By Scott Mahoney – Senior Vice President, General Counsel and Secretary; Chief Compliance Officer of AVANGRID
AVANGRID, a leading sustainable energy company, has developed a unique corporate governance system inspired by and based on a commitment to ethical principles, transparency and continuous improvement that reflect its role as the ‘utility of the future’.
Driven by the vision of being a leader in the energy sector, through service and innovations that make reliable, sustainable and cleaner energy a reality for millions of customers across the US, AVANGRID’s corporate governance system is integral to this corporate mission and the creation of sustainable value for society, customers and shareholders.
Formed in December 2015 through the merger of Iberdrola USA, Inc. and UIL Holdings Corporation, AVANGRID has more than $31 billion in assets and operations in 27 states. AVANGRID owns network utilities and renewable power facilities through two primary lines of business, Avangrid Networks and Avangrid Renewables. Avangrid Networks is comprised of eight regulated electric and natural gas companies, serving approximately 3.2 million customers in New York and New England. Avangrid Renewables operates more than six gigawatts of owned and controlled renewable electric generation capacity, primarily through wind and solar, in 22 states across the United States. AVANGRID is the third largest owner/operator of renewable energy in the US.
AVANGRID’s corporate structure forms an essential part of its governance system, supporting a business model that promotes operational efficiency and implements best practices, while ensuring the proper checks and balances are in place. At the top of AVANGRID’s corporate structure is a holding company that consolidates the two AVANGRID subsidiaries (Avangrid Networks and Avangrid Renewables) that hold AVANGRID’s primary lines of business. These, in turn, hold their respective wholly-owned subsidiaries that operate AVANGRID’s primary lines of business.
This structure promotes an agile and rapid decision-making process in day-to-day management, while achieving appropriate coordination and supervision at the AVANGRID level. Management power is not centralised within a single governance body or officer, but rather is decentralised among the boards of directors of AVANGRID’s subsidiaries. AVANGRID engages an independent auditor annually to verify the effective application of this system of checks and balances, as part of an evaluation of the operation and performance of the board of directors and its committees.
A culture of ethics and transparency
Under the leadership of its chairman of the board of directors, Ignacio S. Galán, and its chief executive officer, James P. Torgerson, AVANGRID’s vision is to be a leader in the energy sector, providing reliable service for its customers with a commitment to the wellbeing of its communities. AVANGRID’s core values of ethical principles, good governance and transparency are fundamental to this vision.
“Through a constant process of review and improvement, AVANGRID continues to develop its robust governance system and incorporate the best practices in the United States and international markets”
While only in its second year as a publicly-traded company, AVANGRID has implemented an extensive suite of policies and procedures that form the framework of AVANGRID’s governance, ethics and compliance programme and reflect best practices in both the United States, and internationally. Although not customary in the United States, all of the policies adopted by the AVANGRID board of directors are publicly available in the corporate governance section of AVANGRID’s website at www.avangrid.com. In furtherance of this commitment to transparency, AVANGRID makes publicly available on its website annual reports on ethics and compliance and an annual report on the activities of the audit and compliance committee of the board of directors, which includes an assessment of the committee’s performance.
AVANGRID supports this commitment to corporate governance best practices through a robust ethics and compliance programme implemented by an independent, permanent division directly supervised by the audit and compliance committee of the board of directors. The compliance division is responsible for overseeing regulatory compliance and fostering a preventive culture, which is committed to zero tolerance for corruption in connection with its business activities.
Extensive engagement and continuous improvement
Continuous improvement is one of AVANGRID’s core values and is a hallmark of its corporate governance system. AVANGRID is constantly looking across its business to identify and implement best practices that focus on building a diversified and sustainable business that delivers value to shareholders. AVANGRID is committed to the modernisation of the electric grid and transformation to a low-carbon, more reliable and efficient energy system. In particular, during the last two years AVANGRID has made significant investments in grid automation and modernisation and the expansion of wind and solar generation capacity. This includes AVANGRID’s deployment of smart meters, with more than one million currently installed and plans for an additional 1.8 million more over the next five years; and AVANGRID’s generation of approximately 86 per cent of its energy production from wind and solar renewable resources.
Similarly, AVANGRID’s corporate governance system is continuously being reviewed for opportunities for improvement. The annual independent audit of its governance system includes an assessment of how AVANGRID’s practices compare to peers as well as key leading governance indicators. Through this constant process of review and improvement, AVANGRID continues to develop its robust governance system and incorporate the best practices in the United States and international markets.
As part of this effort, AVANGRID launched a year-round shareholder engagement programme in 2016 to enable management and the board of directors to understand the issues that matter most to AVANGRID’s shareholders and address them effectively. AVANGRID reached out to holders of approximately 92 per cent of the company’s outstanding shares throughout 2016 and had discussions covering corporate governance, executive compensation, director skills and refreshment, and the board’s role in oversight of critical issues for the company. The board of directors carefully considered shareholder feedback and took a number of actions to enhance the company’s corporate governance system. These actions included the election of two new independent directors in July 2016 (each of which was overwhelming reelected by shareholders in 2017), the establishment of a new compensation, nominating and corporate governance committee, the implementation of a majority voting standard in uncontested director elections, and an increase in the minimum number of independent members of the board of directors.
Partially due to this extensive engagement programme, approximately 99 per cent of all issued and outstanding shares were present in person or by proxy at the 2017 annual meeting of shareholders. AVANGRID shareholders overwhelmingly supported all items proposed by the board of directors, voting to reelect each of the 14 members of the board of directors and approving all other items proposed, with at least 99 per cent of the votes cast in favour of each proposal.
AVANGRID’s commitment to ethical principles, good governance and transparency has been recognised within the energy industry and the business community. In 2016, AVANGRID’s businesses in Connecticut were awarded Corporation of the Year by the Greater New England Minority Supplier Development Council and its businesses in New York and Maine were named Utility Customer Champions by the Market Strategies International in the 2016 Utility Trusted Brand & Customer Engagement study. Additionally, AVANGRID was recently recognised for the second consecutive year as the North American utility with the best corporate governance practices for 2017 by this publication. In 2016, during AVANGRID’s first year as a company listed on the New York Stock Exchange (NYSE), NYSE Governance Services recognised AVANGRID’s governance and compliance programme and named AVANGRID as a Finalist in the Best Governance, Risk and Compliance Programme in the Large-Cap Company category at the NYSE Governance Services’ third annual Governance, Risk and Compliance Leadership Awards.
About the Author:
Mr. Mahoney is the Secretary for the Board of Directors, General Counsel for and a member of the AVANGRID Senior Management Team. Mr. Mahoney also serves as the Chief Compliance Officer for AVANGRID. He earned a Bachelor of Arts Degree from St. Lawrence University, a Doctor of Jurisprudence Degree, with honors, from the University of Maine, a Master’s Degree, with honors, in Environmental Law from the Vermont Law School, and a Postgraduate Diploma in Business Administration from the University of Warwick. He has received bar admission to the State of Maine, the State of New York, the U.S. Court of Appeals, the U.S. District Court, and the U.S. Court of Military Appeals. Mr. Mahoney is also a Certified Compliance & Ethics Professional and a member of the Society of Corporate Compliance and Ethics.
NOTEWORTHY EXPERIENCE: Energy Sector Serving as General Counsel of AVANGRID since 2012, he is responsible for managing all regulatory, litigation and corporate legal issues for AVANGRID. AVANGRID is the parent company of Avangrid Networks and Avangrid Renewables. He also heads the AVANGRID Compliance Program. He served as Deputy General Counsel and Chief FERC Compliance Officer for AVANGRID and Secretary of Avangrid Networks. He held several positions at AVANGRID subsidiaries, including Central Maine Power Company, including Vice President, Controller and Treasurer, Director – Executive Administration, and Legal Counsel.