Atmos Energy (ATO) DEF 14ADefinitive proxy

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider before casting your vote. Please read this entire proxy statement carefully before voting. This proxy statement is first being made available to our Shareholders on or about December 20, 2024.

Our corporate governance policies and practices promote the long-term interests of our shareholders, strengthen the accountability of our Board and management, and help build public trust in the Company. Below is a summary of some of the highlights of our corporate governance framework.

The Board and the Nominating Committee believe it is important that our directors represent diverse viewpoints and backgrounds. Our Corporate Governance Guidelines provide that the Nominating Committee shall evaluate each director’s continued service on the Board, at least annually, by considering the appropriate skills and characteristics of members of the Board in the context of the then current makeup of the Board. The Board seeks to maintain balance and diversity on the Board with respect to race, sex, age, geographical location, knowledge, skills, expertise, business experience, and other appropriate measures. It is also the practice of the committee to consider these factors when screening and evaluating candidates for nomination to the Board.

Each of the following current directors, other than Mr. Geiser and Ms. Toliver, was last elected by shareholders at the 2024 annual meeting of shareholders. Mr. Geiser and Ms. Toliver were elected by the Board of Directors in September 2024. Each of the nominees has been nominated to serve a one-year term on the Board of Directors with such term expiring in 2026.

In fiscal 2024, the Board held 5 meetings. Each of the directors attended 100% of the total meetings of the Board and the Committees on which he or she served. In addition, we strongly support and encourage each member of our Board to attend our annual meeting of shareholders. All members of the Board attended our annual meeting of shareholders on February 7, 2024.

The Board’s leadership structure is designed so that independent directors exercise oversight of the Company’s management and key issues related to strategy and risk. Only independent directors serve on our Audit Committee, Human Resources Committee (“HR Committee”) and Nominating Committee, and all standing Board committees are chaired by independent directors.

Independent directors regularly hold executive sessions of the Board led by the Lead Director (defined below) outside the presence of the Chairman, the President and CEO or any other Company employee, and they generally meet in a private session with the Chairman and the President and CEO at regularly scheduled Board meetings.

The Board welcomes the regular attendance at each Board meeting of the Company’s executive officers who are not members of the Board. Additionally, the Board (both as a whole and each director individually) and each Board committee has complete access to the Company’s management. The Board encourages the executive officers to bring non-executive managers to Board meetings, from time to time, who can provide additional insight into the items being discussed because of personal involvement in these areas as well as represent non-executive managers with future potential that the senior management believes should be given exposure to the Board.

The Company’s Corporate Governance Guidelines provide that our Board has the right to exercise its discretion to either separate or combine the offices of the Chairman of the Board and the CEO. This decision is based upon the Board’s determination of what is in the best interests of the Company and its shareholders, in light of the circumstances and taking into consideration succession planning, skills and experience of the individuals filling those positions and other relevant factors. The current leadership structure is based on the experienced leadership provided by a Chairman of the Board (currently Mr. Cocklin) and a full-time President and CEO (currently Mr. Akers), with both positions being subject to oversight and review by the Company’s independent directors. The Board recognizes that if the circumstances change in the future, other leadership structures might also be appropriate and it has the discretion to revisit this determination of the Company’s leadership structure.

The Board’s leadership structure is designed so that independent directors exercise oversight of the Company’s management and key issues related to strategy and risk. Only independent directors serve on our Audit Committee, HR Committee, and Nominating Committee, and all standing Board committees are chaired by independent directors. Additionally, independent directors regularly hold executive sessions of the Board led by the Lead Director (defined below) outside the presence of the Chairman, the President and CEO or any other Company employee, and they generally meet in a private session with the Chairman and the President and CEO at regularly scheduled Board meetings.

Each year, the independent directors of the Board select an independent director to serve as a lead director (the “Lead Director”). The Lead Director is expected to consult with the chairs of the appropriate Board committees and solicit their participation. The Lead Director also has the authority to call meetings of the independent directors as well as the non-management directors; and if requested by major shareholders, will ensure that he or she is available for consultation and direct communication. In February 2024, the independent directors of the Board designated Mr. Richard K. Gordon as the Lead Director. Mr. Gordon reached mandatory retirement age in July 2024 and will be retiring from the Board of Directors as of the date of the 2025 annual meeting of shareholders.

Atmos Energy’s Board committee structure is organized around key strategic issues to facilitate oversight of management. Committee chairs regularly coordinate with one another to ensure appropriate information sharing. To further facilitate information sharing, all committees provide a summary of significant actions to the full Board. As required under our Corporate Governance Guidelines, each standing committee conducts an annual self-evaluation and review of its charter.

The Nominating Committee considers all relevant facts and circumstances in evaluating the independence of directors, including without limitation, written responses to submitted questionnaires completed annually by each of our directors. On the basis of this information, the Nominating Committee advised the full Board of its conclusions regarding director independence. After considering the committee’s recommendation, for fiscal 2024, the Board affirmatively determined that each of the Company’s directors other than Mr. Akers and Mr. Cocklin is independent in accordance with applicable NYSE and Securities and Exchange Commission (“SEC”) independence rules and requirements and the standards described above. The Board determined that Mr. Akers is not independent because he is the President and Chief Executive Officer of the Company and that Mr. Cocklin is not independent because he was the Executive Chairman of the Company until December 2020. Beginning in fiscal 2025, Mr. Cocklin will be considered independent based on the Company’s Categorical Standards of Director Independence.

The Board is committed to assessing its own performance as a board in order to identify its strengths as well as areas in which it may improve its performance. The self-evaluation process, which is established by the Nominating Committee, involves the completion of annual written questionnaires of the Board and its committees, review and discussion of the results of the evaluations by both the committee and full board, and consideration of action plans to address any issues.

If a shareholder wishes to nominate a candidate for election to the Board at the annual meeting, he or she should write to the Corporate Secretary, Atmos Energy Corporation, 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, which is our principal executive office, not earlier than October 8, 2025, and not later than the close of business on November 7, 2025. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the Company’s bylaws.

The Board is actively involved in the oversight of material risks that could affect the Company. This oversight is conducted primarily through committees of the Board pursuant to the charters of each committee. The full Board has retained responsibility for oversight of strategic risks. The Board satisfies this responsibility through reports by each committee chair regarding the committee’s consideration and actions, as well as through regular reports directly from employees responsible for management of particular risks within the Company.

While the Board and its committees oversee material risk, Company management is charged with managing risk. Atmos Energy’s integrated risk management (“IRM”) framework supports the Company’s vision to be the safest provider of natural gas services by providing a consistent approach for the Company to identify and manage risk. In 2006, Atmos Energy began formalizing an integrated risk management framework, informed by the Committee of Sponsoring Organizations of the Treadway Commission principles. Since then, we have actively engaged internal and external experts to assist us with integrating our IRM process into our structure, operations, and business processes. The Risk Management and Compliance Committee (“RMCC”), which is overseen by the Management Committee, is charged with oversight of enterprise-wide risk management across all categories, including safety, security, and cybersecurity. The RMCC also has oversight of the Quality Assurance and Management of Change processes. The Management Committee is comprised of the President and Chief Executive Officer, Senior Vice President and Chief Financial Officer, Senior Vice President, Utility Operations, Senior Vice President, General Counsel & Corporate Secretary and Senior Vice President, Human Resources.

We continuously assess our risk of cyber threats to adapt quickly to the ever-changing challenges and risks surrounding cybersecurity. Atmos Energy has implemented policies, procedures, and controls to identify, protect, detect, and respond to cyberattacks or acts of online terrorism. Atmos Energy is also subject to the U.S. Department of Homeland Security Transportation Security Administration (“TSA”) security directive for our natural gas pipeline monitoring and control systems. To learn more about our cybersecurity efforts, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

The Board is actively engaged and involved in succession planning, including detailed discussions of the Company’s leadership and succession plans for key positions at the senior officer level. As part of these activities, the Board engages in a robust CEO succession planning process, including reviewing development plans for potential CEO candidates and engaging with potential successors at board meetings and in less formal settings to allow directors to personally assess candidates.

Succession planning does not stop with senior officers. We perform succession planning annually throughout the organization to ensure that we are building a strong bench of talent capable of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed to ensure that employees have an opportunity to build their skills and are well-prepared for future roles. The strength of our succession planning process is evident through our long history of promoting our senior leadership from within the organization.

We believe that maintaining an active dialogue with our shareholders is important to our commitment to deliver sustainable, long-term value to our shareholders. We engage with shareholders on a variety of topics throughout the year to ensure we are addressing questions and concerns, to seek input, and to provide perspective on our policies and practices. We also engage with proxy and other advisory firms that represent the interests of various shareholders. Shareholder feedback is regularly reviewed and considered by the Board and is reflected in adjustments or enhancements to our policies and practices. We remain committed to investing time with our shareholders to maintain transparency and to better understand their views on key issues.

The Board has adopted an insider trading policy applicable to our directors, officers, employees, and certain persons and entities that we believe is reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the NYSE listing standards.

The Board recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest and may create the appearance that Company decisions are based on considerations other than the best interests of the Company and its shareholders. As a result, the Board prefers to avoid related party transactions, while also recognizing that there are situations where related party transactions may be in the best interests of or may not be inconsistent with the best interests of the Company and its shareholders. The Board has adopted and periodically reviews written guidelines with respect to related party transactions and has delegated to the Nominating Committee the responsibility to review and, if not adverse to the Company’s best interests, approve, related party transactions. Under the guidelines, a related party transaction is any transaction (or series of related transactions) involving the Company and in which the amount involved exceeds $100,000 and a related person has a direct or indirect material interest. A “related person” is:

Under the guidelines, all executive officers, directors and director nominees are required to identify, to the best of their knowledge after reasonable inquiry, business and financial affiliations involving themselves or their immediate family members, which could reasonably be expected to give rise to a related person transaction. Executive officers, directors and director nominees are required to advise the Corporate Secretary promptly of any change in the information provided and are asked periodically to review and reaffirm this information.

In accordance with the guidelines, the Nominating Committee reviews the material facts of all related person transactions and either approves or disapproves of the entry into any such transaction.

The Nominating Committee has considered and adopted standing pre-approvals under the guidelines for limited types of transactions that meet specific criteria. Such pre-approved transactions are limited to:

The Company’s non-employee director compensation program reflects best practices, as follows:

Together with its independent compensation consultant, the HR Committee annually reviews the non-employee director pay program to ensure it remains competitive. As a result of this review, our annual board retainer, committee chair, and lead director fees remained the same for fiscal 2024 as for fiscal 2023.

The Board believes that the level of non-employee director compensation should be based on Board and committee responsibilities and be competitive with comparable companies. The Board generally targets compensation near the median of our proxy peer group (discussed below). In addition, the Board believes that a significant portion of non-employee director compensation should be awarded in the form of equity to align director interests with the long-term interests of shareholders.

In fiscal 2024, our director compensation program included the following components:

The Company provides our non-employee directors the option to receive all or part of their cash director retainer and fees (in 10% increments) in Company stock through the LTIP. The selected Company stock portion of the fee earned in each quarter is issued as soon as practicable following the first business day of each quarter. The number of shares issued is equal to the amount of the cash fee that would have been paid to the non-employee director during the quarter divided by the fair market value (average of the highest and lowest prices as reported on the NYSE Consolidated Tape) on the first business day of such quarter. Only whole numbers of shares of Company stock may be issued. Fractional shares are paid in cash.

All directors are reimbursed for reasonable expenses incurred in connection with attendance at Board and committee meetings. A director who is also an officer or employee receives no additional compensation for his or her service as a director. We provide business travel accident insurance for non-employee directors and their spouses. The policy provides $100,000 coverage to directors and $50,000 coverage to their spouses per accident while traveling on Company business.

Each non-employee director is also eligible to participate in the Atmos Energy Corporation Equity Incentive and Deferred Compensation Plan for Non-Employee Directors (“Directors Plan”). This plan allows each such director to defer receipt of his or her annual retainer or other director fees and to invest such deferred fees in either a cash account or a stock account (in 10% increments). The amount of the fee allocated as a credit to the cash account is converted to a cash balance as of the first business day of each quarter and credited with interest at a rate equal to 2.5% plus the annual yield reported on a 10-year U.S. Treasury Note for the first business day of January for each plan year. Interest on the accumulated balance of the cash account is credited monthly. The amount of the fee allocated as a credit to the stock account is converted to share units. The fee payable for the quarter is converted to a number of whole and, if applicable, fractional share units on the first business day of that quarter. Share units are also credited with dividend equivalents whenever dividends are declared on shares of the Company stock. Such dividend equivalent credits are converted to whole and, if applicable, fractional share units on the same day on which such dividends are paid. At the time of a participating director’s separation from service, plan benefits paid from the cash account are paid in cash and plan benefits paid from the stock account are paid in whole shares of Company stock (rounded up to the nearest whole share).

The following table sets forth all compensation paid to our non-employee directors for fiscal 2024:

The following table sets forth, for each participating non-employee director, the amount of director compensation deferred during fiscal 2024 and cumulative deferred compensation as of September 30, 2024:

We have share ownership guidelines for our non-employee directors that require each director to hold a multiple of his or her annual retainer in shares of Company stock. The HR Committee believes that share ownership promotes better alignment of the interests of our directors with those of our shareholders, and it monitors compliance with the ownership guidelines each year. Minimum ownership levels are as follows:

The restriction period of restricted stock and/or restricted stock units commences on the date of grant and expires upon satisfaction of the conditions set forth in the award agreement (if any). Such conditions may provide for vesting based on (i) length of continuous service, (ii) achievement of specific business objectives, (iii) increases in performance compared to specified indices, (iv) attainment of specified growth rates or (v) other comparable performance measurements, as determined by the HR Committee in its sole discretion.

The HR Committee may not grant ISOs under the LTIP to any employee which would permit the aggregate fair market value of the common stock with respect to which ISOs are exercisable for the first time during any calendar year to exceed $100,000. Any stock option granted under the LTIP which is designated as an ISO that exceeds this limit or otherwise fails to qualify as an ISO will be a NQSO. If an option qualifies as either an ISO or NQSO, there will generally be no federal income tax consequences to either the recipient or us upon the issuance of such options. In the case of an ISO, there should also be no federal income tax consequences to either the recipient or us upon its exercise. However, if a stock option is categorized as a NQSO, the recipient must recognize compensation income in the year of exercise equal to the difference between the fair market value of the common stock on the date of exercise and the exercise price, while we will receive a corresponding deduction for compensation paid for the same amount.

While the use of equity awards is an important part of our overall executive compensation program, we are also aware of our responsibility to our shareholders to exercise judgment in the granting of such awards. As a result, we monitor both our “share overhang” and annual share usage, or “burn rate,” and the LTIP’s potential impact on our shareholders as described below.

The annual share usage, or burn rate, under the LTIP for the last three fiscal years was as follows:

On November 5, 2024, the Board of Directors approved and adopted the amendment to the LTIP, which is subject to the approval of our shareholders at the annual meeting of shareholders. The Board of Directors believes that the LTIP will continue to accomplish its primary purpose of motivating employees using performance-related incentives linked to longer-range performance goals and the interests of our shareholders.

The amendment to the LTIP is being submitted to our shareholders for their approval pursuant to the provisions of the LTIP, as well as to comply with the rules of the NYSE. According to our Bylaws and NYSE requirements, this proposal to adopt the amendment to the LTIP will be approved if the votes cast in favor exceed the votes cast in opposition. Broker non-votes will have no effect on the vote for this proposal.

Fees for professional services provided by our independent registered public accounting firm, E&Y, in each of the last two fiscal years, in each of the following categories are:

Management is responsible for the Company’s internal controls and the financial reporting process. E&Y is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and for issuing audit reports on the financial statements and the assessment of the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board.

In discharging its responsibility for the year ended September 30, 2024:

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (which the Board has approved) that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024 for filing with the SEC.

Respectfully submitted by the members of the Audit Committee.

This Compensation Discussion and Analysis provides an overview of our executive compensation program objectives and strategy, and the elements of compensation that we provide to our named executive officers, including the process we employed in reaching the decisions to pay the specific amounts and types of executive compensation discussed. Our named executive officers for fiscal 2024 are listed below:

Over the past thirteen years, our operating strategy has focused on modernizing our distribution and transmission system to improve the safety and reliability of the system while reducing regulatory lag. Since that time, our capital expenditures have increased approximately 12% annually. Our ability to increase capital spending each year to modernize our system has increased our rate base, which has also resulted in increasing earnings per share.

This trend continued during fiscal 2024. In fiscal 2024, we generated net income of $1,042.9 million or $6.83 per diluted share representing increases over net income for the year ended September 30, 2023 of $885.9 million or $6.10 per diluted share. Capital expenditures for fiscal 2024 totaled approximately $2.9 billion, with 83% of this amount invested to improve the safety and reliability of our distribution and transmission systems.

We do not have any individual compensation policies or plans that are not applied consistently to all our named executive officers.

In determining executive compensation, the HR Committee and our Board consider the results of our most recent shareholder advisory vote on executive compensation. The results for the say-on-pay votes for the last three fiscal years, which have been in excess of 90% each year, show consistent support from our shareholders of our executive compensation program. Accordingly, for fiscal 2024, the HR Committee and Board decided to adhere to its pay-for-performance philosophy and did not materially change our executive compensation programs and policies over the last fiscal year as a result of the most recent shareholders’ advisory votes on executive compensation.

Our executive compensation program is designed to closely align the interests of our named executive officers with those of our shareholders and customers and to pay our named executive officers above-target incentive compensation only when the Company’s financial performance warrants the payment of such compensation. We believe that our executive compensation program is effective in allowing our organization to attract and retain highly-qualified senior management team members who can deliver outstanding performance. Our executive compensation program is founded upon the following principles: