Governance and Oversight
Our Board of Directors has a commitment to corporate responsibility and environmental accountability. Community-focused and with a breadth and diversity of experience, board members bring strong, effective oversight in their service to MGE and MGE Energy.
Active board committed to engagement
Our board is very active and engaged with 10 regularly scheduled meetings of the full board each year, in addition to committee meetings. These meetings help directors stay well-informed of industry and company developments.
Board meetings are held at the company's corporate headquarters in Madison, Wis., and are structured to provide for regular presentations and active dialogue with MGE management. Internal and external subject matter experts present to the board on issues of strategic importance to inform board members' decision-making and oversight.
Ongoing board education
In summer 2018, the board tapped expertise on climate change science, scenarios and projections from the University of Wisconsin-Madison's Nelson Institute Center for Climatic Research and the Wisconsin Initiative on Climate Change Impacts. The initiative brings together scientists and other experts to conduct science-based assessments of potential climate change impacts on Wisconsin.
These regular interactions with internal and external subject matter experts provide useful information and insight relative to critical business initiatives and corporate strategy, including financial performance, environmental performance, risk management and oversight, and corporate succession planning.
In 2018, the board held a strategic planning and review session with all officers of the company. This session was designed to review corporate strategy across all aspects of the company's business and to provide directors with the opportunity to engage the entire senior management team on issues of strategic importance. The board plans to continue holding these strategic planning and review sessions with all officers periodically.
Shareholder engagement
Our board believes that understanding and considering shareholder perspectives advances accountability and transparency.
Our investor relations efforts also help executive management and the board understand how investors view the company's policies and practices, strategies and long-term direction, and help leadership assess and address investors' emerging areas of interest, such as ESG-related topics. Officers engage shareholders in several ways, including through discussions with a number of our institutional shareholders; presentations at industry conferences and investor meetings; meetings with analysts and investment firms; our Annual Meeting; and inquiries taken through the company's investor site, board email and in-house Shareholder Services staff. These efforts are in addition to the company's regular and ongoing investor relations program.
Effective oversight
Directors understand sustainability is integral to the company's long-term success and share management's commitments in these areas, from long-term and strategic direction to day-to-day business practices companywide. Their oversight includes review of environmental risks and mitigation as well as assessment of current and/or future environmental regulations. It also includes review of the company's environmental and sustainability performance.
In 2018, MGE moved from biennial to annual production of our Environmental and Sustainability Report. This report is reviewed by the board every year.
Executive compensation
MGE Energy's Board of Directors' compensation committee, composed of independent directors, takes into consideration environmental performance, among other factors such as cost containment and management of day-to-day operations, when evaluating executive compensation. The committee also considers other performance goals, such as earnings, system reliability and customer satisfaction as well as long-term strategic goals, including those related to sustainability.
As part of its ongoing assessment of corporate performance, the board of directors regularly reviews how well the company is advancing its overall goals around carbon emission reductions as well as progress on its specific strategies for deep decarbonization.
State and federal oversight
As a public utility, MGE operates under state and federal regulations. These regulations serve to protect the interests of customers, investors and the environment.
MGE is subject to regulation by the Public Service Commission of Wisconsin (PSCW), which has authority to regulate most aspects of MGE's business, including rates, terms and conditions of service, accounts, issuance of securities and construction of infrastructure, such as generation siting.
The Federal Energy Regulatory Commission (FERC) has jurisdiction, under the Federal Power Act, over certain accounting practices and certain other aspects of MGE's business. MGE Energy's subsidiaries also are subject to regulation under local, state and federal laws regarding air and water quality and solid waste disposal.
Risk management
Enterprise-wide risk assessment and oversight are fundamental responsibilities of our board. Directors are involved in the process of overseeing the primary risks facing the company.
As part of the company's Enterprise Risk Management program, our board receives on an ongoing basis information from management related to key business risks and mitigation strategies. These business risks include existing and emerging risks related to environmental performance and sustainability.
Our board engages in a comprehensive risk assessment and mitigation review biannually. In addition, on a biennial basis, the board engages in a broad-based exercise with all company officers on risk and emerging risk identification, assessment and mitigation strategies.
Third-party evaluation of risk
Additionally, MGE is employing an independent third party to oversee the expansion of the company's Environmental Management System (EMS). In 2017, MGE expanded the scope of its renewed five-year contract with the Wisconsin Department of Natural Resources for its Green Tier certification, which recognizes environmental leadership. Our primary goal in the expanded contract is to cover all MGE operations under our EMS.
Our independent third-party's expertise in risk management and compliance is helping MGE to identify operational and environmental risks and to evaluate those risks under the scope of our expanded EMS. This further demonstrates our commitment to goal-setting and to environmental accountability.
MGE operates within a culture of sustainability and risk management, which is brought to the entire board. All officers of the company take ownership in and are accountable for managing and mitigating corporate risk. Our comprehensive approach encourages all our directors to initiate discussion at any time, either directly or through our Lead Independent Director, on any areas of concern, including risk identification and assessment, controls, management and oversight.