Justin Palfreyman

About Justin Palfreyman

Justin B. Palfreyman, age 46, is President and Chief Executive Officer of NW Holdings and Chief Executive Officer of NW Natural, effective April 1, 2025; he joined the Board as a Class I director (no board committees) in 2025. He holds a BBA (Pacific Lutheran University), an MBA (University of Chicago Booth), and an MPP (University of Chicago Harris) . Under his senior leadership roles, NW Holdings reported 2024 adjusted EPS of $2.33 and advanced key initiatives including ~10,000 net utility connections, ~$394.4M of system investments, rate case progress, and RNG execution; the Organization & Executive Compensation Committee (OECC) recognized below-target 3‑year TSR in LTI decisions, aligning payouts accordingly . In Q1 2025, management reported adjusted EPS of $2.28 vs. $1.69 in the prior-year quarter, citing rate case benefits and growth across businesses .

Past Roles

External Roles

Board Governance

• Board service: Class I director since 2025 (term to 2027); no committee assignments .
• 2025 election result (Annual Meeting May 22, 2025): For 30,144,347; Withheld 478,947; Broker non-votes 4,559,602 .
• Governance structure: Independent Chair; Chair and CEO roles separated; audit, governance, and OECC committees comprised entirely of independent directors; regular executive sessions of non-management directors .
• Dual-role implications: As CEO and director, he is not independent; however, the independent Chair structure and independent committees mitigate independence concerns .

Fixed Compensation

Multi-year compensation (Summary Compensation Table):

Notes: Company indicates no employment contracts; compensation design emphasizes pay-at-risk .

Performance Compensation

Executive Annual Incentive Plan (EAIP) design and 2024 results:

Long-Term Incentives (LTI) – structure and 2024 grants:

Governance overlays: OECC applied discretion to align pay with below-target 3‑year TSR by reducing certain long-term incentive payments by 25% (i.e., executives received 75% of awards otherwise earned) .

Equity Ownership & Alignment

Beneficial ownership (as of 12/31/2024):

Outstanding equity awards at 12/31/2024 (selected lines for Palfreyman):

Ownership policies and alignment:

• Executive stock ownership guidelines: CEO 5x salary; President 4x; SVP/NEO 2x–3x; attainment expected within five years; Board found NEOs have achieved or are making appropriate progress (Feb 2025 review) .
• Hedging and pledging: Prohibits short sales, derivatives, zero-cost collars; restricts pledging/margin arrangements for directors and executive officers .
• Equity grant practices: No stock options granted; no intention to grant options; no dividends on unearned awards .

Deferred compensation (2024):

• Company contributions to DCP for Palfreyman: $34,888; aggregate earnings $4,196; year-end balance $113,394 .

Vesting cadence and potential selling pressure indicators:

• RSUs generally vest 25% each March 1 for four years, only if the ROE threshold is met; unvested tranches forfeited if threshold not met for that year .
• PSU cycles are three years (e.g., 2023–2025, 2024–2026), with vesting based on EPS, ROIC threshold, and relative TSR modifier; 2022–2024 payout at 71.60% of target .

Employment Terms

Director and Shareholder Votes (context)

Compensation Structure Analysis

• Pay mix emphasizes at‑risk incentives: LTI up to ~54% of CEO total direct compensation; other NEOs average ~42% LTI; RSUs and PSUs comprise 100% of LTI equity with performance conditions .
• Annual plan (EAIP) ties 70% to Company factors (Net Income 71.43% weight; Operations 28.57%) and 30% to individual/ROIC; 2024 NI over target and operations below target yielded a 126.40% average NEO payout driver .
• Long-term alignment levers: 3‑year EPS target with ROIC threshold and TSR modifier; 2022–2024 PSU payout at 71.60% of target; OECC applied discretionary 25% reduction to certain LTI given below-target 3‑year TSR to reinforce pay-for-performance .
• No options, no gross-ups, double-trigger CIC; hedging/pledging restricted—factors generally supportive of shareholder-aligned design .

Investment Implications

• Alignment: Strong pay-at-risk orientation (annual and long-term) tied to earnings, ROIC, and relative TSR, plus RSU performance thresholds (ROE > cost of LTD) reduce misalignment risk; 2022–2024 PSU payout at 71.60% and OECC’s discretionary downward LTI adjustment for below-target TSR signal discipline .
• Vesting/selling cadence: RSUs vest March 1 annually when threshold is met; combined with multiple unvested RSU series and PSU cycles, expect periodic vesting-driven liquidity windows each spring, potentially creating episodic selling pressure depending on 10b5‑1 plans and window availability .
• Retention/CIC economics: Double‑trigger CIC with ~2x cash multiple and full RSU acceleration (and PSU treatment) creates meaningful retention during strategic events without single-trigger optics; no gross-ups mitigate shareholder concerns .
• Ownership: Beneficial holdings are <1% but governance requires 4x salary ownership level for President/CEO track; Board deems NEOs compliant or on track; hedging prohibited and pledging restricted .
• Governance checks: Independent Chair, independent key committees, clean practices (no options/repricing, clawback) and solid say-on-pay support provide oversight while the CEO’s simultaneous board seat is balanced by structure and practice .