Exhibit 99.1

 

EMERA INC.

NOTICE OF ANNUAL MEETING

OF COMMON

SHAREHOLDERS

AND MANAGEMENT

INFORMATION CIRCULAR

 

 

 

 

THURSDAY, MAY 20, 2021

 

ABOUT EMERA

We’re a team of experts focused on safely delivering cleaner, affordable and reliable energy to our customers in Canada, the US and the Caribbean. Our Environmental, Social and Governance (“ESG”) commitments are core to our strategy and we’re leading the way to a cleaner energy future with clear climate goals and a vision to achieve net-zero carbon emissions by 2050. We primarily invest in regulated electric and gas utilities, driving predictable returns and steady growth for our investors, enabling us to reinvest in our teams, our companies and our communities.

TABLE OF CONTENTS

 

Notice of Annual Meeting			4
Management Information Circular			5
Business of the Meeting			9
Director Nominees			10
Skills and Experience			11
Statement of Corporate Governance Practices			27
A Letter from the Management Resources and Compensation Committee to Our Shareholders			50
Statement of Executive Compensation			53
Compensation Discussion and Analysis			60
Performance Graph			77
NEO Summary Compensation Table			79
Appendix “A” – Board of Directors Charter			94
Appendix “B” – Resolution Amending the Senior Management Stock Option Plan			96

 

 

NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

FELLOW SHAREHOLDERS,

Despite the uncertainty and many unknowns, our team very effectively navigated the challenges of the COVID-19 pandemic to safely deliver the cleaner, affordable and reliable energy our customers count on while continuing to create value for shareholders. As essential service providers, we adapted quickly to deliver for our customers and communities in 2020.

We look forward to the opportunity to discuss Emera’s performance at our Annual Meeting of Shareholders on May 20, 2021. Outlined in this Circular, you will find information about the business to be conducted at our upcoming meeting, including details about our 2021 Director nominees. You will also find information about our approach to executive compensation and our commitment to strong corporate governance.

ADAPTING TO DELIVER IN A CHALLENGING YEAR

As the reality of a global pandemic became clear in the first quarter of 2020, the team adapted quickly to introduce new protocols and procedures to continue to safely deliver for our customers and stakeholders while keeping employees, customers and our communities safe.

The COVID-19 pandemic impacted the regions where we operate to varying degrees. While community spread was greater in some areas than others, the new protocols and the team’s commitment to safety successfully protected our employees with virtually no workplace spread of COVID-19. The team also stepped up to assist those most impacted by the pandemic through customer relief programs and community investments to support energy costs, food banks and mental health initiatives.

Despite the added challenges of the pandemic, the team continued to advance our strategy and execute on a $2.7 billion capital plan, the largest in Emera’s history. We completed the final phase of the more than 600MW of solar now in service for Tampa Electric, and started work on another 600MW. We advanced the modernization of Big Bend to reduce the use of coal at Tampa Electric. We continued to safely deploy smart meters in Nova Scotia, Florida and the Caribbean, with well over a million now in service. We also completed the Santa Fe Loop Project at New Mexico Gas, increasing pipeline capacity and improving reliability for customers. For additional details on Emera’s key operational accomplishments, see Emera’s 2020 Annual Report.

FINANCIAL PERFORMANCE AND LONG-TERM VALUE

In March of 2020, we closed the sale of Emera Maine, which officially completed our asset sale program, a significant accomplishment that strengthened our balance sheet and positions Emera well for future growth.

Emera delivered consolidated financial results that were in line with our annual budget, a reflection of the overall quality of Emera’s business. Emera’s regulated portfolio continued to perform very well, collectively increasing earnings by 13 per cent. This growth underpinned Emera’s adjusted earnings per share (“EPS”) growth and supports the 4 per cent increase in our common share dividend.

We remain focused on providing long-term value to our shareholders. The Management Resources and Compensation Committee’s Letter to Shareholders on page 50 of this Circular provides additional information on our commitments and an overview of our long-term shareholder returns.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

Our ESG commitments have been core to our strategy for more than 15 years. In 2020, with oversight from the Board, we took steps to better articulate our ESG commitments along with our approach to governance, risk management and transparency in this important area. We enhanced our ESG disclosures in our annual Sustainability Report with the addition of both the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosures frameworks. We also established executive oversight for ESG and established a Management Sustainability Committee with cross-functional participation that is chaired by the President and CEO.

Decarbonization is a key driver of Emera’s growth and culture of innovation. While we have a strong track record of progress and achievement, we have now also established clear, future-focused carbon reduction goals and our vision to achieve net-zero CO₂ emissions by 2050. We announced Emera’s Climate Commitment in February 2021, and more details are included in the Strategy section of this Circular or at www.emera.com/climatecommitment.

 

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Emera’s values are reflected in our commitment to our people, customers and communities. In 2020, through our Community Investment Program, we continued our commitment to helping to build stronger, safer and more innovative communities with $16 million in donations. Together with our employees, we also moved quickly to partner with community leaders to contribute over $6 million to organizations providing critical aid to those most impacted by the COVID-19 pandemic.

We are committed to continuing to build teams and Boards that reflect the communities where we live and work. We’ve made good progress in advancing our multi-year Inclusion and Diversity Strategy, but we recognize we have more work to do. We also recently announced Emera’s Inclusion and Diversity Community Fund, a $5 million fund to support community efforts to remove barriers and advance diversity and inclusion.

SAFETY

Safety is Emera’s number one priority. Last year, in addition to implementing new procedures and protocols to continue to safely deliver for our customers during the pandemic, we also achieved our lowest ever Occupational Safety & Health Association (“OSHA”) and Lost-Time Injury rates. However, two recent contractor fatalities are a reminder that the team must stay relentlessly focused on safety. The team, supported by the Board and its Health, Safety and Environment Committee, is more committed than ever to a strong safety culture and an injury-free Emera.

DIRECTOR CHANGES

We would like to acknowledge Sylvia Chrominska, who is stepping down from the Emera Board this year. Since joining the Board in 2010, Sylvia has been a driving force behind Emera’s human resources strategies and executive compensation practices. As a member of the Management Resources and Compensation Committee (“MRCC”) and serving as Chair of that Committee since 2016, Sylvia’s oversight has been invaluable to the Board and the company. On behalf of the Board and management team, thank you Sylvia. We wish you all the best.

We are also pleased to welcome Karen Sheriff, who joined the Board in February 2021. Karen’s cross-industry executive experience, combined with her expertise in driving innovation, growth and corporate strategy make Karen a strong addition to our Board. On behalf of all of us, welcome Karen.

SHAREHOLDER ENGAGEMENT & ANNUAL SHAREHOLDER MEETING

We value feedback from our shareholders and work hard to provide engagement opportunities, including regular meetings, investor day events and other initiatives.

In 2020, we held an Investor Day on February 25 in Tampa, Florida, one of our last in-person meetings. Despite the limitations on travel and gatherings, our executive team met virtually throughout the year with many shareholders, including all of Emera’s active top 20 investors. Our Annual Meeting of Shareholders is also a valuable opportunity to engage with shareholders on key issues including our annual “Say on Pay” advisory vote on executive compensation.

As the global COVID-19 pandemic continues, and in the interest of public safety, we are providing additional options again this year for remote participation in our Annual Meeting of Shareholders. Our 2021 annual meeting will take place on May 20, at 11:00 a.m. (Atlantic time), at Emera Place, 5151 Terminal Road in Halifax, Nova Scotia. Emera is subject to the Nova Scotia Companies Act annual general meeting requirements, as well as directives under the Nova Scotia Health Protection Act and Emergency Management Act which currently limit the capacity for in-person meetings.

 

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NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

Details on how to participate in the meeting are described in this Circular and will be available prior to the meeting on our website at www.emera.com/investors. Please check the website regularly for updates. Shareholders will be able to participate in the meeting by webcast and will be able to exercise voting rights electronically during the meeting. You will be able to ask questions through the webcast site, or submit questions in advance to AGM@emera.com or in writing at the address provided in this Circular.

We strongly encourage shareholders to take advantage of the option to vote in advance by proxy.

If you have any questions regarding our Annual Meeting of Shareholders, please contact Emera’s Corporate Secretary, Stephen Aftanas, at AGM@emera.com, in writing to P.O. Box 910, Halifax, Nova Scotia B3J 2W5 or by calling 1-800-358-1995 from anywhere in North America or (902) 428-6060 within the Halifax-Dartmouth area.

THANK YOU

We encourage you to review this information and exercise your right to vote at our Annual Meeting of Shareholders. It’s important to us that your views be expressed and that your shares be counted.

Last year highlighted the strength and resiliency of Emera’s team, portfolio and strategy. We are proud of what the Emera team accomplished in 2020. On behalf of the Board and management team, thank you for your ongoing support and confidence in Emera.

 

Jackie Sheppard		Scott Balfour
Chair of the Board, Emera Inc.		President and CEO, Emera Inc.

 

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NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

NOTICE OF ANNUAL MEETING

 

Thursday, May 20, 2021		Virtual Participation		Emera Place		Record Date
11:00 a.m. Atlantic time		https://web.lumiagm. com/429761988		5151 Terminal Road Halifax, Nova Scotia		Close of business March 22, 2021
		Password: emera2021   (case sensitive)

 

Items of Business

1.   Electing Directors to serve until the next Annual Meeting of Shareholders;

2.   Appointing Auditors;

3.   Authorizing the Directors to establish the Auditors’ fee;

4.   Considering an advisory resolution on the Company’s approach to executive compensation;

5.   Approving an amendment to the Company’s Senior Management Stock Option Plan; and

6.   Transacting such other business as may properly come before the meeting.

As we respond to the global COVID-19 pandemic, Emera is taking special actions to ensure shareholders have options to participate in the meeting while protecting the safety of shareholders, our team and the community.

Emera is subject to the Nova Scotia Companies Act annual general meeting requirements, as well as directives under the Nova Scotia Health Protection Act and Emergency Management Act regarding social distancing and limits on the size of gatherings.

To address public health concerns and these requirements, Emera will hold its 2021 annual meeting of shareholders with the aid of virtual meeting technology described below.

Registered shareholders and proxyholders will be able to participate in the meeting by webcast and will be able to exercise voting rights electronically during the meeting. Emera encourages all participation in the Meeting to be through the virtual meeting tool that can be found at https://web.lumiagm.com/429761988, using password: emera2021 (case sensitive). Beneficial owners may listen to a live webcast of the meeting through https://web.lumiagm.com/429761988 but will only have the ability to vote virtually or ask questions through the live webcast if they are duly appointed and registered as proxyholders. Inside this Management Information Circular, you will find further details and instructions about virtual participation.

As a shareholder, it is important that you vote. Common shareholders are encouraged to return their proxy or voting instruction form as soon as possible. A postage-paid, pre-addressed envelope is provided. As an alternative, shareholders may choose to vote by telephone or on the internet as provided for on the proxy or voting instruction form. Proxies must be received prior to 5:00 p.m. Atlantic time on Tuesday, May 18, 2021, or if the meeting is adjourned, or postponed, 5:00 p.m. Atlantic time two business days prior to the reconvened meeting date.

Should you have questions or comments, please contact Emera Incorporated by writing to the Corporate Secretary, Emera Incorporated, P.O. Box 910, Halifax, Nova Scotia B3J 2W5 or by calling 1-800-358-1995 from anywhere in North America or (902) 428-6060 within the Halifax-Dartmouth area.

 

Stephen D. Aftanas Corporate Secretary

 

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NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

MANAGEMENT INFORMATION CIRCULAR

Information as of March 22, 2021 (unless otherwise noted)

MEETING MATERIALS AND NOTICE AND ACCESS

Canadian securities rules (“Notice and Access”) permit Emera Incorporated (the “Company” or “Emera”) to provide you with electronic access to this Management Information Circular (the “Circular”) and the 2020 Annual Report (the “Meeting Materials”) for the Annual Meeting of common shareholders (“shareholders”) instead of sending you a paper copy. Emera is sending Meeting Materials to registered holders and beneficial owners using Notice and Access. This approach is environmentally friendly as it helps reduce paper use. The notice you received includes instructions on how to access and review an electronic copy of the Meeting Materials and how to request a paper copy. The notice also provides instructions on voting by proxy at the meeting. If you would like to receive a paper copy of the Meeting Materials, please follow the instructions in the notice.

For those shareholders who have previously provided instructions to receive paper copies of Meeting Materials, we sent you a paper copy in addition to the notice regarding their electronic availability.

SOLICITATION OF PROXIES

This Circular is furnished in connection with the solicitation of proxies by the Board of Directors of Emera (the “Board of Directors” or “Emera’s Board” or the “Board”) and management of Emera for use at the Annual Meeting (“Meeting”) of Shareholders of the Company to be held on Thursday, May 20, 2021 at 11:00 a.m. (Atlantic time), as set forth in the Notice of Annual Meeting (the “Notice”).

You have received a proxy or voting instruction form. The solicitation of proxies will be primarily by mail although proxies may also be solicited by telephone, facsimile or email, in writing, or in person, by directors of the Company (“Directors”), Officers, or other employees or agents of the Company.

The Company wishes to have as many shareholders vote as possible and has retained D.F. King Canada as the proxy solicitation agent to assist with the solicitation of votes from shareholders. The proxy solicitation agent will monitor the number of shareholders voting and will contact shareholders in order to increase participation in voting. The cost of this solicitation will be borne by the Company and is not expected to exceed $50,000.

RECORD DATE AND VOTING OF SHARES

The date for determining which shareholders are entitled to receive the Notice is Monday, March 22, 2021. This is called the “Record Date”. Only shareholders of record at the close of business on the Record Date will be entitled to vote. Each common share owned as of the Record Date entitles the holder to one vote.

To the knowledge of the Directors and Officers, as of the date of this Circular, no person owned or exercised control over more than 10 per cent of the outstanding common shares of the Company and the only outstanding voting shares were 253,295,950 common shares.

BENEFICIAL (OR NON-REGISTERED) OWNERS

The voting process is different depending on whether you are a registered shareholder, Non-Objecting Beneficial Owner or Objecting Beneficial Owner.

If you have shares registered in your own name, then you are a registered shareholder. If your shares are listed in the name of a nominee, then you are a beneficial or non-registered shareholder. For example, if an account statement is provided to you by a broker, then it is likely that those shares will not be registered in your name, but under the broker’s name or under the name of an agent of the broker such as CDS Clearing and Depository Services Inc., the nominee for many Canadian brokerage firms, or its nominee.

 

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NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

There are two kinds of beneficial owners: (i) Objecting Beneficial Owners – those who object to their name being made known to the issuers of shares which they own and (ii) Non-Objecting Beneficial Owners – those who do not object to their name being made known to the issuers of the shares which they own. Non-Objecting Beneficial Owners will receive a voting instruction form from Emera’s registrar and transfer agent, AST Trust Company (Canada) (“AST”). This is to be completed and returned to AST in the envelope provided. In addition, AST provides both telephone voting and internet voting as described on the voting instruction form.

Securities regulation requires brokers or agents to seek voting instructions from Objecting Beneficial Owners in advance of the Meeting. Objecting Beneficial Owners should be aware that brokers or agents can only vote shares if instructed to do so by the Objecting Beneficial Owner. Your broker or agent (or their agent, Broadridge) will have provided you with a voting instruction form or form of proxy for the purpose of obtaining your voting instructions. Every broker has its own mailing procedures and provides instructions for voting. You must follow those instructions carefully to ensure your shares are voted at the Meeting.

If you are an Objecting Beneficial Owner receiving a voting instruction form or proxy from a broker or agent, you cannot use that proxy to vote in person at the Meeting. To vote your shares at the Meeting, the voting instruction form or proxy must be returned as instructed by the broker well in advance of the Meeting. If you wish to attend and vote your shares in person at the Meeting, follow the instructions for doing so provided by your broker or agent.

VIRTUAL PARTICIPATION

As we continue to respond to the global COVID-19 pandemic, Emera is using virtual meeting technology that will allow participation in the meeting online or by phone. Emera encourages all participation in the meeting to be through the virtual meeting technology that can be found online at https://web.lumiagm.com/429761988, using password: emera2021 (case sensitive). Emera is subject to the Nova Scotia Companies Act annual shareholder meeting requirements, as well as directives under the Nova Scotia Health Protection Act and Emergency Management Act which currently limit the capacity for in-person meetings.

REGISTERED SHAREHOLDERS AND PROXYHOLDERS

Registered shareholders and duly appointed proxyholders may participate virtually in the Meeting using an internet connected device such as a laptop, computer, tablet or mobile phone. A registered shareholder or a proxyholder should simply log in to https://web.lumiagm.com/429761988 and enter their 13-digit Control Number as their username, using the password: emera2021 (case sensitive). If you are a registered shareholder and have appointed a proxyholder to act on your behalf at the Meeting, you must register your proxyholder. Once your proxyholder has been registered, they will receive a Control Number from AST to access the virtual meeting. If you do not register your proxyholder, your proxyholder will not receive a Control Number in order to log in to the Meeting.

Please allow ample time before the start of the Meeting to complete the log-in process. Emera recommends logging in at least 15 minutes prior to the start of the Meeting. In order to be able to vote, please ensure that you are connected to the internet at all times. If you are not connected, your vote may not be recorded. To ensure the optimum experience, virtual participants will need the latest versions of Chrome, Safari, Edge or Firefox (please do not use Internet Explorer). Participants should ensure their browser is compatible by logging in early. Please note that internal network security protocols including firewalls and VPN connections may block access to the virtual meeting technology. If during the meeting, participants experience any difficulty connecting or watching the meeting, they should ensure their VPN setting is disabled or use their computer on a network that is not restricted to security settings of a participant’s organization.

 

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BENEFICIAL (OR NON-REGISTERED) OWNERS

In order to participate online or vote at the meeting, a beneficial or non-registered owner must:

1. appoint themselves as proxyholder;

2. register their proxyholder; and

3. access the meeting as a proxyholder using the Control Number received after registering as a proxyholder.

If you do not register your proxyholder, your proxyholder will not receive a Control Number in order to log in to the meeting. The control number included in any voting instruction form you have received will not enable you to log in to the Meeting.

In order to appoint yourself as a proxyholder, follow the instructions in the form of proxy or voting instruction form sent to you by your intermediary. In most cases, you can simply insert your own name in the form of proxy or voting instruction form, sign it and return it in the envelope provided or you can make the appointment online. Do not complete the voting instructions, as you will be voting at the virtual meeting. However, many Objecting Beneficial Owners located in the United States instead will need to (i) send a request to their intermediary or its agent to send them a legal proxy appointing them as proxyholder and (ii) promptly following receipt of the legal proxy, submit the legal proxy to AST at 1 Toronto Street, Suite 1200, Toronto, Ontario M5C 2V6 prior to 5:00 p.m. Atlantic time on Tuesday, May 18, 2021.

Once a beneficial or non-registered owner has been appointed a proxyholder and has registered as proxyholder, they will receive a Control Number from AST to access the virtual meeting. The beneficial owner should follow the instructions under “Registered Shareholders and Proxyholders” above to log in to the virtual Meeting as a proxyholder.

REGISTERING YOUR PROXYHOLDER

If you are a registered shareholder and wish to appoint a proxyholder to participate virtually in the Meeting or if you are a beneficial or non-registered owner and have appointed yourself as proxyholder, you must contact AST, Emera’s registrar and transfer agent, before 5:00 p.m. (Atlantic time) on Tuesday, May 18, 2021 to obtain a new Control Number to use to access the virtual meeting by:

 

(i)

calling:

1-866-751-6315 (within North America); or

1 (212) 235-5754 (outside of North America); or

 

(ii)	going to AST’s website at https://lp.astfinancial.com/control-number-request-en.html to request the control number by completing an electronic form. This form once completed and submitted online will generate a message to AST to send the Control Number to the designated proxyholder.

SHAREHOLDER PROXY MATERIALS

These security holder materials are being sent to both registered and non-registered owners of the securities. If you are a non-registered owner, and the issuer or its agent has sent these materials directly to you, your name, address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding on your behalf. Emera has arranged for its registrar and transfer agent, AST, to send materials directly to Non-Objecting Beneficial Owners. Emera will bear the cost of delivering shareholder proxy materials to registered shareholders, Non-Objecting Beneficial Owners and Objecting Beneficial Owners.

By choosing to send these materials to you directly, Emera (and not the intermediary holding on your behalf) has assumed responsibility for (i) delivering these materials to you as a Non-Objecting Beneficial Owner, and (ii) executing your proper voting instructions. Please return voting instructions as specified in the voting instruction form or form of proxy.

 

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APPOINTMENT AND REVOCATION OF PROXIES

The persons named in the enclosed proxy are Jackie Sheppard, Chair of the Board, Scott Balfour, President and Chief Executive Officer, and Stephen Aftanas, Corporate Secretary of the Company.

For a vote by proxy or voting instruction form to be counted, it must be received prior to 5:00 p.m. (Atlantic time) on Tuesday, May 18, 2021, or if the meeting is adjourned or postponed, by 5:00 p.m. Atlantic time two business days prior to the reconvened meeting date. The Company reserves the right to accept late proxies and to waive the proxy cut-off with or without notice, but is under no obligation to accept or reject a late proxy. For Canadian residents, a postage-paid, pre-addressed envelope is provided for this purpose.

You may vote by proxy or voting instruction form via mail, the internet or telephone. If you are a registered shareholder or a Non- Objecting Beneficial Owner, you may attend the Meeting in person and submit your completed proxy or vote by ballot.

Completion of a proxy gives discretionary authority to the proxyholder to vote as he, she or they see fit in respect of amendments to matters identified in the Notice, and other matters that may properly come before the Meeting or any adjournment or postponement thereof, whether or not the amendment or other matter that comes before the Meeting is, or is not, routine and whether or not the amendment or other matter that comes before the Meeting is contested. Management of the Company is not aware of any amendments or other matters to be presented for action at the Meeting.

If you appoint Ms. Sheppard, Mr. Balfour or Mr. Aftanas as your proxyholder, they will vote, or withhold from voting, in accordance with your directions. If you do not specify how you want your shares voted, they will vote “For” the:

 

•

election of each of the Directors named in this Circular;

 

•

appointment of Ernst & Young LLP as Auditors;

 

•

authorization of the Directors to establish the Auditors’ fee;

 

•

advisory resolution on the Company’s approach to executive compensation; and

 

•

approval to amend the Company’s Senior Management Stock Option Plan.

They will vote in accordance with their best judgment if any other matters are properly brought before the Meeting.

You may appoint any other person (who need not be a shareholder) to represent you at the Meeting by inserting that person’s name in the space provided on the proxy or voting instruction form. That person is your proxyholder and must participate and vote at the Meeting for your vote to count.

You may revoke your proxy by providing new voting instructions in a new proxy or voting instruction form with a later date, or at a later time if you are voting on the internet or by telephone. Any new voting instructions, however, will only take effect if received prior to 5:00 p.m. (Atlantic time) on Tuesday, May 18, 2021, or if the meeting is adjourned or postponed, 5:00 p.m. (Atlantic time) two business days prior to the reconvened meeting date. You may also revoke your proxy without providing new voting instructions by giving written notification addressed to Mr. Stephen Aftanas, Corporate Secretary, P.O. Box 910, Halifax, Nova Scotia B3J 2W5, no later than the last business day preceding the day of the Meeting or preceding the day of any postponement or adjournment thereof or with the Chair of the Meeting on the day of the Meeting or the day of any postponement or adjournment thereof or in any other manner permitted by law. Registered shareholders and Non-Objecting Beneficial Owners may attend the Meeting and vote their shares in person and, if they do so, any voting instructions previously given by such persons for such shares will be revoked.

RESTRICTION ON SHARE OWNERSHIP AND VOTING

Under Nova Scotia legislation, no Emera shareholder may own or control, directly or indirectly, more than 15 per cent of the outstanding voting shares. This restriction may be enforced by limiting non-complying shareholders’ voting rights (including by disqualifying or deeming votes to have not been cast by such non-complying shareholders), dividend rights and transfer rights. Shareholders may be required, at any time, to furnish a statutory declaration to verify the number of shares held to ensure compliance with this restriction.

If you have any questions about the share ownership and voting restriction, please contact the Corporate Secretary using the contact information contained in the Notice.

 

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BUSINESS OF THE MEETING

 

1.

Election of the Board of Directors: The 11 nominees proposed for election as Directors at the 2021 Meeting are identified under Director Nominees in this Circular. For more information about the process for nominating Directors, see Nomination of Directors and Director Recruitment Process in the Statement of Corporate Governance Practices.

All nominees are currently Directors of the Company. Each nominee has indicated his or her willingness to serve as a Director. Each Director elected at the Meeting will hold office until the next Annual Meeting of Shareholders.

Ms. Sheppard, Mr. Balfour and Mr. Aftanas intend to vote proxies received “For” the 11 nominees unless instructed otherwise by shareholders in their proxy.

 

2.

Appointment of Auditors: Emera’s Audit Committee evaluates and recommends to the Board of Directors the external Auditors to be nominated for issuing the Auditors’ reports and performing other audit or review services. Once appointed, the Auditors report directly to the Audit Committee, which oversees its work for the Company. The Audit Committee is responsible for reviewing the experience and qualifications of the Auditors, their performance, their effectiveness and the quality of their service.

Ernst & Young LLP have been Auditors of the Company since its inception in 1998. Ernst & Young have been the Auditors of the Company’s subsidiary, TECO Energy, Inc., since the first quarter of 2018. They were Auditors of the Company’s subsidiary, Nova Scotia Power Inc. (“NSPI”), from 1991 to 2003 and from 2012 to the present.

Every five years, the Committee performs a comprehensive review of the performance of the Auditors over multiple years to provide further insight on the firm, its independence and its application of professional standards. The last comprehensive review occurred in 2017, when the Company initiated a rigorous request for proposals process to provide external audit services to Emera and its subsidiaries. This process was overseen by the Audit Committee, which selected Ernst & Young LLP as the Company Auditors.

The Audit Committee has reviewed the performance of Ernst & Young LLP, including its independence relating to the audit, and recommends the reappointment of Ernst & Young LLP as Auditors.

Ms. Sheppard, Mr. Balfour and Mr. Aftanas intend to vote proxies received “For” the reappointment of Ernst & Young LLP as Auditors of the Company, to hold office until the close of the next Annual Meeting of Shareholders, unless a shareholder specifies their shares be withheld from voting.

 

3.

Auditors’ Fee: The Company is incorporated under the Nova Scotia Companies Act. Shareholder approval of the authorization of Directors to establish the Auditors’ fee is required pursuant to the Companies Act. The aggregate fees billed by Ernst & Young LLP, during the last two fiscal years ended December 31, 2019 and December 31, 2020, were as follows:

 

Service fee		2020 ($)				2019 ($)
Audit Fees			1,867,620				2,431,160
Audit-Related Fees (1)			19,600				108,000
Tax Fees (2)			194,774				311,665
Total			2,081,994				2,850,825

 

(1)

Audit-Related Fees for Emera relate to fees associated with the audit of pension plans.

 

(2)

Tax Fees for Emera relate to the structuring of cross-border financing of Emera’s subsidiaries and affiliates as well as tax compliance services and general tax consulting advice on various matters.

Ms. Sheppard, Mr. Balfour and Mr. Aftanas intend to vote proxies received “For” the authorization of Directors to establish the Auditors’ fee, unless a shareholder instructs otherwise in their proxy.

 

4.	Advisory Vote on Executive Compensation: You will be asked to consider and approve, on an advisory basis, a resolution on Emera’s approach to executive compensation as disclosed in this Circular.

Our executive compensation programs are designed to attract, retain, motivate and reward high-calibre leaders to deliver strong performance in alignment with Emera’s corporate strategy and to create and sustain shareholder value. Programs are designed to reflect a blend of short- and long-term incentive plans to reflect our pay-for-performance philosophy and to provide for a significant portion of an executive’s compensation to be at risk, while aligning the structure of programs and payouts with sound risk management and good governance principles.

 

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The Board, through the Management Resources and Compensation Committee (“MRCC”), has directed and reviewed the contents of the Statement of Executive Compensation in this Circular and has unanimously approved it as part of the Committee’s report to you.

As our shareholder, on an advisory basis, you have the opportunity to vote “For” or “Against” our approach to executive compensation through the following resolution:

“RESOLVED, on an advisory basis, and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the Company’s Management Information Circular delivered in advance of the 2021 Annual Meeting of Shareholders of Emera Incorporated.”

Since your vote is advisory, it will not be binding on the Board; however, the Board, and in particular the MRCC, will seriously consider the outcome of the vote as part of its ongoing review of executive compensation.

Unless otherwise instructed, Ms. Sheppard, Mr. Balfour and Mr. Aftanas intend to vote proxies received “For” the advisory resolution on executive compensation.

 

5.

Senior Management Stock Option Plan Amendment: To consider and, if thought appropriate, to pass an ordinary resolution (the full text of which is reproduced in Appendix “B” of this Circular), ratifying, confirming and approving an increase in the maximum number of common shares reserved for issuance under the Company’s Senior Management Stock Option Plan (the “Plan”) from 11,700,000 to 14,700,000 common shares (an increase of 3,000,000 shares), and any amendments or variations thereto that may come before the Meeting. The Plan is an important part of the Company’s long-term incentive program for senior management. This amendment, if approved, would replenish the inventory of common shares available for issuance under the Plan which would otherwise be exhausted by the Company for the 2022 grants. This increase will allow for a sufficient reserve balance to be maintained, based on granting an average of 550,000 options per year, for the next five years. For more information about this Amendment of the Plan, see Senior Management Stock Option Plan Amendment in the Statement of Corporate Governance Practices later in this Circular.

Unless otherwise instructed, Ms. Sheppard, Mr. Balfour and Mr. Aftanas intend to vote proxies received “For” the amendment of the Company’s Senior Management Stock Option Plan.

DIRECTOR NOMINEES

The following pages set out the names of the nominees proposed for election as Directors of Emera. Biographical information about the Director nominees is also provided, including age, municipality and country of residence, year first elected or appointed as a Director, principal occupation, education, skills and experience. The information about each Director nominee includes Committee memberships and meeting attendance. Their membership on other public company boards in the last five years is also described.

There is information about the common shares and deferred share units (“DSUs”) of Emera held by each Director nominee for the past three years. The estimated value of each Director nominee’s common shares and DSU holdings is based on the following:

 

Year-end		Closing price of Emera common shares ($)
December 31, 2018			43.71
December 31, 2019			55.79
December 31, 2020			54.10

All Director nominees are required to meet share ownership guidelines. The information below details their status under those guidelines. For further information on the share ownership guidelines for Directors, see Director Share Ownership Guidelines in the Statement of Corporate Governance Practices later in this Circular. For further information on the share ownership guidelines for the Company’s executive officers, including Mr. Balfour, see Executive Share Ownership Requirements and Anti-Hedging Policy in the Statement of Executive Compensation.

All Director nominees, except Mr. Balfour and John Ramil, are considered by the Board to be independent. For more information about the Company’s definition of independence, see Director Independence in the Statement of Corporate Governance Practices later in the Circular.

 

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Skills and Experience Total

 

The above bar chart shows eight categories of skills and experience important to the Company’s business and governance (along the vertical axis), and the number of the 11 Director nominees who possess those skills and experience (along the horizontal axis). The details of each Director nominee’s skills and experience are contained in their biographies later in this Circular.

The voting results for those Directors who were nominees for election in the 2020 Annual Meeting of Shareholders are shown in the two rows below.

 

		Scott C. Balfour				James V. Bertram				Sylvia D. Chrominska				Henry E. Demone				Kent M. Harvey				B. Lynn Loewen				John B. Ramil				Andrea S. Rosen				Richard P. Sergel				M. Jackie Sheppard				Jochen E. Tilk
Percentage of votes cast “For” each Director (%)			99.82				99.77				99.76				99.86				99.54				99.86				99.74				99.34				99.75				99.81				99.76
Percentage of votes cast “Withheld” (%)			0.18				0.23				0.24				0.14				0.46				0.14				0.26				0.66				0.25				0.19				0.24

 

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COMPENSATION OF DIRECTORS IN 2020

PURPOSE OF DIRECTOR COMPENSATION

The compensation of Directors is designed to:

 

a.

attract and retain highly skilled and experienced individuals to serve on Emera’s Board of Directors;

b.

ensure alignment with shareholders’ long-term interests; and

c.

recognize the substantial time commitment required to oversee management of the Company.

For more information about the process of determining Director compensation, see Director Compensation in the Statement of Corporate Governance Practices later in the Circular.

DEFERRED SHARE UNITS

In 2020, the annual retainer for each Director was $227,500, of which $142,500 was payable in deferred share units or “DSUs” and the balance was payable in cash. Directors can elect to receive some or all of their cash compensation in the form of additional DSUs. More information about the Directors’ DSU Plan is provided later in this section of the Circular. The Company does not offer option-based awards, non-equity incentive plan participation, or participation in a Company pension plan to its non-executive Directors.

BOARD CHAIR’S ALL-INCLUSIVE RETAINER

The annual Chair’s retainer is an all-inclusive fee, meaning the Board Chair receives no meeting fees or any other retainer for serving as Emera’s Board Chair. The all-inclusive annual retainer of the Board Chair in 2020 was $425,000. This was comprised of $212,500 in DSUs, and the remainder in cash.

COMPENSATION RATES FOR DIRECTORS

Listed below are the annual compensation rates for non-executive Directors. Mr. Balfour does not receive director compensation because he is compensated in the role of President and CEO.

 

Annual retainers for Directors in 2020		Cash amount ($)				DSUs ($)				Total ($)
Annual Chair’s retainer			212,500				212,500				425,000
Annual Director’s retainer			85,000				142,500				227,500
Annual Audit Committee Chair’s retainer			27,500				N/A				27,500
Annual Audit Committee member’s retainer			12,500				N/A				12,500
Annual Management Resources and Compensation Committee Chair’s retainer			22,500				N/A				22,500
Annual Management Resources and Compensation Committee member’s retainer			10,500				N/A				10,500
Annual Nominating and Corporate Governance Committee Chair’s retainer			17,500				N/A				17,500
Annual Nominating and Corporate Governance Committee member’s retainer			10,500				N/A				10,500
Annual Health, Safety and Environment Committee Chair’s retainer			17,500				N/A				17,500
Annual Health, Safety and Environment Committee member’s retainer			10,500				N/A				10,500

Each Director is entitled to an annual travel allowance of $10,000. See Compensation in the Statement of Corporate Governance Practices for a description of how the travel allowance was impacted by the COVID-19 pandemic.

Members of ad hoc committees receive meeting fees ($1,750 in-person meeting fee; $1,250 videoconference/telephone meeting fee) for their participation in each committee meeting, but typically receive no annual retainer for being a member of an ad hoc committee because of the nature of the committee’s existence, having generally been established for a specific purpose and a temporary period of time. For further information on the Company’s committees, see Committees of the Board of Directors in the Statement of Corporate Governance Practices later in this Circular.

 

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TOTAL DIRECTOR COMPENSATION IN 2020

The following table sets out the total compensation earned by the Directors who served on Emera’s Board during 2020. Compensation is made up of applicable retainers and the annual $10,000 travel allowance (the travel allowance was determined to be payable to Directors in the first quarter of 2020, but not after as a result of Directors not travelling due to the COVID-19 pandemic – see Director Compensation for more detail).

Mr. Balfour is not included in the table as his compensation for service as Emera’s President and CEO is disclosed in the Statement of Executive Compensation. He does not receive any additional compensation for his services as a member of the Board of Emera or as a member of the Board of any of Emera’s subsidiaries or investments.

In the table below, the columns under the headings “DSUs Awarded” and “DSUs Held” show detailed information about DSUs received by Directors as compensation.

Total Compensation

 

																		DSUs awarded								DSUs held
Director			Fees earned     in 2020 ($) (1)				All other    compensation    ($)				Total ($)				2020 Share-based awards ($)	(2)			Value of DSUs vested during 2020 ($) (3)				Change in value of DSUs held in 2020 ($) (4)				Market value     of total DSU     holdings ($) (5)
James Bertram			257,986				N/A				257,986				257,986				273,807				(13,077	)			692,426
Sylvia Chrominska			252,486				N/A				252,486				197,493				292,947				(66,892	)			2,434,288
Henry Demone			250,986				N/A				250,986				142,500				204,040				(43,293	)			1,589,945
Kent Harvey (6)			301,557				N/A				301,557				142,500				155,898				(10,449	)			490,417
Lynn Loewen			252,986				N/A				252,986				252,986				333,241				(56,990	)			2,157,616
Donald Pether (7)			113,889				N/A				113,889				113,889				233,344				(94,221	)			1,634,036
John Ramil (6)			273,673				N/A				273,673				273,673				317,577				(32,321	)			1,352,230
Andrea Rosen			263,418				N/A				263,418				263,418				427,633				(114,337	)			4,087,742
Richard Sergel (6)			290,361				13,351(8)				303,712				142,500				191,829				(34,963	)			1,311,059
Jackie Sheppard			425,000				N/A				425,000				425,000				614,246				(133,013	)			4,872,246
Jochen Tilk			252,986				N/A				252,986				252,986				264,296				(9,954	)			582,928

 

(1)	The “Fees earned in 2020” column is the amount of Directors’ fees, and includes the dollar value of that portion of their retainer paid in DSUs. All fees are in Canadian dollars.

 

(2)	This column shows the portion of Directors’ fees earned in 2020 that was allocated to DSUs. DSUs granted in 2019 are based on the value of the Emera common share closing price on December 31, 2019 ($55.79).

 

(3)	This column shows the value of all DSUs received in 2020, including received as dividend equivalents during the year, multiplied by the December 31, 2020 Emera common share closing price of $54.10.

 

(4)	This column shows the change in value of all DSUs held by each Director at the beginning of the year because of the change to the Emera common share closing price from $55.79 at the beginning of the year to $54.10 on December 31, 2020.

 

(5)	This column shows the value of all DSUs held by each Director at the end of 2020 based on the December 31, 2020 Emera common share closing price of $54.10.

 

(6)	As US-domiciled Directors, the annual cash retainer, committee retainers, and the associated meeting and travel fees are paid to Mr. Harvey, Mr. Ramil and Mr. Sergel in US dollars, using a one-to-one conversion rate to the Canadian dollar.

 

(7)	Mr. Pether retired from the Board on June 5, 2020. He redeemed 29,861 DSUs on October 2, 2020, leaving a balance of 30,204 DSUs as of December 31, 2020.

 

(8)	Mr. Sergel also received compensation for serving as a Director of Emera US Holdings Inc.

The table above includes compensation earned by Emera Directors who served on the Board of Directors of Emera subsidiaries. What follows is more information about Emera’s Directors who served on the Boards of its subsidiaries.

 

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COMPENSATION OF EMERA DIRECTORS ON SUBSIDIARY BOARDS

The Emera Board of Directors, on the recommendation of the Nominating and Corporate Governance Committee, determines the compensation to be received by Emera Directors who serve on the Boards of Emera’s subsidiaries. Such compensation received by each Emera Director that serves as a Director on the Board of an Emera subsidiary is reported under “All other compensation” and “Total” in the Total Compensation table on the previous page.

Mr. Sergel was a member of the Board of Directors of Emera US Holdings Inc., a US holding company which is a direct subsidiary of Emera and holds certain US-based investments of Emera. He receives an annual retainer of $10,000 USD for serving on the Emera US Holdings Inc. Board, plus $1,000 USD for any Board meetings.

DIRECTORS’ SHARE OWNERSHIP GUIDELINES

To align the interests of Directors and shareholders, the Directors are subject to share ownership guidelines that require them to own common shares and/or DSUs with a value of not less than three times the annual Director’s retainer within five years following their appointment date or within five years of any change to the Directors’ compensation, whichever is the later date. For the status of each Director nominee under the Director Share Ownership Guidelines, see their biographies earlier in this Circular. For more information about the Director Share Ownership Guidelines, see Director Share Ownership Guidelines in the Statement of Corporate Governance Practices.

DIRECTORS’ DSU PLAN

Under the Directors’ Deferred Share Unit Plan (the “Directors’ DSU Plan”), non-employee Directors may elect to receive all or any portion of their cash compensation in DSUs in lieu of that cash compensation, subject to the requirement to receive a minimum portion of their annual retainer in DSUs.

Directors’ fees are paid on a quarterly basis and, at the time of each quarterly payment, the applicable amount is converted to DSUs. The number of DSUs to be credited is determined by dividing (a) the quarterly portion of the Director’s annual fee that the Director is required to receive in DSUs, together with the portion the Director elected to be paid in DSUs by (b) the fair market value of an Emera common share on the last trading day of the preceding calendar year, with fractions computed to three decimal places.

A DSU is a unit that has a value based upon the value of one Emera common share. When a dividend is paid on Emera’s common shares, the Director’s DSU account is credited with additional DSUs computed by dividing: (a) the amount obtained by multiplying the amount of the dividend declared and paid per common share by the number of DSUs recorded in the Director’s account on the record date for the payment of such dividend by (b) the market price of a common share as of the dividend payment date.

DSUs cannot be redeemed for cash until the Director leaves the Board. The cash redemption value of a DSU equals the market value of a common share at the time of redemption. DSUs are not shares, cannot be converted to shares and do not carry voting rights. DSUs received by Directors in lieu of cash compensation and held by them represent an at-risk investment in Emera. The value of DSUs is based on the value of the common shares of Emera, and therefore is not guaranteed. See Director Compensation in the Statement of Corporate Governance Practices in this Circular for more information about the compensation of Directors. Non-employee Directors are not entitled to participate in any other compensation plan of the Company or in Emera’s Employee Common Share Purchase Plan.

 

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has four standing Committees to assist it in carrying out its duties. They are the:

 

•

Audit Committee;

 

•

Management Resources and Compensation Committee (“MRCC”);

 

•

Nominating and Corporate Governance Committee (“NCGC”); and

 

•

Health, Safety and Environment Committee (“HSEC”).

From time to time the Board may establish ad hoc committees to assist the Board on specific matters of a temporary nature.

CERTAIN PROCEEDINGS

To the knowledge of the Company, none of the proposed nominees for election as Directors of the Company:

 

(a)

are, as at the date of this Circular, or have been, within 10 years before the date of this Circular, a director, chief executive officer or chief financial officer of any company that:

 

(i)

was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days (an “Order”) that was issued while the proposed nominee was acting in the capacity as director, chief executive officer or chief financial officer; or

 

(ii)

was subject to an Order that was issued after the proposed nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;

 

(b)

are, as at the date of this Circular, or have been within 10 years before the date of this Circular, a director or executive officer of a company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangements or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

(c)

have, within the 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed nominee.

 

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STATEMENT OF CORPORATE GOVERNANCE PRACTICES

 

Corporate governance at a glance
Emera’s Board of Directors annually reviews its approach to corporate governance. It monitors best practices of leading corporations with a view to enhancing governance to create and preserve long-term shareholder value. Details of Emera’s corporate governance practices may be found in this Statement of Corporate Governance Practices.
Governance highlights		For details see
All Emera Directors are independent from management except the President and Chief Executive Officer and John Ramil. Mr. Ramil joined the Board following the closing of Emera’s acquisition of TECO, where he previously held the position of President and CEO.		Board of Directors Page 28
The Board oversees the Company’s strategy, which includes reviewing the strategic planning process and annually approving the strategic plan after considering, among other things, the opportunities and risks of the business.		Board of Directors Page 28
The Board and, on certain matters by delegation, its Committees oversee the Company’s risk management.		Board of Directors Page 28
The Charter of the Chair of the Board of Directors and position descriptions for each of the Committee Chairs describe the roles and responsibilities for these leadership positions.		Position Descriptions Page 29
Directors receive an in-depth orientation when they become Board members. Regular site visits are organized for operating facilities and offices. While site visits were impacted by the COVID-19 pandemic in 2020, Directors participated in virtual training and education on special topics by videoconference. In addition, special topics of focus or interest are addressed at Board dinners and meetings. Board members are encouraged to continue to pursue education to familiarize themselves with the Company’s business, investments and key Company personnel.		Orientation of Directors and Continuing Education Page 39
Creating a culture of integrity begins with the tone at the top. Directors, Officers and employees are required to annually acknowledge that they have reviewed and understand the Emera Code of Conduct, which itself is overseen by the Nominating and Corporate Governance Committee.		Ethical Business Conduct Page 42
New Directors are recruited on the basis that they will make a strong contribution and have the background, diversity, skills and experience needed by the Board in view of the Company’s strategy.		Nomination of Directors and Director Recruitment Process Page 29
The Company maintains compensation for Directors designed to recognize the substantial time commitment required to oversee management of the Company and to align Directors’ interests with the long-term interests of shareholders.		Director Compensation Page 37
Four standing Committees assist the Board in carrying out its responsibilities: the Audit Committee; the Management Resources and Compensation Committee; the Nominating and Corporate Governance Committee; and the Health, Safety and Environment Committee. Special committees are struck from time to time as needed in regard to specific matters.		Committees of the Board of Directors Page 44
The Board annually assesses its performance in order to find ways to improve its effectiveness and that of the Chair, individual Directors and the Board Committees.		Board and Director Performance Assessments Page 34
In conjunction with the Board and Director assessment work, Directors reflect on strategy work over the year and recommend actions to be undertaken in the following year to carry out strategy. This work informs the Company’s setting of its priorities and goals for the following year, including the CEO’s objectives, and provides a guide for tracking of progress throughout the year.		Board and Director Performance Assessments Page 34
Emera Directors are always interested in receiving shareholders’ views about the Company. Shareholders are able to communicate directly with the Chair of the Board or other independent Directors through private and confidential correspondence.		Communication with Directors and Shareholder Engagement Page 47
Please read Emera’s entire Statement of Corporate Governance Practices on the following pages for more important details about the Company’s governance practices.

 

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BOARD OF DIRECTORS

BOARD OF DIRECTORS CHARTER

The Board of Directors believes that clear accountabilities lead to the best governance and therefore maintains a Charter for the Board. Under the Charter, the Board is responsible for overseeing the management of the business of the Company and for providing stewardship and governance for the long-term success of the Company. The Charter describes the duties and responsibilities of the Board in matters of strategic planning, independence and integrity, risk management, leadership and succession, financial reporting, corporate communications, public disclosure, and corporate governance.

The Board of Directors Charter was reviewed earlier this year and amendments were adopted to ensure it appropriately reflects the Board’s responsibility. The most recent changes to the Charter highlight the Company’s ESG values. This new section underlines the Board’s responsibility to oversee management’s approach to addressing Emera’s ESG impacts, risks and opportunities which are most important to its business performance and to key stakeholders. Emera’s ESG commitments are core to our strategy. We are committed to transparency and we recently enhanced our disclosure in our annual Sustainability Report with the addition of both the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosure frameworks. Emera’s Sustainability Reports with our latest ESG highlights are available at www.emera.com/sustainability.

The Board Charter is attached to this Circular as Appendix “A”. We encourage you to carefully review the Charter for more detail about the responsibilities of the Board in these areas.

DIRECTOR INDEPENDENCE

All Emera Directors are independent from management, except for Mr. Balfour, who is President and CEO, and Mr. Ramil. Mr. Ramil, who was President and CEO of TECO at the time it merged with Emera on July 1, 2016, is not considered independent. He retired as President and CEO of TECO in August 2016 and he joined the Emera Board in September 2016. The question of his independence is a matter for determination by the Emera Board under applicable Canadian securities laws.

Use of the term “independent” in relation to a Director in this Circular means a Director is independent as defined under applicable Canadian securities laws and, in particular, is free of any direct or indirect material relationship, which could, in the view of the Board of Directors, be reasonably expected to interfere with the Director’s independent judgment.

In making a determination about the independence of Mr. Ramil, the Board considered the definitions of independence adopted by proxy advisory firms such as ISS and Glass Lewis, which include a five-year period during which a former CEO of an acquired company is not considered independent. But for the Board’s decision to apply the above five-year period set by third-party proxy advisory firms for a former CEO of an acquired company, the Board has determined that Mr. Ramil is in all other respects an independent Director. The Board will review Mr. Ramil’s independence status in September 2021, following the fifth anniversary of his joining the Board.

Except in regard to Mr. Sergel, who receives a retainer for being a member of the Board of Emera’s subsidiary Emera US Holdings Inc., Directors receive no other remuneration from Emera other than Directors’ retainers, fees or retainers for service as Chair of the Board or Chair or member of a Committee. Ms. Sheppard receives an all-inclusive annual retainer as Chair of the Board of Emera. As noted earlier in the Circular, Mr. Balfour does not receive any additional compensation for his services as a member of the Board of Emera or as a member of the Board of any of Emera’s subsidiaries or investments, beyond his compensation as Emera’s President and CEO.

The Company’s Articles of Association provide that no more than two Directors may be employees of the Company or of a subsidiary or affiliate of the Company. Mr. Balfour, as President and CEO of the Company, is the only Director employed by the Company.

INDEPENDENT CHAIR

Ms. Sheppard, the Chair of the Board, is an independent Director. The Articles of Association of the Company require that the Chair of the Board and the President and CEO be separate individuals.

 

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POSITION DESCRIPTIONS

Chair of the Board

The Chair provides leadership to the Board, in order that it may fulfill its duties effectively, efficiently and independent of management. The Chair’s role is to see that the Board and shareholder meetings function effectively. The Chair leads the Board discussions and represents the Board in providing additional advice and counsel to the President and CEO, and senior leadership. Under the leadership of the Nominating and Corporate Governance Committee, the Chair participates in the recruitment and retention of Directors and oversees appropriate processes to determine that the Board of Directors has the requisite skill sets needed by the Company. The Chair also leads the conduct of an annual assessment of the effectiveness of the overall Board and its members. For the full text of the Chair of the Board of Directors Charter, visit www.emera.com/governance.

Committee Chairs

The Board has adopted position descriptions for each Committee Chair, which detail the duties of the Committee Chairs. Each Committee Chair is required to provide leadership to the Committee members and support the Committee’s effective operation to fulfill its mandate. For the full text of the position description for Committee Chairs, visit www.emera.com/governance.

President and Chief Executive Officer

The President and CEO is responsible for leadership of the Company, its people, strategic planning, financial results, overall performance, and succession planning. He is to define, communicate and implement the strategic direction, goals and core values of the Company with a view to ensuring long-term success and value creation for all stakeholders. These roles and responsibilities of the President and CEO are contained in his employment contract. The President and CEO’s employment contract is reviewed by the Chair of the Board of Directors and the MRCC, and it is approved by the Board of Directors.

Among the various responsibilities of the Board, CEO selection is of critical importance. The Board oversees the succession planning program for the Chief Executive Officer. For more information about succession planning, see Succession Planning and Leadership Development in the Statement of Executive Compensation.

BOARD SIZE

The Articles of Association provide that the number of Directors on the Company’s Board must not be less than eight and not more than fifteen. Eleven Director nominees are being proposed for election at the 2021 Annual Meeting.

NOMINATION OF DIRECTORS AND DIRECTOR RECRUITMENT PROCESS

The Nominating and Corporate Governance Committee (“NCGC”) is responsible for providing the Company with a list of nominees for election as Directors at the Company’s Annual Meeting of Shareholders. In developing a list of nominees, the NCGC evaluates the size of the Board and the mix of skills and experience of its Directors and its diversity overall, including the level of representation of women on the Board (required to be at least 30 per cent as noted below under Board Diversity).

Director nominees must, in the opinion of the members of the NCGC, be able to fully discharge their duties as Directors and contribute to the broad range of issues which come before the Board for consideration. They must be able to devote the time necessary to prepare for and attend meetings of the Board and Committees of the Board to which they may be appointed. The NCGC regularly evaluates the expected turnover of Directors in advance of their retirement from the Board and develops an effective succession plan.

Working with the Board Chair, the NCGC considers recruitment in the context of the age and tenure of current members and considering the Board’s overall policy of ensuring renewal and orderly Board succession.

The NCGC will consider the likely potential tenure of a Director candidate before making a selection. This is factored into the selection decision having regard to the current make-up of the Board, the skills and experience the candidate offers relative to those of the other Directors and keeping in mind the age of Directors. Of the proposed slate of Directors, three Director nominees have served on the Board for more than a decade and three Director nominees have served for less than three years. This represents an appropriate mix of longer-serving Directors with a history on the Emera Board, and Directors that are newer to Emera, who bring a fresh perspective and approach to the Company’s Board. For more information about the average age and tenure of Emera’s Director nominees, refer to the section entitled Mechanism for Board Renewal.

 

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DIRECTORS’ MEMBERSHIP ON OTHER PUBLIC COMPANY BOARDS

Public company board membership for each Director during the last five years is set forth in their biographies in the section entitled Director Nominees.

COMMON MEMBERSHIPS ON BOARDS OF PUBLIC COMPANIES

Currently no other public company includes on its board two or more of Emera’s Directors.

MECHANISM FOR BOARD RENEWAL

Emera has no term limits for its Directors. The Board of Directors oversees processes for renewal of the Board, which balance many factors, and have as their ultimate objective the fulfillment of the fundamental responsibility of the Board to provide stewardship and good governance for the Company. Those processes primarily include: a robust Director recruitment process, internal governance practices that regularly assess each of the Board’s desired skills, and the conduct of an annual performance assessment of the Board, its Committees and individual Board members, all of which provide for renewal in a deliberate manner.

Emera’s governance practices prescribe that planned departures of Board members in any one year will not exceed two Directors. This practice contributes to Board renewal in a deliberate manner while ensuring continuity.

A rigorous annual performance assessment takes place under the leadership of the Board Chair with support from the NCGC and is described in greater detail under Board and Director Performance Assessments. The annual performance assessment provides information that is relevant for Board renewal.

In November 2016, the Board of Directors adopted a governance practice intended to provide for Board renewal, considering the removal in 2016 of the age limit from Emera’s Articles of Association. Under this governance practice, when recommending the nomination of Directors for election, the NCGC members must consider certain principles in relation to appropriate and balanced renewal of the Board. Those principles are as follows:

Board Renewal Principles

The NCGC adheres to a philosophy of promoting deliberate and balanced Board renewal. In keeping with such philosophy, it considers the following principles in respect of the list of Director nominees:

 

(a)

Age: as Directors approach 70 years of age, the NCGC assesses the needs of the Board, based on the Board’s complement and other relevant factors. Where a determination is made that such Director will be retiring, the NCGC begins the replacement process.

 

(b)

Tenure: the length of time that a nominee has served on the Company’s Board of Directors is considered, subject to the Guideline on Board Tenure, with a view to the Board having Directors with an appropriate mixture of tenures.

 

(c)

Average age: the average age of all of the Company’s Director nominees is determined and considered.

 

(d)

Average tenure: the average tenure of all of the Company’s Director nominees is determined and considered.

 

(e)

Other relevant factors: the NCGC considers any other factor Committee members determine to be relevant in the promotion of orderly succession and balanced renewal of membership on the Board, having as its ultimate objective the constitution of a Board of Directors which fulfills the fundamental responsibility of providing stewardship and good governance for the Company.

In practice, as a Director approaches age 70, the Board assesses the needs of the Board and may immediately commence a search. Depending on factors listed and taking a view as to the appropriate transition period, the transitioning Director may or may not be proposed for nomination but should not expect to be nominated after the age of 72. This flexibility allows for an orderly Board transition and balances the desire for renewal against the need for continuity and stability.

Application of Board Renewal Principles

The NCGC applied the principles to the Director nominees for Emera’s 2021 Annual Meeting. The Committee considered the average age of all of the Company’s Director nominees for election at the 2021 Annual Meeting, which will be 64.35 (in 2020 it was 63.52 years, and in 2019 it was 63.17 years), and the average tenure of all of the Company’s Director nominees as of the 2021 Annual Meeting, which will be 6.68 years (in 2020 it was 6.34 years, and in 2019 it was 5.69 years). In applying the Board Renewal Principles as described, the NCGC has recommended to the Board of Directors all the Director nominees presented earlier in this Circular.

 

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Board Tenure Guideline

In February 2021, on the recommendation of the NCGC, the Board adopted the following Board Tenure Guideline:

In support of the Board Renewal Principles, the Board has set a guideline that Directors may serve on the Board for a maximum tenure of 15 years. Re-nominations for election as Directors will be based on the recommendation of the Nominating and Corporate Governance Committee taking into consideration the needs of the Board, the best interests of Emera given its strategic objectives and the results of the annual Board and Director Performance Assessment.

As of the date of Emera’s 2021 AGM, all Director nominees shall have served on the Board for less than 15 years.

DIRECTOR’S OCCUPATION

The Directors have also instituted a policy which requires them to submit their resignation as a Director if there is a significant change in their principal occupation. The resignation is then considered by the Board which determines if the circumstances warrant acceptance of the resignation, whether due to a conflict of interest arising by virtue of a new principal occupation or otherwise.

COVID-19 PANDEMIC

Emera activated pandemic planning protocols to respond to the global COVID-19 pandemic early last year. In March 2020, the Company elevated its response plan to address increasing risks from COVID-19 to our employees, customers and communities. With health and safety as our top priority, the Company implemented restrictions on all business travel and new procedures and protocols for our operations. Directors have observed these travel restrictions and public health directives concerning travel resulting in no face-to-face meetings being held since the start of the pandemic. However, the business of the Board and its Committees has continued, uninterrupted, through videoconference technology. The governance response to the COVID-19 pandemic was considered effective. It involved periodic updates with comprehensive information on the response to the COVID-19 pandemic across all of Emera’s operating companies. It also included the scheduling of more frequent Board meetings during the initial months of the pandemic to provide appropriate oversight of the Company’s pandemic response.

DIRECTORS MEET WITHOUT MANAGEMENT

There were 27 Emera Board and Committee meetings during 2020. The Board and each Committee have adopted the practice of meeting in an in-camera session, during which the President and CEO and all other members of management are excluded. This practice has been implemented and the Board held an in-camera session at each Board and Committee meeting.

As the former President and Chief Executive Officer of TECO, who joined Emera’s Board following the closing of the TECO acquisition in 2016, John Ramil provides excellent industry and jurisdictional expertise. Recognizing the importance of independent dialogue, the Board developed a separate protocol concerning Mr. Ramil’s participation on the Board during his early tenure as a Director. That protocol meant that Mr. Ramil recused himself for a portion of each meeting. In 2018, it was determined this protocol was no longer necessary, and that Mr. Ramil should participate in all in-camera sessions.

The Board generally holds an evening session before the day of a regularly scheduled Board meeting and prior to the Board’s annual strategy meeting. As a governance practice, and at least once a year, the non-executive Directors conduct such an evening session that excludes the President and CEO and all other management. See Board Dinner Sessions for more information.

BOARD DINNER SESSIONS

Since the declaration of the global COVID-19 pandemic in March 2020, the Emera Board has avoided all in person meetings, including its regularly scheduled pre-meeting Board dinners. However, in lieu of Board dinners, Directors have scheduled and held educational sessions by videoconference on a variety of relevant topics. These sessions are treated as an opportunity to accomplish many important governance objectives, including:

 

•

Meeting as Directors in an atmosphere that is not a Board meeting;

 

•

Meeting in a less formal atmosphere with the CEO and other senior officers;

 

•

Holding educational sessions on important topics for the Company’s business and strategic direction;

 

•

Meeting high-potential employees to advance the succession planning for the Company; and

 

•

Strengthening Directors’ working relationships.

 

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CORPORATE STRATEGY

Oversight and guidance of the corporate strategy is one of the primary roles of the Board. Led by the President and CEO, the Management team works with the Board to set the strategy agenda for the year, including annual individual interviews with each Director in addition to discussions with the Board as a whole.

A specific and significant component of every scheduled Board meeting includes an update and discussion on strategy and related matters, including trends in the industry, growth initiatives, financial forecast updates and new risks and opportunities. These updates serve to keep the Board aware of changes in the market, industry and within Emera, as well as giving the Board an opportunity to provide insight and direction throughout the year on strategy.

Each year, at least one and often two board meetings are dedicated to strategy. In 2020, strategy-focused meetings were held in June and September. These meetings included the annual strategic update on industry trends including the company’s strategic positioning related to the customer-driven trends of decarbonization, decentralization and digitalization, an updated long-term financial forecast, a review and analysis of industry peers, an overview of strategic signposts that management is regularly monitoring in its ongoing assessment and review of strategy, updates on specific components of strategy including talent and digital strategies and other key strategic initiatives and projects. 2020 also included a presentation and discussion on Emera’s focus areas for growth. The June meeting also included significant scenario analysis of the current and long-term impacts of COVID-19 on the Company as well as key industry trends.

Our strategy is designed to both prepare for and capitalize on the customer-driven trends of decarbonization, decentralization and digitalization facing our industry. Broadly, Emera’s strategy continues to focus on safely delivering the cleaner, reliable and affordable energy our customers count on. We continue to drive organic growth through regulated investments in cleaner energy, reliability, infrastructure renewal and system expansion.

Environmental, Social and Governance

The Board reinforced Emera’s ESG commitments as core to our strategy and our culture. Last year, we took steps to better articulate our commitments and our approach to managing the risks and opportunities related to ESG. We also increased our ESG disclosures and governance with the addition of two disclosure frameworks to our reporting, namely: the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures disclosure frameworks. We also enhanced executive oversight of ESG and established a Sustainability Management Committee mandated to oversee the risk management, disclosures and focus areas for the Company.

Decarbonization and 2050 Net-Zero Vision

Our focus on building a more sustainable energy future shapes our environmental commitments. Decarbonization has been central to our strategy for more than 15 years and has been a key driver of our growth and innovation. Throughout 2020, the Board and Management examined and discussed Emera’s decarbonization progress, plans and pathways, which were finalized and shared publicly in February 2021 as Emera’s Climate Commitment.

Building on its strong decarbonization track record, Emera is continuing its efforts by establishing clear carbon reduction goals and a vision to achieve net-zero carbon emissions by 2050.

In 2020, we achieved a 39 per cent reduction in CO2 over 2005 levels. With existing technologies and resources and the benefit of supportive regulatory decisions, we plan and expect to achieve the following goals compared to corresponding 2005 levels:

 

•

A 55 per cent reduction in carbon emissions by 2025;

•

An 80 per cent reduction in coal usage by 2023 and the retirement of our last existing coal unit no later than 2040; and

•

At least an 80 per cent reduction in carbon emissions by 2040.

Emera seeks to achieve these goals and realize our net-zero vision while staying focused on enhancing reliability, maintaining affordability, adopting emerging technologies and working constructively with policymakers, regulators, partners, investors, and our communities.

 

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Inclusion and Diversity

Emera is committed to the promotion of inclusion and diversity throughout the Company. Our commitment to our people, customers and communities reflects Emera’s social values and culture. We strive for a workplace that:

 

•

Reflects its communities and diverse customer base, enabling us to better understand the needs of our customers and the communities we serve;

 

•

Helps position Emera as an employer of choice to recruit, retain and engage high-performing talent; and

 

•

Fosters better decision-making with the benefit of more diverse perspectives and experiences.

Emera is now in its third year of a multi-year Inclusion and Diversity Strategy to align best practices across its operations. To support this, we have undertaken several initiatives:

 

•

Conducting unconscious bias training for all Emera leaders;

 

•

Supporting strong Inclusion & Diversity employee networks;

 

•

Gathering self-identification data to ensure our teams reflect our communities;

 

•

Undertaking the process to recruit a Director of Diversity and Inclusion; and

 

•

Establishing a $5 million fund to support community efforts to advance diversity and inclusion.

The Board of Directors has requested and received inclusion and diversity training and will be receiving further education and training in this area.

Gender Diversity and Women in Executive Officer Appointments

While Emera does not have targets for women in executive officer positions, management monitors and encourages the development and progression of women into leadership positions within Emera and its subsidiary companies. Management believes that diversity among the senior executive team within the Emera group of companies serves the best interests of the Company.

At Emera Inc., 38 per cent of executive officers are female. Across all Emera companies, an average of 34 per cent of executive officers are female. Among the executive officers(1) of Emera Inc. and its major subsidiary,( 2) Tampa Electric Company, 18 are female, representing 39 per cent (in 2020 there were 16 female executive officers, representing 37 per cent). Currently, four of our companies are led by women (Tampa Electric, Emera Energy, Grand Bahama Power Company, and Dominica Electricity Services).

Management continues to be focused on ensuring Emera’s hiring and pay practices promote equity between men and women. Progress is being made and we continue to be committed to:

 

1.	Analyzing pay equity annually to:

 

a.

Monitor annually the rates of women in leadership and senior leadership roles;

 

b.

Undertake regular wage gap analysis to track progress and identify challenges by affiliate;

 

c.

Exercise selective pay increases if wage disparity exists; and

 

d.

Examine our recruitment strategies to ensure equity in pay at entry into the organization.

 

2.

Developing and promoting programs, such as the Engineer in Training program at Nova Scotia Power, that are focused on increasing female participation in our industry, particularly for traditionally male-dominated roles. Approximately 57 per cent of the Engineers in Training hired since 2017 have been female.

 

(1)	The term executive officer is defined as the Company’s Board Chair, president, a vice president in charge of a principal business unit, division or function, or any person who performed a policy-making function in respect of the issuer.

(2)	Major subsidiary means a subsidiary of the Company, the assets or revenue of which are 30 per cent or more of the consolidated assets or revenue of the Company as included in the financial statements of the Company for a relevant period. Only Tampa Electric Company meets this definition.

 

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Our Commitment to Safety

Safety is Emera’s number one priority and the Company is committed to fostering a strong “speak up” culture that supports safety performance. In 2020, Emera’s teams adapted quickly to implement new safety procedures and protocols to respond to the global COVID-19 pandemic to keep employees, customers and communities safe. Last year, the Company implemented an Emera-wide safety management system and Emera saw the lowest OSHA injury rate and lost-time injury rate in the Company’s history. However, two recent contractor fatalities are a reminder that the Company needs to stay relentlessly focused on safety. In 2021, initiatives will focus on prevention of serious injuries and fatalities, and the management of high-risk activities. Another area of focus is safety leadership training, including behavioural aspects of safety management and improving hazard identification. Emera’s team is more resolved than ever to achieve an injury-free workplace.

Investing in Our Communities

Throughout its Community Investment Program, Emera is committed to helping to build stronger, safer and more innovative communities where we live and work. In 2020, we invested $16 million in our communities, including over $6 million to organizations providing critical aid to those most affected by the COVID-19 pandemic. Our contributions helped to provide assistance with energy costs, food, shelter and mental health support.

Information Security Oversight and Cybersecurity

The Company increasingly relies on information technology systems and network infrastructure to manage its business and safely operate its assets, including controls for interconnected systems of generation, distribution and transmission as well as financial, billing and other business systems.

The Company’s reliance on technology exposes it to potential risks of business interruption or the unavailability, release, destruction or misuse of critical, sensitive or confidential information due to cyberattacks.

The Company seeks to manage these risks by aligning to a common set of cybersecurity standards, periodic security testing, program maturity objectives and strategy derived, in part, from the National Institute of Standards and Technology’s Cyber Security Framework, including incident management, vendor management, configuration management and employee communication and training. With respect to certain of its assets, the Company is required to comply with rules and standards relating to cybersecurity and information technology including, but not limited to, those mandated by bodies such as the North American Electric Reliability Corporation and Northeast Power Coordinating Council.

The status of key elements of the Company’s cybersecurity program is reported to the Audit Committee on a quarterly basis and the Board receives reports on that work through the Audit Committee. In addition, the Board oversees the risk and mitigation plans in relation to these risks, as updated and reported on quarterly in a risk dashboard provided to Directors at each regularly scheduled Board meeting.

BOARD AND DIRECTOR PERFORMANCE ASSESSMENTS

The Board annually assesses its effectiveness to find ways to improve its performance.

Each year, the NCGC, in consultation with the Board Chair, and with the intention of continuously improving, determines the process by which assessments of the Board, Directors, Committees and individual Committee members will be conducted. The process has included the use of questionnaires and one-on-one interviews with each Director by the Board Chair. A written report from the Board Chair on the assessment is provided to the NCGC and the Board of Directors. The Board considers the report, its findings and a set of priority actions for the year at a Directors-only session which is attended by the President and CEO for only a portion of the session. Progress is monitored throughout the year with oversight on that process by the NCGC. In 2020, the NCGC determined that from time to time the assessment process may be supplemented with the engagement of a third-party consultant to assist with the process of conducting the assessment. A consultant was engaged to assist with the 2020 Board and Director performance assessment (please see 2020 Assessment below for more detail).

 

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2019 ASSESSMENT

Overall, the 2019 Assessment found that the Board and Director performance and effectiveness were very strong. Board members take pride in the Company’s strong governance. The Assessment resulted in several priority actions for 2020 in the areas of the Company’s strategy and business, its organizational structure and capacity and with respect to Board and Committee effectiveness. With the assistance of the NCGC, the Board Chair reviewed and reported to the Board on progress made to address those priorities.

2020 ASSESSMENT

The Chair of the Board interviewed each non-executive Director as part of the 2020 Board and Director Performance Assessment. A series of questions was sent to each Director for advance consideration. The questions pertained to several themes, including:

 

•

Board and Committee effectiveness;

 

•

Corporate governance;

 

•

Board composition and succession;

 

•

An assessment of their own performance as Directors;

 

•

An assessment of their peer Directors on the Board;

 

•

Emera’s strategy and business;

 

•

Organizational structure and capacity; and

 

•

The CEO’s 2020 evaluation, and his 2021 CEO goals and objectives.

The assessment of the Chair of the Board was conducted in a meeting of all Directors that excluded the Board Chair and the President and CEO and was led by the Chair of the NCGC. Directors were also given an opportunity to provide their assessment of the Chair of the Board in a one-on-one format with the Chair of the NCGC in advance of the meeting.

Third-party Consultant

The NCGC determined that while the traditional annual assessment process conducted by the Chair was robust and effective, a third-party consultant should be engaged as part of the 2020 Board Performance process in order to provide additional insights. Separate interviews with each Director were scheduled by the consultant, who also interviewed the President and CEO and some of his direct reports as part of the process. A report of the consultant on the findings from the assessment process was provided to the Board Chair and the Board of Directors. The consultant also provided the Chair of the NCGC with a briefing on the findings that related to the Board Chair in support of her assessment.

2020 ASSESSMENT FINDINGS

The principal themes that emerged from the 2020 Board and Director Performance Assessment related to strategy and business, organizational structure and capacity as well as Board and Committee effectiveness.

Directors were satisfied with the quality and the integrity of the Board and its membership. Members are very supportive of the Board’s meeting practices.

On recruiting of Directors, the Board will focus on diversity of its membership and the ultimate size of the Board. Improvements in the way the Board and the Committees operate will also be considered, though the function of each are considered strong.

The NCGC has devoted considerable time to successfully advancing the Board’s renewal, while objectively determining the required skills of the Board and advancing diversity. Diversity of Directors at the Company’s subsidiary boards also remains a focus.

2021 OBJECTIVES

In the course of performing the Board and Director performance assessments, Directors assessed 2020 progress and proposed areas of future focus as it relates to strategy and management performance. These included:

Strategy and Business: The Company’s long-term growth priority continues to be making prudent organic investments within the existing portfolio of regulated utilities, most of which entails investments in decarbonization, reliability, infrastructure renewal and infrastructure expansion capital projects. Outside of the Company’s utilities, Management continues to pursue initiatives focused on exploring and testing Emera’s role in the energy sector of the future and the associated risks and opportunities,

 

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largely stemming from the newer customer-driven industry trends of decentralization and digitalization. The strategy process has been enhanced, with the Board’s year-round oversight of strategy resulting in significant progress and increased alignment. Ongoing work will focus on the Company’s growth strategy, and, in an effort to continue to deliver competitively attractive risk adjusted growth in earnings and cash flow over the long term, is principally focused on organic rate base growth. Opportunities for growth through acquisition also remains an area of engagement for the Board as it continues to engage with Management in its refinement of the strategic framework and criteria for possible acquisitive growth. ESG impacts, risks and opportunities are important and growing areas of focus in strategic discussions. Significant work in the area of enterprise risk and, in particular, high-impact risks was advanced in 2020 and remains an area of focus for 2021.

Organizational Structure and Capacity: Senior management succession plans have been a focus of the Board and have been advanced with organizational changes identified to facilitate development of potential internal candidates. Board processes have included a program to expose prospective leaders to the Board. Emera’s affiliate governance model has been an area of ongoing focus and refinement by management, with input and oversight from the NCGC, and is overall considered to be structured effectively. Strategy engagement within management has been enhanced with the establishment of a Strategy Council that includes cross affiliate and cross functional executive engagement. Significant progress was made in 2020 in several areas, including senior management succession and the Company’s important ongoing inclusion and diversity initiatives. Areas of ongoing focus include leadership development; greater Board exposure to a broader succession pool; workforce diversity; workplace culture; maintaining Emera’s values; cross-functional approach to ESG; risks and opportunities from disruptive technologies; and harnessing value through digitalization. The long-term effects of the COVID-19 pandemic on the workplace will also be considered.

BOARD DIVERSITY

Diversity at the Board level is an important strategic objective of the Board and is incorporated into the Board’s succession planning and recruitment processes. Consistent with the Company’s goal of achieving and maintaining a Board of Directors with a diverse mix of experience, skills and backgrounds, when assessing Board composition or identifying suitable candidates for appointment or re-election to the Board, the NCGC considers candidates using objective criteria having due regard to the benefits of diversity and the needs of the Board. In addition to considering business experience, geography and age, the NCGC considers diversity of gender, race, Indigenous status and other distinct characteristics.

To ensure that there are a significant number of women on the Company’s Board of Directors, the NCGC adopted in 1994 a formal corporate governance practice, which has been incorporated into the NCGC charter and which requires that a minimum of 30 per cent of the members of the Board of Directors are women. The list of Director nominees for the 2021 Annual Meeting includes four women out of 11 Director nominees, or 36 per cent, which exceeds this minimum requirement (the 2020 Annual Meeting also included four women out of 11 Director nominees, or 36 per cent).

Emera’s commitment to diversity extends beyond gender. While the Board currently has no members who identify as aboriginal, a member of a visible minority or as a person with a disability, the Company is focused on establishing and maintaining a Board with a diverse mix of experience, skills and backgrounds. The NCGC considers candidates having due regard to the benefits of diversity. Its current succession focus for Board recruitment is on candidates that offer US electric utilities experience and racial and ethnic diversity to the Board. The NCGC has retained qualified external recruiters to help identify candidates of diverse backgrounds and characteristics. These recruiters are mandated to seek diverse candidates who meet the skills, experience and diversity objectives established by the NCGC.

Subsidiary Board Diversity

Emera has made significant progress in this area. Of the 20 external directors that serve on the Boards of our four largest subsidiaries (Nova Scotia Power, Tampa Electric, Peoples Gas and New Mexico Gas), 45 per cent are female and 30 per cent are Black, Hispanic or Indigenous. Diversity on our subsidiary boards remains an ongoing focus.

 

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COMPENSATION

EXECUTIVE COMPENSATION

On the recommendation of the Management Resources and Compensation Committee (“MRCC”), the Board of Directors determines the compensation for the Company’s senior executives and other officers of the Company. See Compensation Discussion and Analysis with respect to compensation of the Company’s named executive officers.

DIRECTOR COMPENSATION

The Board of Directors determines the compensation for the Company’s Directors on the recommendation of the NCGC. The compensation of Directors is designed to recognize the substantial time commitments required to oversee management of the Company. It is intended to attract and retain highly skilled and experienced individuals to serve on Emera’s Board, and to ensure alignment with shareholders’ long-term interests. Appropriate compensation for Directors, independently determined, is also intended to support their independence of management.

In 2020, the Company removed meeting fees for Directors and moved to a flat fee structure. It also removed per meeting travel fees and moved to a single $10,000 travel allowance. The annual retainer for Directors in 2020 was $227,500 per annum, payable as follows:

 

•

$85,000 cash; and

•

$142,500 in DSUs.

To address the impact of changes in the Canadian and US foreign exchange rate, the annual cash retainer and committee retainers for US-domiciled Board members are paid in US dollars using a one-to-one conversion rate to the Canadian dollar.

Directors were not travelling to the Company’s Board and Committee meetings since the start of the COVID-19 pandemic in March 2020 and met by videoconference instead. In light of this, the Board decided that the Director travel allowance should not be paid for the second, third and fourth quarters of 2020. It is expected Directors would continue to forgo their entitlement to the travel allowance until the quarter in which they begin travelling again to Board and Committee meetings.

For more details on total compensation received by Emera Directors in 2020, see Compensation of Directors in 2020 earlier in the Circular.

ANNUAL REVIEW

The NCGC annually reviews the compensation of Directors to ensure it is appropriate.

The Committee reviews the compensation practices of publicly traded companies similar in size and complexity to Emera to determine whether the Directors are appropriately compensated for the responsibilities and risks involved in being a member of the Company’s Board. The review is based upon publicly available information concerning Directors’ compensation and the advice of Mercer (Canada) Limited, a third-party compensation consultant.

The NCGC has adopted the 50th percentile as a target for Director compensation and has determined it would be appropriate for Emera to continue to position total compensation of Directors at approximately the median of its peer group, which is the average of the Canadian and US sub-groups. The peer group used for Director compensation purposes is the same as the benchmarking comparator group used for senior executive compensation purposes and disclosed in the Statement of Executive Compensation later in the Circular.

 

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Based on the approach to Director compensation described above and the recommendation of the NCGC, the Board approved the following changes to the retainer and equity compensation for Emera Directors and the annual retainer for the Chair of the Board, effective January 1, 2021.

 

•

The cash component of the Board Chair’s annual retainer was increased by $12,500 for a total of $225,000 and the equity component of the Board Chair’s annual retainer was increased by $12,500 for a total of $225,000. As a result of this increase, the Board Chair’s total annual compensation is $450,000.

•

The cash component of each Director’s annual retainer was increased by $7,500 for a total of $92,500 and the equity component of each Director’s annual retainer was increased by $17,500 for a total of $160,000. As a result of this increase, the total annual compensation for each Director is $252,500.

DIRECTOR SHARE OWNERSHIP GUIDELINES

Director common share and/or DSU ownership is viewed by Emera as an important means of enhancing the alignment of Director and shareholder interests. Under guidelines established by the Board of Directors, within a prescribed time frame, each Director must own Emera common shares and/or DSUs with a market value of three times the annual Board retainer. Based on the annual retainer for Emera Directors in effect on January 1, 2021 as described above, under these guidelines each Director must own Emera shares or DSUs, or a combination of the two, worth $757,500 within five years following their appointment date or within five years of any change to the Director’s compensation, whichever is the later date. Notwithstanding the increase in Director compensation on January 1, 2021, the Board did not reset the date by which current Directors must meet the share ownership guideline threshold where they have not already done so.

Details of each Director’s share and DSU ownership, and status under the Share Ownership guidelines, is shown in each Director nominee biography earlier in this Circular. All of Emera’s Director nominees are in compliance with these guidelines.

DIRECTORS ARE INCREASING THEIR SHARE/DSU OWNERSHIP OVER TIME

By virtue of the compensation payable in DSUs, more than 63 per cent of the annual retainer for Emera Directors will be paid in DSUs, which mirror the value of Emera common shares. The Directors increase their DSU ownership by at least $160,000 per annum. A majority of the Director nominees have elected to receive DSUs in lieu of cash compensation they would otherwise be entitled to as Emera Directors.

MAJORITY VOTING FOR ELECTION OF DIRECTORS

The confidence of shareholders in the actions of the Board and management is important. In order to provide a mechanism for shareholders to express that confidence in each Director, the Board has adopted a Majority Voting Policy for Directors. The Policy states:

Should a Director nominee, in an uncontested election at a meeting of shareholders of Emera Inc. at which Directors are to be elected, receive a majority of “withheld” votes from his or her election as a Director (a “Majority Withheld Vote”), the individual shall submit his or her resignation to the Board for consideration immediately following such shareholders’ meeting.

The votes determining a Majority Withheld Vote shall be the total votes cast by ballot by shareholders and proxyholders, or if a ballot vote was not conducted, shall be the total votes represented by proxies validly deposited prior to the shareholders’ meeting.

The Directors who received a majority “For” vote at the shareholders’ meeting shall consider whether or not to accept the resignation.

If there are less than three such Directors, the entire Board shall meet to consider the appropriate actions to be taken. The resignation of a Director who received a Majority Withheld Vote shall be accepted absent exceptional circumstances and is effective when accepted by the Directors. The determination shall be made within 90 days following the date of the shareholders’ meeting and a news release disclosing such determination shall be issued promptly following such determination. If the resignation is rejected, the news release shall include the reasons for rejecting the resignation. A copy of the press release shall be provided to the Toronto Stock Exchange.

Since the adoption of the Majority Voting Policy in 2008, all Director nominees have received a majority “For” vote at the Company’s meetings of shareholders.

 

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ORIENTATION OF DIRECTORS AND CONTINUING EDUCATION

In order to best bring their skills and experience to the operation of the Board, new Directors receive an in-depth orientation to the Company’s executive leaders, business, strategy, principal risks, financial information and governance practices. This allows them to effectively and efficiently step into their new role as Director and discharge the responsibilities of that role. The Board and management have built and continue to expand a long-term program of training and information sharing for Directors to enhance their effectiveness and reinforce a collegial working relationship among members of the Board.

Orientation sessions are attended by the President and CEO and other executive officers or leaders of key subsidiaries. The Chair also attends the orientation with a new Director. A reference manual is provided in advance of the session that includes:

 

(a)

Recent annual and interim MD&A and financials, Management Information Circular and Annual Information Form;

 

(b)

Board and Committee Charters;

 

(c)

Strategic Plan and Business Plan and Budget;

 

(d)

Guide to the Company’s management structure;

 

(e)

Insider trading guidelines;

 

(f)

Emera’s Code of Conduct; and

 

(g)

Minutes of previous Board meetings.

CONTINUING EDUCATION FOR DIRECTORS

The Board, with the support and oversight of the NCGC, regularly seeks opportunities to update, educate and inform the Directors in areas they request or that management determines are relevant to issues facing the Company.

The Board and Committees receive regular presentations from Management updating Directors about market and industry conditions and trends that may impact the Company’s business and influence its strategy. From time to time, the Board receives specialized presentations on various matters of significance to the Company.

Annually, the Board has also been provided with opportunities to visit operational facilities to help Directors to get to know leaders, understand management structure and more fully understand the business. Given the global COVID-19 pandemic, the Emera Board has avoided travel and, therefore, there were no visits to operational facilities in 2020. Site visits are tentatively being scheduled for later in 2021 pending health guidelines regarding travel and gatherings.

Emera adopted a Guideline for Directors’ Attendance at Education Sessions, which is designed to encourage Directors to participate in education sessions from time to time that are directly related to the business of the Company and the performance of their duties as a Director of the Company. The Guideline provides that independent Directors who wish to attend an education session request the approval of the Board Chair to attend a particular education session and receive reimbursement of expenses in accordance with the Guideline. In 2020, Emera Directors participated in relevant education that included sessions presented by the Institute of Corporate Directors in Canada and the National Association of Corporate Directors in the United States.

 

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Directors participated in education sessions and received education materials about specific topics in 2020, as follows below:

 

Topic		Date		Participants
Business and operations
Government Relations		February		Board members
Regulatory & Government Relations Update Negative Interest Rates Discussion Paper		May		Board members
Capital Markets Overview Industry Trends		June		Board members
Utility Sector Regulatory Update State of hydrogen development and its potential role in decarbonization		August		Board members
Subsidiary Governance Update on Charter and Best Practices		September		Nominating and Corporate Governance Committee members and Board Chair
US presidential election results – macro and geopolitical and energy sector implications		November		Board members
High Impact Risks – Electric Utilities High Impact Risks – Gas Operations		September and November		Board members
Market trends and regulatory updates
Safety – Supplemental Reading Materials		January		Health, Safety and Environment Committee members and Board Chair
Future of Natural Gas Industry		March		Board members
Presentation on Inclusion and Diversity		September		Board members
Executive Compensation and Governance Trends		September		Management Resources and Compensation Committee members and Board Chair
Developments in Corporate Governance		September		Nominating and Corporate Governance Committee members and Board Chair
Deep Decarbonization Strategic Role of Natural Gas		November		Board members

The Board of Directors encourages, and the Company pays the out of pocket costs for, Directors to pursue education sessions provided by third parties that are related to the business of the Company and the performance of their duties as a Director of the Company.

 

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RISK MANAGEMENT

The Emera Board has a comprehensive and multi-faceted approach to risk oversight.

The Board of Directors is responsible for overseeing risk. It is also responsible for overseeing the implementation by management of appropriate systems to identify, report and manage the principal risks of Emera’s business. It is responsible for overseeing the development of Emera’s risk management framework and allocation of responsibilities for risk management, which it does with support from the NCGC. The Board has endorsed a risk statement which articulates the Company’s risk appetite. The risk statement sets out the risk appetite across a number of areas and is intended to provide general guidance for decisions of the Company. The Board considers Emera’s risk profile and oversees Emera’s risk management by reviewing:

 

(a)

the annual identification and assessment of the principal risks of Emera;

 

(b)

the process for ongoing monitoring, updating and reporting of the principal risks of Emera;

 

(c)

the effectiveness of Emera’s mitigation response to its principal risks; and

 

(d)

the alignment of risk management with Emera’s risk profile, its strategy and its organizational objectives, including capital and resources allocation.

Further, a comprehensive and ongoing risk assessment is part of every major project the Company undertakes. The Board is also responsible for reviewing Emera’s annual insurance program and its uninsured exposure.

Over the course of 2020, the Board oversaw a significant advancement in the way enterprise risk is assessed and reported on to provide greater insight into the current and future state of Emera’s risk posture. This involved two interrelated initiatives which have enhanced governance of enterprise risk at Emera. Under the Board’s oversight, management undertook a robust, in-depth analysis of several of its top high impact enterprise risks where teams identified and assessed the likelihood, impact and maturity of control systems for a number of the Company’s major risks and identified further opportunities for risk mitigation. This work is ongoing in 2021 with respect to other high impact risks. In addition, the previous quarterly risk dashboard was significantly updated and supplemented with a new heat map which identifies for each risk, the inherent risk, the currently mitigated risk, the maturity of the control environment and the directional opportunities for further risk reductions.

The Board also annually evaluates the operation and effectiveness of the Board of Directors, its Committees and the Chair of the Board. That evaluation includes consideration of whether the Board has examined the key risks to the Company’s strategy and business plan. It also invites suggestions for improving the risk management process. More information about this process is included under Board and Director Performance Assessments in the Circular.

The Board has delegated certain risk oversight to the Committees as set forth in their Charters. Notwithstanding such delegation, the Board retains its oversight function and ultimate responsibility for these delegated functions.

Nominating and Corporate Governance Committee (“NCGC”)

The NCGC has responsibility for overseeing the development of a risk management framework and assisting the Board in determining the proper and effective allocation of risk oversight responsibilities.

Management Resources and Compensation Committee (“MRCC”)

The MRCC is responsible for evaluating the compensation programs to determine that they do not reward executive officers for taking inappropriate risks that may harm the interests of the Company and its shareholders. The MRCC conducts a compensation risk review annually to ensure that the compensation policies are designed to take account of and mitigate (a) the incentive opportunities that inadvertently encourage excessive and unnecessary risk-taking, (b) pay structures that inadvertently encourage behaviour that destroys or diminishes long-term value, (c) a lack of appropriate alignment between pay and performance, and (d) payouts which are not aligned with Emera’s business strategy.

Audit Committee

The Audit Committee of the Board of Directors assists the Board in discharging its oversight responsibilities concerning the integrity of Emera’s financial statements, its internal control systems, the internal audit and assurance process, the external audit process and its compliance with legal and regulatory requirements. The Audit Committee has oversight responsibilities for trading and credit risk. It receives the annual update on trading and credit risk activities, and reports to the Board. Cybersecurity risk is also reviewed by the Audit Committee on a quarterly basis.

 

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Health, Safety and Environment Committee (“HSEC”)

The HSEC reviews actions taken by the Company to identify and manage risks related to health, safety and environmental matters which may have the potential to adversely impact the Company’s operations, employees, strategy or reputation. In 2020, the HSEC reviewed detailed updates on the Company’s COVID-19 pandemic response and planning, including the framework for responsible re-entry of employees back into the workplace.

ETHICAL BUSINESS CONDUCT

The Board is committed to sustaining a culture of integrity and ethical business practices throughout the Company.

CODE OF CONDUCT

Emera adopted a new Code of Conduct in 2016 when Emera and TECO closed their merger transaction, replacing Emera’s Standards for Business Conduct and TECO’s Code of Ethics & Business Conduct. When they join, and annually thereafter, Directors, officers and employees of Emera and its subsidiaries are required to sign a form acknowledging they have reviewed, understand, are currently in compliance and agree to comply with our Code.

The Code of Conduct is available on Emera’s website at www.emera.com/governance, or a copy may be obtained by contacting the Chief Human Resources Officer, Emera Inc., P.O. Box 910, Halifax, Nova Scotia B3J 2W5.

The Board regularly reviews the Code of Conduct and makes revisions to update the content in keeping with best practices. Employees are encouraged under the Code to, in good faith, seek advice, raise concerns, and report suspected misconduct related to Emera’s business. Emera does not tolerate retaliation, threats of retaliation, termination from an Emera Company, or other types of discrimination that are directly or indirectly related to the good faith disclosure of suspected unethical activities or violations of laws, regulations or policies.

The Board monitors compliance with the Code of Conduct. There have been no instances of any waiver of compliance with the Code of Conduct for any Director or Officer.

RESPECTFUL WORKPLACE

Emera has a long-standing Respectful Workplace Policy, which clearly condemns harassment, sexual harassment, bullying and discrimination in the workplace. Emera’s Code of Conduct also highlights the Company’s commitment to respect in the workplace and makes it clear there is no place for disrespect in the form of harassment, sexual harassment, bullying or discrimination in the workplace.

In 2018, the Respectful Workplace Policy was revised to be adopted by all operating subsidiaries. The revised Policy highlights the standard process for reporting and addresses harassment, sexual harassment, discrimination and bullying. These revisions have been reflected in the Code of Conduct and in the mandatory training which were each instituted in 2019. The training includes a more robust module on harassment, sexual harassment, discrimination and bullying, and outlines the support available to employees.

ETHICS HOTLINE

The Company has established a confidential Ethics Hotline hosted by an independent external service provider. The Ethics Hotline is available to employees, contractors and third parties to report allegations of non-compliance with the Code of Conduct. The internal audit department (“Audit Services”) is responsible for administering the Ethics Hotline process and ensuring all reports are investigated by the Company. Audit Services provides an overview of the Ethics Hotline reports to the Audit Committee on a quarterly basis.

CORPORATE DISCLOSURE POLICY

The Board has approved a Disclosure Policy to ensure that communications to investors and potential investors are timely, factual and accurate, and that the information is disseminated in accordance with all applicable legal and regulatory requirements to the investing public, analysts and the media. For the full text of the Corporate Disclosure Policy, visit www.emera.com/governance.

CONFLICTS OF INTEREST

Directors are required to declare any conflict of interest which they may have in a matter before the Board. In any matter requiring approval of the Board, a Director is prohibited by the Company’s Articles of Association from voting in respect of the matter in which the Director is interested.

 

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RELATED PARTY TRANSACTIONS

Transactions between Emera and related parties are monitored in several ways to determine that such transactions comply with applicable laws, regulatory rules, and Emera’s Code of Conduct. In particular:

 

•

The Audit Committee oversees the disclosure in Emera’s financial statements of related party transactions that are required to be disclosed pursuant to United States Generally Accepted Accounting Principles. In the ordinary course of business, Emera provides energy, construction and other services and enters into transactions with its subsidiaries, associates and other related companies on terms similar to those offered to non-related parties. All material amounts are under normal interest and credit terms. Additional disclosure is provided in Emera’s financial statements regarding more significant transactions between Emera and its associated companies.

•

Under Emera’s Articles of Association, any Director who has an interest in a transaction with the Company must disclose the existence and nature of the interest to the Board of Directors and such director may not participate or vote on the matter.

•

Under Emera’s Code of Conduct, Directors, officers and employees of Emera cannot own more than a 10 per cent interest in, or act in the capacity of a director, officer, partner, consultant, employee or agent for a supplier, contractor, sub-contractor, Emera customer, competitor or any other person or organization with which Emera has a similar relationship, without the express prior approval of Emera’s President, Board Chair or its Board of Directors, as the case may be. They must also seek similar approval when a company, partnership or business in which they, or a member of their family, own more than a 10 per cent interest, or in which they are a director, partner, officer, consultant, employee or agent seeks to do business with Emera.

•

Also, as described in Emera’s Code of Conduct, Emera’s subsidiaries are regulated by several Canadian, U.S. and Caribbean energy regulators. Certain of these regulators have imposed specific codes and standards of conduct which address matters such as undue discrimination and preferential treatment between regulated companies and their affiliates. These rules may apply to and restrict arrangements between affiliates to conduct business or share employees. Emera’s subsidiaries have created separate codes and standards of conduct addressing these matters. Directors, officers and employees are required by the Code to be aware of, and comply with, these affiliate rules at all times.

The Audit Committee is responsible for annually receiving and reviewing a report on executive officers’ compliance with the Code of Conduct and receives quarterly reports on the Company’s ethics program, including reports received through the Ethics Hotline (see Ethics Hotline, above) or submitted directly to the Company’s Audit Services group.

SUBSIDIARY GOVERNANCE

The Tampa Electric Company and Nova Scotia Power Boards have each adopted Board charters. These charters reflect the appropriate balance between the role of an operating subsidiary Board and the role of Emera as the parent holding company. In 2020, the NCGC approved a form of a Board charter to be used as a model for adoption by each operating subsidiary Board that does not currently have a Board charter. Emera’s operating subsidiaries have robust and disciplined governance processes that include fully active Boards of Directors, with most having a complement of external Directors. In most cases, external, independent, and local Directors are added to the subsidiary Board until they form a majority on the Board. The inclusion of external members on subsidiary Boards in a fiduciary role as Directors has significant benefits. Local Directors bring a diversity of thought and perspective to the Board table and they bring a connection to the community where the business is located.

The Chair of each operating subsidiary Board is elected in accordance with the subsidiary’s organizational documents and is typically Emera’s CEO or an Emera executive based on the CEO’s recommendation. Additional Emera and subsidiary executives are also Directors but combined would typically form a minority of the Board. Emera values the benefits that diversity can bring to subsidiary Boards of Directors. Emera’s operating subsidiaries seek to achieve and maintain a Board comprised of talented and dedicated Directors with a diverse mix of experience, skills and backgrounds.

As the parent holding company, Emera provides certain corporate-wide services to its operating subsidiaries. These corporate- wide services, which provide benefit for the entire organization, include several areas such as safety, environment, compliance, internal audit, insurance, corporate security and treasury services. Enterprise-wide policies of Emera, such as Emera’s safety management system, are either expressly adopted by an operating subsidiary Board, or the impact is considered by Emera through consultation with the operating subsidiary.

 

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board is committed to effectively and efficiently carrying out its oversight responsibilities. As such, it strongly supports the work of its four standing Committees, to which certain functions are delegated as set forth in the written charters. The Board Committees are:

 

(a)

the Audit Committee;

 

(b)

the Health, Safety and Environment Committee (“HSEC”);

 

(c)

the Management Resources and Compensation Committee (“MRCC”); and

 

(d)

the Nominating and Corporate Governance Committee (“NCGC”).

From time to time the Board establishes ad hoc Committees.

AUDIT COMMITTEE

The Audit Committee is comprised of:

Chair: Mr. Harvey

Members: Ms. Loewen, Ms. Rosen, Mr. Sergel and Mr. Tilk

The Audit Committee assists the Board in discharging its oversight responsibilities concerning the integrity of Emera’s financial statements, its internal control systems, the internal audit and assurance process, the external audit process and its compliance with legal and regulatory requirements.

The Committee consists of independent Directors only, who each have a high degree of financial acumen. The Committee is responsible for reviewing and recommending to the Board the annual and interim financial statements and all related management’s discussion and analysis.

The Committee evaluates and recommends to the Board the appointment of the external auditors and the compensation of such external auditors. Once appointed, the external auditors report directly to the Committee, and the Committee oversees the work of the external auditors concerning the preparation or issuance of the Auditors’ reports or the performance of other audit, review or at test services for Emera.

The Committee reviews and discusses Emera’s major financial risk exposures and the policy steps management has taken to monitor and control such exposures, including the use of financial derivatives, hedging activities, credit and trading risks, and cybersecurity.

The Committee reviews management controls and processes concerning the administration of investment activities, financial reporting, and financial performance and funding of the pension plans. The Company’s lead internal auditor also reports directly to the Audit Committee, and the Committee oversees the appointment, replacement and termination of the lead internal auditor.

For the full text of the Audit Committee Charter, visit www.emera.com/governance.

 

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HEALTH, SAFETY AND ENVIRONMENT COMMITTEE (“HSEC”)

The HSEC is comprised of:

Chair: Mr. Bertram

Members: Mr. Harvey, Ms. Loewen and Mr. Ramil

The HSEC consists of Directors selected by the Board. A majority of Committee members shall be independent Directors. The purpose of the HSEC is to assist the Board in carrying out its responsibilities relating to oversight and coordination of Emera’s health, safety and environmental programs, and making recommendations to the Board as appropriate.

The Committee’s role is to review the performance of the Company on health, safety and environmental matters, including the Company’s compliance with legislation, and conformance with industry standards and best practices. It reviews emergency response plans and programs.

The HSEC oversees the Company’s health, safety and environmental systems and policies. It reviews actions taken by the Company to identify and manage risks. This oversight extends to Emera’s subsidiaries.

Any significant safety or environmental incidents respecting the Company’s assets or operations will be reviewed by the HSEC, including those involving personnel safety, contractor safety, public safety or environmental damage. The Committee oversees management’s response to any significant regulatory findings, orders, reports and/or recommendations related to health, safety and the environment.

For the full text of the HSEC Charter, visit www.emera.com/governance.

MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE (“MRCC”)

The MRCC is comprised of:

Chair: Ms. Chrominska

Members: Mr. Bertram, Mr. Demone and Mr. Tilk

The MRCC consists of independent Directors only. The Committee reviews overall compensation, including salary and benefits policies, and recommends such policies to the Board of Directors for approval.

The MRCC supports the Chair of the Board in conducting a review of corporate goals and objectives relevant to the President and CEO’s compensation and supports the Chair of the Board in recommending such goals and objectives for the current year to the Board of Directors. The Committee ensures that an assessment of the President and CEO’s performance in relation to these goals and objectives is completed. It makes recommendations to the Board of Directors relating to the President and CEO’s total compensation, including participation in incentive compensation and equity-based plans. It also makes recommendations about senior management’s total compensation and incentive compensation plans and equity-based plans. It approves grants of stock options, performance share units (“PSUs”), restricted share units (“RSUs”) and deferred share units (“DSUs”) in accordance with the provisions of the respective plans. It reviews executive compensation disclosure prior to the Company releasing such information to the public.

The Committee recommends executive officer appointments to the Board of Directors for approval. It supports and contributes to the Board’s succession planning process in respect of the President and CEO of the Company. It annually reviews the succession planning process for senior management and other potential senior management candidates, including for Emera’s subsidiaries, and oversees and contributes to that process. It reviews share ownership guidelines for executive officers. It satisfies itself that there are appropriate labour relations strategies in place and it regularly reviews management’s direction and decisions made in support of labour and employee relations. It also reviews the design of pension plans for the Company’s employees.

 

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The MRCC is responsible for evaluating the compensation programs to determine that they do not reward executive officers for taking inappropriate risks that may harm the interests of the Company and its shareholders. Under its Charter, the Committee must conduct a compensation risk review annually to ensure that the compensation policies are designed to take account of and mitigate:

 

(a)

incentive opportunities that inadvertently encourage excessive and unnecessary risk-taking;

 

(b)

pay structures that inadvertently encourage behaviour that negatively impacts long-term value;

 

(c)

misalignment of pay and performance; and

 

(d)

payouts which are not aligned with Emera’s business strategy.

For the full text of the MRCC Charter, visit www.emera.com/governance.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE (“NCGC”)

The NCGC is comprised of:

Chair: Ms. Rosen

Members: Mr. Demone and Mr. Sergel

The NCGC assists the Board with a variety of matters relating to corporate governance. One of its primary duties is to provide the Company with a list of nominees for election as Directors to be included in the Company’s Management Information Circular prior to each Annual Meeting of Shareholders of the Company. The Committee is responsible for identifying, considering and recruiting people qualified to become Directors, having regard for the background, employment and qualifications of possible candidates and the criteria for service as a Director as approved by the Committee and the Board. For more information about the nomination of Directors, see Nomination of Directors and Director Recruitment Process earlier in this Circular. The Committee consists of independent Directors only, selected by the Board.

The NCGC oversees the succession of Directors in accordance with the Board’s Renewal Principles and following a full skills assessment, having regard to the anticipated retirement of Directors and, where applicable, the Chair of the Board and Committee Chairs.

The NCGC is responsible for developing and communicating the Company’s approach to corporate governance issues, and reviews and approves Emera’s disclosure of corporate governance practices, including this Statement of Corporate Governance Practices. The Committee keeps abreast of best governance practice benchmarks and regularly evaluates the governance practices of Emera. It reviews any disclosure of the Company’s corporate governance practice in accordance with applicable rules and regulations.

The NCGC oversees the orientation of new Directors. This orientation program for new Directors is reviewed each time that a new Director joins the Board and is updated as required.

The Committee is responsible for assisting the Board of Directors in determining the proper and effective allocation of risk oversight responsibilities. Other duties and responsibilities of the Committee include:

 

(a)

assisting the Board and its Committees in determining Committee composition, as well as reviewing and updating the mandate of each Committee, for submission to the Board;

 

(b)

making recommendations to the Board on all components of non-employee Director compensation, including the Board Chair and Committee Chairs;

 

(c)

ensuring procedures are in place to assist the Board in obtaining information necessary to carry out its duties and ensuring the Board has access to executive management;

 

(d)

reviewing and updating the Company’s Code of Conduct;

 

(e)

determining the process by which performance assessments are to be conducted, which evaluate the performance of the Board, the Board Chair, individual Directors, Board Committee Chairs and Board Committee members;

 

(f)

reviewing all activity with respect to the indemnification of Directors and officers; and

 

(g)

overseeing pension governance for the Emera group of companies.

For the full text of the NCGC Charter, visit www.emera.com/governance.

 

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COMMUNICATION WITH DIRECTORS AND SHAREHOLDER ENGAGEMENT

Disclosure Policy and Practices

The Board has adopted a Disclosure Policy to ensure all communications of material information to the investing public about the Company are accurate, that they fairly present in all material respects the Company’s financial condition and its results of operations and are made on a timely basis.

Emera has established an executive Disclosure Committee responsible for overseeing the Company’s disclosure practices. The Company’s CEO and CFO, the leaders of its businesses, and senior management responsible for legal, finance, investor relations, and communications functions are members of the Disclosure Committee, which meets at least quarterly. Members of the Committee are responsible for reviewing all core disclosure documents containing material information, including the Company’s management’s discussion and analysis and financial statements prior to their being presented to the Audit Committee and Board for approval. The Committee is responsible for taking reasonable measures to ensure the education of Directors, officers and employees about disclosure issues and the Disclosure Policy. The Disclosure Policy defines the Company’s designated spokespersons and outlines the role of employees in Company disclosure. It also defines procedures for contact with analysts, investors and the media and guidelines for the disclosure of forward-looking information in continuous disclosure documents, speeches and conference calls.

Emera’s Disclosure Policy may be found on its website at www.emera.com/governance.

Engagement

Emera has a mature and robust program of engaging with investors through meetings with shareholders, investor day events and other initiatives. In 2020, Emera’s executives met with many of the Company’s shareholders, including all of Emera’s active top 20 investors. An investor day is generally held each year, most recently on February 25, 2020 in Tampa, Florida. Directors receive detailed reports on the shareholder engagement activity by management at each regularly scheduled meeting of the Board.

The Directors are interested in shareholders’ views about the Company, its governance and its operations. The Board oversees systems for receiving feedback from shareholders and it monitors feedback received by the Company.

 

Shareholders are encouraged to provide feedback to management and/or the Board		Contact information
To reach management:
• President and CEO   • Chief Financial Officer   • Chief Legal and Compliance Officer   • Corporate Secretary		Email: Scott.Balfour@emera.com Email: Greg.Blunden@emera.com Email: Bruce.Marchand@emera.com Email: Stephen.Aftanas@emera.com
To reach the Board: (1)
• Chair of the Board   • Chair of a Committee		Email: info@emera.com

 

(1)  Confidential

communications with the Chair of the Board or another Board member should be mailed to the address below marked “Private and Confidential”.

The Board has engaged with the Canadian Coalition for Good Governance (“CCGG”), which represents a number of Canadian institutional shareholders (including many of Emera’s largest shareholders), in promoting good governance practices in Canadian public companies. In October 2017, Ms. Sheppard, the Board Chair, and Ms. Chrominska, the Chair of the MRCC, met with representatives of the CCGG in a Board engagement session. The purpose of the Board engagement meeting was to provide a private forum for dialogue and exchange of views between independent Directors and institutional investors. The Board engagement meeting was not attended by any member of Emera’s management. Following this Board engagement session, Emera was awarded the 2018 Governance Gavel Award recognizing excellence in shareholder communications as reflected in Emera’s Management Information Circular. The CCGG again reached out to schedule a further Board engagement meeting in June 2019. This further meeting was also attended by Ms. Sheppard as Board Chair and Ms. Chrominska as MRCC Chair. Again, no member of Emera’s management attended the meeting.

 

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The meeting’s discussion topics included Emera’s corporate governance practices and disclosure, executive compensation, Board oversight of risk and the Company’s approach to sustainability and ESG as an emerging focus area for institutional investors.

The Board recognizes that shareholder engagement is an evolving practice and plans to review its practices annually with a view to enhancing their effectiveness.

 

 

Shareholder engagement process		Contact information
Shareholders may communicate with the Chair of the Board or other independent Directors by sending them a letter using regular mail or other means of delivery. If the envelope is marked “Private and Confidential”, it will be delivered, unopened, to the Chair of the Board of Directors, or such other independent Director to whom it is addressed.		Attention: Chair of the Board of Directors of Emera Inc. (or Name of Independent Director)   P.O. Box 910, Halifax, Nova Scotia B3J 2W5   in a sealed envelope marked “Private and Confidential”

Say on Pay

Emera’s 2021 Annual Meeting of Shareholders will again ask shareholders to consider and approve the Company’s approach to executive compensation. While the outcome of the vote is non-binding, the MRCC will take the results of the vote very seriously in determining the Company’s approach to executive compensation.

Shareholder Proposals

Shareholders can submit proposals to be considered at an annual meeting of the Company provided they are duly submitted in advance and included in the Management Information Circular for the meeting. A shareholder intending to submit a proposal for consideration at an annual meeting must comply with the applicable provisions of the Nova Scotia Companies Act and the Company’s Articles of Association (“Articles”). This includes compliance with the requirements for Director nominations contained in the Articles where the proposal includes a nomination for the election of an individual to the Board of Directors. The Company will include a shareholder proposal in its Management Information Circular prepared for an annual meeting provided such proposal was received by the Company at least 90 days before the anniversary date of the previous annual meeting and provided such proposal is required by the Companies Act to be included in such Management Information Circular. Regardless of whether you are submitting a proposal, the nomination of Directors is still subject to compliance with the Articles which require notice of the nomination not less than 30 days prior to the date of the annual meeting. Should you have any questions about shareholder proposals or Director nominations, please contact Emera’s Corporate Secretary using the contact information in the Notice of Meeting at the beginning of this Circular.

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. The Company’s financial information is contained in its comparative financial statements and management’s discussion and analysis for the financial year ended December 31, 2020.

For copies of the Company’s financial statements and management’s discussion and analysis, you may also contact the Office of the Corporate Secretary at:

Corporate Secretary

P.O. Box 910, Halifax, Nova Scotia B3J 2W5

Telephone: 902.428.6096; Facsimile: 902.428.6171; email: Stephen.Aftanas@emera.com.

 

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NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

SENIOR MANAGEMENT STOCK OPTION PLAN AMENDMENT

At the Meeting, shareholders will be asked to ratify, confirm and approve, with or without variation, an amendment to the Senior Management Stock Option Plan (the “Plan”), under which options may be granted to senior management in respect of authorized and unissued common shares of the Company to a current maximum of 11,700,000 shares, or approximately 4.65 per cent of the total issued and outstanding common shares of the Company (all figures in this section are as of December 31, 2020 unless otherwise noted).

The Plan has been established by the Company as a long-term incentive program for senior management of the Company and its affiliates. This Plan is intended to: (a) encourage participants to acquire an increased proprietary interest in the Company and to thereby participate in the Company’s future growth and development; (b) attract and retain high calibre senior management; and (c) provide an incentive to further the development, growth and profitability of the Company, and thereby to enhance shareholder value.

The purpose of the amendment is to increase the maximum number of common shares available for issuance under the Plan by an additional 3,000,000 common shares issuable under the Plan, which represents approximately 1.19 per cent of the Company’s issued and outstanding common shares.

INCREASE MAXIMUM NUMBER OF SHARES

The common share reserve of 1,706,109 was originally approved by shareholders in April 1994. In May 2006 the reserve was increased to 6,700,000 common shares, and then in 2014, the reserve was further increased to the current maximum of 11,700,000 common shares. Since its inception in 1994, 8,170,108 common shares have been issued under the Plan, which represents approximately 3.25 per cent of the total issued and outstanding common shares of the Company, leaving 3,529,892 common shares reserved for issuance under the Plan.

Accordingly, the 3,529,892 common shares reserved for issuance under the Plan, together with the 3,000,000 additional common shares sought to be made available for issuance under the Plan by virtue of the proposed amendment, represent approximately 2.60 per cent of the total issued and outstanding common shares of the Company.

If this amendment is not approved, the inventory of common shares available for issuance under the Plan will be exhausted by the Company for the 2022 grants, and the Plan will no longer be available to encourage common share ownership. This increase will allow for a sufficient reserve balance to be maintained, based on granting an average of 550,000 options per year, for the next five years.

For more information about the Plan, see the section entitled Senior Management Stock Option Plan in the Statement of Executive Compensation later in this Circular.

SHAREHOLDER APPROVAL

The rules of the TSX require that the above-described amendment to the Plan be approved by an ordinary resolution passed by a majority of the votes cast by holders of common shares present or represented by proxy at the Meeting. The management representatives designated in the enclosed form of proxy intend to vote FOR the ratification, confirmation and approval of the amendment to the Plan. The full text of the amendment is set out in the resolution attached as Appendix “B” to this Circular.

RECOMMENDATION OF DIRECTORS

The Board believes that the proposed amendment is in the best interests of the Company and unanimously recommends that shareholders vote in favour of the proposed amendment by voting FOR the resolution set out in Appendix “B” to this Circular.

 

EMERA INCORPORATED		49

NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR

 

A LETTER FROM THE MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE TO OUR SHAREHOLDERS

Dear Shareholder:

At Emera, our commitment to delivering sustainable value to shareholders is rooted in the strength of our strategy, portfolio and team. The ability of our executive team to lead and motivate all employees to act in the best interests of shareholders, customers and other stakeholders is fundamental to that commitment to shareholders. This was particularly evident in 2020 as our executive leaders established new policies and procedures to guide our teams through the global COVID-19 pandemic and continue to deliver the energy our customers count on and the value our shareholders expect.

Emera’s compensation philosophy is to align pay with performance. This is why we directly link a significant portion of the compensation we pay our executives to the achievement of objectives that drive value. We believe that aligning the interests of our executives with the interests of our shareholders is critical so we require executives to hold significant equity in the Company. Our share ownership guidelines reflect our belief that executives must also be shareholders and maintain a meaningful personal financial stake in the Company.

The Management Resources and Compensation Committee (the “Committee” or “MRCC”) is the steward of the Company’s compensation programs and oversees all aspects of executive compensation. The Committee carefully assesses and makes recommendations to the Board on how performance measures and targets are set so they reflect the Company’s core values and our short- and long-term strategic priorities. The targets must be achieved within the principles of prudent risk management, good corporate governance, and compliance with relevant standards and regulations. Guided by these principles and input from other members of the Board, the Committee diligently oversees the establishment of the Company’s performance goals and assesses our executive compensation programs, including payouts for the executive team, while continuously seeking to improve our practices and standards.

We are pleased to provide an overview of our approach to executive compensation, the Board’s assessment of Emera’s 2020 performance, and our decisions relating to executive compensation.

COVID-19 IMPACT

Despite the challenges of COVID-19, the Committee felt that the existing compensation policies adequately addressed the impact of the pandemic and, consequently, no changes have been made to Emera’s short- and long-term incentive measures, targets or payouts in 2020.

SAY ON PAY

We held our annual “Say on Pay” advisory vote at our 2020 Annual Meeting that allowed shareholders to indicate whether they agreed with Emera’s compensation practices and policies. Shareholders voted 99.13 per cent in favour of our approach to executive compensation, an increase in support over the 2019 results. At this year’s Annual Meeting of Shareholders, we will again be presenting a “Say on Pay” non-binding advisory resolution. As part of our continued commitment to shareholder engagement, it is important for us to receive direct feedback from our shareholders and have constructive dialogue about our compensation decisions and other governance matters. Shareholders can contact the Chair of the Committee or the Chair of the Board at the address listed at the end of this letter.

2020 COMPENSATION DECISIONS

Based on the comparative positioning of Emera’s target compensation to market, the Committee is satisfied that our named executive officers are compensated competitively and aligned with our overall compensation philosophy.

Our compensation philosophy is guided by the median level of compensation paid by our peer group, which is made up of companies of a similar size, scope and complexity as Emera. In addition to the market competitive data, the Committee considers experiences, uniqueness of responsibilities and performance of the Named Executive Officers (“NEOs”) in setting the level of target compensation. At the end of 2020, the Committee reviewed benchmarking analyses from both Hugessen Consulting Inc., the Board’s independent compensation advisor, and Mercer (Canada) Limited, management’s external compensation advisor, using the Company’s benchmarking comparator group. The Committee will continue to monitor market trends to maintain our competitive positioning.

 

50		EMERA INCORPORATED