2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 70 AMERICAN WATER WORKS COMPANY Highlightsofourenvironmentalandsocialpoliciesandpractices,manyofwhicharedetailedinour mostrecentCorporateResponsibilityReport,include: EnvironmentalResponsibility SocialResponsibility Š Expecttospendbetween$8.0billionand $8.6billiononcapitalinvestmentsfrom2018 to2022,toaddressaginginfrastructure, reduceoreliminateleaks,improvecyber andphysicalsecurity,andincrease resiliencyofcriticalassetstoclimate variability,including: ▪ $7.2billionforregulatedcapital expenditures ▪ $0.6billionto$1.2billiontoacquire financiallydistressedmunicipal systems,whichtendtorequirecapital investments ▪ $0.2billionforstrategiccapital investments Š Loweredourgreenhousegasemissionsby approximately26percentsinceourbase yearof2007,andsetanewgoalof40 percentreductionby2025 Š Reducedwateruseby3.5billiongallons throughourconservationeffortsand programsin2015ascomparedto2014 Š Recycledover1billiongallonsofwater annuallyandproducedreusewaterat30of ourfacilitiesin2016 Š EstablishedtheSafety,Environmental, TechnologyandOperations,orSETO, Committeeasastandingcommitteeofthe Board,highlightingtheprominenceofthese areasinouroverallbusinessobjectives Š CollaboratedwiththeEPAandother agenciesinsupportingeffective environmental,healthandsafety,andwater qualitystandardsandregulations Š Providedmorethan60,000hoursofsafety trainingannuallytoouremployees Š Achievedtopquartileinthewaterindustry forcustomersatisfaction(basedonsurvey resultsof12waterutilitycompanies) Š Increasedourannualspendwithourtop diversesupplierstoover$385millionin 2016 Š Sponsoredmorethan4,000hoursof communityserviceperformedannuallyby ouremployeesin2016 Š Sponsorednationalworkplacegiving campaignswiththeUnitedWayandWater ForPeople,aswellasnumerousother regionalandstatecharitablecampaigns Š AmericanWaterCharitableFoundation focusedonsupportingemployeesintheir owncharitableendeavors,supporting disasterreliefeffortsandprovidingfunding forinitiativesrelatedtocleanwater, conservation,educationandcommunity sustainability Š Supportedmorethan85percentofourjob requisitionswithadiversecandidatepool, andfilledmorethan50percentoftransfers orpromotionswithminority,female,veteran ordisabledindividuals AmericanWater | 2018ProxyStatement iii Total of 07 pages in section Our Commitment to Corporate, Environmental and Social Responsibility Weintegrateenvironmentalandsocialpoliciesandpracticesintoourdailyoperationsbydelivering valuetoourcustomers,buildingstrongcommunities,leveraginginnovationtodevelopourindustryand supportingouremployees.Wederivethisfocusfromourvisionstatement,“cleanwaterforlife,”and fromourcorevaluesofsafety,trust,environmentalleadership,teamworkandhighperformance.Our visionandvaluesinformourcompanystrategy,whichiscenteredonfivethemes: Safety Customers Š Ournumberonefocusisthesafetyofour employeesandcustomers. Š Ourcustomersareatthecenterof everythingwedo,helpingustoshapeour strategicpriorities. Š Safetyisbothavalueandastrategy. Š Wechallengeourselvessothatifour regulatedutilitycustomershadachoiceof providers,wewouldwantthemtochoose us. Š BenefitsfromtheTaxCutsandJobsActgo directlytotheregulatedutilitycustomers. People TechnologyandOperationalEfficiency Š Weseektomaintainanenvironmentthatis open,diverseandinclusive,andwhereour peoplefeelvalued,includedand accountable. Š Ourtechnologyandoperationalefficiency strategyhelpsustocontinuallyfindbetter andmoreefficientwaystodobusinessand providethebestservicesatanaffordable costforourcustomers. Š Wewanteachpersontobedevelopedto hisorherfullestpotential. Growth Š Webelievethatwhencompaniesgrow,they caninvestmoreincreatingstablejobs, training,benefits,infrastructureandour communities.Growth,inturn,benefitsall stakeholders. In2017,weissuedourfourthbiennialCorporateResponsibilityReport,coveringourperformancefrom 2015to2016.Ourfirstreportwasissuedin2011,makingusthefirstlargewaterservicescompanyto measureitsperformanceagainsttheGlobalReportingIndex.Inaddition,oursustainabilitypractices havesupportedourinclusionintheDowJonesSustainabilityNorthAmericaIndexin2012,2013and 2015,andwehavealsomaintainedourpositionintheEuronextVigeo ® U.S.50Index,whichincludes the50mostadvancedcompaniesinthenationwithrespecttotheirenvironmental,socialand governanceperformance,basedonareviewofhundredsofindicators. ii AmericanWater | 2018ProxyStatement Proxy Statement Summary Thissummary highlightsinformation generallycontainedelsewhereinthis proxy statement. This summary doesnot containallof the information that you shouldconsider, andyou shouldread the entire proxy statement carefullybefore votingyour shares. For more complete information regarding the Company’s2017performance, pleasereviewthe Company’sAnnualReport on Form 10-K for the year endedDecember 31, 2017, whichwerefer to inthis proxy statement as the 2017Form 10-K. Annual Meeting Information DATE & TIME Friday, May 11, 2018 10:00 a.m., Eastern Time (The doors willopento the publicat 9:30 a.m., Eastern time) LOCATION TheCamdenAdventure Aquarium 1 RiversideDrive Camden, NewJersey 08103 (Directionsandparking information are providedat the back of the proxy statement) RECORD DATE Recordholdersas of March 15, 2018are entitled to noticeof, andto vote at, the AnnualMeeting Summary of Matters to be Voted Upon at the Annual Meeting Thefollowingtablesummarizes the items that willbe brought for a vote of our stockholdersat the meeting, alongwiththe Board’svotingrecommendations andthe requiredvote for approval. ProposalNo. Description of Proposal RequiredVote for Approval Board’sRecommendation 1 Toelecteightdirectornominees Formoreinformation,seepage15. Foreach director,majority ofvotescast FOR Each Nominee 2 Toapprove,onanadvisorybasis,the compensationofournamedexecutive officers Formoreinformation,seepage31. Majorityof sharespresent andentitledto vote FOR 3 Ratificationoftheappointmentofour independentregisteredpublicaccounting firmfor2018 Formoreinformation,seepage73. Majorityof sharespresent andentitledto vote FOR 4-6 Thethreestockholderproposals describedinthisproxystatementif properlypresentedatthemeeting Formoreinformation,seepages75, 78and80 . Majorityof sharespresent andentitledto vote AGAINST American Water | 2018Proxy Statement i AMGEN ProxyStatementSummary WeHaveImplementedGovernanceBestPractices We continuously monitor developments and best practices in corporate governance and consider stockholder feedback when enhancing our governancestructures.Belowarehighlightsofourkeygovernancepractices: ✓ ProxyAccess (pages17and96) − upto20eligiblestockholdersthatown3%ofshares − for3yearswhomeettherequirementssetforthinourBylaws − cannominatethegreaterof20%ortwonominees ✓ MajorityVotingStandardforDirectorElections (pages16and94) ✓ StockholdersMayActByWrittenConsent (page17) ✓ StockholdersHaveaRighttoCallSpecialMeetings(15%thresholdrequirement) (page17) ✓ NoSupermajorityVoteProvisionsinArticlesorBylaws (page17) ✓ HighlyIndependentBoard–12ofour13directornominees (page21) ✓ StrongRefreshmentPracticesWith9NewDirectorsSince2012–AverageBoardtenureofapproximately4.8yearsforourdirectornominees (pages8and16) ✓ AnnualAnonymousBoardandCommitteeEvaluationProcess (page21) ✓ AllDirectorsMeetOurBoardofDirectorsGuidelinesforDirectorQualificationsandEvaluations (Appendix A) ✓ RobustLeadIndependentDirectorRole (page17) ✓ SignificantStockOwnershipRequirementsforDirectorsandOfficers (pages 59and79) ✓ CorporateResponsibilityandComplianceCommittee (page23) ✓ Enterprise Risk Management Program and Annual Detailed Compensation Risk Analysis – overseen by Board and Compensation and ManagementDevelopmentCommittee,respectively (pages18and26) THEBOARDOFDIRECTORSRECOMMENDSAVOTE“FOR”EACHOF THE13NAMEDNOMINEES. ⎪ 2018 Proxy Statement 3 Total of 06 pages in section ProxyStatementSummary 9newDirectorssince20128ExperiencedCurrentandFormerPublicCompany6Directorsw/ScientificResearchand/orCEO/CFOHealthcareExperience5DirectorswithFinancialIndustryExperience3WomenPROXYACCESSFORDIRECTORNOMINATIONS92%INDEPENDENTDIRECTORS*LEADINDEPENDENTDIRECTOR9NEWDIRECTORSSINCE2012*~4.8YEARSAVERAGETENURE*8CURRENT/FORMERPUBLICCOMPANYCEO/CFOs Item 1: Election of 13 Nominees to the Board of Directors (Page 7) Nominee Age Director Since Audit Governance and Nominating Executive Compensation and Management Development Equity Award Corporate R ponsibility and Compliance WandaM.Austin 63 2017 M M RobertA.Bradway 55 2011 C M BrianJ.Druker (1) 62 InitialElection RobertA.Eckert 63 2012 M M C C GregC.Garland 60 2013 C M M M FredHassan 72 2015 M M RebeccaM.Henderson 57 2009 M M FrankC.Herringer 75 2004 M M M CharlesM.Holley,Jr. 61 2017 C M TylerJacks 57 2012 M M EllenJ.Kullman 62 2016 M M RonaldD.Sugar 69 2010 M M C R.SandersWilliams 69 2014 M M “C” indicatesChairofthecommittee. “M” indicatesmemberofthecommittee. (1) Dr.DrukerisstandingforinitialelectiontotheBoardofDirectors,orBoard.Dr.DrukerhasbeenappointedtotheAuditCommitteeandtheCorporateResponsibilityand ComplianceCommittee,effectiveasoftheAnnualMeetingandsubjecttohiselectiontotheBoardbyourstockholders. 9new Directors since 2012* 7 5 1 0-5Years 6-10Years 10+Years 8 5 3 6 ExperiencedCurrent and FormerPublicCompany CEO/CFO Directorsw/Scientific Research and/or HealthcareExperience DirectorswithFinancial IndustryExperience Women CorporateGovernanceHighlightsandBestPractices ~4.8 years AVERAGE TENURE* 9 NEWDIRECTORS SINCE 2012* FORDIRECTOR NOMINATIONS Proxy Access 92% INDEPENDENT DIRECTORS* 8 CURRENT/FORMER PUBLICCOMPANY CEO/CFOs Lead INDEPENDENT DIRECTOR * Forourdirectornominees. 2 ⎪ 2018 Proxy Statement ProxyStatementSummary Proxy Statement Summary This summary contains highlights about our Company and the upcoming 2018 Annual Meeting of Stockholders,or Annual Meeting. This summary doesnotcontainalloftheinformationthatyoushouldconsiderinadvanceofthemeetingandweencourageyoutoreadtheentireproxystatement beforevoting. 2018 Annual Meeting of Stockholders DateandTime: Tuesday,May22,2018at11:00A.M.,localtime Location: FourSeasonsHotelWestlakeVillage,TwoDoleDrive,WestlakeVillage,California91362 RecordDate: March23,2018 MailDate: WeintendtomailtheNoticeRegardingtheAvailabilityofProxyMaterials,ortheproxystatementandproxycard,asapplicable, onoraboutApril11,2018toourstockholders. Voting Matters and Board Recommendations Matter OurBoardVoteRecommendation Item1: Electionof13NomineestotheBoardofDirectors(page7) FOReachDirectorNominee Item2: AdvisoryVotetoApproveOurExecutiveCompensation(page27) FOR Item3: RatificationofSelectionofIndependentRegisteredPublicAccountants(page86) FOR Item4: StockholderProposalForAnAnnualReportontheExtentToWhichRisksRelatedtoPublicConcernOver DrugPricingStrategiesAreIntegratedIntoOurExecutiveIncentiveCompensation(page88) AGAINST ⎪ 2018 Proxy Statement 1

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