •Fixed amount of cash compensation based on an Officer’s role, experience and responsibilities | •Compensate Officers for scope of responsibilities, previous experience, individual performance and business area performance •Provide base compensation at a level consistent with our compensation philosophy |
| | | | | | | | |
Compensation Component | Key Characteristics | Purpose |
AIP | •Variable annual cash incentive based on corporate performance metrics with threshold, target and maximum opportunities for each Officer. Incentive EPS threshold must be achieved to receive any incentives and awards are capped at a maximum of two-times the target bonus amount | •Reward and motivate Officers for achieving annual financial and operating goals across the organization •Link annual pay with annual performance |
LTIP | •Awards are a combination of PSs and RSAs. PS awards represent variable compensation incentive based on long-term corporate performance metrics, typically with a three-year performance period and generally granted annually. Amounts actually earned will vary based on corporate performance and the Officer’s position | •Reward Officers for achieving long-term business objectives by tying incentives to long-term performance (PSs) •Align the interests of the Officers and the shareholders (PSs and RSAs) •Enhance retention of Officers |
Deferred Compensation and Retirement Benefits | •A broad-based 401(k) retirement plan and a non-qualified supplemental retirement savings plan •A frozen defined benefit plan for employees hired prior to January 1, 1998 | •Enhance recruitment and retention by aligning benefits with competitive market practices •Provide for future retirement of Officers |
Supplemental Benefits and Perquisites | •Generally limited to perquisites such as additional officer life insurance, long term disability, executive physicals, financial planning and the ECP. The ECP is limited to $23,000 for the CEO and President and COO, and $18,000 for SVPs | •Align with market practices to provide reasonable supplemental benefits |
Potential Severance Benefits and Change in Control | •These amounts are payable only if employment is terminated under certain conditions (i.e., double trigger) | •Support the objective assessment and execution of potential changes to the Company’s strategy and structure by our Officers •Enhance retention of management by reducing concerns about employment continuity |
Merger-Related Arrangements entered into in December 2023 | •Special RSAs designed to require continued employment for a period of time •Special cash bonuses to incentivize continued employment and/or recognize past performance
| •Special retention agreements to certain NEOs to incentivize them to remain employed during the pending decision relating to the contemplated Merger and for a transition period beyond termination of the Merger |
Sign-On RSA Award made in 2024 in connection with appointment of General Counsel, SVP, Regulatory & Public Policy | •One-time sign-on equity award with 50% fully vested on the hire date and the remaining 50% vested on the first anniversary of hire date | •Special one-time sign-on RSA award to attract top talent •Reinforces the Company’s objectives to align management’s interest with the interests of the Company’s shareholders and customers |
Below are detailed descriptions of components of our executive compensation program as well as certain changes made to our 2024 and 2025 executive compensation plans and programs to further align the structure of the program with shareholders’ interests and current market practices and conditions.
Cash Compensation
Base Salary
Base salary is the fixed component of compensation paid to each NEO for effectively discharging the duties and responsibilities of his or her position. An NEO’s base salary is determined by considering a variety of factors including, but not limited to:
•Scope of responsibilities,
•Previous experience,
•Individual performance,
•Base salaries for comparable NEOs within the TXNM Peer Group,
•Base salaries as reported in compensation surveys, such as the WTW General Industry Executive Survey Report - United States, and
•Recommendations from our independent executive compensation consultant, Pay Governance.
Annually, the Compensation and HC Committee considers all of these factors in recommending the base salary of the CEO (which is approved by the independent members of the Board) and in setting the base salary of all other NEOs. Salary adjustments, if any, are based on the median of base salaries revealed by benchmarking comparable positions, described in the Role of the Independent Compensation Consultant section of Administration and Resources, as well as the Company’s performance, internal pay equity among the Officers and the Compensation and HC Committee’s evaluation of the individual NEO’s performance. Performance is primarily measured on the basis of corporate and individual performance, with applicable goals and objectives being established at the beginning of each year.
At its February 2024 meeting, after reviewing the 2024 Benchmark Data, recommendations from management and Pay Governance, and considering the Company’s performance and strategic objectives, as well as each NEO’s performance in 2023, the Compensation and HC Committee approved increases in base salaries, effective March 2024, for certain of the NEOs, with the independent members of the Board approving an increase for our CEO. The following sets forth our CEO and other NEO’s base salaries in 2023 and as increased in 2024, in each case as approved by the Compensation and HC Committee.
NEO BASE SALARY
| | | | | | | | |
| NEO | 2023 Base Salary | 2024 Base Salary |
| Patricia K. Collawn | $1,088,250 | $1,164,428 |
| Joseph D. Tarry | $540,350 | $578,175 1 |
| Elisabeth A. Eden | $401,250 | $421,313 2 |
Brian G. Iverson 3 | N/A | $450,000 |
Patrick V. Apodaca 4 | $412,983 | $429,503 |
Additional salary adjustments were made throughout the year to recognize changes in NEOs' responsibilities. |
1 Effective December 3, 2024, Mr. Tarry’s annual base salary was increased to $725,000. |
2 Effective July 1, 2024, Ms. Eden’s annual base salary was increased to $450,000. |
3 Mr. Iverson joined the Company as General Counsel, SVP, Regulatory & Public Policy effective September 16, 2024. |
4 Effective October 2, 2024, Mr. Apodaca retired from the Company. |
Annual Incentive Awards
The AIP provides annual cash incentives to reward the NEOs for the achievement of annual financial and operating goals and to reinforce the Company’s pay for performance philosophy. Our philosophy is to set the AIP award opportunities at the approximate median for NEOs in comparable positions based on a benchmarking analysis, which for 2024 consisted of the
2024 Benchmark Data. The table below shows the 2024 AIP target award opportunity as compared to the 2023 AIP target award opportunity.
NEO ANNUAL INCENTIVE AWARD OPPORTUNITY
| | | | | | | | |
| Position | 2023 Target Opportunity1 | 2024 Target Opportunity1 |
| Patricia K. Collawn | 115% | 115% |
Joseph D. Tarry 2 | 70% | 70% 2 |
Elisabeth A. Eden 3 | 60% | 60% 3 |
Brian G. Iverson 4 | N/A | 70% |
| Patrick V. Apodaca | 55% | 55% |
Additional target bonus adjustments were made throughout the year to recognize changes in NEOs’ responsibilities. |
1 As a percentage of Base Salary. The threshold opportunity is half of the target opportunity and the maximum opportunity is two times the target opportunity. |
2 Effective July 1, 2024, Mr. Tarry’s target opportunity increased from 70% to 75% of his annual base salary. Effective December 3, 2024, Mr. Tarry’s target opportunity increased to 90% of his annual base salary. The increases to Mr. Tarry’s target opportunity are pro-rated based on the effective date of the increases. |
3 Effective July 1, 2024, Ms. Eden’s target opportunity increased from 60% to 65% of her annual base salary, pro-rated based on the effective date of the increase. |
4 Mr. Iverson’s 2024 target opportunity was pro-rated based on his date of hire, September 16, 2024. |
The Compensation and HC Committee approved the 2024 AIP for the performance period January 1, 2024 to December 31, 2024. The performance metrics are: Incentive EPS (weighted 60%) and two operational goals, reliability (weighted 20%) and customer satisfaction (weighted 20%). The reliability metric is designed to promote system reliability for customers by including a performance goal that measures the duration of interruptions on the electric system. We continue to focus on customer satisfaction by aligning operations and programs to improve the customer experience and to better serve our customers’ evolving needs in a rapidly changing energy landscape, which we believe ultimately benefits the Company and our shareholders.
The objective of the 2024 AIP was to motivate the eligible NEOs to achieve certain performance goals tied to the Company’s financial and operational results in order to achieve alignment with the corporate strategy of the Company. The Compensation and HC Committee considers the target performance goals to be rigorous, but reasonably achievable. Maximum performance levels are designed to be difficult to achieve. In order to ensure that awards were funded by the Company’s earnings, no awards were to be made under the 2024 AIP unless the Company achieved Incentive EPS of at least $2.65 (even if the reliability and customer satisfaction metrics are achieved above threshold) and annual incentive awards are capped at the maximum opportunity, 200% of target. Straight-line interpolation determines the bonus payout for performance that falls between threshold and target or between target and maximum levels. For 2024, the Compensation and HC Committee did not exercise its discretion to increase or decrease awards to any NEO. Maximum awards were to be made at Incentive EPS levels of $2.80 or higher. For 2024, the Company’s Incentive EPS for the eligible NEOs was $2.74, resulting in achievement of between target and maximum performance levels. The Company achieved below threshold performance level for the reliability goal. The customer satisfaction performance goal is comprised of two measurements, the PNM Research and Polling Survey, achieved at the threshold performance level, and the TNMP REP Satisfaction Survey, achieved at between target and maximum performance levels. See the performance results noted on the corporate scorecard below.
Under the 2024 AIP, NEOs were eligible to receive a target award as detailed in the table above. Based on aggregate performance results shown in the Corporate Scorecard below, each NEO received an award equal to 101% of their target AIP opportunity for the year. Awards are prorated for both changes in target opportunities and time in position.
NEO Incentive Goals and Results
CORPORATE SCORECARD
| | | | | | | | | | | | | | | | | | | | |
| Goal | Weight | Threshold 50% | Target
100% | Maximum
200% | 2024 Results | Weighted Results |
TXNM Incentive EPS | 60% of Scorecard | ≥$2.65/share | ≥$2.70/share | ≥$2.80/share | $2.74/share (140% of target award level) 1 | 84.0% |
Customer Satisfaction (measured by PNM Research and Polling Survey) (weighted average score) | 13% of Scorecard | 7.4 | 7.5 | 7.8 | 7.4 (50% of target award level) | 6.5% |
Customer Satisfaction (measured by TNMP REP Satisfaction) (weighted average score) | 7% of Scorecard | 4.0 | 4.3 | 4.7 | 4.5 (150% of target award level) | 10.5% |
Reliability (measured by PNM & TNMP SAIDI) (weighted respectively, 67% / 33%) | 20% of Scorecard | 109 | 104 | 98 | 122 (0% of target award level) | 0% |
Aggregate Performance Results | | | | 101% |
1 $2.74/share performance results in a 140% multiplier for the Incentive EPS goal. When the 60% weighting is applied, this results in a 84% weighted score.
Equity Compensation
The Company has not used newly issued shares or treasury shares to satisfy any equity awards granted under the PEP. Because the Company’s past and current practice is to only use shares acquired on the open market to satisfy awards of earned PSs and vested RSAs, the vesting of these awards does not increase the number of shares outstanding and does not have a dilutive impact on our shareholders. However, the awards are considered to be dilutive securities in the computation of earnings per share during the period from granting the award until the awards are earned or become vested. The dilutive impact of these awards on earnings per share has not been significant.
Long-Term Incentive Awards
The Compensation and HC Committee recommended and the Board approved an amendment to both the 2023 and 2024 LTIPs in February 2025 to exclude the impact of extraordinary or non-recurring events occurring after February 25, 2025, when determining the FFO/Debt Ratio goal under both plans. At the time of the amendment, the Committee was not aware of any extraordinary or unusual event that would impact the payout under either plan.
2024 LTIP Goals for the Performance Period 2024-2026
Consistent with past years and consistent with our pay for performance philosophy, for 2024, 70% of the NEO’s total 2024 long-term incentive compensation opportunities are dependent upon the Company’s achievement of three performance goals, noted below, over the 2024-2026 performance period. No PSs (shown as PS in the GPBA Table on page 56) will be earned by or paid to our NEOs if actual performance over the 2024-2026 performance period is below the threshold levels set forth in the following table.
Generally, a PS award will not be paid to an Officer who separates from service in the first half of the performance period for any reason other than a qualifying change in control termination. After the first half of the performance period, a prorated PS award will be paid to an NEO who separates from service due to death, disability, impaction or retirement, which will be
calculated based on actual performance and the number of full months of service completed by the Officer during the performance period. The 2024 LTIP award opportunities were benchmarked to the median of the 2024 Benchmark Data.
The PSs awarded under the LTIPs are tied to three-year performance measures designed to support long-term goals. For 2024, we used the following performance metrics for the LTIP PS awards:
•Earnings Growth (targets are determined by the Board based on the Company’s long-range operating plan),
•Relative TSR Goal (comparing Company TSR to the EEI Utilities Index), and
•FFO/Debt Ratio (targets are determined by the Board based on the Company’s long-range operating plan).
