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2-6 Activities, value chain and other business relationships
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Active Sectors: Electric Utilities
Organization’s activities, products, services, and markets served: Annual Report, pages 16-28
Supply chain: Become A Supplier
Entities downstream from the organization and their activities: Annual Report, pages 16-18; 25
Other relevant Significance: Sale of EnerBank; Annual Report pages 173-174
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2-7 Employees
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Our Workforce
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2-8 Workers who are not employees
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Our Workforce
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2-9 Governance structure and composition
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As stated in our Principles, the Board has determined that for the present time, it is in the best interests of the Corporation and shareholders to keep the offices of CEO and Chairman separate to enhance oversight responsibilities. The Board believes that this leadership structure promotes independent and effective oversight of management on key issues relating to long-range business plans, long-range strategic issues, and risks. Additionally, to further promote independent and effective oversight of management, the Board has chosen to appoint a Presiding Director even though our principles
only require one when the Chairman is not considered independent under NYSE listing standards. The Presiding Director provides the independent directors with a key means for collaboration and communication. Under our Bylaws, the Presiding Director will: (1) convene and chair meetings of the independent directors in executive session no less than once each year; (2) preside at meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors; (3) solicit independent directors for advice on agenda items for meetings of the Board; (4) serve as a liaison between the Chairman of the Board, the President and the independent directors; and (5) perform such other duties as may be assigned by the Board from time to time. Russell, the current Chairman, is not a member of management, but served as President and CEO of CMS and Consumers until July 2016. As of July 2019, he qualified as independent under NYSE listing standards; however, on May 5, 2023, Harvey was re-elected as Presiding Director for the Board for a one-year term.
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2-10 Nomination and selection of the highest governance body
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The Governance Committee is responsible for Board succession planning, which includes identifying and evaluating director candidates to serve on the Board consistent with the criteria approved by the Board and recommending a slate of director candidates for election at the Annual Meeting. Our Board determines director independence, in accordance with the New York Stock Exchange listing standards, applicable rules and regulations of the Securities Exchange Commission, our more stringent Independence Standards, as set forth in our Principles, and taking into consideration all business relationships between the Corporation and its subsidiaries and each non-employee director.
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2-11 Chair of the highest governance body
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As stated in our Principles, the Board has determined that for the present time, it is in the best interests of the Corporation and shareholders to keep the offices of CEO and Chairman separate to enhance oversight responsibilities. The Board believes that this leadership structure promotes independent and effective oversight of management on key issues relating to long-range business plans, long-range strategic issues, and risks.
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2-12 Role of the highest governance body in overseeing the management of impacts
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The Board provides direction and oversight with respect to our overall performance, strategic direction, and significant corporate policies. The Board oversees major initiatives, advises on key financial and business objectives, and monitors progress with respect to these matters. Directors are kept informed of our business by management via discussions, presentations, and reports on a regular basis, including operating and financial reports made at Board and Committee meetings. The Board has full and direct access to all members of management and may hire consultants and advisors as it deems necessary.
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2-13 Delegation of responsibility for managing impacts
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We have adopted an Employee Code of Conduct (“Employees’ Code”) that applies to the CEO, Chief Financial Officer (“CFO”), and Chief Accounting Officer (“CAO”), as well as all other officers and employees of CMS Energy and Consumers Energy. CMS Energy and Consumers Energy have also adopted a Board of Director Code of Ethics (“Directors’ Code”) that applies to the members of the Board. The Governance Committee annually reviews the Codes and recommends changes to the Board, as appropriate. The Employees’ Code is administered by the Chief Compliance Officer, who reports directly to the Audit Committee. The Audit Committee oversees compliance with the Codes. Any alleged violation of the Directors’ Code will be investigated by disinterested members of the Audit Committee, or if none, by disinterested members of the Board. The Governance Committee would recommend appropriate action to the Board in the event a determination is made that a director violated the Directors’ Code. The Codes and any waivers of, or amendments or exceptions to, a provision of the Employees’ Code that applies to the CEO, CFO, CAO or persons performing similar functions and any waivers of, or exceptions to, a provision of our Directors’ Code will be disclosed on our website. No such waivers or exceptions have been granted.
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2-14 Role of the highest governance body in sustainability reporting
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We integrate multiple levels of sustainability oversight into our daily operations and use several governance and risk management tools when addressing ESG and sustainability matters. These include oversight by the Board, an enterprise risk management program and robust strategic and business planning processes. The Board oversees the Company’s public responsibility and sustainability practices.
The Governance Committee is also responsible for advising and assisting the Board with respect to our public responsibility, including stakeholder outreach, stewardship and corporate social responsibility, and sustainability matters.
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2-15 Conflicts of interest
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Our Employee Code of Conduct, Board of Director Code of Conduct and Third Party Code of Conduct all contain a conflict of interest and reporting and response provision.
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2-16 Communication of critical concerns
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Our Board of Directors has appointed a Chief Compliance Officer (CCO) who has responsibility for coordinating, monitoring and reporting to them on compliance matters for our companies. The CCO aligns with operational leaders and subject matter experts across the company to establish a mature ethics and compliance program that routinely monitors for and assesses compliance risk, evaluates program effectiveness and identifies improvement opportunities. In addition to internal assessments, the program also utilizes independent audits and reviews to validate program performance.
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2-17 Collective knowledge of the highest governance body
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At the Corporation’s expense, Board members are expected to attend at least one continuing education program annually, sponsored by a recognized utility industry or corporate governance organization. Additionally, we have an internal director education program. The internal program includes corporate and industry information disseminated through orientation programs, presentations, business training modules and reports, and operational site visits. This bespoke internal education program allows us to tailor programs to enhance our Board’s ability to provide appropriate oversight. Our internal education offering in 2022 was an Advanced Seminar on ESG and Board Oversight. All Director nominees attended at least one continuing education program in 2022.
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2-18 Evaluation of the performance of the highest governance body
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Board and Committee evaluations are conducted for the Board and each standing Committee. The Board conducts a self-evaluation annually to determine how effectively the Board and the Committees function. The Board also conducts periodic individual Director peer evaluations.
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2-19 Remuneration policies
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Non-employee director compensation is benchmarked annually. Directors who are CMS Energy or Consumers Energy employees do not receive retainers or fees for service on the Board or as a member of any Committee. Non-employee directors receive an annual retainer fee and restricted stock award for service on the CMS Energy and Consumers Energy Boards and additional annual retainer fees for certain Committee positions. Directors are reimbursed for expenses incurred in attending Board or Committee meetings and other company business. We have designed our executive compensation elements to be balanced and simple, placing emphasis on consistent, sustainable, and superior absolute and relative performance.
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2-20 Process to determine remuneration
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The Compensation Committee of the Board oversees CMS Energy’s and Consumers Energy’s compensation programs on behalf of the Board. Management annually undertakes a comprehensive review of the compensation policies and practices throughout the organization to assess the risks presented by such policies and practices. As part of our overall corporate governance, we have an ongoing outreach program to develop and maintain communication with our investors regarding governance and compensation issues. We value these discussions, and the Board considers pertinent feedback when evaluating corporate governance and compensation issues. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance, ESG topics, and share its perspective on business and industry developments. Shareholders may also contact the Board with any inquiry or issue, by the methods described on our website, and the Board will respond as appropriate.
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2-21 Annual total compensation ratio
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The Compensation Committee is responsible for approving the compensation program for the NEOs. The Compensation Committee acts pursuant to its charter that it reviews annually.
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