Martin Kropelnicki
CALIFORNIA WATER SERVICEAbout Martin Kropelnicki
Martin A. Kropelnicki is Chairman, President & CEO of California Water Service Group (CWT). Age 58, he has served on CWT’s board since 2013, became President & CEO in 2013, and was appointed Chairman in 2023 . He holds BA and MA degrees in economics from San Jose State University and previously held executive roles at PowerLight, Hall Kinion & Associates, Deloitte & Touche Consulting Group, and PG&E . Under his leadership, 2024 operating revenue was $1.04B and EPS was $3.25, with net income of $190.8M; CWT invested a record $471M in infrastructure, and achieved a 178% payout on short‑term incentives tied to financial, operational, and safety metrics .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| California Water Service Group | Vice President, CFO & Treasurer | 2006–2012 | Built finance and reporting discipline; rate making and budgeting expertise |
| California Water Service Group | President & COO | 2012–2013 | Operational leadership and strategic planning |
| California Water Service Group | President & CEO | 2013–2023 | Led strategy, regulatory execution, and capital allocation |
| California Water Service Group | Chairman, President & CEO | 2023–present | Unified board and management leadership; oversight of risk, strategy, and execution |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| National Association of Water Companies (NAWC) | Chair; Board & Executive Committee member | As disclosed | Industry policy and advocacy |
| Bay Area Council | Director | As disclosed | Regional economic development |
| California Foundation on the Environment & Economy | Member | As disclosed | Public policy engagement |
| Silicon Valley Leadership Group | Member | As disclosed | Business leadership network |
Fixed Compensation
| Metric | 2023 | 2024 |
|---|---|---|
| Base Salary ($) | $1,050,005 | $1,050,005 |
| Target Short‑Term ARP (% of salary) | 100% | 100% |
| Actual Short‑Term ARP Earned ($) | $1,449,000 | $1,869,000 (178% of target) |
| 2024 Stock Awards – RSAs (grant date fair value, $) | — | $500,170 |
| 2024 Stock Awards – RSUs at target (grant date fair value, $) | — | $1,316,667 (max $2,633,334) |
| 2024 Total Direct Compensation ($) | $4,856,752 | $4,735,842 |
Performance Compensation
Short‑Term ARP (Annual Risk Plan) – 2024
| Metric | Weight | Target | Actual | Payout |
|---|---|---|---|---|
| Water Quality & Public Health | 20% | 0 primary, ≤2 secondary, ≤4 procedural violations | 0 primary, 0 secondary, 0 procedural | 200% |
| Customer Service & Support | 20% | 94.1% of maximum annual metric | 100% of maximum metric; −7% collections; +4% e‑billing | 175% |
| Infrastructure Investment | 20% | $360M capex | $450.5M company‑funded ($471M total) | 200% |
| Budget to Actual (EPS) | 20% | −2.5% to +2.5% vs budget | +53% vs budget (EPS $3.25) | 200% |
| Emergency Preparedness & Safety | 20% | Mixed targets (EOC trainings, training attendance, TCIR, accidents, audits) | 23 EOC, 100% trained, 88% TCIR target, +2% accident improvement, 453 audits | 115% |
| Total ARP Achievement | — | — | — | 178% |
Long‑Term Equity – 2024 RSUs (Performance Period 2024–2026)
| Metric | Weight | Target | Maximum |
|---|---|---|---|
| Return on Equity (three‑year) | 40% | Authorized ROE | Target +50 bps (200% payout) |
| Growth in Stockholders’ Equity + Dividends | 40% | $725M accumulation | $825M (200% payout) |
| Grant Funding for Water Infrastructure | 20% | ≥20 applications; ≥$15M awarded | ≥40 applications; ≥$45M awarded (200% payout) |
Long‑Term Equity – 2022 RSUs (Performance Period 2022–2024) Payout
| Metric | Weight | Target | Achievement | Payout |
|---|---|---|---|---|
| ROE (annual thresholds by year) | 40% | Authorized ROE 9.20%, 9.57%, 10.27% | GAAP ROE 7.70%, 3.73%, 12.44% | 80% |
| Growth in Stockholders’ Equity | 40% | $650M | $655M | 100% |
| ESG Goals (4 goals) | 20% | Achieve 3 of 4 | All 4 achieved | 200% |
| Total Payout | — | — | — | 112% |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 142,111 common shares (as of Apr 16, 2025) |
| Ownership as % of shares outstanding | <1.0%; directors/executives as group ~1.0% |
| Stock Ownership Guidelines | CEO must hold ≥3x annual base salary; all officers/directors in compliance |
| Hedging/Pledging | Prohibited for directors and executives |
| Outstanding Unvested Awards (12/31/2024) | RSAs: 522 (3/1/2022 grant), 3,280 (3/7/2023), 10,080 (6/5/2024); RSUs: 11,109 (2022–2024), 14,144 (2024–2026), 26,535 (2024–2026) |
| Award Vesting Schedules | RSAs 3/1/2022: 33.3% on 3/1/2023, remainder quarterly over 24 months; RSAs 3/7/2023: 33.3% on 3/7/2024, remainder quarterly over 24 months; RSAs 6/5/2024: 33.3% on 3/5/2025, remainder quarterly over 24 months; RSUs vest at end of performance periods (e.g., 3/1/2025; 3/7/2026; 3/5/2027) |
Employment Terms
| Provision | Terms |
|---|---|
| Employment Agreement | None; executives generally not party to individual employment agreements |
| Short‑Term ARP Target | CEO target 100% of base salary; payout 0–200% of target |
| Executive Severance Plan (Change‑in‑Control) | Double‑trigger: if terminated without cause or for good reason within 24 months after a change‑in‑control, cash severance equals 3x base salary; paid in three equal annual installments; includes excise tax gross‑up under IRC Section 4999; subject to release and non‑solicitation/confidentiality covenants |
| Equity Acceleration | No single‑trigger acceleration under equity plan; acceleration assumptions only tied to qualifying termination upon CIC (plan does not require single‑trigger) |
| Clawback Policy | NYSE Rule 10D‑1‑aligned clawback for excess incentive‑based compensation upon certain restatements |
Performance & Track Record
Pay versus Performance (Company‑selected measure: Budget‑to‑Actual EPS)
| Year | CEO Summary Compensation Table ($) | CEO Compensation Actually Paid ($) | Avg SCT (Other NEOs, $) | Avg CAP (Other NEOs, $) | TSR ($100 initial) | Peer Group TSR ($100 initial) | Net Income ($M) | Budget‑to‑Actual EPS |
|---|---|---|---|---|---|---|---|---|
| 2020 | $3,776,856 | $4,268,399 | $901,550 | $983,279 | $106.68 | $115.75 | $96.8 | 21.0% |
| 2021 | $3,718,087 | $4,495,501 | $1,204,755 | $1,050,610 | $144.06 | $144.46 | $101.1 | 6.5% |
| 2022 | $3,351,529 | $3,111,318 | $820,950 | $829,540 | $123.71 | $123.42 | $96.0 | (1.7)% |
| 2023 | $4,856,752 | $3,689,961 | $1,003,883 | $704,548 | $107.84 | $105.53 | $51.9 | (52.1)% |
| 2024 | $4,803,389 | $4,682,415 | $943,423 | $859,492 | $97.46 | $92.93 | $190.8 | 53.0% |
Board Governance
- Combined Chairman & CEO structure since 2023, with a robust Lead Independent Director (Scott L. Morris) and five fully independent committees; 10 of 11 directors are independent .
- Independent directors held regular executive sessions (20 in 2024); board and applicable committee meeting attendance averaged 96% in 2024, with all directors ≥75% attendance .
- Board oversight spans strategy, risk, ESG, cybersecurity; enterprise risk management responsibilities allocated across committees and management .
Committee Assignments (2024/2025 snapshots)
- Organization & Compensation: Chair Thomas M. Krummel; members Scott L. Morris, Lester A. Snow, Patricia K. Wagner .
- Audit: Chair Gregory E. Aliff; members Jeffrey Kightlinger, Charles R. Patton, Patricia K. Wagner .
- Finance & Capital Investment: Chair Patricia K. Wagner; members Gregory E. Aliff, Charles R. Patton, Carol M. Pottenger, Lester A. Snow .
- Nominating/Corporate Governance: Chair Scott L. Morris; members Shelly M. Esque, Thomas M. Krummel, Yvonne A. Maldonado, Carol M. Pottenger .
- Enterprise Risk Management, Safety & Security: Chair Lester A. Snow; members Gregory E. Aliff, Shelly M. Esque, Jeffrey Kightlinger, Yvonne A. Maldonado, Carol M. Pottenger .
Dual‑role implications: The board explicitly cites combined Chair/CEO as appropriate for CWT’s size and complexity, mitigated by an empowered Lead Independent Director, majority independent board, and fully independent committees to preserve oversight and independence .
Director Compensation (Context)
Non‑employee director retainer: $118,000; Lead Independent Director $40,000; Chair fees: Audit $25,000; Organization & Compensation $20,000; Nominating $15,000; Finance $15,000; ERM/Safety/Security $15,000; annual restricted stock grant $115,500 (granted 6/5/2024; fully vested 3/5/2025) . Note: As a management director, Kropelnicki’s compensation is covered under executive tables (above).
Compensation Peer Group (2024/2025)
| Peer Companies (examples) |
|---|
| Allete; American States Water; Avista; Black Hills; Chesapeake Utilities; Essential Utilities; IDACORP; MGE Energy; Northwest Natural; NorthWestern; Otter Tail; PNM Resources; SJW Group; Unitil |
Policy: Target total compensation set within ±20% of median of peers/survey data, reflecting regulatory constraints and talent retention objectives .
Say‑on‑Pay & Shareholder Feedback
| Year | Say‑on‑Pay Approval |
|---|---|
| 2020 | 92% |
| 2021 | 93% |
| 2022 | 92% |
| 2023 | 96% |
| 2024 | 96% |
Board responses included adoption of a clawback policy, adding ESG metrics to long‑term incentives, increasing SERP unreduced retirement age to 65, and peer group updates via independent consultant Meridian .
Risk Indicators & Red Flags
- Excise tax gross‑up under IRC 4999 included in Executive Severance Plan (shareholder‑unfriendly); double‑trigger CIC severance at 3x base salary .
- No employment agreements (reduces entrenchment), no single‑trigger CIC equity acceleration .
- Hedging and pledging prohibited; stock ownership guidelines enforced; clawback policy aligned with NYSE Rule 10D‑1 .
- 2024 TSR below peer group; however, record net income/ARP outperformance reflects operational execution amid regulatory timing effects .
Investment Implications
- Strong 2024 operational execution drove 178% ARP payout and record net income, while long‑term incentives are anchored to ROE, equity growth, and grant funding—aligning pay with regulated utility value creation drivers .
- Ownership alignment is moderate (142k shares; <1% outstanding) with strict hedging/pledging prohibitions and robust ownership guidelines; quarterly RSA vesting beginning March 2025 and RSU cliffs through 2027 create predictable vesting cadence .
- Governance mitigants (Lead Independent Director, independent committees) temper combined Chair/CEO concerns; say‑on‑pay support consistently ≥92% signals investor acceptance of the pay‑for‑performance design .
- The presence of an excise tax gross‑up and 3x salary CIC severance is a governance negative; monitor any shifts in severance terms, long‑term metric calibration, and TSR relative to the water utility peer index to gauge future pay‑performance alignment .