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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
CMS Energy Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[CMS ENERGY LOGO]
CMS ENERGY CORPORATION
CALL AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 2001
To the Shareholders of CMS Energy Corporation:
The annual meeting of shareholders of CMS Energy Corporation will be held on
Friday, the 25th day of May 2001, at 10:30 A.M., Eastern Daylight Saving Time,
at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan 48124 for the
following purposes:
(1) Electing a Board of Directors of 10 members;
(2) Ratifying the appointment of Arthur Andersen LLP, independent public
accountants, to audit the financial statements of CMS Energy Corporation for the
year ending December 31, 2001; and
(3) Transacting such other business as may properly come before the meeting.
The annual report to the shareholders for the year 2000, including financial
statements, has been furnished to you.
The Board of Directors has fixed March 30, 2001 as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the annual meeting and will be
entitled to vote on all matters that come before the meeting. The Board of
Directors requests that you vote by means of touch tone telephone, the Internet,
or by signing and returning the enclosed proxy. The enclosed envelope requires
no postage if mailed in the United States.
Thomas A. McNish
Secretary
CMS Energy Corporation
Fairlane Plaza South
Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
April 20, 2001
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PROXY STATEMENT
------------------------
INTRODUCTION
The Board of Directors solicits your proxy for use at this year's annual
meeting. The shares represented by your proxy will be voted as you direct if the
proxy is returned prior to the meeting. You may revoke your proxy at any time
before it is exercised.
CMS Energy Corporation's ("CMS") outstanding Common Stock ($.01 par value)
consists of a total of 131,418,098 shares. Each outstanding share is entitled to
one vote on all matters which may come before the annual meeting. All shares
represented by valid proxies will be voted at the annual meeting.
CMS has received a copy of Schedule 13G filed with the Securities and
Exchange Commission (SEC) by Putnam Investments, Inc., One Post Office Square,
Boston, Massachusetts, 02109. This schedule indicates that holdings of
15,692,421 shares, representing 11.9% of the outstanding common stock of CMS,
were acquired in a fiduciary capacity in the ordinary course of business for
investment purposes. CMS has also received a copy of Schedule 13G filed with the
SEC by Wellington Management Company, LLP, 75 State Street, Boston,
Massachusetts, 02109. This schedule indicates that holdings of 6,528,800 shares,
representing 5.0% of the outstanding common stock of CMS, were acquired in a
fiduciary capacity in the ordinary course of business for investment purposes.
To the knowledge of management, no other person or entity currently owns
beneficially more than 5% of any class of CMS' outstanding voting securities.
The determination of approval of corporate action by the shareholders is
based on votes "for" and "against". Abstentions and broker non-votes are not
counted as "against" votes but are counted in the determination of a quorum.
NOMINEES FOR ELECTION AS MEMBERS OF
THE BOARD OF DIRECTORS
The nominees for directors of CMS and Consumers Energy Company ("Consumers")
will hold office until the next annual meeting or until their successors are
elected and qualified. Unless a shareholder withholds authority to vote for the
election of directors as provided in the proxy, the returned proxy will be voted
for the listed nominees. The Board of Directors has no reason to believe that
the persons named will not be available but in the event any nominee is unable
to serve, the proxy will be voted for a substitute nominee designated by the
Board of Directors. All of the nominees are presently serving as directors.
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WILLIAM T. MCCORMICK, JR., 56, has served as Chairman of the
WILLIAM T. MCCORMICK, JR. Board and Chief Executive Officer of CMS since it was
[PHOTO] incorporated in 1987, as Chairman of the Board of Consumers
since 1985, and as President of both since December 2000. He
is a director of Bank One Corporation, Rockwell
International Corporation, and Schlumberger Ltd. He has been
a director of CMS since 1987 and of Consumers since 1985.
JOHN M. DEUTCH, 62, has served since 1992 as Institute
JOHN M. DEUTCH [PHOTO] Professor of Massachusetts Institute of Technology (MIT),
Cambridge, Massachusetts. On leave from MIT, he served as
Director of Central Intelligence from 1995 through 1996, as
U.S. Deputy Secretary of Defense from 1994 to 1995, and as
Undersecretary of the U.S. Department of Defense from 1993
to 1994. He is a director of ARIAD Pharmaceuticals, Inc.,
Citigroup, Inc., Cummins Engine Company, Inc., Raytheon
Company, and Schlumberger Ltd. He has been a director of CMS
and of Consumers since 1997. He had previously served as a
director of CMS and of Consumers from 1986 to 1993, when he
resigned following his confirmation as Undersecretary of
Defense.
JAMES J. DUDERSTADT, 58, has been President Emeritus and
JAMES J. DUDERSTADT University Professor of Science and Engineering at the
[PHOTO] University of Michigan, Ann Arbor, Michigan, since 1996. He
served as the President of the University of Michigan from
1988 to 1996. He is a director of Unisys Corporation, serves
on the Executive Council of the National Academy of
Engineering, and chairs the Nuclear Energy Research Advisory
Committee of the U.S. Department of Energy. He has been a
director of CMS and of Consumers since 1993.
KATHLEEN R. FLAHERTY, 49, has served since 1999 as President
KATHLEEN R. FLAHERTY and Chief Operating Officer of WinStar International, a
[PHOTO] provider of global broadband services. Previously, she
served from 1998 to 1999 as President and Chief Operating
Officer of WinStar Communications, Europe, from 1997 to 1998
as Senior Vice President, Product Architecture for MCI
Communications Corporation, and from 1995 to 1997 as
National Business Marketing Director for British Telecom.
She has been a director of CMS and of Consumers since 1995.
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EARL D. HOLTON, 67, has served since 1999 as Vice Chairman
EARL D. HOLTON [PHOTO] of Meijer, Inc., a Grand Rapids, Michigan based operator of
food and general merchandise centers. He is also Chairman of
the Board of Steelcase, Inc. Previously, he served from 1980
to 1999 as President of Meijer, Inc. He is a director of
Meijer, Inc. and Steelcase, Inc. He has been a director of
CMS and of Consumers since 1989.
WILLIAM U. PARFET, 54, has served since 1999 as Chairman and
WILLIAM U. PARFET [PHOTO] Chief Executive Officer of MPI Research, Inc., Mattawan,
Michigan, a research laboratory conducting risk assessment
toxicology studies. Previously, he served from 1995 to 1999
as Co-Chairman of MPI Research, and from 1993 to 1996 as
President and Chief Executive Officer of Richard-Allan
Medical Industries. He is a director of Pharmacia
Corporation, Stryker Corporation, Sybron International
Corporation, and Monsanto Company. He is also a Commissioner
of the Michigan Department of Natural Resources. He has been
a director of CMS and of Consumers since 1991.
PERCY A. PIERRE, 62, has served since 1990 as Professor of
PERCY A. PIERRE [PHOTO] Electrical Engineering, Michigan State University, East
Lansing, Michigan. He also served as Vice President for
Research and Graduate Studies at Michigan State University
from 1990 to 1995. Dr. Pierre is a former Assistant
Secretary of the Army for Research, Development and
Acquisition. He is also a former President of Prairie View
A&M University. He is a director of Old Kent Financial
Corporation and the Whitman Education Group. He also serves
as a member of the Boards of Trustees for the University of
Notre Dame and Hampshire College. He has been a director of
CMS and of Consumers since 1990.
KENNETH L. WAY, 61, has served since 1988 as Chairman of the
KEN L. WAY [PHOTO] Board of Lear Corporation, a Southfield, Michigan based
supplier of automotive interior systems to the automotive
industry. In addition, he served from 1988 to October 1,
2000 as Chief Executive Officer of Lear Corporation. He is a
director of Comerica, Inc. and WESCO International, Inc. He
also serves as a member of the Boards of Trustees for
Kettering University and the Henry Ford Health Systems. He
has been a director of CMS and of Consumers since 1998.
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KENNETH WHIPPLE, 66, served from 1988 until his retirement
KENNETH WHIPPLE [PHOTO] in 1999 as Executive Vice President of Ford Motor Company,
Dearborn, Michigan, a world-wide automotive manufacturer,
and President of the Ford Financial Services Group. In
addition, he served from 1997 to 1998 as Chairman and Chief
Executive Officer of Ford Motor Credit Company. He had
previously served as Chairman and Chief Executive Officer of
Ford of Europe, Inc. from 1986 to 1988. He is a director of
Galileo International, Inc. and a trustee of 13 J.P. Morgan
& Chase Co. mutual funds. He has been a director of CMS and
of Consumers since 1993.
JOHN B. YASINSKY, 61, served from 1999 until his retirement
JOHN B. YASINSKY [PHOTO] on December 1, 2000 as Chairman of the Board and Chief
Executive Officer and continued as Chairman until February
2001 of OMNOVA Solutions Inc., Fairlawn, Ohio, a developer,
manufacturer, and marketer of emulsion polymers, specialty
chemicals, and building products. Previously, he served from
1995 to 1999 as Chairman, Chief Executive Officer and
President of GenCorp. He is a director of A. Schulman, Inc.
He has been a director of CMS and of Consumers since 1994.
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MANAGEMENT SECURITY OWNERSHIP
The following chart sets forth the ownership of CMS' Common Stock by the
directors and executive officers:
Shares
Name Beneficially Owned*
---- -------------------
William T. McCormick, Jr................ 245,100
John M. Deutch.......................... 9,600
James J. Duderstadt..................... 4,553
Kathleen R. Flaherty.................... 5,195
Earl D. Holton.......................... 15,958
William U. Parfet....................... 13,200
Percy A. Pierre......................... 5,615
Kenneth L. Way.......................... 12,505
Kenneth Whipple......................... 5,904
John B. Yasinsky........................ 9,672
David W. Joos........................... 64,340
Alan M. Wright.......................... 33,930
William J. Haener....................... 58,122
Tamela W. Pallas........................ 22,028
Victor J. Fryling....................... 121,999
All Directors and Executive Officers.... 1,075,605
* In addition to the shares shown above, Mr. McCormick, Mr. Joos, Mr.
Wright, Mr. Haener, Ms. Pallas, Mr. Fryling, and all other executive officers
own options to acquire 549,000; 108,000; 90,000; 112,000; 65,000; 322,000; and
757,355 shares, respectively.
Shares shown as beneficially owned include (1) shares to which a person has
or shares voting power and/or investment power, and (2) the number of shares and
share equivalents represented by interests in the Employees' Savings and
Incentive Plan, the Deferred Salary Savings Plan, the Performance Incentive
Stock Plan, and the Directors' Deferred Compensation Plan as of December 31,
2000. The directors each own 10 shares of Preferred Stock of Consumers. No other
executive officer owns shares of Consumers Preferred Stock. The directors and
executive officers together own less than 1% of the outstanding shares of CMS.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require CMS' directors and executive officers, and
persons who own more than 10% of CMS' Common Stock, to file with the SEC reports
of ownership and changes in ownership of any securities or derivative securities
of CMS. To CMS' knowledge, during the year ended December 31, 2000, CMS'
officers and directors made all required Section 16(a) filings on a timely basis
except Rodney E. Boulanger, President and CEO of CMS Generation, who reported on
March 2, 2001 purchases of CMS common stock made in February 1997 (75 shares)
and September 1999 (170 shares) by his daughter and in August 1999 (300 shares)
by his wife.
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BOARDS OF DIRECTORS AND COMMITTEES OF CMS AND CONSUMERS
The Board of Directors of CMS met 9 times and Consumers' Board of Directors
met 8 times during 2000. All incumbent directors attended more than 75% of the
board and assigned committee meetings during 2000.
AUDIT COMMITTEES
Members: William U. Parfet (Chair), John M. Deutch, James J. Duderstadt,
Percy A. Pierre, and John B. Yasinsky.
Meetings during 2000: CMS 3 - Consumers 3
These committees meet with representatives of the independent public
accountants from time to time during the year and after the completion of the
annual audit of CMS' and Consumers' financial statements to review and discuss
this audit, internal controls and other appropriate matters; review the
activities of the Internal Audit Department; review the relationship of CMS' and
Consumers' independent public accountants with CMS and Consumers insofar as they
perform nonaudit services; review and recommend to the Boards of Directors the
appointment of independent public accountants; and report to the Board of
Directors with respect to the committees' recommendations. The Board of
Directors has adopted a written charter for the audit committee. The charter is
included as an appendix to this proxy statement.
NOMINATING COMMITTEES
Members: John M. Deutch (Chair), James J. Duderstadt, Kathleen R. Flaherty,
Percy A. Pierre, Kenneth L. Way, and Kenneth Whipple.
Meetings during 2000: CMS 2 - Consumers 2
These committees conduct a continuing study of the size, structure,
composition and compensation of the Boards; seek out possible candidates to fill
Board positions; aid in attracting qualified candidates to the Boards; recommend
annually, prior to the solicitation of proxies, a slate of qualified candidates
for election to the Boards at the annual meeting and, in case of any vacancies
on the Boards, candidates to fill those vacancies; review periodically and
recommend to the Boards of Directors modifications, as appropriate, to the
director tenure policy; and determine from time to time criteria for selection
and retention of Board members. The committees consider shareholders'
recommendations of nominees for election to the Boards of Directors. The
recommendations must be accompanied by the consent of each of the recommended
nominees to act as a director. Shareholders should send their written
recommendations of nominees to: Mr. Thomas A. McNish, Vice President and
Secretary, CMS Energy Corporation, Fairlane Plaza South, Suite 1100, 330 Town
Center Drive, Dearborn, Michigan 48126.
ORGANIZATION AND COMPENSATION COMMITTEES
Members: Earl D. Holton (Chair), John M. Deutch, William U. Parfet, Kenneth
L. Way, Kenneth Whipple, and John B. Yasinsky.
Meetings during 2000: CMS 3 - Consumers 3
These committees review the executive organization of CMS and of Consumers
from time to time; review from time to time the salaries and other compensation
of all the officers of CMS and of Consumers; monitor the
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development of personnel for availability to fill key management positions as
vacancies occur; establish goals annually for the Executive Incentive
Compensation Plan; review and approve the incentive compensation payment
schedule; administer CMS' Performance Incentive Stock Plan; and report to the
Boards of Directors with respect to the committees' recommendations.
ENVIRONMENTAL AND CORPORATE RESPONSIBILITY COMMITTEES
Members: Percy A. Pierre (Chair), James J. Duderstadt, Kathleen R. Flaherty,
Earl D. Holton, and John B. Yasinsky.
Meetings during 2000: CMS 2 - Consumers 2
These committees make recommendations to the Boards of Directors regarding
significant environmental matters affecting CMS' and Consumers' operations;
advise the Boards on the adoption and evaluation of policies designed to
maintain CMS' and Consumers' position of corporate responsibility; review and
monitor CMS' and Consumers' policies and objectives related to equal employment
opportunities; review CMS' and Consumers' policies to comply with federal and
state laws and regulations affecting personnel matters; and review CMS' and
Consumers' policies related to contributions and support of charitable,
educational and community organizations.
EXECUTIVE COMMITTEES
Members: William T. McCormick, Jr. (Chair), John M. Deutch, Earl D. Holton,
William U. Parfet, Percy A. Pierre and Kenneth Whipple.
Meetings during 2000: CMS 0 - Consumers 0
These committees exercise the power and authority of the Boards of Directors
as may be necessary during the intervals between meetings of the Boards of
Directors, subject to such limitations as are provided by law or by resolution
of the Boards.
FINANCE AND PENSION COMMITTEES
Members: Kenneth Whipple (Chair), Kathleen R. Flaherty, Earl D. Holton,
William U. Parfet, and Kenneth L. Way.
Meetings during 2000: CMS 2 - Consumers 2
These committees give advice and counsel to the officers of CMS and
Consumers with respect to the means for providing the funds required to carry
out CMS' and Consumers' programs; review the financial policies including
capitalization objectives, use of short-term financing and issuance of long-term
securities; and recommend to the Boards of Directors financial policies for CMS
and Consumers. In addition, the committee of Consumers reviews the investment
policies for all employee benefit funds with respect to assets being managed,
including adequacy of funding; reviews quarterly the investment performance of
each of the investment managers for all employee benefit funds of Consumers;
reports to the Board of Directors on findings regarding selection and retention
of managers; and reviews the administration of the employee benefit plans.
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COMPENSATION OF DIRECTORS
Directors who are not officers of CMS or Consumers received in 2000 an
annual retainer fee of $30,000, and $1,500 for attendance at each Board meeting
and $750 for attendance at each committee meeting. Committee chairs receive
$1,000 for attendance at each committee meeting. Retainer and attendance fees
are set by the Boards of Directors. In 2000, all Directors who were not officers
of CMS or Consumers were granted 1,000 restricted shares of Common Stock of CMS
with a fair market value at time of grant of $22,375. Directors are reimbursed
for expenses incurred in attending Board or committee meetings. Directors who
are officers of CMS or Consumers do not receive retainers or meeting fees for
service on the Board or as a member of any Board committee. Pursuant to the
Directors' Deferred Compensation Plan, a Director of CMS or Consumers who is not
an officer may, at any time prior to a calendar year in which a retainer and
fees are to be earned, or at any time during the year prior to the month in
which a retainer and fees are earned, irrevocably elect to defer payment for
that year, or a portion thereof, through written notice to CMS or Consumers, of
all or half of any of the retainer and fees which would otherwise be paid to the
Director, to a time following the Director's retirement from the Board of
Directors. Any amount deferred will either (a) accrue interest at either the
prime rate or the rate for 10-year Treasury Notes (whichever is greater), (b) be
treated as if it were invested as an optional cash payment in CMS' Stock
Purchase Plan, or (c) be treated as if it were invested in a Standard & Poor's
500 stock index fund. Accrued amounts will be distributed in a lump sum or in
five or ten annual installments in cash. Outside Directors who retire with five
years of service on the Board will receive retirement payments equal to the
retainer. These payments will continue for a period of time equal to their years
of service on the Board. All benefits will cease at the death of the retired
Director. Outside Directors are offered optional life insurance coverage,
business-related travel accident insurance, and optional health care insurance,
and CMS and Consumers pay the premiums associated with participation by
Directors. The imputed income for the life insurance coverage in 2000 was:
Messrs. Deutch, $846; Duderstadt, $621; Holton, $1,665; Parfet, $447; Pierre,
$846; Whipple, $1,485; and Yasinsky, $774.
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EXECUTIVE COMPENSATION
The following charts contain information concerning annual and long-term
compensation and awards of stock options and restricted stock under CMS'
Performance Incentive Stock Plan. The charts include the Chairman of the Board
and the next four most highly compensated executive officers in 2000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation(1)
------------------------
Awards Payouts
Annual ---------- ----------
Compensation Securities Long-Term
---------------------- Underlying Incentive All Other
Name and Principal Position Year Salary Bonus Options Payouts(2) Compensation
--------------------------- ---- ------ ----- ---------- ---------- ------------
William T. McCormick, Jr. 2000 $1,060,000 $700,000 100,000 $ 319,869 $31,800(3)
Chairman and CEO, CMS 1999 1,000,000 0 100,000 796,497 30,000(3)
and Chairman, Consumers 1998 900,000 665,000 62,000 1,093,554 27,000(3)
David W. Joos 2000 508,333 326,510 32,000 98,233 15,250(3)
Executive Vice President 1999 465,000 319,366 32,000 227,915 13,950(3)
and COO - Electric, 1998 430,000 269,520 18,000 301,802 12,900(3)
CMS and President and
CEO - Electric, Consumers
Alan M. Wright 2000 417,500 249,374 28,000 98,233 12,525(3)
Executive Vice President, 1999 360,000 0 28,000 244,140 10,800(3)
Chief Financial Officer and 1998 335,000 189,220 16,000 332,770 10,050(3)
Chief Administrative Officer,
CMS and Consumers
William J. Haener 2000 406,667 322,459 22,000 83,977 12,200(3)
Executive Vice President 1999 380,000 0 22,000 213,642 11,400(3)
and COO - Natural Gas, CMS 1998 310,000 195,250 11,000 254,461 9,300(3)
Tamela W. Pallas 2000 345,000 230,000 15,000 0 125,350(4)
President and COO, 1999 57,500 0 50,000 0 225,862(5)
CMS Marketing, Services 1998 0 0 0 0 0
and Trading Company
Victor J. Fryling (6) 2000 730,000 410,632 60,000 191,912 21,900(3)
1999 690,000 0 60,000 481,182 20,700(3)
1998 625,000 382,440 36,000 663,158 18,750(3)
(1) Aggregate non-performance based restricted stock granted prior to 2000 held
as of December 31, 2000 by named officers was: Mr. Joos, 7,500 shares, with
value based on market price on December 31, 2000 of $237,675; Mr. Haener,
954 shares with value based on market price on December 31, 2000 of $30,232;
and Ms. Pallas, 10,000 shares with value based on market price on December
31, 2000 of $316,900. Regular dividends were paid on such restricted stock.
(2) Market value of Common Stock paid under CMS' Performance Incentive Stock
Plan for three-year performance periods.
(3) Employer matching contribution to defined contribution plans.
(4) Employer matching contribution of $10,350 to defined contribution plans and
award of CMS common stock with a value at time of grant of $115,000.
(5) Employer matching contribution of $862 to defined contribution plans and
signing bonus of $225,000.
(6) Mr. Fryling resigned as a director and officer of CMS and Consumers
effective December 22, 2000.
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EMPLOYMENT ARRANGEMENTS
Agreements with the executive officers named above provide for payments
equal to three times annual cash compensation if there is a change of control
and adverse change of responsibilities, as well as payments equal to annual cash
compensation if employment is terminated by the company, other than for cause,
prior to a change of control. CMS and Consumers also provide long-term
disability insurance policies for all executive officers which would provide
payment of up to 60% of compensation in the event of disability. Mr. Fryling
will serve as an Executive Consultant and continue to receive his normal cash
compensation and benefits, but no additional long term incentive awards under
CMS' Performance Incentive Stock Plan, until February 1, 2003, at which time he
will retire under the CMS pension plans.
OPTION GRANTS IN 2000
Number of Securities Percentage of Total Exercise Grant Date
Underlying Options Options Granted to Price Per Expiration Present
Name Granted Employees in 2000 Share Date Value(1)
---- -------------------- ------------------- --------- ---------- ----------
William T. McCormick, Jr. .... 100,000 11.6 $17.00 3/23/10 $234,000
David W. Joos................. 32,000 3.7 17.00 3/23/10 74,880
Alan M. Wright................ 28,000 3.3 17.00 3/23/10 65,520
William J. Haener............. 22,000 2.6 17.00 3/23/10 51,480
Tamela W. Pallas.............. 15,000 1.7 17.00 3/23/10 35,100
Victor J. Fryling............. 60,000 7.0 17.00 3/23/10 140,400
(1) The present value is based on the Black-Scholes Model, a mathematical
formula used to value options traded on securities exchanges. The model
utilizes a number of assumptions, including the exercise price, the
underlying stock's volatility of 27.25% using weekly closing prices for a
four and one half year period prior to grant date, the dividend rate of
$0.365 per quarter, the term of the option, and the level of interest rates
at 6.56%, equivalent to the rate of four-year Treasury Notes. However, the
Model does not take into account a significant feature of options granted to
employees under CMS' Plan, the non-transferability of options awarded.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTIONS VALUES
Number of Securities Value of Unexercised
Shares Acquired Value Underlying Unexercised In-the-Money Options
Name On Exercise Realized Options at Year End at Year End(1)(2)
---- --------------- -------- ---------------------- --------------------
William T. McCormick, Jr. ....... 0 $0 549,000 $3,105,800
David W. Joos.................... 0 0 108,000 476,470
Alan M. Wright................... 0 0 90,000 411,320
William J. Haener................ 0 0 112,000 574,850
Tamela W. Pallas................. 0 0 65,000 220,350
Victor J. Fryling................ 0 0 322,000 1,782,840
(1) All options listed in this table are exercisable. The named officers have no
unexercisable options.
(2) Based on the December 31, 2000 closing price of CMS' Common Stock as shown
in the report of the NYSE Composite Transactions ($31.69).
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LONG-TERM INCENTIVE PLANS -- AWARDS IN 2000
Estimated Future Payouts
Under Non-Stock Price-Based
Plans (Shares)(1)
Number of Period Until ------------------------------------
Name Shares Payout Threshold Target Maximum
---- --------- ------------ --------- ------ -------
William T. McCormick, Jr. ................. 25,000 2-5 Years 6,250 25,000 37,500
David W. Joos.............................. 8,000 2-5 Years 2,000 8,000 12,000
Alan M. Wright............................. 7,000 2-5 Years 1,750 7,000 10,500
William J. Haener.......................... 5,500 2-5 Years 1,375 5,500 8,250
Tamela W. Pallas........................... 3,750 2-5 Years 938 3,750 5,625
Victor J. Fryling.......................... 15,000 2-5 Years 3,750 15,000 22,500
(1) Under CMS' Performance Incentive Stock Plan, awards of restricted stock for
the above officers vest at the rate of 25% per year after two years and are
subject to achievement of specified levels of total shareholder return over
a three-year period. The target number of shares as shown above will be
earned if 100% of the targeted average 15% annual total shareholder return
is achieved. The threshold number of shares will be earned on achievement of
40% of the target, and the maximum number of shares will be earned on
achieving 140% of the target.
PENSION PLAN TABLE
The following table shows the aggregate annual pension benefits at normal
retirement date presented on a straight life annuity basis under CMS' qualified
Pension Plan and non-qualified Supplemental Executive Retirement Plan (offset by
a portion of Social Security benefits).
Years of Service
--------------------------------------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
$ 500,000 $157,500 $210,000 $247,500 $ 285,000 $ 322,500
800,000 252,000 336,000 396,000 456,000 516,000
1,100,000 346,500 462,000 544,500 627,000 709,500
1,400,000 441,000 588,000 693,000 798,000 903,000
1,700,000 535,500 714,000 891,500 969,000 1,096,500
2,000,000 630,000 840,000 990,000 1,140,000 1,290,000
Regular, straight-time salary, as shown in the Summary Compensation Table
during the five years of highest earnings, is used in computing benefits under
the Pension Plan. In addition, awards under the Executive Incentive Compensation
Plan, as shown in the Summary Compensation Table during the five years of
highest earnings, are used in computing benefits under the Supplemental
Executive Retirement Plan. The estimated years of service for each named
executive is: Mr. McCormick, 25.20 years; Mr. Joos, 29.33 years; Mr. Wright,
19.64 years; Mr. Haener, 14.00 years; Ms. Pallas, 2.35 years; and Mr. Fryling,
25.00 years.
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ORGANIZATION AND COMPENSATION COMMITTEE REPORT
Compensation Philosophy
CMS' executive compensation program is directed by a committee composed
entirely of independent outside directors. The Committee is responsible for
determining and administering executive compensation policies and plans as well
as reviewing and recommending officer appointments to the Board of Directors.
The Committee also has the responsibility for approving both annual compensation
and awards under long-term stock ownership programs. Such programs seek to
enhance the profitability of CMS and, hence, shareholder value by aligning the
financial interests of CMS' officers with those of its shareholders. In doing
so, the Committee relies to a large degree on incentive compensation including
stock-related awards to attract and retain outstanding officers.
Compensation for Mr. McCormick and the other executive officers consists of
a base salary, which is intended to be at the competitive median of the amounts
paid to senior executives with equivalent positions at other energy companies of
comparable size, and substantial annual and long-term incentive compensation
closely tied to CMS' success in achieving earnings, stock appreciation and other
performance goals. The incentive program is also designed to be competitive with
plans of other comparable energy companies and variable "at risk" compensation
is intended to be above median in years when CMS meets or exceeds its
performance goals, which in recent years have exceeded industry norms in terms
of earnings and dividend growth.
Annual Compensation
Just prior to the beginning of each fiscal year, the Committee reviews the
base salary of Mr. McCormick and the other officers and approves annual salaries
for them based on industry, peer group, and national surveys and judgment as to
the past and expected future contributions of each individual. In the case of
Mr. McCormick, such judgment also involves the Committee's assessment of his
past performance and its expectation as to his future contribution in leading
CMS.
The annual incentive compensation (bonus) payment, if any, is based on CMS'
success in meeting challenging earnings per share goals set by the Committee at
the beginning of each year. In addition, individual performance goals are
established for each executive officer for specific financial, operating and
management achievements. Following the end of each year, the results on a
corporate and individual basis are reviewed by the Committee to determine the
appropriate awards. The Executive Incentive Compensation Plan has a threshold
payout at 90% of the earnings per share goal and a maximum payout at 120% of
goal. Under the Plan for 2000, because the Corporation achieved 97.3% of its
earnings per share goal, the Committee granted annual incentive bonuses to
officers, including those shown in the Summary Compensation Table. The Plan has
a threshold payout at 90% of the earnings per share goal and a maximum payout at
120% of goal. Mr. McCormick's award was based on a standard award under the plan
of 75% of his salary, adjusted to reflect the Corporation's earnings relative to
goal and the Committee's judgment as to his performance for the year measured
against specific, predetermined goals.
Long-Term Compensation
The last element of executive compensation considered by the Committee
during each year is long-term incentive awards in the form of stock options and
restricted stock awards under CMS' Performance Incentive Stock Plan. The
Committee believes such awards are desirable in encouraging Common Stock
ownership by executives, thus linking their interests directly to that of other
shareholders. Therefore, in 2000, the Committee decided to grant
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stock options with an exercise price equal to the market price on the date of
the grant to the officers, including those shown in the above charts. Options
have been granted annually, usually for approximately the same number of shares.
The Committee believes grants should be made annually on a generally consistent
basis. In determining grants, the Committee weighed a number of factors
including prior grants and corporate performance. The Committee also awarded
performance-based restricted stock which will vest at the rate of 25% per year
after two years, with 100% vested after five years. However, the nominal
restricted stock award will be paid only if the average annual shareholder
return target of 15% is achieved for each three-year performance period. If the
average annual shareholder return is less than the target, then the award will
be smaller, and if the return is more than the target, then the award will be
greater.
Compensation Deductibility
The Committee has reviewed CMS' compensation plans and the applicability of
Section 162(m) of the Internal Revenue Code and regulations thereunder dealing
with federal income tax deductibility for compensation in excess of $1 million.
The Committee believes that bonus awards under the Executive Incentive
Compensation Plan and awards of stock options and vesting of performance-based
restricted stock under CMS' Performance Incentive Plan are considered deductible
compensation under the regulations under Section 162(m), because they are based
on pre-established performance goals and the plans have been approved by
shareholders.
Compensation Consultant
In connection with its ongoing independent review of executive compensation,
the Committee has retained Hewitt Associates, a recognized compensation and
benefit consultant, to assist the Committee in evaluating the appropriateness
and competitiveness of its compensation policies and programs.
Submitted by the Organization and Compensation Committee: Earl D. Holton
(Chair), John M. Deutch, William U. Parfet, Kenneth L. Way, Kenneth Whipple, and
John B. Yasinsky.
AUDIT COMMITTEE REPORT
CMS' and Consumers' audit activities are directed by committees composed
entirely of independent outside directors. The Committees are responsible for
overseeing the preparation of external financial reports, the adequacy of
internal audit controls, the audit process, the independence and performance of
the independent accountants, and compliance with legal and regulatory
requirements.
We have reviewed and discussed with management CMS' and Consumers' audited
financial statements as of and for the year ended December 31, 2000.
We have discussed with the independent auditors, Arthur Andersen LLP, the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with Arthur Andersen LLP the auditors' independence.
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We have considered the provision of all Arthur Andersen LLP services to CMS
and Consumers and the fees paid for all such services, and have concluded that
all current arrangements are compatible with maintaining the independence of
Arthur Andersen LLP.
Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the financial statements referred to above be
included in each company's Annual Report on Form 10-K for the year ended
December 31, 2000.
Submitted by the Audit Committee: William U. Parfet (Chair), John M. Deutch,
James J. Duderstadt, Percy A. Pierre, and John B. Yasinsky.
INDEPENDENT ACCOUNTANT COMPENSATION
Audit Fees
The aggregate fee billed by Arthur Andersen LLP for professional services
rendered for the audit of the CMS annual financial statements for the year 2000
and for the reviews of the quarterly financial statements was $1,554,000. The
Consumers portion of this total was $554,000.
Financial Information Systems Design and Implementation Fees
The aggregate fee billed to CMS by Arthur Andersen LLP for professional
services related to financial information systems design and implementation was
$154,000, all of which was billed to Consumers.
All Other Fees
The aggregate fee billed to CMS by Arthur Andersen LLP in the year 2000 for
services other than those discussed under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" was $2,150,000. The
Consumers portion of this total was $40,000.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
[COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN GRAPH]
CMS ENERGY S&P 500 DOW JONES UTILITY
---------- ------- -----------------
1995 100 100 100
1996 116 123 109
1997 158 164 134
1998 178 211 159
1999 119 255 150
2000 129 232 227
Total return assumes reinvestment of dividends.
Fiscal years ending December 31.
Assumes the value of the investment in CMS' Common Stock and each index was $100
on December 31, 1995.
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RATIFICATION OF THE APPOINTMENT OF AUDITORS
Subject to the approval of the shareholders, the Board of Directors has
appointed Arthur Andersen LLP, independent public accountants, to audit the
financial statements of CMS for the year 2001. Arthur Andersen LLP also served
as CMS' auditors for the year 2000. A representative of Arthur Andersen LLP will
be present at the annual meeting of shareholders and will have an opportunity to
make a statement and respond to appropriate questions.
Approval of the proposal to ratify the appointment of auditors requires the
affirmative vote of a majority of the shares of Common Stock voting on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF AUDITORS
2002 PROXY STATEMENT INFORMATION
A shareholder who intends to submit a proposal for consideration at the 2002
annual meeting pursuant to the applicable rules of the Securities and Exchange
Commission must send the proposal to reach CMS' Corporate Secretary on or before
December 25, 2001; and in any event if CMS has not received written notice of
any matter to be proposed at that meeting by March 10, 2002, the holders of the
proxies may use their discretionary voting authority on any such matter. The
proposals should be addressed to: Mr. Thomas A. McNish, Vice President and
Secretary, Fairlane Plaza South, Suite 1100, 330 Town Center Drive, Dearborn,
Michigan 48126.
OTHER MATTERS
The Board of Directors does not know of any other matters that might be
presented to the meeting except matters incident to the conduct of the meeting.
However, if any other matters (including matters incident to the conduct of the
meeting) do come before the meeting, it is intended that the holders of the
proxies will vote thereon in their discretion.
The cost of solicitation of proxies will be borne by CMS. Proxies may be
solicited by officers and other employees of CMS or its subsidiaries or
affiliates, personally or by telephone, facsimile, Internet, or mail. CMS has
arranged for Morrow & Co., Inc. 445 Park Avenue, New York, New York 10022, to
solicit proxies in such manner, and it is anticipated that the cost of such
solicitations will not exceed $20,000, plus incidental expenses. CMS may also
reimburse brokers, dealers, banks, voting trustees or other record holders for
postage and other reasonable expenses of forwarding the proxy material to the
beneficial owners of shares of stock held of record by such brokers, dealers,
banks, voting trustees or other record holders.
In some instances, only one annual report or proxy statement is being
delivered to multiple security holders sharing an address unless the company has
received contrary instructions from one or more of the shareholders. A
shareholder wishing to receive a separate annual report or proxy statement can
so notify the company at the address or telephone number below. Similarly,
shareholders currently receiving multiple copies of these documents can request
the elimination of duplicate documents by contacting the company at Investor
Services, 212 W. Michigan Ave, Jackson, MI 49201, telephone 517.788.1868.
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APPENDIX
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee (the Committee) is appointed by the Board of Directors
to assist it in fulfilling its oversight responsibilities. The Committee's
primary duties and responsibilities are to:
- Oversee Management's and the independent accountant's preparation of
external financial reports
- Monitor the adequacy of internal controls
- Oversee the audit process, including the independence and performance
of the Corporation's independent accountants and Internal Audit
Department
- Monitor compliance by the Corporation with legal and regulatory
requirements
The Committee shall have the authority to call meetings at its discretion
and to invite officers and employees of the Corporation and independent
accountants to attend. The Committee shall have the authority to require and
oversee any investigations that the Committee deems necessary to discharge its
responsibilities and to employ whatever auditors, advisors, or consultants that
it deems necessary to conduct such investigations. The independent accountants
are ultimately accountable to the Board and the Committee; therefore, the
Committee and the Board shall have the authority and responsibility to select,
evaluate and, when appropriate, replace the independent accountants.
The Committee shall have the authority to provide the proper educational
programs for its members to ensure the financial and accounting expertise that
is expected of each Committee member.
The Chairman of the Committee shall be consulted before the appointment or
removal of the Director of the Internal Audit Department.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined by
the Board, each of whom shall be independent directors and who are financially
and relationally independent of the Corporation, as defined by the New York
Stock Exchange (NYSE). All members of the Committee shall have a working
familiarity with basic finance and accounting practices and be able to read and
understand fundamental financial statements including the Corporation's balance
sheet, income statement and cash flow statement. At least one member of the
Committee shall have accounting or related financial management expertise.
The members of the Committee shall be elected by the Board at its annual
organizational meeting to serve until the next organizational meeting or until
their successors shall be duly elected and qualified. A Chair for the Committee
shall be named by the Board.
III. MEETINGS
The Committee shall meet at least three times annually, or more frequently
as circumstances dictate. As part of its responsibility to foster open
communications, the Committee shall meet at least annually with management, the
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Director of the Internal Audit Department, and the independent accountants in
separate private sessions to discuss any matters that the Committee or any of
these groups believe should be discussed. The Committee will report its findings
and conclusions at the next regularly scheduled meeting of the full Board. The
Chair shall designate a person, who need not be a member, to act as secretary
and to record the minutes of its proceedings which shall be kept in accordance
with the Bylaws of the Corporation. The agenda of each meeting will be prepared
by the secretary at the direction of the Chair and, whenever reasonably
practicable, delivered to each member before the meeting.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee shall do the following:
A. External Financial Reporting:
1. Oversee the Corporation's annual and quarterly financial reporting
process, including the related internal accounting controls.
2. Review the results of the annual audit of the consolidated
financial statements conducted by the independent accountants and
the acceptability and quality of the Corporation's accounting
principles as applied in its financial reporting.
3. Review, before publication, the Corporation's annual consolidated
financial statements and related accounting policies and changes.
4. Receive assurance of the review by the independent accountants of
filings with the Securities and Exchange Commission (SEC) and other
published documents containing the Corporation's financial
statements to consider whether the information contained in these
documents is consistent with the information contained in the
annual financial statements.
5. Before announcement or publication of the Corporation's quarterly
financial report, review and discuss with Management and the
independent accountants, the Corporation's quarterly financial
results and the significant events, transactions and changes in
accounting estimates which were considered by the independent
accountants in performing their quarterly review. Such review shall
include a discussion about the quality of reporting. The
chairperson of the Committee may represent the entire Audit
Committee for purposes of this review.
6. Inquire of management how it accounted for business transactions,
activities and exposures and whether any accounting principles were
changed.
7. Discuss with the independent accountants and management pending
accounting principle changes and their impact on the Corporation,
including the effect of implementation on the financial statements.
8. Review with the Corporation's General Counsel, or any outside legal
counsel the Committee may select, any legal matters that could have
a material impact on the Corporation and any material inquiries or
reports received from regulators or governmental agencies.
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9. Report to the Board and to the shareholders whether, based on such
reviews and discussions, it recommends to the Board that the most
recent year's audited financial statements be included in the
Corporation's Annual Report on Form 10K to be filed with the SEC.
B. Internal Controls:
1. In consultation with management, the independent accountants and
the Internal Audit Department, consider the integrity of the
Corporation's financial reporting processes and the adequacy and
effectiveness of internal controls taking into account significant
financial risk exposures and the steps management has taken to
monitor, control and report such exposures.
2. Review significant findings identified by the independent
accountants and the Internal Audit Department together with
management's responses to such recommendations.
3. Review annually the results of management's program to monitor
compliance with the Corporation's employee code of conduct and
related corporate policies, and review, whenever necessary,
significant cases of employee conflicts of interest or misconduct.
4. Review the reports of the Corporation's Risk Policy Committee
concerning the Corporation's risk management activities and
compliance with the Corporation's Risk Oversight Policy.
5. Review the annual report of the Internal Audit Department covering
their review of the officers' travel and entertainment.
C. The Audit Process:
1. Select and recommend annually to the Board the firm of independent
accountants that is to audit and report on the Corporation's
consolidated financial statements.
2. Review the annual audit plan and proposed fees of the independent
accountants, review the annual audit plan of the Corporation's
internal auditors, and request any additional audit work that the
Committee deems necessary.
3. Review annually the scope of activities, staffing, budget, results,
and effectiveness of the Corporation's internal audit function and
advise management of such changes to the internal audit function as
the Committee deems necessary.
4. Confirm the independence of the independent accountants,
considering the effect on independence resulting from the nature
and amounts of fees for all nonaudit services, if any, performed by
the independent accountants.
5. Ensure receipt of a formal written statement from the independent
accountants regarding relationships and services which may affect
their objectivity and independence and discuss any such relevant
matters with the independent accountants and recommend that the
full Board take action to address the auditor's independence when
necessary to satisfy itself of the auditor's independence.
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D. Compliance with Legal and Regulatory Requirements:
1. Provide periodic reports to the full Board concerning the scope and
results of the work performed by the Committee.
2. Review and reassess the Audit Committee Charter annually. Submit
the charter to the Board for adoption and approval and inclusion in
the proxy statement at least once every three years in accordance
with SEC regulations.
3. Review and approve required stock exchange certifications and proxy
statement disclosures regarding the Committee.
4. Annually prepare a report to shareholders as required by the SEC
stating whether they have:
- Reviewed and discussed the audited financial statements with
management;
- Discussed with the external auditors the matters required to be
discussed by relevant auditing standards; and
- Received certain disclosures from the external auditors regarding
their independence.
- Recommended to the Board, based upon the review and discussion
referred to above, whether the audited financial statements
should be included in the Corporation's Annual Report on Form 10K
to be filed with the SEC for the last fiscal year.
5. Cause the Corporation to annually, and at any other times when the
composition of the Committee changes, to submit the "Written
Affirmation Form" addressing the Committee's composition,
independence and financial literacy and charter to the NYSE.
Adopted by the Board of Directors, May 26, 2000
Revised February 23, 2001
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[CMS ENERGY LOGO]
COMMON STOCK PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned appoints W. T. MC CORMICK, JR. and T. A. MC NISH, and each of
them, proxies with full power of substitution, to vote on behalf of the
undersigned at the annual meeting of shareholders of CMS Energy Corporation to
be held at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan, at
10:30 AM on May 25, 2001 and at any adjournment or adjournments thereof. Said
proxies, and each of them present and acting at the meeting, may vote upon the
matters set forth on the reverse side hereof and with discretionary authority
on all other matters that come before the meeting; all as more fully set forth
in the Proxy Statement received by the undersigned. The shares represented
hereby will be voted on the proposals as specified. IF THIS PROXY IS RETURNED
SIGNED BUT NOT COMPLETED, IT WILL BE VOTED IN FAVOR OF THE ELECTION OF
DIRECTORS AND THE RATIFICATION OF APPOINTMENT OF AUDITORS.
PLEASE VOTE, SIGN AND DATE THIS PROXY ON
THE REVERSE SIDE.
THANK YOU FOR YOUR PROMPT RESPONSE.
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PLEASE VOTE, SIGN AND DATE BELOW
[ ] TO VOTE AS RECOMMENDED by the Board of Directors on all items, PLEASE MARK
THIS BOX, SIGN, DATE AND RETURN THIS PROXY.
(No additional boxes need be marked. If additional boxes are marked, this
box will take precedence.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
(1) ELECTION OF [ ] FOR all nominees listed below (except as indicated below)
DIRECTORS [ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(01) William T. McCormick, Jr., (02) John M. Deutch, (03) James J.
Duderstadt, (04) Kathleen R. Flaherty, (05) Earl D. Holton,
(06) William U. Parfet, (07) Percy A. Pierre, (08) Kenneth L. Way,
(09) Kenneth Whipple, and (10) John B. Yasinsky.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
________________________________________________________________________________
FOR AGAINST ABSTAIN
(2) Ratification of appointment of auditors [ ] [ ] [ ]
Signed _______________________
PLEASE SIGN, DATE AND RETURN THIS PROXY.
Dated___________________, 2001