Exhibit 10.16

 

STATEMENT OF

COMPENSATION OF THE BOARD OF DIRECTORS

 

Effective January 1, 2004, Wisconsin Energy Corporation’s (WEC or the Company)
Board of Directors approved a change in director compensation practices in order
to align WEC’s director compensation with director compensation practices at
WEC’s peer companies and to reflect emerging governance and compensation trends
with regard to equity compensation. In addition, the Board adopted stock
ownership guidelines to further align the Board’s interests with stockholders.
Under these guidelines, directors are generally expected, over time (generally
within five years of commencement of Board service), to acquire and hold WEC
common stock with a fair market value equal to five times the director’s annual
retainer.

 

During 2004, each non-employee director received an annual retainer fee of
$36,000 paid in cash. Non-employee chairs of Board committees received a
quarterly retainer of $1,250. Non-employee directors received a fee of $1,500
for each Board or committee meeting attended. In addition, each non-employee
director received a per diem fee of $1,250 for travel on Company business for
each day on which a Board or committee meeting was not also held, and the
Company reimbursed non-employee directors for all out-of-pocket travel expenses
(including the travel expenses of spouses if they were specifically invited to
attend the event and approved in advance by the Chairman of the Board).
Non-employee directors were paid $300 for each signed, written unanimous consent
in lieu of a meeting. Each non-employee director also received on January 2,
2004, the 2004 annual stock compensation award in the form of restricted stock
equal to a value of $65,000, with vesting to occur three years from the grant
date. Insurance is also provided by the Company for director liability coverage,
fiduciary and employee benefit liability coverage and travel accident coverage
for director travel on Company business. Employee directors did not receive any
directors’ fees.

 

For 2005, the fees paid to non-employee directors will be the same as in 2004.
In addition, each non-employee director received on January 3, 2005 the 2005
annual stock compensation award in the form of restricted stock equal to a value
of $65,000, with vesting to occur three years from the grant date.

 

Non-employee directors may defer all or a portion of director fees pursuant to
the Directors’ Deferred Compensation Plan. Deferred amounts can be credited to
any of ten measurement funds, including a WEC phantom stock account. The value
of these accounts will appreciate or depreciate based on market performance, as
well as through the accumulation of reinvested dividends. Deferral amounts are
credited to accounts in the name of each participating director on the books of
WEC, are unsecured and are payable only in cash following termination of the
director’s service to WEC and its subsidiaries. The deferred amounts will be
paid out of the general corporate assets or the trust established for such
purpose.

 

Although WEC directors also serve on the boards and board committees of its two
wholly-owned subsidiaries, Wisconsin Electric Power Company and Wisconsin Gas
LLC, a single annual retainer is paid and only a single fee is paid for meetings
held on the same day. Fees are allocated among WEC, Wisconsin Electric Power
Company and Wisconsin Gas LLC based on services rendered.

 

The Company has established a Directors’ Charitable Awards Program to help
further its philosophy of charitable giving. Under the program, the Company
intends to contribute up to $100,000 per year for 10 years to one or more
charitable organizations chosen by each director, upon the director’s death.
Directors are provided with one charitable award benefit for serving on the
boards of WEC and its subsidiaries. There is a vesting period of three years of
service on the Board required for participation in this program. Beneficiary
organizations under the program must be approved by the Corporate Governance
Committee. Charitable donations under the program will be paid out of general
corporate assets. Directors derive no financial benefit from the program and all
income tax deductions accrue solely to the Company. The tax deductibility of
these charitable donations mitigates the net cost to the Company.