PROXY STATEMENT

 

We are providing these proxy materials to you in connection with the solicitation of proxies by the Board of Directors of Entergy Corporation for our 2011 Annual Meeting of Shareholders and for any adjournment or postponement of the meeting (“Annual Meeting”). In this Proxy Statement, we refer to Entergy Corporation as “Entergy,” “the Company,” “we,” “our” or “us.”

 

We are holding the Annual Meeting at The Woodlands Waterway Marriott Hotel & Convention Center, 1601 Lake Robbins Drive, The Woodlands, Texas. We intend to mail this Proxy Statement and a proxy card to shareholders starting on or about March 24, 2011.

 

Who is entitled to vote at the Annual Meeting?

 

Holders of our common stock at the close of business on March 8, 2011, the record date for the meeting, can vote their shares at the Annual Meeting. On that date, we had 178,777,374 common shares outstanding and entitled to vote. Each common share is entitled to one vote on each matter properly brought before the meeting.

 

Do I need a ticket to attend the Annual Meeting?

 

No. If you are a shareholder of record, you need only present a form of personal identification to be admitted to the meeting. If your shares are held beneficially in the name of a bank, broker or other holder of record, you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting also will be offered to shareholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Annual Meeting in order to vote. If your shares are held in an employee savings plan, you must present your employee identification badge.

 

What is the difference between owning shares as a shareholder of record and as a beneficial owner?

 

You may own common shares in one of the following ways:

 

 

If your shares are registered directly in your name, you are the holder of record of these shares and you have the right to give your proxy directly to us, to give your voting instructions by telephone or by the Internet, or to vote in person at the meeting. If you hold your shares in street name, your broker, bank or other holder of record is sending these proxy materials to you. As a holder in street name, you have the right to direct your broker, bank or other holder of record how to vote by filling out a voting instruction form that accompanies your proxy materials. If your shares are held in one of the Savings Plans, see “How do I vote shares held under the Savings Plans?” below.

 

How do I vote?

 

Your vote is important. We encourage you to vote promptly. Internet and telephone voting is available through 11:59 p.m. Eastern Time on Tuesday, May 3, 2011 for shares held in the Savings Plans and through 11:59 p.m. Eastern Time on Thursday, May 5, 2011 for all other shares. You may vote in one of the following ways:

 

By Telephone.   If you are located in the United States or Canada, you can vote your shares by calling 1-800-690-6903 and following the instructions on the proxy card. You may vote by telephone 24 hours a day.

You will be able to confirm that the system has properly recorded your votes. If you vote by telephone, you do not need to return your proxy card.

 

By Internet.   You can also vote your shares over the Internet at www.proxyvote.com. If you hold your shares in street name, please follow the Internet voting instructions that accompany your proxy materials. You may vote on the Internet 24 hours a day. As with telephone voting, you will be able to confirm that the system has properly recorded your votes. If you vote on the Internet, you do not need to return your proxy card or your voting instruction form.

 

By Mail.   If you received your proxy materials by mail, you can vote by marking, dating, and signing your proxy card and returning it by mail in the enclosed postage-paid envelope. If you hold your shares in street name, please complete and mail the voting instruction form as indicated on such form.

 

At the Annual Meeting.   If you hold your shares in street name, you must obtain a proxy, executed in your favor, from the holder of record if you wish to vote these shares at the meeting.

 

All shares that have been properly voted and not revoked will be voted at the meeting. If you sign and return your proxy card without any voting instructions, your shares will be voted as the Board of Directors recommends.

 

What if I change my mind after I vote my shares?

 

If you are a shareholder of record, you can revoke your proxy before it is exercised by:

 

 

If you hold your shares in street name, you may submit new voting instructions by contacting your bank, broker or other holder of record. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described in the answer to the previous question.

 

All shares that have been properly voted and not revoked will be voted at the Annual Meeting.

 

How do I vote shares held under the Savings Plans?

 

If you participate in one of the Company’s Savings Plans, your proxy card includes the number of shares credited to your account under that plan as of the record date. To allow sufficient time for the trustee to vote, the trustee must receive your voting instructions by 11:59 p.m. Eastern Time, on May 3, 2011. If the trustee does not receive your instructions by that date, the trustee will vote your shares in the same proportion of votes that the trustee receives from the other participants who did vote, except as may be otherwise required by law.

 

Is my vote confidential?

 

We maintain the confidentiality of the votes of individual shareholders. We do not disclose these votes to any member of management, unless we must disclose them for legal reasons. However, if a shareholder writes a comment on the proxy card, we will forward the comment to management. In reviewing the comment, management may learn how the shareholder voted. In addition, the Inspectors of Election and selected employees of our independent tabulating agent may have access to individual votes in the normal course of counting and verifying the vote.

 

What are the voting requirements to elect directors and approve each of the proposals discussed in this Proxy Statement?

 

Quorum.   We will have a quorum and will be able to conduct the business of the Annual Meeting if the holders of a majority of the votes that shareholders are entitled to cast are present at the meeting, either in person or by proxy. Abstentions and “broker non-votes” (see below) are counted as present for purposes of determining a quorum.

Votes Required for Proposals.   To elect directors and adopt the other proposals, the following proportion of votes is required:

 

 

Although the advisory votes on executive compensation and the frequency of future advisory votes on executive compensation are non-binding, as provided by law, our Board will review the results of the votes and will take them into account in making a determination concerning executive compensation and the frequency of such advisory votes.

 

Who counts the votes?

 

We have engaged Broadridge Financial Solutions, Inc. as our independent agent to receive and tabulate shareholders votes. Broadridge will separately tabulate “for” and “against” votes, votes on the frequency of holding an advisory vote on executive compensation, abstentions and broker non-votes. Broadridge has also been retained to be our election inspector to certify the results, determine the existence of a quorum and the validity of proxies and ballots, and perform any other acts required under the General Corporation Law of Delaware.

 

A vote to Abstain will, pursuant to the Company’s bylaws, not have any effect with respect to the election of directors. It will, however, have the effect of a vote Against the other proposals other than Proposal 5 (the advisory vote on the frequency with which the advisory vote on executive compensation should be held).

 

Could other matters be decided at the Annual Meeting?

 

As of the date of this Proxy Statement, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement. If other matters are properly presented at the Annual Meeting for consideration, the Proxy Committee appointed by the Board of Directors (the persons named in your proxy card if you are a shareholder of record) will have the discretion to vote on those matters for you.

 

What happens if I do not submit voting instructions to my broker?

 

If a proposal is considered, pursuant to New York Stock Exchange (“NYSE”) rules, to be routine (see below), a broker or other entity holding shares for an owner in street name may vote for the proposal without receiving voting instructions from the owner. If a proposal is not routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. A broker non-vote occurs when the broker or other entity is unable to vote on a proposal because the proposal is not routine and the owner does not provide any instructions. For purposes

of our Annual Meeting, we understand that the proposal relating to the ratification of the selection of our independent registered public accountants will be treated as a routine item, but all other proposals will not be deemed routine items. Broker non-votes will not have an impact on the outcome of any proposal to be voted on at the Annual Meeting.

 

Who will pay for the cost of the proxy solicitation?

 

We will pay the expenses of soliciting proxies. Our directors, officers or employees may solicit proxies for us in person, or by telephone, facsimile or electronic transmission. We have hired Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902 to help us distribute and solicit proxies. We will pay Morrow $14,000, plus expenses, for these services.

CORPORATE GOVERNANCE

 

As of March 24, 2011, there were 13 members of the Board of Directors:

 

 

The Board provides oversight with respect to our overall performance, strategic direction and key corporate policies. It approves major initiatives, advises on key financial and business objectives, and monitors progress with respect to these matters. Members of the Board are kept informed of our business by various reports and documents provided to them on a regular basis, including operating and financial reports made at Board and Committee meetings by the Chairman and Chief Executive Officer and other officers. The Board has six standing committees: Audit, Corporate Governance, Personnel, Finance, Nuclear and Executive. The charters of the Audit, Personnel and Corporate Governance Committees are available on the Company’s Investor Relations website at http://www.entergy.com/investor_relations/corporate_governance.aspx and in print to any shareholder who requests them from the Secretary of the Company.

 

The Board met 13 times in 2010. Each incumbent member of the Board attended at least 75% of the total number of meetings of the Board and the committees on which he or she served. We encourage, but do not require, our Board members to attend annual meetings of shareholders. All of our Board members then in office attended our 2010 Annual Meeting of Shareholders.

 

The nominees for election to the Board of Directors at the Annual Meeting include all of our current directors with the exception of Mr. Blount and Mr. Nichols, who are retiring from our Board at the Annual Meeting. For additional information concerning the background and qualifications of the director nominees, see “Matters Requiring Shareholder Action — Proposal 1 — Election of Directors.”

 

A director is considered independent if the Board affirmatively determines that he or she has no material relationship with the Company and otherwise satisfies the independence requirements of the NYSE. A director is “independent” under the NYSE listing standards if the Board affirmatively determines that the director has no material relationship with us directly or as a partner, shareholder or officer of an organization that has a relationship with us. According to the NYSE listing standards, a director is not independent if:

 

 

 

The Board of Directors has reviewed information concerning each of its non-employee members to determine compliance with the independence standards established by the NYSE. The Board has affirmatively determined that each of our non-employee directors is independent within the meaning of the rules of the NYSE. In making this determination, the Board considered Mr. Percy’s service as the non-compensated, non-executive chair of the Board of Directors of Hope Enterprise Corporation, a non-profit community development financial institution, that provides financial products and services in Arkansas, Louisiana and Mississippi. In 2010, certain of our subsidiary corporations contributed $2,500 to this entity and one of our subsidiaries renewed a $1,500,000 loan to a for-profit subsidiary of Hope Enterprise Corporation. Mr. Percy is a director of the subsidiary, but is not an officer or employee of Hope Enterprise Corporation or any of its subsidiaries. The Board also considered the fact that Mr. Tauzin recently became affiliated with the legislative practice of Alston & Bird LLP, a law firm that has previously been engaged by the Company and which may be engaged by the Company in the future. Mr. Tauzin will be Special Legislative Counsel to the firm in its legislative and public policy practice. He will not practice law and will not provide any services to the Company or any of its affiliates, nor will any compensation Mr. Tauzin receives from Alston & Bird be based in whole or in part on fees received by Alston & Bird from the Company or its affiliates. In 2010, the fees paid by the Company to Alston & Bird represented less than 0.1% of Alston & Bird’s total fee revenue.

 

Audit Committee.   The Board has established an Audit Committee for the purpose of overseeing our accounting and financial reporting processes and the audits of our financial statements. In addition, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to, among other things:

 

 

The Board has adopted an Audit Committee Charter, a copy of which is available at http://www.entergy.com/investor_relations/corporate_governance.aspx and in print to any shareholder who requests it from the Secretary of the Company. For information about the Audit Committee’s policy regarding independent auditor service, see “Entergy Audit Committee Guidelines for Pre-Approval of Independent Auditor Services” on page 60 of this Proxy Statement.

 

The Audit Committee consists of four directors, each of whom the Board has determined has no material relationship with us and is otherwise independent under the rules of the NYSE. In addition, all Audit Committee members must meet the heightened standards for independence for audit committee members imposed by the Securities and Exchange Commission (“SEC”) and the NYSE. Under those heightened standards, a director may not serve on the Audit Committee if the director (i) has received any consulting, advisory, or other compensatory fees from us (other than in his or her capacity as a director) or (ii) is our affiliate or the affiliate of any of our subsidiaries.

 

Each member of our Audit Committee satisfies these heightened standards. No director may serve as a member of the Audit Committee if that director serves on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of that director to effectively serve on the Audit Committee. All Audit Committee members must be financially literate, and at least one member must have accounting or related financial management expertise.

The members of the Audit Committee are: Steven V. Wilkinson (Chair), Maureen S. Bateman, Stuart L. Levenick and James R. Nichols.

 

The Board has determined that Mr. Wilkinson, the Chair of the Audit Committee, is an audit committee financial expert, as such term is defined by the rules of the SEC. During 2010, the Audit Committee met 12 times.

 

Corporate Governance Committee.   The Board has established the Corporate Governance Committee, which is responsible for, among other things:

 

 

The Board has adopted a Corporate Governance Committee Charter, a copy of which is available at http://www.entergy.com/investor_relations/corporate_governance.aspx and in print to any shareholder who requests it from the Secretary of the Company.

 

The Corporate Governance Committee consists of three directors, each of whom the Board has determined has no material relationship with us and is otherwise independent under the rules of the NYSE. The members of the Corporate Governance Committee are: Alexis M. Herman (Chair), Gary W. Edwards and William A. Percy, II.

 

During 2010, the Corporate Governance Committee met 8 times.

 

Personnel Committee.   The Board has established a Personnel Committee which is responsible for, among other things:

 

 

The Board has adopted a Personnel Committee Charter; a copy of which is available at http://www.entergy.com/investor_relations/ corporate_governance.aspx and in print to any shareholder who requests it from the Secretary of the Company.

 

The Personnel Committee consists of four directors, each of whom the Board has determined has no material relationship with us and is otherwise independent under the rules of the NYSE. The members of the Personnel Committee are: Maureen S. Bateman (Chair), Gary W. Edwards, Alexis M. Herman and Stewart C. Myers.

 

During 2010, the Personnel Committee met 8 times. In addition, the Personnel Committee met jointly with the Finance Committee once in 2010. The role of our Chief Executive Officer in determining or recommending the amount or form of executive compensation is discussed in “Compensation Discussion and Analysis” on page 30 of this Proxy Statement.

 

The Personnel Committee Report is set forth on page 32 of this Proxy Statement, immediately following the “Compensation Discussion & Analysis” section.

 

Finance Committee.   The Board has established the Finance Committee, which is responsible for, among other things:

 

 

The Finance Committee consists of six directors. The members of the Finance Committee are: W. Frank Blount (Chair), Donald C. Hintz, Stuart L. Levenick, Stewart C. Myers, James R. Nichols and W. J. “Billy” Tauzin.

 

During 2010, the Finance Committee met 7 times. In addition, the Finance Committee met jointly with the Personnel Committee once during 2010.

 

Nuclear Committee.   The Board has established the Nuclear Committee, which is responsible for, among other things:

 

 

The Nuclear Committee consists of five directors. The members of the Nuclear Committee are: Donald C. Hintz (Chair), W. Frank Blount, William A. Percy, II, W. J. “Billy” Tauzin and Steven V. Wilkinson.

 

During 2010, the Nuclear Committee met 7 times.

 

Executive Committee.   The Board has established the Executive Committee, which is authorized to act for the Board on matters other than those matters specifically reserved by Delaware law to the entire Board. The members of the Executive Committee are: J. Wayne Leonard (Chair), W. Frank Blount, Gary W. Edwards and Donald C. Hintz.

 

During 2010, the Executive Committee did not meet.

 

Corporate Charters and Ethics Policies.   Our Corporate Governance Guidelines, certificate of incorporation, Bylaws and Board committee charters form the framework of our corporate governance. In addition, we have adopted a Code of Business Conduct and Ethics for the members of our Board of Directors, a Code of Business Conduct and Ethics for our employees and a Code of Entegrity, which sets forth the ethical responsibilities of our employees, officers and representatives.

 

Our Corporate Governance Guidelines, the charters of our Audit, Personnel and Corporate Governance Committees, and our ethics guidelines, including any amendments, are available at http://www.entergy.com/investor_relations/corporate_governance.aspx and in print to any shareholder who requests it from the Secretary of the Company.

 

Board Independence.   Our Corporate Governance Guidelines state that the Board of Directors should include a substantial majority of non-employee directors and a majority of independent directors. Under our Corporate Governance Guidelines, no director qualifies as independent unless the Board of Directors affirmatively determines that the director has no material relationship with the Company (directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In addition, the Board of Directors applies the independence tests specified in the rules of the NYSE. For additional information, see “Corporate Governance — Director Independence.”

 

Executive Meetings of the Board of Directors.   The non-employee directors meet in executive session (separate from management) at least four times a year. In addition, if non-employee directors include directors who are not independent, the independent directors meet in executive session at least once a year. The non-employee directors met in executive session 7 times in 2010.

 

Board Leadership Structure and Risk Oversight.   Our Company is led by J. Wayne Leonard, who has served as Chief Executive Officer and Chairman of the Board since August 2006. Our Board is composed of Mr. Leonard and 12 independent directors. Our Corporate Governance Guidelines require that when the roles of Chairman of the Board and the Chief Executive Officer are combined, the Board of Directors appoints from among its independent members a Presiding Director. The Presiding Director is recommended by the Corporate Governance Committee and appointed by a majority of the independent members of the Board of Directors. The Presiding Director, subject

to his or her annual election to the Board of Directors, serves for a term of three years. The Company’s Presiding Director currently is Gary W. Edwards.

 

Under our Corporate Governance Guidelines, the Presiding Director has the following responsibilities:

 

 

As discussed above, the Board has six standing committees — audit, corporate governance, executive, finance, nuclear and personnel. Each of the committees, other than the Executive Committee, consists solely of independent directors with each of the six committees having a separate chair.

 

We believe that having a combined Chairman/Chief Executive Officer, independent chairs for each of our Board committees and an independent presiding director provides the right form of leadership for our Company. This leadership structure is commonly utilized by other public companies and we believe that it has been an effective structure for us because it facilitates swift and effective decision making and helps to assure that the Company speaks with one voice, while at the same time encouraging open and constructive dialogue among Board members.

 

We believe that the Board of Directors provides effective oversight of the risks we face and our risk assessment and risk management processes. In accordance with NYSE requirements, our Audit Committee has the primary responsibility for overseeing risk management. To assist the Audit Committee in discharging its oversight responsibility, management provides the committee with regular reports on environmental compliance, corporate compliance, significant legal matters, the Company’s insurance programs, and market and credit risk. Our standing Board committees also regularly consider risks arising within their respective functional areas of responsibility, with broad operational risks reviewed by the full Board. Thus, under their respective committee charters, the Finance Committee evaluates risks associated with strategic decisions and major transactions; the Audit Committee reviews risks relating to the financial reporting process and the Company’s internal controls; the Corporate Governance Committee considers risks relating to the Company’s corporate governance and legislative and regulatory policy; the Personnel Committee considers risks relating to compensation, safety, employee matters and succession planning; and the Nuclear Committee considers risks relating to safety and other matters unique to our nuclear fleet. Each of these committees receives regular reports from management which assist it in its oversight of risk in its respective area of responsibility.

 

Board Evaluation Process.   The Board conducts a self-evaluation process at least annually to determine whether it and its committees are functioning effectively.

 

Mandatory Resignation upon Change in Professional Circumstances.   Under our Corporate Governance Guidelines, non-employee directors should submit their resignations when either their employment or the major responsibilities they held when they joined the Board changes. Based on the recommendation of the Corporate Governance Committee, the Board reviews the appropriateness of the director’s nomination for re-election to the Board under these circumstances.

Mandatory Director Retirement and Term Limits.   Under our Corporate Governance Guidelines, a person may not be nominated for election or re-election to the Board if he or she has reached the age of 72 on or before January 1 of the year in which such person would be elected or re-elected, unless specifically recommended to serve beyond the age of 72 by the Corporate Governance Committee and approved by the Board of Directors. The Company does not have term limits for its directors. Instead, our Board addresses the suitability for continued service as a director upon the expiration of each director’s term.

 

Succession Planning for the Chief Executive Officer.   The Personnel Committee reports on at least an annual basis to the Board on succession planning. Our succession planning is intended to include appropriate contingencies for the unexpected retirement or incapacity of the Chief Executive Officer.

 

Director Orientation and Continuing Education.   The Corporate Governance Committee specifies the desired components of new director orientation and makes periodic recommendations concerning the continuing education of all Board members.

 

Director Stock Ownership Guidelines.   The Board of Directors believes the alignment of directors’ interests with those of shareholders is strengthened when Board members are also shareholders. The Board of Directors therefore requires that all non-employee directors, within three years of being first elected, own shares or units of Entergy common stock having a market value of at least four times their annual cash retainer. A review of non-employee director stock ownership was conducted at the December 2010 Corporate Governance Committee meeting. The Committee determined that all of our non-employee directors satisfied these guidelines, as all non-employee directors who had been members of the Board for at least three years held the requisite number of shares or units.

 

Executive Officer Stock Retention Policy.   The Personnel Committee has adopted stock retention guidelines applicable to the Company’s executive officers. Our guidelines require an executive officer to achieve and maintain a level of stock ownership equal to a specified multiple of his or her salary. Until an executive officer achieves the required level of stock ownership, the executive officer is required: (i) upon the exercise of any stock option granted on or after January 1, 2003, to retain at least 75 percent of the after tax net profit in Entergy common stock; and (ii) to hold 100 percent of any restricted stock grants, net of taxes.

 

Majority Voting in Director Elections.   Our Bylaws require each director to be elected by a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted “For” a director must exceed the number of votes cast “Against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.

 

Political Contributions.   We are committed to participating constructively in the political process, as we believe participation is essential to our Company’s long-term success. Our participation in the political process includes contributions to political organizations in a manner that is compliant with all applicable laws and reporting requirements. We have established effective governance processes including oversight by our governmental affairs department and in 2010, our Board adopted a policy governing political contributions made by our Company. We have also committed to produce an annual report regarding our political contributions to candidates for election to political office, political parties, political committees and political entities organized under Section 527 of the Internal Revenue Code (the “Code”). The annual report will disclose the dollar amounts of the portion of more than de minimis annual dues or payments made by Entergy to trade associations that are not deductible under Section 162(e)(1) of the Code. The report will also include information regarding Entergy’s sponsorship of the Entergy Corporation Political Action Committee (“ENPAC”), its purposes and governance mechanisms and that information about ENPAC’s activities can be found on the Federal Elections Commission website. Please see our website at http://www.entergy.com/investor_relations/corprate_governance.aspx for a copy of the annual report and more information about the ways in which we participate in the political process.

 

Review of Transactions with Related Persons.   Our Board of Directors has adopted written policies and procedures for the review, approval or ratification of any transaction involving an amount in excess of $120,000 in which any director or executive officer of the Company, any nominee for director, or any immediate family member of the foregoing has or will have a material interest as contemplated by Item 404(a) of Regulation S-K (“Related Party Transactions”). Under these policies and procedures, the Corporate Governance Committee, or a

subcommittee of the Board of Directors consisting entirely of independent directors, reviews the transaction and either approves or rejects the transaction after taking into account the following factors:

 

 

The policy does not apply to (a) compensation and related party transactions involving a director or an executive officer solely resulting from that person’s service as a director or employment with the Company so long as the compensation is approved by the Board of Directors (or an appropriate committee), (b) transactions involving the rendering of services as a public utility at rates or charges fixed in conformity with law or governmental authority or (c) any other categories of transactions currently or in the future excluded from the reporting requirements of Item 404(a) of Regulation S-K.

 

 

Since December 31, 2009, neither the Company nor any of its affiliates has participated in any Related Party Transaction.

 

 

We believe that communication between the Board of Directors and the Company’s shareholders and other interested parties is an important part of the corporate governance process. The independent members of the Board of Directors of the Company have adopted the following communication policy:

 

Shareholders and other interested parties may communicate with the Board or individual directors, including non-management directors, by writing to them in care of the Presiding Director at the address set forth below:

 

Presiding Director

Entergy Corporation

639 Loyola Avenue

P.O. Box 61000

New Orleans, LA 70161

E-mail: etrbod@entergy.com

 

The following types of communications will not be forwarded to the directors:

 

 

Except as provided above, our Secretary forwards communications sent in accordance with the above instructions to the Board or to any individual director(s) to whom the communication is directed unless the communication is threatening, illegal or similarly inappropriate. The Secretary periodically advises the Presiding Director of significant communications received from shareholders and other interested parties.

 

The Corporate Governance Committee has not established any specific, minimum qualifications that must be met by director candidates or identified any specific qualities or skills that it believes our directors must possess. The Committee’s policy regarding consideration of potential director nominees acknowledges that choosing a Board member involves a number of objective and subjective assessments, many of which are difficult to quantify or categorize. The Committee seeks to nominate candidates with superior credentials, sound business judgment, and the highest ethical character. The Committee also will take into account the candidate’s relevant experience with businesses or other organizations of comparable size to the Company and seeks to identify candidates whose experience will add to the collective experience of the Board. The Committee believes the Board should reflect a diversity of backgrounds and experiences in various areas, including age, gender, race, geography and specialized experience, and candidates are assessed to determine the extent to which they would contribute to that diversity. The Committee also seeks to confirm that candidates are not disqualified from serving on the Board under applicable legal or regulatory requirements and evaluates candidates’ independence, as that term is defined under applicable legal and regulatory requirements. The Corporate Governance Committee annually evaluates the effectiveness of its policy and procedures for the evaluation of director candidates.

 

The Corporate Governance Committee does not have any single method for identifying director candidates but will consider candidates suggested by a wide range of sources. Blanche Lambert Lincoln was elected to the Board in January 2011, effective March 2, 2011; we also increased the size of the Board to 13 members effective March 2, 2011. Recognizing that two vacancies on the Board would be created by the retirements of Messrs. Blount and Nichols, the Corporate Governance Committee established a process to identify and evaluate prospective director candidates. The Committee sought to identify candidates with backgrounds and qualifications that would add to the collective knowledge and expertise of the Board, while also reflecting an appropriate diversity of backgrounds and experiences. With respect to Ms. Lincoln, the Committee also took into account her strong ties to the State of Arkansas. Ms. Lincoln was considered by the Committee at the initial suggestion of Wayne Leonard, our Chief Executive Officer and with other Board support based on her strong reputation in the Senate on a broad range of issues. Ms Lincoln was interviewed and, at the conclusion of this process, the Committee unanimously recommended that Ms. Lincoln be elected to the Board.

 

The Corporate Governance Committee will consider director candidates recommended by our shareholders. Shareholders wishing to recommend a candidate to the Corporate Governance Committee should do so by submitting the recommendation in writing to our Secretary at 639 Loyola Avenue, P.O. Box 61000, New Orleans, LA 70161, and they will be forwarded to the Corporate Governance Committee members for their consideration.

 

Any recommendation should include:

 

 

Once the Corporate Governance Committee receives the recommendation, it may request additional information from the candidate about the candidate’s independence, qualifications and other information that would assist the Corporate Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our Proxy Statement, if nominated. The Corporate Governance Committee will

apply the same standards in considering director candidates recommended by shareholders as it applies to other candidates.

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors and executive officers, and any persons owning more than ten percent of Entergy’s common stock, to file with the SEC and NYSE initial reports of beneficial ownership and certain changes in that beneficial ownership, with respect to the equity securities of Entergy. We prepare and file these reports on behalf of our directors and executive officers. Based solely on a review of these forms filed with the SEC and written representations from the reporting persons that no Form 5 was required, the Company believes all reports were timely filed.

 

Introduction

 

In this section, we discuss and analyze the salaries and other compensation elements paid in 2010 to our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated executive officers (collectively, the “Named Executive Officers”). We believe the executive pay programs described herein and in the accompanying tables have played a material role in our ability to drive strong financial results and to attract and retain a highly experienced and successful management team. Compensation data for each Named Executive Officer appear in the summary compensation and other tables appearing immediately after this section. This discussion and analysis of Named Executive Officers compensation policies and practices is also generally applicable to our broader group of executive officers.

 

Overview of 2010 Performance and Compensation

 

2010 Performance and Significant Achievements.   Our businesses delivered strong financial and operational performance in 2010, achieving record operational earnings per share for the sixth year in a row and record cash flow from operations. Our operational earnings per share increased by 6.4% from 2009 and our consolidated cash flow from operations increased by 33.9%. We believe our efforts in 2010 also have positioned the Company for future success, as reflected in the following significant achievements and recognitions:

 

 

 

Despite these strong financial and operational results, our total shareholder return in 2010 substantially lagged our peers, placing us in the fourth quartile of the Philadelphia Utility Index for 2010 and in the third quartile for the three year period ending December 31, 2010. This is in contrast to our total shareholder return measured over the past ten years, which has been in the top quartile of the Philadelphia Utility Index.

 

2010 Compensation.   Due in large part to the effects on our business and market salaries of the recent economic downturn, none of our Named Executive Officers received a base salary merit increase in base salary for 2010. However, the incentive compensation paid to our Named Executive Officers for 2010 performance reflected both our strong financial and operational performance in 2010 and our poor 2010 total shareholder return in relation to our peers. The payouts under our annual incentive plan properly rewarded our executive officers for substantially exceeding financial performance objectives in 2010 that were deemed to be important to the Company and its stakeholders and position the Company for long term success. Our Long-Term Performance Plan, on the other hand, paid out at a substantially lower level than in prior years and substantially below target as a result of our poor total shareholder return in relation to our peers. These payouts reflect the pay-for-performance philosophy that underlies our incentive compensation programs.

 

Annual Incentive Compensation Paid for 2010 Financial Performance .   Our annual incentive program is tied to our financial performance through the Entergy Achievement Multiplier (the performance metric used to determine awards under the Annual Incentive Plan), which is determined based on our success in achieving our operational earnings per share and operating cash flow goals. We exceeded our operational earnings per share goal of $6.80 in fiscal 2010 by $0.30 per share, and we exceeded our operating cash flow goal of $3.04 billion by $0.94 billion. This resulted in an Entergy Achievement Multiplier of 172%, with our Chief Executive Officer receiving an award equal to 206% of his base salary and our other Named Executive Officers each receiving awards equal to 120% of their base salaries. For additional information regarding our Annual Incentive Compensation program see “Short-Term Compensation — Non-Equity Incentive Plans (Cash Bonus)” on page 19.

 

Long-Term Incentive Compensation Paid for 2008-2010 Financial Performance .   Under our Long-Term Performance Plan, we measure performance over a three year period by assessing Entergy’s total shareholder return in relation to the total shareholder return of the companies included in the Philadelphia Utility Index, with payouts under the plan tied directly to our performance in relation to the other companies in the index over the three year performance period. Relative total shareholder return is used as the measure of performance under this plan because it encourages our executives to deliver superior shareholder value in relation to our peers. For the 2008 — 2010 performance cycle, our total shareholder return in relation to the other companies in the Philadelphia Utility Index resulted in a minimum payout of 10% of target for the performance units granted in 2008. For additional information regarding our long-term compensation program see “Long-Term Compensation — Performance Unit Program” on page 22.

 

2010 Changes to Executive Compensation.   In 2010, with the assistance of the Personnel Committee’s independent executive compensation consultant, the Personnel Committee completed a review of the Company’s overall approach to its executive compensation programs, which it undertakes annually to ensure that the Company’s programs continue to be in line with best practices of other companies in our industry as well as other Fortune 500 companies. As a result of that review, the Personnel Committee approved a number of changes to our executive compensation programs that are intended to enhance the alignment of the Company’s executive compensation programs with best practices at companies in the Philadelphia Utility Index as well as other Fortune 500 companies in general. These changes include:

 

 

 

In January 2011, our Board also adopted a policy that prohibits the Company or its affiliates from engaging the independent consultant that provides executive and director compensation services to the Personnel and Corporate Governance Committees or its affiliates to provide other services to the Company with an aggregate value in excess of $120,000 in any fiscal year.

 

 

To align the economic interests of our Named Executive Officers with our shareholders, we believe that a substantial portion of their total compensation should be in the form of equity-based awards. Historically, awards were granted in the form of stock options with a three-year vesting schedule and performance units with a three-year performance cycle. Beginning in 2011, awards will be granted in the form of restricted stock, stock options and performance units. Stock options and restricted stock generally will be subject only to time-based vesting. Performance units pay out only if we achieve specified performance targets with the amount of payout contingent on the level of performance achieved. These awards focus and reward executive officers on building shareholder value.

 

 

It is in our shareholders’ best interests that we attract and retain talented executives by offering compensation packages that are competitive. Our Personnel Committee has sought to develop compensation programs that deliver total target compensation in aggregate at approximately the 50th percentile of the market.

 

Our Starting Point

 

To develop a competitive compensation program, the Personnel Committee annually reviews base salary and other compensation data from two sources:

 

 

The Committee uses the survey data to develop compensation programs that deliver total target compensation at approximately the 50th percentile of the surveyed companies. This survey data is used as the primary data for purposes of determining target compensation. For this purpose, the Committee reviews the results of the survey data (organized in tabular format) comparing each Named Executive Officer’s compensation relative to the 25th, 50th (or median) and 75th percentile of the surveyed companies. The Committee considers its objectives to have been met if our Chief Executive Officer and the executive officers who constitute what we refer to as our Office of the Chief Executive, considered as a group (9) officers, including all of the Named Executive Officers, have a target compensation package that falls within the range of 90 — 110 percent of the 50th percentile of the companies in the survey data. In 2010, the target compensation of all Named Executive Officers fell within this range. Actual compensation received by an individual officer may be above or below the 50th percentile based on an individual officer’s skills, performance and responsibilities, Company performance and internal equity.

 

 

 

Elements of Our Compensation Program

 

The major components of our executive compensation program are presented below:

 

 

Our executive compensation package consists of a combination of short-term and long-term compensation elements. For 2010, short-term compensation includes base pay and annual cash bonus awards and long-term compensation includes stock options and performance units. All of our incentive plans are linked to the Company’s financial and stock performance or its total shareholder return in relation to its peers. Our executive compensation program is approved by our Personnel Committee, which consists entirely of independent board members.

 

Our executive compensation programs reflect a balanced compensation approach to incentivizing and rewarding performance by combining a market-based base salary with reasonable annual and long-term incentive compensation programs. These incentive compensation programs are designed to reward our executive officers if they attain specified annual and long-term goals while taking an appropriate level of risk, as further explained in “Compensation Risk Assessment” on page 32.

The following table summarizes the principal factors that we take into account in deciding the amount of each compensation element we pay or award to our executives:

 

 

We make compensation decisions for each executive officer after taking into account all elements of the officer’s compensation. In making compensation decisions, we apply the same compensation policies to all of our executive officers; however, the application of these policies results in different compensation amounts to individual executive officers because of: (i) differences in roles and responsibilities; (ii) differences in market-based compensation levels for specific officer positions; (iii) our assessment of individual performance; (iv) internal pay equity; and (v) variations in business unit performance.

Short-Term Compensation

 

 

Base Salary.   The Personnel Committee analyzes pay data and determines the base salaries for all of our Named Executive Officers. Base salary is a component of our Named Executive Officers’ compensation package because the Committee believes it is appropriate that some portion of the compensation that is provided to these officers is stable. Also, base salary remains the most common form of payment throughout all industries. Its use ensures a competitive compensation package for our Named Executive Officers.

 

The Committee determines the base salaries of our Named Executive Officers, including whether to grant annual merit increases, based on the following factors:

 

 

The corporate and business unit goals and objectives vary by individual officers and include, among other things, corporate and business unit financial performance, capital expenditures, cost containment, safety, reliability, customer service, business development and regulatory matters.

 

Our use of “internal pay equity” in setting merit increases assists us in determining whether a change in an executive officer’s role and responsibilities relative to other executive officers requires an adjustment in the officer’s salary. The Committee has not established any predetermined formula against which the base salary of one Named Executive Officer is measured against another officer or employee.

 

In January 2010, in light of the continued uncertainty in economic conditions and the projected slow growth in executive officer salaries in 2010, based on our review of general industry surveys prepared by various human resource consulting firms, the Personnel Committee decided not to increase base salaries from the levels established in 2009 for the executive officers who constitute the Office of the Chief Executive.

 

In June 2010, Mr. Savoff was promoted to Executive Vice President and Chief Operating Officer. Mr. Savoff’s base salary was increased from $549,000 to $590,000 to reflect the increased responsibilities of his new position, including oversight of nuclear operations, and comparative market data for officers in similar positions.

 

The 2010 base salaries for our Named Executive Officers were:

 

 

Mr. Leonard’s salary is larger than our other Named Executive Officers because of his leadership role in setting company policy and strategic planning and reflects market practice for salaries for chief executive officers.

 

 

We include performance-based incentives in the Named Executive Officers’ compensation packages because we believe performance-based incentives encourage our Named Executive Officers to pursue objectives consistent with the overall goals and strategic direction that the Board has set for our Company. Annual incentive plans are

commonly used by companies in a variety of industry sectors to compensate their executive officers for achieving financial and operational goals.

 

Our Named Executive Officers participate in a performance-based cash bonus plan known as the Executive Annual Incentive Plan or Annual Incentive Plan. Under the plan, we use a performance metric known as the Entergy Achievement Multiplier to determine the percentage of target annual plan awards that will be paid each year to each Named Executive Officer. Each year the Personnel Committee reviews the performance measures used to determine the Entergy Achievement Multiplier. In December 2009, the Personnel Committee decided to retain the performance measures used in 2009. Accordingly, the 2010 performance measures used to determine the Entergy Achievement Multiplier were consolidated operational earnings per share and operating cash flow, with each measure weighted equally. The Committee selected these performance measures because:

 

 

In addition, these measures are used by a number of other companies, including the companies in the Philadelphia Utility Index, as components of their incentive programs. For example, approximately 72% of the industry peer group companies use earnings per share as an incentive measure.

 

The Committee sets minimum and maximum achievement levels under the Annual Incentive Plan. Payouts for performance between minimum and target achievement levels and between target and maximum levels are calculated using straight line interpolation. If we do not achieve our minimum achievement levels, no payout occurs under the Annual Incentive Plan. In general, the Committee seeks to establish target achievement levels such that the relative difficulty of achieving the target level is consistent from year to year. Over the five years ending with 2010, the average Entergy Achievement Multiplier was 148% of target.

 

In December 2009, the Committee set the 2010 target award for incentives to be paid in 2011 under the Annual Incentive Plan for our Chief Executive Officer at 120% of his base salary and the target awards for each other Named Executive Officer at 70% of their respective base salaries. In setting these target awards, the Personnel Committee considered several factors, including:

 

 

The Committee established a higher target percentage for Mr. Leonard compared to the other Named Executive Officers to reflect the following factors:

 

 

 

In December 2009, the Committee determined the Annual Incentive Plan targets to be used for purposes of determining annual bonuses for 2010. The Committee’s determination of the target levels was made after full Board review of management’s 2010 financial plan for the Company, upon recommendation of the Finance Committee, and after the Committee’s determination that the established targets aligned with the Company’s anticipated 2010 financial performance as reflected in the financial plan. The targets established to measure management performance against as reported results, excluding the impact of the activities associated with the previously planned separation of our non-utility nuclear business (the “Spin Transaction”) were:

 

 

In January 2011, after reviewing earnings per share and operating cash flow results against the performance objectives in the above table, the Committee determined that we had exceeded the operational EPS target of $6.80 by $0.40 in fiscal 2010 and had exceeded the operating cash flow goal of $3.04 billion by $0.94 billion. In accordance with the terms of the Annual Incentive Plan, in January 2011, the Personnel Committee certified the 2010 Entergy Achievement Multiplier at 172% of target.

 

Under the terms of the Management Effectiveness Program, the Entergy Achievement Multiplier is automatically increased by 25 percent for the members of the Office of the Chief Executive if the pre-established underlying performance goals established by the Personnel Committee are satisfied at the end of the performance period, subject to the Personnel Committee’s discretion to adjust the automatic multiplier downward or eliminate it altogether. In accordance with Section 162(m) of the Code, the multiplier, which we refer to as the Management Effectiveness Factor, is intended to provide the Committee, through the exercise of negative discretion, a mechanism to take into consideration specific achievement factors relating to the overall performance of the Company. In January 2011, the Committee exercised its negative discretion to eliminate the Management Effectiveness Factor with respect to the 2010 incentive awards reflecting the Personnel Committee’s determination that the Entergy Achievement Multiplier, in and of itself without the Management Effectiveness Factor, was consistent with the performance levels achieved by the Company’s management.

 

The following table shows the Annual Incentive Plan payments as a percentage of base salary for 2010 based on an Entergy Achievement Multiplier of 172% as well as the incentive awards for each Named Executive Officer:

 

 

Nuclear Retention Plan

 

Some of Entergy’s executive officers, including Mr. Taylor, participate in a retention plan for officers and other leaders with special expertise in the nuclear industry. The Committee authorized this retention plan to attract and

retain management talent in the nuclear power field, a field that requires unique technical and other expertise that is in great demand in the utility industry. This type of retention plan has become a common practice among companies that operate nuclear power plants. Mr. Taylor’s participation in the plan covers a three-year period that began on January 1, 2009. In January 2010, 2011 and 2012, in accordance with the terms and conditions of the plan, Mr. Taylor received or will receive a cash bonus equal to 30% of his base salary as of January 1, 2009. Mr. Taylor’s participation in the plan (with respect to the period covered and percentage of base salary paid) is consistent with the level of participation of other employees who participate in the Plan.

 

Long-Term Compensation

 

Our goal for our long-term incentive compensation is to focus and reward our executive officers for building shareholder value and to increase our executive officers’ ownership in our common stock. In our long-term incentive programs, we have historically used a mix of performance units and stock options. Performance units reward the Named Executive Officers on the basis of total shareholder return, which is a measure of stock appreciation and dividend payments relative to the companies in the Philadelphia Utility Index. Stock options provide a direct incentive for increasing the price of our common stock. In addition, we have occasionally awarded restricted stock units for retention purposes or to offset forfeited compensation in order to attract officers and managers from other companies.

 

Beginning in 2011, our long-term incentive program will include awards of restricted stock, in addition to grants of performance units and stock options. For 2010, the target value of long-term incentive compensation granted to an executive was divided equally between the value determined on the date of grant of the performance units and stock options granted under the program. Beginning in 2011, the target value of long-term incentive compensation will be allocated 60% to performance units and 40% to a combination of stock options and restricted stock, equally divided in value, all based on their grant date values.

 

Each of the performance units and stock options granted to our Named Executive Officers in 2010 were awarded under our 2007 Equity Ownership and Long Term Cash Incentive Plan, which we refer to as the 2007 Equity Ownership Plan. Prior to shareholder approval of the 2011 Equity Ownership and Long Term Cash Incentive Plan, any grants of performance units, stock options and restricted stock will be granted under the 2007 Equity Ownership Plan. If and when we receive shareholder approval for the 2011 Equity Ownership Plan, performance units, stock options and awards of restricted stock will be made under the 2011 Equity Ownership Plan and no further grants will be made under the 2007 Equity Ownership Plan.

 

 

We issue performance unit awards to our Named Executive Officers under our Performance Unit Program. Each performance unit equals the cash value of one share of our common stock at the end of the three-year performance cycle. Each unit also earns the cash equivalent of the dividends paid during the performance cycle. Dividends accrued during the performance cycle are paid out only to the extent that the performance measures are achieved and a payout under the program for that cycle occurs. The Performance Unit Program is structured to reward Named Executive Officers only if performance goals set by the Personnel Committee are met. The Personnel Committee has no discretion to make awards if minimum performance goals are not achieved.

 

The Performance Unit Program provides a minimum, target and maximum achievement level. We measure performance by assessing Entergy’s total shareholder return relative to the total shareholder return of the companies in the Philadelphia Utility Index. The Personnel Committee chose relative total shareholder return as a measure of performance because it assesses the Company’s creation of shareholder value relative to other electric utilities over the performance cycle. It also takes into account dividends paid by the companies in this Index and normalizes events that affect the industry as a whole. Minimum, target and maximum performance levels are determined by reference to the percentile ranking of Entergy’s total shareholder return against the total shareholder return of the companies in the Philadelphia Utility Index. At any given time, a participant in the Performance Unit Program is participating in three performance cycles. Currently, participants are participating in the 2009-2011, the 2010-2012 and the 2011-2013 cycles.

The 2010-2012 Performance Grant.   For the 2010-2012 performance cycle, the Personnel Committee identified the Philadelphia Utility Index as the industry peer group for total shareholder return performance because the companies represented in this index more closely approximate us in terms of size and scale.

 

Subject to achievement of the Performance Unit Program performance levels, the Personnel Committee established the following target amounts for the 2010-2012 performance cycle: 22,300 performance units for our Chief Executive Officer and 5,300 performance units for each of the other Named Executive Officers. The range of payouts under the program is shown below.

 

 

There is no payout for performance below the 25th percentile. Payouts between minimum and target and target and maximum are calculated using straight line interpolation.

 

The Personnel Committee sets payout opportunities for the Performance Unit Program at the outset of each performance cycle. In determining payout opportunities, the Committee considers several factors, including:

 

 

Payout for the 2008-2010 Performance Cycle .   For the 2008-2010 performance cycle, the target amounts established in January 2008 for the Chief Executive Officer were 16,500 performance units and for the other Named Executive Officers, the target amounts established were 3,900 performance units. Participants could earn performance units based on relative total shareholder return consistent with the range of payouts described above for the 2010-2012 performance cycle. The Committee established a higher target amount for Mr. Leonard compared to the other Named Executive Officers based on the following factors:

 

 

In January 2011, the Committee assessed the Company’s total shareholder return for the 2008-2010 performance cycle and determined the actual number of performance units to be paid to Performance Unit Program participants for the 2008-2010 performance cycle. The Committee compared the Company’s total shareholder return against the total shareholder return of the companies that comprise the Philadelphia Utility Index. Based on this comparison, the Committee concluded that the Company’s performance for the 2008-2010 performance cycle, ranked at the bottom of the third quartile, or approximately the 25th percentile. This resulted in a payout at 10% of target, or 10% of the target number of units awarded. Each performance unit was then automatically converted into

cash at the rate of $70.83 per unit, the closing price of our common stock on the last trading day of the performance cycle (December 31, 2010), plus dividend equivalents accrued over the three-year performance cycle. See the 2010 Stock Option Exercises and Stock Vested table for the amount paid to each of the Named Executive Officers for the 2008-2010 performance cycle.

 

 

The Personnel Committee considers several factors in determining the amount of stock options it will grant under our 2007 Equity Ownership Plan to our Named Executive Officers, including:

 

 

For stock option awards, the Committee’s assessment of individual performance of each Named Executive Officer done in consultation with our Chief Executive Officer, which involves a review of each officer’s performance, role and responsibilities, strengths and developmental opportunities is the most important factor in determining the number of options awarded. The Committee also considers the significant achievements of the Company for the prior year.

 

The following table sets forth the number of stock options granted to each Named Executive Officer in 2010. The exercise price for each option was $77.10, which was the closing price of Entergy Corporation common stock on the date of grant.

 

 

The option grants awarded to our named executive officers (other than the Chief Executive Officer) ranged in number between 30,000 and 50,000 shares. In the case of our Chief Executive Officer, who received 135,000 stock options in 2010, the Committee took special note of Mr. Leonard’s performance as the Company’s Chief Executive Officer. Among other things, the Committee noted that the total shareholder return of the Company measured over the eleven-year period between Mr. Leonard’s appointment as Chief Executive Officer of the Company in January 1999 and the January 29, 2010 grant date exceeded all of our industry peer group companies as well as all other U.S. investor owned electric utility companies.

 

For additional information regarding stock options awarded in 2010 to each of the Named Executive Officers, see the 2010 Grants of Plan-Based Awards table on page 35 of this Proxy Statement.

 

Under our 2007 Equity Ownership Plan and our predecessor equity plans, all stock options must have an exercise price equal to the fair market value of Company common stock on the date of grant. In addition, until an executive officer achieves the multiple of salary ownership position of our common stock as described on page 10 of this Proxy Statement, the executive officer (including a Named Executive Officer), upon exercising any stock option granted on or after January 1, 2003, must retain at least 75% of the after-tax net profit from such stock option

exercise in the form of Company common stock. Our equity ownership plans prohibit the repricing of “underwater” stock options without shareholder approval.

 

We have not adopted a formal policy regarding the granting of options at times when the Company is in possession of material non-public information. However, we generally grant options to Named Executive Officers only during the month of January in connection with our annual executive compensation decisions. On occasion, we may grant options to newly hired employees or existing employees for retention or other limited purposes.

 

 

During 2010, the Personnel Committee approved a change in our long-term incentive awards to include awards of restricted stock to our executive officers beginning in 2011. The grant of restricted stock awards will replace a portion of the stock option awards historically granted to our executive officers. We believe this change enhances retention, mitigates the burn rate and assists in building ownership of our common stock.

 

Shares of restricted stock generally will vest over a three-year period, have voting rights and accrue dividends during the vesting period. Upon vesting, shares of Entergy common stock will be distributed. Officers subject to our stock ownership guidelines will be required to retain vested shares until he or she satisfies the stock ownership guidelines.

 

We intend our restricted stock awards to:

 

 

Benefits, Perquisites, Agreements and Post-Termination Plans

 

 

Our senior executive officers are eligible to participate in the Pension Plan, Pension Equalization Plan and System Executive Retirement Plan. The Committee believes that these plans are an important part of our Named Executive Officers’ compensation program. These plans are important in the recruitment of top talent in the competitive market, as these types of supplemental plans are typically found in companies of similar size to the Company. These plans serve a critically important role in the retention of our senior executives, as benefits from these plans generally increase for each year that these executives remain employed by us. The plans thereby encourage our most senior executives to remain employed by us and continue their work on behalf of our shareholders.

 

The Named Executive Officers participate in a Company-sponsored pension plan that covers a broad group of employees. This pension plan is a funded, tax-qualified, noncontributory defined benefit pension plan. Benefits under the pension plan are based upon an employee’s years of service with the Company and the employee’s average monthly rate of “Eligible Earnings” (which generally includes the employee’s salary and eligible incentive awards, other than incentive awards paid under the Annual Incentive Plan) for the highest consecutive 60 months during the 120 months preceding termination of employment. Benefits under the tax-qualified plan are payable monthly after separation from the Company. The amount of annual earnings that may be considered in calculating benefits under the tax-qualified pension plan is limited by federal law.

 

Benefits under the tax-qualified pension plan in which the Named Executive Officers participate are calculated as an annuity equal to 1.5% of a participant’s Eligible Earnings multiplied by years of service. Years of service under the pension plan formula cannot exceed 40. Contributions to the pension plan are made entirely by the Company and are paid into a trust fund from which the benefits of participants will be paid.

 

The Company sponsors a Pension Equalization Plan, which is available to a select group of management and highly compensated employees, including the Named Executive Officers (other than our Chief Executive Officer). The Pension Equalization Plan is a non-qualified unfunded supplemental retirement plan that provides for the

payment to participants from Entergy’s general assets a single lump sum cash distribution upon separation from service generally equal to the actuarial present value of the difference between the amount that would have been payable as an annuity under the tax-qualified pension plan, but for Internal Revenue Code limitations on pension benefits and earnings that may be considered in calculating tax-qualified pension benefits, and the amount actually payable as an annuity under the tax-qualified pension plan. The Pension Equalization Plan also takes into account as “Eligible Earnings” any incentive awards paid under the Annual Incentive Plan.

 

The Company also sponsors a System Executive Retirement Plan, which is available to the Company’s approximately 60 officers, including the Named Executive Officers (other than our Chief Executive Officer). Participation in the System Executive Retirement Plan requires individual approval by the plan administrator. An employee participating in both the System Executive Retirement Plan and the Pension Equalization Plan is eligible to receive only the greater of the two single-sum benefits computed in accordance with the terms and conditions of each plan.

 

Like the Pension Equalization Plan, the System Executive Retirement Plan is designed to provide for the payment to participants from Entergy’s general assets of a single-sum cash distribution upon separation from service. The single-sum benefit is generally equal to the actuarial present value of a specified percentage of the participant’s “Final Average Monthly Compensation” (which is generally 1/36th of the sum of the participant’s annual rate of base salary and Annual Incentive Plan award for the 3 highest years during the last 10 years preceding termination of employment), after first being reduced by the value of the participant’s tax-qualified Pension Plan benefit and typically any prior employer pension benefit available to the participant.

 

While the System Executive Retirement Plan has a replacement ratio schedule from one year of service to the maximum of 30 years of service, the table below offers a sample ratio at 20 and 30 years of service.

 

 

Mr. Leonard’s retention agreement (as further discussed below) provides that, in lieu of his participation in the Pension Equalization Plan and the System Executive Retirement Plan, upon the termination of his employment (unless such termination is for Cause, as defined in the agreement), he will be entitled to receive a benefit equal to 60% of his Final Average Compensation (as described in the description of the System Executive Retirement Plan above) calculated as a single life annuity and payable as an actuarial equivalent lump sum. This benefit will be reduced by other benefits to which he is entitled from any Company-sponsored pension plan or prior employer pension plans. The terms of Mr. Leonard’s Supplemental Retirement Benefit were negotiated at the time of his employment with the Company and were designed to, among other things, offset the loss of benefits resulting from Mr. Leonard’s resignation from his prior employer. At the time that the Company recruited Mr. Leonard, he had accumulated twenty-five years of seniority with his prior employer and had served as an executive officer for that employer for over ten years and in an officer-level capacity for over fifteen years.

 

We have agreed to provide service credit to all of our Named Executive Officers (other than Mr. Leonard and Mr. Savoff, our Executive Vice President, Chief Operating Officer) under either the Pension Equalization Plan or the System Executive Retirement Plan. We typically offer these service credit benefits as one element of the total compensation package offered to new mid-level or senior executives that we recruit from other companies. By offering these executives “credited service,” we are able to compete more effectively to hire these employees by mitigating the potential loss of their pension benefits resulting from accepting employment with our Company.

 

See the 2010 Pension Benefits table on page 38 of this Proxy Statement for additional information regarding the operation of the plans described under this caption.

 

The Named Executive Officers are eligible to participate in a Company-sponsored Savings Plan that covers a broad group of employees. This is a tax-qualified retirement savings plan, wherein total combined before-tax and after-tax contributions may not exceed 30 percent of a participant’s base salary up to certain contribution limits defined by law. In addition, under the Savings Plan, the participant’s employer matches an amount equal to seventy cents for each dollar contributed by participating employees, including the Named Executive Officers, on the first six percent of their Earnings (as defined in the Savings Plan) for that pay period. We maintain the Savings Plan for our employees, including our Named Executive Officers, because we wish to encourage our employees to save some percentage of their cash compensation for their eventual retirement. The Savings Plan permits employees to make such savings in a manner that is relatively tax efficient. This type of savings plan is also a critical element in attracting and retaining talent in a competitive market.

 

 

The Named Executive Officers are eligible to defer up to 100% of their Annual Incentive Plan award into either or both the Company-sponsored Executive Deferred Compensation Plan and the equity plan. In addition, they are eligible to defer up to 100% of their base salary into the Executive Deferred Compensation Plan.

 

We provide these benefits because the Committee believes it is standard market practice to permit officers to defer the cash portion of their compensation. We believe that providing this benefit is important as a retention and recruitment tool as many, if not all, of the companies with which we compete for executive talent provide a similar arrangement to their senior employees.

 

All deferral amounts represent an unfunded liability of the employer. Amounts deferred into the equity plan are deemed invested in phantom shares of our common stock. Amounts deferred under the Executive Deferred Compensation Plan are deemed invested in one or more of the available investment options (generally mutual funds) offered under the Savings Plan.

 

The Company does not “match” amounts that are deferred by employees pursuant to the Executive Deferred Compensation Plan or equity plan. With the exception of allowing for the deferral of federal and state taxes, the Company provides no additional benefit to the Named Executive Officer for deferring any of the above payments. Any increase in value of the deferred amounts results solely from the increase in value of the investment options selected (phantom Company stock or mutual funds available under the Savings Plan).

 

Additionally, Mr. Leonard and Mr. Savoff currently have deferred account balances under a frozen Defined Contribution Restoration Plan. These amounts are deemed invested in the options available under this plan.

 

 

The Named Executive Officers are eligible to participate in various health and welfare benefits available to a broad group of employees. These benefits include medical, dental and vision coverage, life and accidental death & dismemberment insurance and long-term disability insurance. Eligibility, coverage levels, potential employee contributions and other plan design features are the same for the Named Executive Officers as for the broad employee population.

 

 

All of our executive officers, including the Named Executive Officers, are eligible to participate in our Executive Long-Term Disability program. Individuals who elect to participate in this plan and become disabled under the terms of the plan are eligible for 65 percent of the difference between their base salary and $275,000 (i.e. the base salary that produces the maximum $15,000 monthly payment disability payment under our general long-term disability plan).

 

We provide our Named Executive Officers with certain perquisites and other personal benefits as part of providing a competitive executive compensation program and for employee retention. The Personnel Committee reviews all perquisites, including the use of corporate aircraft, on an annual basis. As a result of its 2010 review, beginning in 2011, we will not provide personal financial counseling, club dues for members of the Office of Chief Executive or tax gross up payments on any perquisites, except for relocation. Our Named Executive Officers did not receive any additional compensation for the lost value of these discontinued perquisites.

 

In 2010, we offered to our Named Executive Officers the following personal benefits: corporate aircraft usage, personal financial counseling, club dues, relocation and housing benefits and annual mandatory physical exams. For security and business convenience reasons, we permit the Chief Executive Officer to use our corporate aircraft at Company expense for personal use. Our other Named Executive Officers may use corporate aircraft for personal travel subject to the approval of our Chief Executive Officer. For additional information regarding perquisites, see the “All Other Compensation” column in the Summary Compensation Table on page 33 of this Proxy Statement.

 

 

The Committee believes that retention and transitional compensation arrangements are an important part of overall compensation. The Committee believes that these arrangements help to secure the continued employment and dedication of our Named Executive Officers, notwithstanding any concern that they might have at the time of a change in control regarding their own continued employment. In addition, the Committee believes that these arrangements are important as recruitment and retention devices, as all or nearly all of the companies with which we compete for executive talent have similar arrangements in place for their senior employees.

 

To achieve these objectives, we have established a System Executive Continuity Plan under which each of our Named Executive Officers (other than our Chief Executive Officer and Chief Financial Officer) is entitled to receive “change in control” payments and benefits if such officer’s employment is involuntarily terminated. To allow incentive payments under the Annual Incentive Plan to continue to be considered performance-based under Section 162(m), severance payments under the System Executive Continuity Plan are based on a multiple of the sum of an executive officer’s annual base salary plus his or her average Annual Incentive Plan award at target for the two fiscal years immediately preceding the fiscal year in which the termination of employment occurs. Under no circumstances can this multiple exceed 2.99 the sum of (a) annual base salary plus (b) the higher of: (i) the annual incentive award actually awarded to the executive office under the Annual Incentive Plan for the fiscal year immediately preceding the fiscal year in which the termination of employment occurs or (ii) the average Annual Incentive Plan award for the two fiscal years immediately preceding the fiscal year in which the termination of employment occurs. We have strived to ensure that the benefits and payment levels under the System Executive Continuity Plan are consistent with market practices. Recognizing that market practices have changed, in December 2010, in connection with its review of our compensation practices and policies, the Personnel Committee modified our System Continuity Plan to eliminate tax gross up payments on any severance benefits received under this plan.

 

In certain cases, the Committee may approve the execution of a retention agreement with an individual executive officer. These decisions are made on a case by case basis to reflect specific retention needs or other factors, including market practice. If a retention agreement is entered into with an individual officer, the Committee considers the economic value associated with that agreement in making overall compensation decisions for that officer. As mentioned above, the Company has voluntarily adopted a policy that any severance arrangements providing benefits in excess of 2.99 times an officer’s annual base salary and annual incentive award must be approved by the Company’s shareholders.

 

At present, we have entered into retention agreements with our Chief Executive Officer and Chief Financial Officer. In general, these retention agreements provide for “change in control” payments and other benefits in lieu of those provided under our System Executive Continuity Plan. The retention agreements entered into with Mr. Leonard and Denault reflect, among other things, the competition for chief executive officer and chief financial officer talent in the marketplace and the Committee’s assessment of the critical role of these officers in executing the Company’s long-term financial and other strategic objectives. Effective January 1, 2010, we made amendments similar to those made to the System Executive Continuity Plan to Mr. Denault’s and Mr. Leonard’s retention

agreements to allow incentive payments under the Annual Incentive Plan to continue to be considered performance based under Section 162(m). Based on the market data provided by its independent compensation consultant, the Committee believes the benefits and payment levels under these retention agreements are consistent with market practices. Again to align with best market practices, in December 2010, both Mr. Leonard’s and Mr. Denault’s agreements were amended to eliminate tax gross up payments on any severance benefits they may receive under these agreements.

 

In December 2009, we entered into a retention agreement with Richard J. Smith, President, Entergy Wholesale Commodity Business, in order to retain his services should the Spin Transaction not occur. On April 5, 2010, we announced that we would not proceed with the Spin Transaction. Under this agreement, Mr. Smith remains employed by an Entergy System company at a management level and with a salary no less than Mr. Smith’s salary as of December 18, 2009. In addition, the agreement provides that Mr. Smith is entitled to receive a lump sum cash payment equal to 1.5 times his base salary as of the date of separation from Entergy if either he (i) remains continuously employed in such capacity for 24 months after April 5, 2010 (the date of the public announcement that the Spin Transaction will not occur) or (ii) remains continuously employed in such capacity for at least six (6) months after April 5, 2010 and thereafter retires with the consent of our Chief Executive Officer prior to reaching such 24 months of service. We entered into this agreement with Mr. Smith in light of Mr. Smith’s leadership role in the preparations for the Spin Transaction and the critical role that Mr. Smith would have in dismantling these preparations if the Spin Transaction did not occur. In determining the type and size of the amount of payment under this agreement, we consulted with our independent compensation consultant to confirm that the economic value of this arrangement was consistent with market practices.

 

For additional information regarding the System Executive Continuity Plan and the three retention agreements described above, see “2010 Potential Payments upon Termination or Change in Control” on page 41 of this Proxy Statement.

 

Compensation Program Administration

 

Executive Compensation Governance

 

We periodically review our compensation philosophy and make adjustments that are believed to be in the best interest of the Company and our shareholders. Some of the actions taken include the following:

 

1. Our Company’s ultimate objective is to deliver long-term value to shareholders as well as our other stakeholders such as customers and employees. We continually review and adjust our pay programs so that the primary focus is our long-term success. Executives understand that successful long-term decision making will allow them to be paid their target compensation. Short term decisions that impair our long term value will reduce an executive’s compensation over the long term. To further this objective, in 2011, we increased the portion of long-term compensation that will be derived from performance units from 50% to 60% and decreased the portion that will be derived from other equity awards to 40%. We added restricted stock awards to our long-term compensation program because we believe the use of restricted stock enhances retention, mitigates the burn rate and assists in building ownership of our common stock.

 

2. Our Board of Directors adopted the Entergy Corporation Policy Regarding Recoupment of Certain Compensation in December 2010. This policy covers executive officers of the Company who are subject to Section 16 of the Exchange Act. Under the policy, the Committee will require reimbursement of incentives paid to these executive officers where:

 

 

 

The amount the Committee requires to be reimbursed is equal to the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or correct calculation. Further, following a material restatement of our financial statements, we will seek to recover any compensation received by our Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Section 304 of the Sarbanes-Oxley Act of 2002

 

3. The Committee has formalized the timing and process for reviewing our executive compensation consultant services and fees. Annually, the Committee reviews the relationship with its compensation consultant including services provided, quality of those services, and fees associated with services during the fiscal year to ensure executive compensation consultant independence is maintained. To ensure the independence of the Committee’s compensation consultant, in January 2011, the Board adopted a policy that any consultant (including its affiliates) retained by the Board of Directors or any Committee of the Board of Directors to provide advice or recommendations on the amount or form of executive and director compensation should not be retained by the Company or any of its affiliates to provide other services in an aggregate amount that exceeds $120,000 in any fiscal year.

 

4. In 2010, we also adopted an anti-hedging policy which prohibits officers, directors and employees from entering into hedging or monetization transactions involving our common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to the Company’s stock or transactions involving “short-sales” of the Company’s stock. The Board adopted this policy to require officers, directors and employees to continue to own Company stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with the Company’s other shareholders

 

Reviewing Our Executive Compensation Programs and Establishing Compensation Levels

 

Role of Personnel Committee

 

The Personnel Committee has overall responsibility for approving the compensation program for our Named Executive Officers and makes all final compensation decisions regarding our Named Executive Officers. The Committee works with our executive management to ensure that our compensation policies and practices are consistent with our values and support the successful recruitment, development and retention of executive talent so we can achieve our business objectives and optimize our long-term financial returns. The Committee evaluates executive pay each year to ensure that our compensation policies and practices are consistent with our philosophy. The Personnel Committee is responsible for, among its other duties, the following actions related to our Named Executive Officers:

 

 

Role of Chief Executive Officer

 

The Personnel Committee solicits recommendations from Mr. Leonard, our Chief Executive Officer, with respect to compensation decisions for individual Named Executive Officers (other than himself). The Personnel Committee also relies on the recommendations of our senior human resources executives with respect to compensation decisions, policies and practices. Our Chief Executive Officer’s role is limited to:

 

 

 

In addition, the Committee may request that the Chief Executive Officer provide management feedback and recommendations on changes in the design of compensation programs, such as special retention plans or changes in structure of bonus programs. Mr. Leonard does not play any role with respect to any matter affecting his own compensation nor does he have any role determining or recommending the amount, or form of, director compensation.

 

Mr. Leonard may attend meetings of the Personnel Committee only at the invitation of the chair of the Personnel Committee and cannot call a meeting of the Committee. However, he is not in attendance at any meeting when the Committee determines and approves the compensation to be paid to the Named Executive Officers. Since he is not a member of the Committee, he has no vote on matters submitted to the Committee. During 2010, Mr. Leonard attended 6 meetings of the Personnel Committee.

 

Role of the Compensation Consultant

 

Our Personnel Committee has the sole authority from the Board of Directors for the appointment, compensation and oversight of its outside compensation consultant. Prior to the engagement of Pay Governance LLC, the Committee’s current independent compensation consultant, in October 2010, our Personnel Committee retained Towers Watson as its independent compensation consultant to assist it in, among other things, evaluating different compensation programs and developing market data to assess our compensation programs. Under the terms of its engagement, Towers Watson reported directly to the Personnel Committee, which had the right to retain or dismiss the consultant without the consent of the Company’s management. In addition, the consent of the Personnel Committee was required to be obtained before Towers Watson could accept any material engagements recommended by the Company’s management.

 

In considering the appointment of Towers Watson, the Personnel Committee took into account that Towers Watson provided from time to time general consulting services to the Company’s management with respect to non-executive compensation matters. In this connection, the Committee reviewed the fees and compensation received by Towers Watson for these services over a historical period. After considering the nature and scope of these engagements and the fee arrangements involved, the Personnel Committee determined that the engagements did not create a conflict of interest. The Committee subsequently reviewed on an ongoing basis the fees and compensation received by Towers Watson for non-executive compensation matters to monitor its independence.

 

During the first nine months of 2010, the Committee retained the consulting firm of Towers Watson as its consultant to assist the Committee with its responsibilities related to the Company’s compensation programs for its executives. Specifically, the Committee directed Towers Watson to: (i) regularly attend meetings of the Committee, (ii) conduct studies of competitive compensation practices, (iii) identify the Company’s survey and proxy peer group, (iv) review base salary, annual incentives and long-term incentive compensation opportunities relative to competitive practices, and (v) develop conclusions and recommendations related to the executive compensation plan of the Company for consideration by the Committee. A senior consultant from Towers Watson generally attended most Personnel Committee meetings. In its role as advisor to the Committee, Towers Watson presented annual reports to the committee on executive and director compensation. In 2010, Entergy incurred in the aggregate fees of $259,286 from Towers Watson for determining or recommending the amount or form of executive and director compensation and $946,326 for others services, $877,331 of which was related to the Spin Transaction.

 

Pay Governance was engaged by the Committee as its executive compensation consultant for the remainder of 2010. Pay Governance is not affiliated with Towers Watson. Pay Governance reviewed our compensation practices and made recommendations to the Personnel Committee regarding our 2011 executive compensation program. Pay Governance did not provide any other services to the Company.

 

Tax and Accounting Considerations

 

Section 162(m) of the Code limits the tax deductibility by a publicly held corporation of compensation in excess of $1 million paid to the Chief Executive Officer or any of its other Named Executive Officers (other than the

Chief Financial Officer), unless that compensation is “performance-based compensation” within the meaning of Section 162(m). The Personnel Committee considers deductibility under Section 162(m) as it structures the compensation packages that are provided to its Named Executive Officers. However, the Personnel Committee and the Board believe that it is in the best interest of the Company that the Personnel Committee retains the flexibility and discretion to make compensation awards, whether or not deductible. This flexibility is necessary to foster achievement of performance goals established by the Personnel Committee as well as other corporate goals that the Committee deems important to the Company’s success, such as encouraging employee retention and rewarding achievement.

 

Likewise, the Personnel Committee considers financial accounting consequences as it structures the compensation packages that are provided to the Named Executive Officers. However, the Personnel Committee and the Board believe it is in the best interest of the Company that the Personnel Committee retains the flexibility and discretion to make compensation awards regardless of their financial accounting consequences.

 

The Personnel Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Personnel Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

 

The Personnel Committee

 

Maureen S. Bateman, Chair
Gary W. Edwards
Alexis M. Herman
Stewart C. Myers

 

Entergy’s management, under the oversight of the Personnel Committee, has conducted an assessment of the risks associated with our compensation practices and policies and has determined that risks arising from such compensation policies and practices are not reasonably likely to have a material adverse effect on Entergy. This determination has taken into account, among other things, the following design elements of our compensation programs and policies and practices: the mix of cash and equity payouts at various compensation levels; the mix of performance time horizons used by our plans; the use of financial performance metrics that are readily monitored and reviewed; incorporation of both operational and financial goals and individual performance; avoidance of uncapped awards; multiple levels of review and approval of awards; and our internal risk review and assessment processes.

 

The following table summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscal years ended December 31, 2010, 2009 and 2008.

 

The Company has not entered into any employment agreements with any of the Named Executive Officers other than the retention agreements described in “Potential Payments upon Termination or Change in Control.” For additional information regarding the material terms of the awards reported in the following tables, including a general description of the formula or criteria to be applied in determining the amounts payable, see “Compensation Discussion and Analysis.”

 

 

 

 

 

 

For security and business reasons, we permit our Chief Executive Officer to use our corporate aircraft for personal use at Company expense. Our other Named Executive Officers may use the corporate aircraft for personal travel subject to the approval of our Chief Executive Officer. The aggregate incremental aircraft usage cost associated with Mr. Leonard’s personal use of the corporate aircraft, including the costs associated with travel to outside board meetings, was $30,381 for fiscal year 2010. These amounts are reflected in column (i) and the total above. The incremental cost to the Company for use of the corporate aircraft is based on the variable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications and fees, including flight planning, ground handling and landing permits. In addition, in accordance with the Company’s relocation policies, the Company paid $71,944 in relocation and housing expenses for Mr. Smith in 2010. This amount reflects payments to our relocation service provider and temporary living expenses. None of the other perquisites referenced above exceeded $25,000 for any of the other Named Executive Officers.

 

Beginning in 2011, the Company will not provide personal financial counseling, club dues for the members of the Office of Chief Executive or tax gross up payments on any perquisites, except for relocation. The Company did not replace the value of these discontinued perquisites in the executive’s compensation.

2010 Grants of Plan-Based Awards

 

The following table summarizes award grants during 2010 to the Named Executive Officers.

 

 

 

2010 Outstanding Equity Awards at Fiscal Year-End

 

The following table summarizes unexercised options, stock that has not vested and equity incentive plan awards for each Named Executive Officer outstanding as of December 31, 2010.