ESSENTIAL UTILITIES, INC.

(Name of Registrant as Specified In Its Charter)

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Christopher H. Franklin

“We are steadfast in our commitments – investing in infrastructure, operational excellence, environmental stewardship and rigorous safety standards – which improve reliability and service for our customers, provide consistent return for shareholders and contribute to the economic prosperity of communities we serve.”

Preliminary Proxy Statement

To Our Shareholders

On behalf of your Board of Directors, I am pleased to invite you to attend the 2020 Annual Meeting of the Shareholders of Essential Utilities, Inc. to be held on Wednesday, May 6, 2020 in Pittsburgh, Pennsylvania. This will be our first Annual Meeting of Shareholders following the closing of the acquisition of Peoples Natural Gas, and the changing of our name from Aqua America, Inc. to Essential Utilities, Inc.

The combination of these two companies, each of which have been in existence for more than 130 years, will provide an opportunity to make a substantial contribution to the improvement in our nation’s infrastructure while simultaneously adding shareholder value. Peoples Natural Gas, the nation’s fifth largest natural gas local distribution company, adds 745,000 new utility customers to our existing platform, as the second largest publicly traded water utility with one million water and wastewater customer connections. Together, these two utilities, under Essential Utilities, Inc., are expected to invest nearly $1 billion a year to improve our nation’s infrastructure.

Importantly, in the context of the transaction, the Company’s board and management remain optimistic in growing the water business; the addition of a natural gas utility platform is supplemental to the expected continued growth in our water business. As an example of the Company’s commitment to expanding the water and wastewater business, in October 2019, we announced an agreement to purchase the wastewater assets of the Delaware County Regional Water Control Authority (DELCORA), the largest municipal transaction in the Company’s history. Both the board and management remain confident in the continued growth in the water and wastewater business.

For the beginning part of 2019, the Company’s stock price lagged industry stock multiples. We attribute the temporary lag to the market’s anticipation of the large equity and debt offerings that needed to be undertaken to finance the acquisition of Peoples Natural Gas. After the successful completion of the debt and equity offerings, the market and stock price reacted positively, and we finished the year with a total return to shareholders of 40%.

Our transaction with Peoples Natural Gas has given us an opportunity to revisit our compensation plans and our ESG (Environmental, Social and Governance) initiatives. Reflected in this proxy statement, you will recognize a marked difference in our approach. After listening carefully during more than 500 meetings with investors in 2019, we have incorporated much of that feedback into our approach to compensation and corporate strategy. The 2020 proxy statement includes information regarding matters important to our shareholders about these efforts.

You will notice one change immediately - we have enhanced our disclosures and made our proxy statement easier to read and understand. We are pleased with the results and hope that you are as well.

Thank you for your confidence in Essential!

Sincerely,

Christopher H. Franklin

Chairman, President and Chief Executive Officer

March 27, 2020

Essential Utilities, Inc.
762 W. Lancaster Avenue

Bryn Mawr, Pennsylvania 19010

The annual meeting will be held:

Wednesday, May 6, 2020
8:00 A.M. Local Time

Location

Peoples Natural Gas Headquarters
375 North Shore Drive

Pittsburgh, Pennsylvania 15212

Record Date

March 9, 2020

Purpose

The Annual Meeting of Shareholders of Essential Utilities, Inc. (the “Company”) will be held for the following purposes:

1  To elect nine nominees for directors;

2  To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the 2020 fiscal year;

3  To approve an advisory vote on the compensation paid to the Company’s named executive officers for 2019;

4  To approve an amendment to the Amended and Restated Articles of Incorporation, as amended, (the “Articles of Incorporation”) to establish a majority voting standard in uncontested director elections;

5  To approve an amendment to the Articles of Incorporation to increase the number of authorized shares of common stock from 300 million to 600 million; and

6  To transact any other business as may properly come before the meeting or any adjournments or postponements thereof.

Who can vote

Only shareholders of record at the close of business on March 9, 2020 will be entitled to notice of, and to vote at, the meeting and at any adjournments or postponements thereof.

How to vote

Your vote is important

We urge each shareholder to promptly sign and return the enclosed proxy card, or to use telephone or internet voting. See our questions and answers about the meeting and the voting section of the proxy statement for information about voting by telephone or internet, how to revoke a proxy and how to vote your shares in person.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 6, 2020

The Notice of Annual Meeting, Proxy Statement and 2019 Annual Report to Shareholders are available at: www.essential.co/investor-relations

By internet*

www.proxyvote.com

By phone*

In the U.S. or Canada

dial toll-free

1-800-690-6903

In person

At the 2020 Annual Shareholders’ Meeting

By mail

Return your proxy card in the postage-paid envelope provided

By Order of the Board of Directors,

Christopher P. Luning

Secretary

March 27, 2020

37

83

85

C-1

D-1

Proposal

Description

Proposal 1

Election of Directors

Proposal 2

Ratification of Independent Accounting Firm

The Board believes the retention of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 2020 fiscal year is in the best interests of the Company and its shareholders. As a matter of good corporate governance, shareholders are being asked to ratify the Audit Committee’s selection of PricewaterhouseCoopers LLP.

Proposal 3

Advisory Vote to Approve Named Executive Officers’ Compensation

Proposal 4

Approval of an Amendment to the Articles of Incorporation to establish a majority voting standard in uncontested director elections

Proposal 5

Approval of an Amendment to the Articles of Incorporation to increase the number of authorized shares of common stock from 300 million to 600 million

The Board believes that amending the Company’s Articles of Incorporation to increase the authorized shares of common stock is in the best interests of the Company and its shareholders by allowing the Company to have flexibility for acquisitions and other business combinations, public or private financing, and other various corporate programs or purposes.

What’s New

·  We enhanced our disclosures and made our proxy statement easier to read and understand.

·  We closed the acquisition of Peoples Natural Gas, and changed our name from Aqua America, Inc. to Essential Utilities, Inc.

·  The Executive Compensation Committee held in-depth discussions on the Company’s strategy and compensation program with our largest investors, assessing the peer group, and evaluating each component of the package

including base salaries, short term incentives, and long-term incentives.

·  Our new 2020 compensation program’s performance measures align the interests of our stakeholders and our named executive officers by correlating the amount of the named executive officer’s pay with the short-term and long-term performance of the Company and its stock price. See pages 48 through 49 for a summary of the extensive new compensation program changes.

Director Nominee

Age

Director
Since

Principal Occupation

Executive

Executive
Compensation

Audit

Risk Mitigation
& Investment
Policy

Corporate
Governance

Executive Vice President and Chief Human Resources Officer

United Technologies Corporation

—

●

●

3

CHAIR

Chairman, President and Chief Executive Officer

Essential Utilities, Inc.

—

●

●

—

●

●

Daniel J. Hilferty

Lead Independent Director

—

●

●

CHAIR

—

●

●

—

●

CHAIR

●

—

●

●

Board Nominees

from left to right

Christopher H.

Franklin

Ellen T. Ruff

Francis O. Idehen

Wendy A. Franks

Lee C. Stewart

Christopher C. Womack

Daniel J. Hilferty

Elizabeth B. Amato

Nicholas DeBenedictis

·  Annual election of directors

·  15 year term limit for directors who were elected after 2015

·  Mandatory retirement age of 75 for directors

·  Seven out of nine director nominees are independent

·  Independent audit, compensation, and governance committees

·  Over 55% of the Board is diverse

·  33% of the Board is comprised of female directors

·  Risk oversight by full Board and all committees

·  Robust oversight of cybersecurity measures by full Board and Risk Mitigation and Investment Policy Committees

·  Robust director and management stock ownership guidelines

–  Directors: 5x annual base cash retainer

–  CEO: 5x midpoint of average base salary

–  Other NEOs/EVPs: 3x midpoint of average base salary

·  In 2019, we invested $550 million on infrastructure projects, helping to ensure safe and reliable water for all customers.

·  Revenues were $889.7 million in 2019, an increase of 6.2 percent over 2018.

·  Earnings per share were $1.04 in 2019, including items from the Peoples transaction. Excluding these items, adjusted (non-GAAP) earnings per share were $1.47 compared to earnings per share of $1.41 in 2018.*

·  We added approximately 12,000 customer connections thru acquisition in 2019 and increased customers served by more than 2 percent, which includes customers from organic growth and acquisitions. Our acquisitions in 2019 added over $50 million in rate base.

·  In September we announced the DELCORA acquisition, a $276 million acquisition of a wastewater authority which provides service to over half a million people. DELCORA has the equivalent of 165,000 retail customers.

·  From January 1, 2017 to December 31, 2019, the total return to our shareholders, including share price appreciation and dividends paid, shows 67.75 percent growth. In 2019 alone our total return to shareholders was 40.41 percent.

·  In July 2019, the Board of Directors approved a 7 percent increase in the quarterly dividend to an annualized rate of $0.9372 per share.

·  We completed the financing for the previously announced agreement to acquire Peoples Natural Gas, a natural gas distribution utility, that reflects an enterprise value of $4.275 billion. This included an equity offering which was oversubscribed and a debt offering locking in long-term rates at under 4%.

·  We revisited our ESG program, publishing new tear sheets and disclosures in February 2020 and submitted our second report to the CDP, receiving an increased grade of B-.

Revenues

$889.7M

up 6.2%é

Adjusted EPS*

$1.47 vs

$1.41

TSR

68^%

Growth,

since 2017

EPS
(adjusted for comp plan)

STI Payout %

3 Year TSR Return

PSU Payout %

·  Extensive shareholder outreach designed to align compensation practices with shareholders

·  Compensation program highly correlated to total shareholder return, adjusted earnings per share, and other financial metrics

·  Emphasis on performance-based compensation

·  Significant portion of compensation is variable and at risk

·  Reasonable change-in-control agreements with double-trigger termination

·  Clawback policies in place

·  Anti-hedging and anti-pledging policy

·  No tax gross ups

·  Shareholding requirement ensures that executives are aligned with shareholders

·  Reasonable severance arrangements in line with market practices

·  Modest perquisites

·  Newly designed 2020 compensation program aimed at incenting management to drive safety and customer satisfaction following the acquisition of Peoples Natural Gas and to drive long-term shareholder growth

25%

Base Salary

29%

Compensation Short-Term
Incentives (Cash)

32%

Stock Options

14%

Restricted Stock

Units (RSUs)

Performance Based

28%

Compensation Short-Term
Incentives (Cash)

25%

Stock Options

10%

Restricted Stock

Units (RSUs)

Performance Based

Regulatory

Financial

Leadership

Board Committees

·  Corporate Governance Committee

·  Executive Compensation Committee

Key Skills

·  Legal/Government

·  Leadership

·  Mergers & Acquisitions

·  Geographic Diversity

·  “C-Suite” Experience

Elizabeth B. Amato

Executive Vice President and Chief Human Resources Officer,
United Technologies Corp.

Director since 2018

Age 63

Independent Director

Experience

·  Executive Vice President & Chief Human Resources Officer of United Technologies Corp. (“UTC”) 2015 to present.

·  Senior Vice President, Human Resources and Organization of UTC with global responsibility for UTC’s Human Resources and Communications functions 2012-2015.

·  Ms. Amato joined UTC in 1985 at Pratt & Whitney and has held a variety of the most senior human resources leadership positions across the corporation in both aerospace and commercial building systems, including UTC Climate, Controls & Security (2011-2012), Carrier (2010-2011), Pratt & Whitney (2006-2009) and Sikorsky (1997-2006).

Ms. Amato is a recipient of the YWCA Women Achievers Award and is currently a member of the Human Resources Policy Association, the CHRO Board Academy and is a member of the Board of Directors for Children’s Healthcare Charity, Inc. Ms. Amato holds a bachelor’s degree in political science from Davidson College and a law degree from the University of Connecticut.

Qualifications:

Ms. Amato has over 30 years of experience in various roles with responsibilities ranging from integrating acquisitions to human resources to executive compensation. The Board of Directors views Ms. Amato’s independence, her broad experience, and her leadership roles within the industry as important qualifications, skills and experience that support the Board of Directors’ conclusion that Ms. Amato should serve as a director of the Company.

Other current public company directorships (0).

Board Committees

·  Chairman, Risk Mitigation
and Investment Policy
Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Financial

·  Legal/Government

·  Leadership

·  Mergers & Acquisitions

·  “C-Suite” Experience

Nicholas DeBenedictis

Chairman Emeritus, Essential Utilities, Inc.

Director since 1992

Age 74

Experience

·  Chairman Emeritus of the Board, having retired as Chief Executive Officer of the Company in 2015 and as non-executive Chairman of the Board in 2017.

·  Chief Executive Officer from 1992 until 2015 and Chairman of the Board from 1993 until 2017.

·  Senior Vice President for Corporate Affairs of PECO Energy Company (an Exelon Corporation) 1989 to 1992.

·  President of the Greater Philadelphia Chamber of Commerce 1986 to 1989.

·  Secretary of the Pennsylvania Department of Environmental Resources 1983 to 1986.

Qualifications:

In addition to his knowledge and experience as the Company’s previous Chairman of the Board from 1993 to 2017 and Chief Executive Officer from 1992 to 2015, and his prior experience as a senior executive of a major electric utility, Mr. DeBenedictis has experience as the head of Pennsylvania’s environmental regulatory agency. He serves as a director of three other public companies, including, as member of the corporate governance, audit, finance and compensation committees of those companies. Mr. DeBenedictis has also held leadership positions with various, educational, business, civic and charitable institutions. The Board of Directors views Mr. DeBenedictis’ experience with various aspects of the utility industry and his demonstrated leadership roles in business and community activities as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. DeBenedictis should serve as a director of the Company.

Other current public company directorships (3):

Exelon Corporation, P.H. Glatfelter Company and Mistras Group.

Other current directorships:

Mr. DeBenedictis serves on the Boards of Pennsylvania area non-profit, civic, and business organizations, including Independence Health Group.

Board Committees

·  Audit Committee

·  Risk Mitigation and Investment Policy Committee

Key Skills

·  Financial

·  Leadership

·  Mergers & Acquisitions

·  Geographic Diversity

Wendy A. Franks

Senior Principal, Canada Pension Plan Investment Board

Director since 2020

Age 45

Independent Director

Experience

·  Senior Principal, Canada Pension Plan Investment Board (“CPPIB”) 2012 to present; responsible for sourcing and evaluating potential relationship investment opportunities, monitoring portfolio Company performance and development of the business network.

Ms. Franks has a bachelor’s degree in chemical engineering and a master’s degree in applied science in electrical and computer engineering from the University of Waterloo. She holds a Ph.D. in Natural Sciences from the Swiss Federal Institute of Technology, Zurich.

Ms. Franks joined the Board as a nominee designated by CPPIB under the terms of the Company’s private placement transaction with CPPIB.

Qualifications:

The Board has determined, based on her abilities, qualifications, knowledge, judgment, character, leadership skills, education, background and experience in fields and disciplines relevant to the Company, including her U.S. GAAP financial expertise, that Ms. Franks is qualified to serve on the Board and will make a positive contribution to the Board. The Board of Directors views Ms. Frank’s extensive experience with mergers and acquisitions, her auditing and evaluation of financial statements and complex accounting issues, her capabilities, and her demonstrated leadership roles as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Ms. Franks should serve as a director of the Company.

Other current public company directorships (0).

Other current directorships:

ReNew Power, the largest renewable energy independent power producer in India.

Board Committees

·  Chair, Executive Committee

·  Risk Mitigation and
Investment Policy
Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Financial

·  Legal/ Government

·  Leadership

·  Mergers & Acquisition

·  “C-Suite” Experience

Christopher H. Franklin

Chairman, President, and Chief Executive Officer, Essential Utilities, Inc.

Director since 2015

Age 54

Experience

Chairman, President, and Chief Executive Officer of the Company.

Mr. Franklin earned his B.S. from West Chester University and his M.B.A. from Villanova University.

Qualifications:

Since 2015, under Mr. Franklin’s leadership as CEO, the Company’s customer base has nearly doubled by completing over 50 acquisitions and increased its market capitalization from $4.1 billion to $11 billion at the end of 2019. During the same period, total shareholder return has been in excess of 70%. During his long tenure at the Company, Mr. Franklin has held a series of roles. Among his accomplishments in public affairs was the passage of key legislation designed to provide customers with improved water quality and better water and wastewater systems while allowing a fair and reasonable return for shareholders; as vice president of customer operations, Mr. Franklin lead the implementation of a single-customer information system and the creation of three central call centers; as operating president, he integrated the acquisition of AquaSource and brought the utility back to full profitability.

The Board of Directors views Mr. Franklin’s extensive experience with the Company, capabilities, and his demonstrated leadership roles with the Company and in business and community activities as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. Franklin should serve as a director of the Company.

Other current public company directorships (0).

Other current and past directorships:

Past Board member of ITC Holdings (which was sold in 2016). Mr. Franklin is active in the community and serves on a number of nonprofit and higher education boards including the University of Pennsylvania Board of Trustees and the Franklin Institute of Philadelphia.

Lead Independent Director

Board Committees

·  Chair, Corporate Governance Committee

·  Executive Committee

·  Executive Compensation Committee

Key Skills

·  Regulatory

·  Financial

·  Leadership

·  Mergers & Acquisitions

·  “C-Suite” Experience

Daniel J. Hilferty

Lead Independent Director, Essential Utilities, Inc. President and CEO,
Independence Health Group

Director since 2017

Age 63

Independent Director

Experience

·  President and Chief Executive Officer of Independence Health Group (“IHG”), one of the nation’s leading health insurers serving nine million customers in 25 states and Washington D.C., since 2010.

Prior to 2010, Mr. Hilferty was:

·  President and Chief Executive Officer of the AmeriHealth Mercy Family of Companies

·  Executive Director of PennPORTS in the administration of Pennsylvania Governor Robert P. Casey

·  Assistant Vice President overseeing community and media relations for Saint Joseph’s University

Qualifications:

Mr. Hilferty has extensive knowledge and experience in the areas of mergers and acquisitions, the health care field, and government relations and regulation. Based on Mr. Hilferty’s experience, qualifications, and knowledge, in 2017, the Board of Directors determined that Mr. Hilferty should serve as its Lead Independent Director. The Board of Directors views Mr. Hilferty’s independence, his experience with regulation, his reputation in the healthcare industry, and his leadership roles in business and community activities as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. Hilferty should serve as a director of the Company.

Other current public company directorships (0).

Other current and past directorships:

Mr. Hilferty serves on several industry-based and nonprofit boards, including America’s Health Insurance Plans (serves on the Executive Committee), Greater Philadelphia Chamber of Commerce (serves as Chairperson), and on a fund board of FS Investments. In 2015, he served as co-chair on the Executive Leadership Cabinet of the World Meeting of Families; and, was the past Chairman of the Board of Directors for the Blue Cross and Blue Shield Association.

Board Committees

·  Audit Committee

·  Risk Mitigation and Investment Policy Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Financial

·  Leadership

·  Mergers & Acquisitions

·  Geographic Diversity

·  “C-Suite” Experience

Francis O. Idehen

Chief Operating Officer, GCM Grosvenor

Director since 2019

Age 42

Independent Director 

Experience

·  Chief Operating Officer for GCM Grosvenor, an independent alternative asset management firm since May 2017.

·  Served in senior roles at Exelon Corporation from 2011 to 2017, serving as its treasurer, head of investor relations, and managing director of its investment office.

Mr. Idehen has a bachelor’s degree in economics from Yale University and an MBA from Harvard Business School.

Qualifications:

Mr. Idehen has extensive experience with large and complex businesses, including a major utility Company, in various management and financial positions. Mr. Idehen has lived and worked in Illinois, an important area of the Company’s operations, for many years. The Board of Directors views Mr. Idehen’s independence, his experience with various aspects of the utility industry, and his experience as a chief operating officer charged with making prudent financial investments as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. Idehen should serve as a director of the Company.

Other current public company directorships (0).

Board Committees

·  Chair, Executive Compensation Committee

·  Executive Committee

·  Corporate Governance Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Legal Government

·  Leadership

·  Mergers & Acquisitions

·  Geographic Diversity

·  “C-Suite” Experience

Ellen T. Ruff

Former President, Duke Energy

Director since 2006

Age 71

Independent Director

Experience

·  President, Office of Nuclear Development, for Duke Energy Corporation, 2008 until her retirement in January 2011.

·  Partner at the law firm of McGuire Woods LLP from 2011 to 2018.

·  President of Duke Energy Carolinas, an electric utility that provides electricity and other services to customers in North Carolina and South Carolina from 2006 to 2008.

Ms. Ruff joined Duke Energy in 1978 and during her career held a number of key positions, including: Vice President and General Counsel of Corporate, Gas and Electric Operations; Senior Vice President and General Counsel for Duke Energy; Senior Vice President of Asset Management for Duke Power; Senior Vice President of Power Policy and Planning; and Group Vice President of Planning and External Affairs.

Qualifications:

Ms. Ruff has over 30 years of experience with a major utility company in various management, operations, legal planning and public affairs positions. Ms. Ruff has lived and worked in North Carolina, an important area of the Company’s operations, for many years.

The Board of Directors views Ms. Ruff’s independence, her experience with various aspects of the utility industry, her knowledge of North Carolina and her demonstrated leadership roles in business and community activities as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Ms. Ruff should serve as a director of the Company.

Other current public company directorships (0).

Board Committees

·  Chairman, Audit Committee

·  Risk and Investment Policy
Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Financial

·  Leadership

·  Mergers & Acquisitions

·  Geographic Diversity

·  “C-Suite” Experience

Lee C. Stewart

Private Financial Consultant

Director since 2018

Age 71

Independent Director

Experience

·  Mr. Stewart is a private financial consultant with over 25 years of experience as an investment banker.

·  Vice President at Union Carbide Corporation from 1996 to 2001, responsible for various treasury and finance functions.

Qualifications:

Mr. Stewart has over 25 years of experience as an investment banker and over 20 years of experience as a director of a public Company. Mr. Stewart possesses significant experience with financial services, finance and banking, public Company accounting and financial reporting, strategic planning, operations and risk management, and corporate governance. The Board of Directors has determined that Mr. Stewart is an independent director. The Board of Directors views Mr. Stewart’s independence and his experience as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. Stewart should serve as a director of the Company.

Other current public company directorships (2):

Currently serves on the boards of P. H. Glatfelter Company, a New York Stock Exchange-listed global supplier of specialty papers and engineered materials, and Mood Media, Inc, an international in-store provider of music, digital signage, hold music, on-hold messaging, scent, integrated audio/video, and interactive mobile marketing products.

Board Committees

·  Corporate Governance Committee

·  Executive Compensation Committee

Key Skills

·  Utility Industry

·  Regulatory

·  Legal/Government

·  Mergers & Acquisitions

·  Leadership

·  Geographic Diversity

·  C-Suite” Experience

Christopher C. Womack

President, External Affairs, Southern Company

Director since 2019

Age 62

Independent Director

Experience

·  President, External Affairs, Southern Company, a leading American gas and electric utility holding company based in Atlanta, Georgia, 2008 to present.

·  He has worked in various executive leadership positions at Southern Company since 1988, including Executive Vice President, Georgia

Power Company from 2006 to 2008; Senior Vice President, Fossil & Hydro Power, Georgia Power Company from 2001 to 2006; and Senior Vice President, Human Resources from 1998 to 2001.

·  From 1979 to 1987 he served as a legislative aide in the U.S. House of Representatives.

Qualifications:

Mr. Womack has over 20 years of experience as an executive of a gas and electric utility. Mr. Womack possesses significant experience with utility operations, human resources and governmental affairs. The Board of Directors views Mr. Womack’s independence and his experience as important qualifications, skills and experience supporting the Board of Directors’ conclusion that Mr. Womack should serve as a director of the Company.

Other current public company directorships (0).

Governance Materials Available on our Website

Corporate Governance Guidelines provide the principles governing the Board. Developed by the Corporate Governance Committee, the Committee annually reviews these Guidelines and recommends any necessary changes to the full Board.

Board Committee Charters Each of the standing Committees of the Board of Directors operates under a written Committee Charter.

Code of Ethical Business Conduct applies to our directors, officers, and employees and covers a number of important subjects, including: conflicts of interest; corporate opportunities; fair dealing; confidentiality; protection and proper use of Company assets; compliance with laws, rules and regulations (including insider trading laws); and encouraging the reporting of illegal or unethical behavior. In 2019, it was updated to reflect changes in our leadership structure and to stress our Core Values of Respect, Integrity, and the pursuit of Excellence. The Company intends to post amendments to or waivers from the Code of Ethical Business Conduct (to the extent applicable to the Company’s executive officers, senior financial officer, or directors) on its website.

Copies of our Corporate Guidelines, Code of Ethical Business Conduct, Committee Charters and other governance materials can be obtained free of charge from the Corporate Governance portion of the Investor Relations section of the Company’s website: www.essential.co.

Our Corporate Social Responsibility Report is available at www.csr.aquaamerica.com. For additional information see pages 26 through 29 in this proxy statement.

·  Presides at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors;

·  Serves as liaison between the independent directors and the Chairman of the Board;

·  Consults with the Chairman of the Board, reviewing and approving meeting agendas and information provided to the Board for meetings, including the authority to add items to the agendas for any Board meeting;

·  Reviews and approves meeting schedules to assure there is sufficient time for discussion of all agenda items;

·  Possesses the authority to call executive sessions of the independent directors and to prepare the agendas for the executive sessions;

·  If requested by major shareholders, ensures that he is available for consultation and direct communications;

·  Serves as a member of the Executive Committee;

·  In the event of the death or incapacity of the Chairman, becomes the acting Chairman of the Board until a new Chairman is selected; and

·  Has the authority (with the approval of at least the majority of the directors) to engage legal, financial or other advisors as the independent directors deem appropriate at the Company’s expense and without consultation or the need to obtain approval from any officer of the Company.

Chair

Lee C. Stewart

Members

Wendy A. Franks

Francis O. Idehen

All members are independent under NYSE listing requirements and SEC rules

All members are financially literate and two members of the Committee are financial experts within the meaning of applicable SEC rules.

Audit

Meetings Required: 4

2019 Meetings Held: 10

The Committee’s primary responsibilities are to:

·  monitor the integrity of the Company’s financial reporting process and systems of internal controls, including the review of the Company’s annual audited financial statements; and

·  monitor the independence of our independent registered public accounting firm.

The Committee has the exclusive authority to select, evaluate and, where appropriate, replace the Company’s independent registered public accounting firm.

The Committee has considered the extent and scope of non-audit services provided to the Company by its independent registered public accounting firm and has determined that these services are compatible with maintaining its independence.

Chair

Ellen T. Ruff

Members

Elizabeth B. Amato

Daniel J. Hilferty

Christopher C. Womack

All members are independent under NYSE listing requirements

Executive Compensation

2019 Meetings Held: 7

The Committee is responsible for administering our equity compensation plans and determining executive compensation each year.

As part of its annual compensation-setting process, the Committee:

·  reviews the recommendations of the Chief Executive Officer as to appropriate compensation of the Company’s executive officers (other than the Chief Executive Officer) and determines the compensation of these executive officers; and

·  reviews and recommends to the Board of Directors the compensation for the Chief Executive Officer, which is subject to final approval by the independent members of the Board of Directors.

The Committee has retained an independent compensation consultant, Pay Governance LLC, to assist in designing our executive compensation program and assessing its competitiveness through benchmarking peer analysis and other methodologies.

The Committee has the power to delegate aspects of its work to subcommittees, with the approval of the Board of Directors.

Chair

Daniel J. Hilferty

Members

Elizabeth B. Amato

Ellen T. Ruff

Christopher C. Womack

All members are independent under NYSE listing requirements

Corporate Governance

2019 Meetings Held: 6

The Committee’s primary responsibilities include:

·  identifying and considering qualified nominees for directors;

·  developing and periodically reviewing the Corporate Governance Guidelines;

·  advising the Board of Directors on director nominees, executive selections and succession planning, including a succession plan for the CEO and other senior executives; and

·  implementing and overseeing the comprehensive Board, Committee and peer review process.

The Committee also reviews and approves, ratifies or rejects related person transactions under the Company’s written policy.

Chair

Nicholas DeBenedictis

Members

Christopher H. Franklin

Wendy A. Franks

Francis O. Idehen

Lee C. Stewart

Risk Mitigation and Investment Policy

2019 Meetings Held: 6

The Committee oversees the Company’s risk management process, policies, and procedures for identifying, managing and monitoring critical risks, including cyber-related risks, and its compliance with legal and regulatory requirements.

·  The Committee also oversees the Company’s acquisition process in which it is briefed on all potential transactions in excess of $10 million, and reviews all acquisitions valued in excess of $20 million and all transactions that involve the Company’s stock.

·  The Committee’s Chairperson communicates with other Board of Directors Committees to avoid overlap and potential gaps in overseeing the Company’s risks.

·  The Committee advises the Board of Directors in its performance of its oversight of enterprise risk management.

Chair

Christopher H. Franklin

Members

Daniel J. Hilferty Ellen

T. Ruff

Lee C. Stewart

Executive Committee  

2019 Meetings Held: 0

The Committee has and exercises all the authority of the Board in the management of the business and affairs of the Company, with certain specified exceptions.

·  The Committee is intended to serve in the event that action by the Board of Directors is necessary or desirable between regular meetings of the Board, or at a time when convening a meeting of the entire Board is not practical, and to make recommendations to the entire Board with respect to various matters.

·  The Chairman of the Board of Directors serves as Chairman of the Committee.

2019 Actions Taken

New Peer Group and New Compensation Methodologies

Using the expertise of its compensation consultant, Pay Governance, the Executive Compensation Committee completed an evaluation of the Company’s short-term incentive plan and its long-term incentive plan.

In doing so, the Executive Compensation Committee re-evaluated the peer group used to determine relative total return to shareholders and its methodology for establishing pay for performance compensation.

As a result, and as more fully discussed in the CD&A, the Company established a markedly smaller new peer group of fifteen companies and new methodologies aimed to ensure that the Company’s executive compensation program is in line with the market and shareholder expectations.

Voting Resolution for Majority Voting

As a direct result, the Board of Directors voted to endorse a change to the voting standard in director elections from plurality voting to majority voting so that each of the directors is more fully aligned with the shareholders. This change is being presented to shareholders for approval at the 2020 Annual Meeting.

Expanded ESG Disclosure

As a direct result, we have committed to expanding the disclosures of our environmental and social policies in a renewed CSR report, and by making it easier to locate these policies. Our CSR report can be found at: www.csr.aquaamerica.com and other relevant policies can be found at www.essential.co/investor-relations.

·  conservation and stewardship of water, including compliance with federal and state regulations, delivering safe water, implementing programs to manage water resources and reducing water loss, and consistently assessing and updating our water treatment technology;

·  focusing on proper treatment of wastewater;

·  reducing solid waste production;

·  aiming for efficient and responsible energy usage in the Company’s facilities, its fleet of vehicles, and its construction

equipment, including a commitment to the use of renewable energy;

·  reducing greenhouse gas emissions and energy consumption;

·  responding to natural disasters, such as hurricanes and floods; and

·  rebuilding water and wastewater infrastructure from our position as a national leader in infrastructure investment.

Water as a Human Right

In 2019, the Board of Directors considered the Company’s responsibility to its customers and its ongoing commitment to the betterment of the societies in which we serve. It reviewed various policies and objectives. Following a review and recommendation by its Corporate Governance Committee, the Board of Directors unanimously adopted the following resolution:

Diversity and Inclusion

Essential is dedicated to creating a sustainable working atmosphere for its employees to attract and retain the best employees. We are committed to diversity, building a culture of inclusion, supporting employee wellness and facilitating a strong corporate culture where safety is paramount.

Diversity of backgrounds, ideas, thoughts, and experiences is essential to our culture and the way we do business. Creating an environment where our differences are valued and where every person feels a sense of belonging and engagement supports a thriving organization that cares about our customers. In 2019, unconscious bias workshops and action planning sessions were held across the Company’s footprint in order to improve the dialogue and build on an inclusive culture. These workshops explored the perspectives and pre-conceived notions individuals bring to work each day that impact others. These engagement sessions will continue in 2020 to further build a more inclusive workforce.

Diversifying the workforce continues to be a focus at all levels of the Company. Since 2015, the minority population of the workforce has grown from 17% to 22%. Diversity at the management team has also grown with 29% of the management team comprised of minorities and women.

At the Board of Director’s level, in 2019 the Company was named as a winning “W” Company by 2020 Women on Boards and received the Forum of Executive Women’s Advancing Women Company Award. Over 55% of the Board is diverse including 33% female directors.

Our commitments to
renewable energy
reduce the Company’s
overall absolute
green house gas
emissions by nearly

60^%

from a 2018 baseline*

Since 2015, the
minority population
of the workforce has
grown from

17^%–22^%

Minorities and
women now
make up

29^%

of the

management team

Human Rights Policy

The Board of Directors is responsible for overseeing human rights risk management. In 2019 it enacted a Human Rights Policy that underscores the Company’s commitment to conducting business in a way that minimizes the adverse effects our operations may have on people and the communities that we serve. At a minimum, the Company and its vendors will:

·  make efforts to avoid causing or contributing to human rights violations;

·  mitigate and/or remediate adverse human rights impacts of our operations where possible;

·  prohibit the use of child labor, forced labor, or human trafficking; and

·  be transparent in our efforts, successes and challenges.

Together, these policies ensure that that the Company is committed to providing all of its employees with a work environment in which they are treated with dignity and respect and which is free of harassment of any kind, and affirmatively commits the Company to making efforts to avoid causing or contributing to human rights violations. Copies of these policies can be found at www.essential.co/investor-relations.

Employee and Customer Wellness

Growth and Development

We invest significant resources to develop the talent needed to keep the Company at the forefront of quality, delivering multi-modes of training throughout the year. providing rotational or temporary assignment development opportunities. Through our new “Inclusion and Bias” workshops, we are training every employee in the Company on inclusive practices to ensure a respectful workforce.

Communication and Engagement

We believe that our success depends on employees understanding how their work contributes to the Company’s overall strategy. We use a variety of communications channels to facilitate open and direct communication, including open forums with our executives, quarterly Town Halls, regular engagement surveys, and employee resource groups. In 2019, we conducted a survey of our employees’ satisfaction and, in 2020, plan on semi-annual “pulse” surveys so that management can be closely in tune with the Company’s employees.

Safety & Wellness

Safety is not just a topic we talk about — it is our top priority, the foundation of our business and what guides all our employees’ actions. We continue to invest in safety improvements, implement policies and procedures, develop technical training and guidelines for our employees, and leverage new tools and technology to improve our maps, records and infrastructure performance. We are focused on identifying and mitigating risk and safeguarding our plants and distribution lines.

Our employees take actions each day to keep themselves, one another, our customers and our communities safe. Our teams make safety a focus on the job, in meetings, and our surrounding work environments to ensure employees and our customers safety is treated with the highest level of concern.

In fact, our workplace is safer. Since 2015, our safety record has improved significantly. Our lost time incidents are down 76% and our responsible vehicle accidents have declined by 23%. To incentivize managers to promote a safe environment, these metrics, among others, are incorporated in management’s incentive compensation plans and are further discussed in the CD&A.

The health of our employees is just as important to us as is their safety. We provide access to a variety of innovative, flexible, and convenient employee health and wellness programs. We proactively conduct communications outreach to our employees and their family members on health topics that are relevant to them. With the focus on mental health becoming more of a central part of an employee’s well-being, we have added additional resources and counseling access for employees to utilize to ensure they are taking care of themselves and their families.

Customer Satisfaction

We are focused on improving the customer experience. Our capital investments are designed to enhance our customers’ experience and ensure smooth interaction with our utilities. In 2019, we made numerous enhancements to our website and billing platforms in order to provide timely information on usage and billing for our customers. We expanded our payment methods and e-billing efforts to enable more convenience for customers as well as promote environmentally focused paper reduction.

We continue to learn by monitoring industry best practices and gathering customer feedback following service interactions and through external surveys to address pain points, streamlining the customer experience and anticipating future customer needs.

In 2019, we embarked on a customer engagement project to better understand how our customers would like to be served. Our project is an investment in measuring customer experience at every touchpoint along the customer journey to establish baselines for measuring future performance. Our research will help predict and prioritize customer needs and trends, identify key engagement and experience drivers, and enable us to build a customer service program that ensures a consistent, high-quality experience with Essential.

In conjunction with our customer engagement project, we participated in several J.D. Power customer satisfaction reports which provide industry standards in customer satisfaction. During 2019, the Company performed in the top 25^th percentile in the Northeast and South regions and in the top 30^th percentile in the Midwest Region in the 2019 J.D. Power customer satisfaction study. In addition, the Company was awarded Top Brands across all of its operating regions for maintaining infrastructure and was awarded Top Brands in customer notifications and alerts in the Southern region.

Since 2015 our lost

time incidents are

down

76^%

and our responsible

vehicle accidents have

declined by

23^%

2019 J.D. Power

customer satisfaction

study:

Top 25th

percentile

in the Northeast and

South regions

Top 30th

percentile

in the Midwest Region

Fiscal Year

Fees Paid to IHG

IHG Gross Revenues

Certain Beneficial Owners

BlackRock, Inc.⁽³⁾

55 East 52nd Street, New York, NY 10055

The Vanguard Group⁽⁴⁾

100 Vanguard Blvd., Malvern, PA 19355

State Street Corporation⁽⁵⁾

One Lincoln Street, Boston, MA 02111

Revenues

$889.7M

up 6.2%é

Adjusted EPS*

$1.47 vs

$1.41

TSR

68^%

Growth,

since 2017

EPS

(adjusted for comp plan)

STI Payout %

3 Year TSR Return

PSU Payout %

What We Do

·  Tie a high ratio of our executives’ pay to Company performance

·  Require significant stock ownership for Directors and NEOs

·  Tie incentive compensation to a clawback polity

·  Use an independent compensation consultant

What We Don’t Do

·  Provide golden parachute tax gross ups

·  Permit pledging or hedging of Company securities

·  Provide a single trigger vesting cash and equity severance upon a change of control

·  Provide employment agreements to a broad group

·  Encourage excessive or inappropriate risk taking through our compensation programs

Compensation Committee Actions for 2020

·  Approved a highly competitive peer group based on Essential’s post-acquisition revenue and market cap scope as well as business mix. The industry peer group was substantially modified. The number of peer group companies was reduced to 15 and encompass both the gas and water utility industry to reflect the Peoples acquisition. The revised peer group provides a more representative comparison between Essential, the relative utility industry, and those companies used as comparators by institutional investors.

·  Redesigned short-term incentive metrics to include both water and gas lines of business. Environmental compliance and stewardship goals are incorporated into the plan to emphasize our commitment to environmental sustainability. Payout leverage (thresholds and maximums) was validated at the peer group level by the Compensation Committee’s independent consultant, Pay Governance.

·  Revamped long-term incentives to focus on driving Company value through performance share units and promoting retention of key employees through RSUs. For 2020, our long-term incentive mix will weight heavier on PSUs at 65% and RSUs at 35%. Once the peer group and incentive plan recommendations were drafted, shareholder meetings were conducted with the top 10 shareholders including Vanguard, State Street, BNY Mellon, Jennison Associates, Pictet, T. Rowe Price, Northern Trust, Invesco and Impax Asset Management to solicit feedback before Executive Compensation Committee approval.