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March 24, 2017

Fellow Stockholders:

I invite you to join me, our board of directors, and members of our senior management team at our Annual Meeting of Stockholders at 11 a.m., Central Daylight Saving Time, on May 9, 2017, at 909 Airport Road in Bismarck, North Dakota.

In addition to the business that will be conducted at the meeting, I will explain some of the significant, positive changes we made at MDU Resources Group in 2016. During the year, we streamlined our operations into two lines of business: regulated energy delivery and construction materials and services. We reduced our exposure to commodity price volatility by completing the sale of our oil and natural gas exploration and production assets and by selling our interests in a diesel refinery and in a natural gas processing plant both located in North Dakota.

With a business presence in 48 states, we remain committed to Building a Strong America. ® Our continuing businesses performed well in 2016, providing a 32 percent increase in earnings per share. We delivered a total stockholder return of 62 percent for the year, including increasing our dividend for the 26th consecutive year.

Another positive change we made this year is to our proxy statement. We simplified the proxy statement to what we believe is an easier-to-read format, while still adhering to regulations that outline what information we must provide to stockholders. Our goal is to make it easier for you to understand MDU Resources Group’s governance and how we tie the company’s results to executive compensation. We also hope the proxy statement more clearly describes the business we will conduct at our annual meeting.

We have streamlined our annual report and proxy statement delivery process this year as well, moving to a notice-and-access model of providing the report. You likely received notice in the mail that you can vote your shares and view our annual report and proxy statement online, along with instructions on how to request a printed copy if you would like one.

I look forward to you joining us on May 9. Even if you are not able to attend the annual meeting, your vote is important to us. Please follow the instructions on your proxy card to vote and make sure your shares are represented.

We appreciate your continued investment in MDU Resources Group.
 
Sincerely yours,
 
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David L. Goodin
 
President and Chief Executive Officer

 
MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

MDU RESOURCES GROUP, INC.
1200 West Century Avenue
Mailing Address:
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(701) 530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 9, 2017
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on
May 9, 2017
The 2017 Notice of Annual Meeting and Proxy Statement and 2016 Annual Report
to Stockholders are available at www.mdu.com/proxymaterials.

March 24, 2017
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota, on Tuesday, May 9, 2017 , at 11:00 a.m., Central Daylight Saving Time, for the following purposes:
(1)
Election of directors;
(2)
Advisory vote to approve the frequency of the vote to approve the compensation paid to the company’s named executive officers;
(3)
Advisory vote to approve the compensation paid to the company’s named executive officers;
(4)
Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2017;
(5)
Advisory vote to approve an amendment to the company’s bylaws to adopt an exclusive forum for internal corporate claims; and
(6)
Transaction of any other business that may properly come before the meeting or any adjournment(s) thereof.
The board of directors has set the close of business on March 10, 2017 , as the record date for the determination of common stockholders who will be entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof. We expect to begin mailing the Notice of Availability of Proxy Materials (Notice) on or about March 24, 2017. The Notice will contain basic information about the annual meeting and instructions on how to view our proxy materials, and vote electronically, on the Internet. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sent on or about March 30, 2017.
All stockholders as of the record date of March 10, 2017, are cordially invited and urged to attend the meeting in person. Registered stockholders who receive a full set of proxy materials will receive a request for admission ticket(s) with their proxy card that can be completed and returned to us postage-free. Registered stockholders who receive a notice regarding the availability of proxy materials and stockholders whose shares are held in the name of a bank or broker will not receive a request for admission ticket(s). They should, instead: (1) call (701) 530-1000 to request an admission ticket(s); (2) if shares are held in the name of a bank or broker, obtain a statement from their bank or broker showing proof of stock ownership as of March 10, 2017; and (3) present their admission ticket(s), the stock ownership statement, and photo identification, such as a driver’s license, at the annual meeting.
.
 
By order of the Board of Directors,
 
 
 
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Daniel S. Kuntz
 
Secretary

 
MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

TABLE OF CONTENTS
 
 
Page
 
 
 
Page
 
 
1
 
 
 
 
 
 
 
 
 
EXECUTIVE COMPENSATION (continued)
 
 
 
6
 
 
38
 
 
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38
 
 
 
 
 
39
 
 
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A-1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

PROXY STATEMENT SUMMARY
To assist you in reviewing the company’s 2016 performance and voting your shares, we call your attention to key elements of our 2017 Proxy Statement and our 2016 Annual Report to Stockholders. The following is only a summary and does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information about these topics, please review the complete Proxy Statement and our 2016 Annual Report to Stockholders.
Meeting Information
 
Summary of Stockholder Voting Matters
 
 
 
 
 
 
 
 
 
 
Board Vote Recommendation
 
Time and Date:
 
 
Voting Matters
 
See Page
11:00 a.m.
Central Daylight Saving Time (CDT)Tuesday, May 9, 2017
 
Item 1  -
Election of Directors
FOR each nominee
6
 
Item 2  -
Advisory Vote to Approve the Frequency of the Vote to Approve the Compensation Paid to the Company’s Named Executive Officers
FOR ONE YEAR
22
Place:
 
Item 3  -
Advisory Vote to Approve the Compensation Paid to the Company’s Named Executive Officers
FOR
23
MDU Service Center
909 Airport Road
Bismarck, ND
 
 
Item 4  -
Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 2017
FOR
48
 
Item 5  -
Advisory Vote to Approve an Amendment to the Company’s Bylaws to Adopt an Exclusive Forum for Internal Corporate Claims
FOR
51
Corporate Governance Highlights
 
 
 
 
MDU Resources Group, Inc. is committed to strong corporate governance practices. The following highlights our corporate governance practices and policies. See the sections entitled “ Corporate Governance ” and “ Executive Compensation ” for more information on the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
Annual Election of All Directors

 
ü
All Three Standing Committees Consist of Independent Directors
ü
Majority Voting for Directors
 
ü
Active Investor Outreach Program
ü
Separate Chairman and CEO
 
ü
Stock Ownership Requirements for Directors and Executives
ü
Executive Sessions of Independent Directors at Every Regularly Scheduled Meeting
 
ü
Anti-Hedging and Anti-Pledging Policies
ü
Annual Board and Committee Self-Evaluations
 
ü
Compensation Recovery/Clawback Policy
ü
Risk Oversight by Full Board and Committees
 
ü
Code of Business Conduct and Ethics for Directors, Officers, and Employees
ü
All Directors are Independent Other Than our CEO
 
ü
Annual Advisory Approval on Executive Compensation



 
MDU Resources Group, Inc. Proxy Statement 1


Proxy Statement
 

Business Performance Highlights
 
 
 
Our overall performance in 2016 was consistent with our long-term strategy as we executed on priorities to reduce our risk to oil and natural gas commodity price fluctuations and focus on our regulated energy delivery and construction materials and services business segments. In 2016, we accomplished:
The sale of Dakota Prairie Refining, LLC in June, the completion of the sale of our oil and gas exploration and production business assets in April, and the sale of our interest in the Pronghorn natural gas processing plant in January 2017 reduced the company’s risk by decreasing its exposure to commodity price fluctuations.
Our construction materials & contracting segment achieved record earnings, and its backlog at December 31, 2016, was $538 million compared to $491 million a year earlier.
Earnings from our construction services segment were up 43%, to $33.9 million, on 16% revenue growth.
We acquired the Thunder Spirit wind farm providing an additional 107.5 megawatts of renewable generation. We also signed an agreement in 2016 to purchase power from an expansion of the Thunder Spirit wind farm which includes an option to buy the expansion at the completion of construction. This will bring the total capacity of the Thunder Spirit wind farm to 150 megawatts which will increase the company’s nameplate electric renewable generation portfolio to 27%.
Our electric & natural gas distribution segment achieved regulatory relief of an additional $32.7 million in final implemented rates in 2016 through February 2017.
We, along with a partner, began construction of approximately 160-miles of 345 kilovolt electric transmission line which will facilitate delivery of renewable wind energy from North Dakota to eastern markets.
Our pipeline & midstream segment secured sufficient capacity commitments and started survey work on a 38-mile transmission pipeline that will deliver natural gas supply to eastern North Dakota and far western Minnesota. Following receipt of necessary permits and regulatory approvals, construction is expected to start in early 2018 and be complete late that year. This segment also signed agreements for and completed construction of other natural gas transmission pipeline projects.
Our construction services segment constructed and sold a large scale solar project in Nevada. This segment also completed a 135-mile 345-kilovolt electric transmission line project which was the largest transmission construction project ever completed by the construction services segment.
Our pipeline & midstream segment experienced a 59% increase in natural gas storage levels.
With our accomplishments in 2016, we are optimistic about the company’s future financial performance. The charts below show our progress over the last five years.
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2 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

2016 Financial Performance Highlights
 
Strong year-over-year performance from continuing operations resulted in an increase in earnings per share from continuing operations to $1.19 per share compared to $0.90 per share in 2015, an increase of 32%
 
Electric & natural gas distribution segment earnings increased by 16%
 
 
Pipeline & midstream segment earnings increased by 77%
 
 
Construction materials & contracting segment earnings increased by 15%
 
 
Construction services segment earnings increased by 43%
 
Return of stockholder value through the dividend
 
Increased dividend for 26th straight year
 
 
Paid uninterrupted dividend for 79th straight year
 
Improved credit rating outlook from Standard & Poor’s (S&P) from negative to stable
 
BBB+ credit ratings with stable outlooks from both S&P and Fitch Ratings
 
Stock price increased from $18.32 per share on December 31, 2015, to $28.77 per share on December 31, 2016, reflecting appreciation of 57%
One year total stockholder return of 62% including our dividends
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* The calculation of Total Annual Stockholder Return assumes the reinvestment of dividends in additional shares of common stock.

 
MDU Resources Group, Inc. Proxy Statement 3


Proxy Statement
 


26 Years
 
Dividends Paid
 
79 Years
 
$692 Million
 
of Consecutive
 
 
of Uninterrupted
Dividend Increases
 
Over the Last 5 Years
 
Dividend Payments
Compensation Highlights
Executive compensation at the company is focused on performance. Our compensation program is structured to strongly align compensation with the company’s performance with a substantial portion of our executive compensation based upon performance incentive awards.
Over 76% of our chief executive officer’s target compensation and 61% of our other named executive officers’ target compensation is performance based.
100% of annual incentive compensation and 100% of long-term incentive compensation are tied to performance against pre-established, specific, measurable financial and operational goals.
We require all executive officers to own a significant amount of company stock based upon a multiple of their base salary.
2016 Named Executive Officer Target Pay Mix
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With the exception of the president of our construction materials & contracting segment, which achieved record earnings in 2015, base salaries for our named executive officers were frozen in 2016 following a challenging year in 2015 as a result of impairments at our exploration & production segment, which has since been sold.
Annual incentive award payout to our CEO for 2016, which was based upon the strong performance at all four of our business units, was 139.8% of his annual incentive target.
Long-term incentive award payouts in 2017 for the 2014-2016 performance cycle were at 68% of target based upon total stockholder return at the 40th percentile of our peers over the performance cycle reflecting a challenging operating environment in 2014 and 2015.

 
4 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

Key Features of our Executive Compensation Program
What We Do
 
 
þ
Pay for Performance  - All annual and long-term incentives are performance-based and tied to performance measures set by the compensation committee.
þ
Independent Compensation Committee - All members of the compensation committee meet the independence standards under the New York Stock Exchange listing standards and the Securities and Exchange Commission rules.
þ
Independent Compensation Consultant  - The compensation committee retains an independent compensation consultant to evaluate executive compensation plans and practices.
þ
Competitive Compensation  - Executive compensation reflects the executive’s performance, experience, relative value compared to other positions within the company, relationship to competitive market value compensation, and the economic environment of the executive’s business segment.
þ
Annual Compensation Risk Analysis - We regularly analyze the risks related to our compensation programs and conduct a broad risk assessment annually.
þ
Stock Ownership & Retention Requirements  - Executive officers are required to own, within five years of appointment or promotion, company common stock equal to a multiple of their base salary. The executive officers must retain at least 50% of the net after tax shares of stock vested through the long-term incentive plan for the earlier of two years or until termination of employment.
þ
Clawback Policy - If the company’s audited financial statements are restated, the compensation committee may, or shall if required, demand repayment of some or all incentives paid to company executive officers within the last three years.
 
 
What We Don’t Do
 
 
ý
Stock Options  - The company does not use stock options as a form of incentive compensation.
ý
Perquisites  - Executives do not receive perquisites which materially differ from those available to employees in general.
ý
Tax Gross-ups  - Executive officers do not receive tax gross-ups on any compensation.
ý
Hedge or Pledge Stock - Executives and directors are not allowed to hedge or pledge company securities.
ý
No Time Based Awards - All long-term incentives are performance-based and vest only upon the achievement of specific performance measures.


 
MDU Resources Group, Inc. Proxy Statement 5


Proxy Statement
 

BOARD OF DIRECTORS
ITEM 1. ELECTION OF DIRECTORS
The nominating and governance committee of the board, reflecting the criteria for election to the board, identifies and reviews possible candidates for the board and recommends the nominees for directors to the board for approval. The committee considers and evaluates suggestions from many sources, including stockholders, regarding possible candidates for directors. Additional information on our board composition and director nomination process is further discussed in our Proxy Statement under “ Nominating and Governance Committee ” in the section entitled “ Corporate Governance .”
All nominees for director are nominated to serve one-year terms until the annual meeting of stockholders in 2018 and their respective successors are elected and qualified, or until their earlier resignation, removal from office, or death.
We have provided information below about our nominees, all of whom are incumbent directors, including their ages, years of service as directors, business experience, and service on other boards of directors, including any other directorships on boards of public companies. We have also included information about each nominee’s specific experience, qualifications, attributes, or skills that led the board to conclude that he or she should serve as a director of MDU Resources Group, Inc. at the time we file our Proxy Statement, in light of our business and structure. Unless we specifically note below, no corporation or organization referred to below is a subsidiary or other affiliate of MDU Resources Group, Inc.
Director Nominees
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Thomas Everist
Age 67
Independent Director Since 1995
Compensation Committee
Other Current Public Boards:
--Raven Industries, Inc.
Mr. Everist has more than 43 years of business experience in the construction materials and aggregate mining industry. He has business leadership and management experience serving as president and chairman of his companies for over 29 years. Mr. Everist also has experience serving as a director and chairman of another public company, which enhances his contributions to our board.
Career Highlights
President and chairman of The Everist Company, Sioux Falls, South Dakota, an investment and land development company, since April 2002. Prior to January 2017, The Everist Company was engaged in aggregate, concrete, and asphalt production.
Managing member of South Maryland Creek Ranch, LLC, a land development company; president of SMCR, Inc., an investment company, since June 2006; and managing member of MCR Builders, LLC, which provides residential building services to South Maryland Creek Ranch, LLC, since November 2014.
Director and chairman of the board of Everist Health, Inc., Ann Arbor, Michigan, which provides solutions for personalized medicines, since 2002, and chief executive officer from August 2012 to December 2012.
President and chairman of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 2002.
Other Leadership Experience
Director of publicly traded Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and engineered films, since 1996, and chairman of the board since April 2009.
Director of Showplace Wood Products, Sioux Falls, South Dakota, a custom cabinets manufacturer, since January 2000.
Director of Bell, Inc., Sioux Falls, South Dakota, a manufacturer of folding cartons and packages, since April 2011.
Director of Angiologix Inc., Mountain View, California, a medical diagnostic device company, from July 2010 through October 2011 when it was acquired by Everist Genomics, Inc.
Member of the South Dakota Investment Council, the state agency responsible for prudently investing state funds, from July 2001 to June 2006.
Education
Bachelor’s degree in mechanical engineering and a master’s degree in construction management from Stanford University.

 
6 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

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Karen B. Fagg
Age 63

Independent Director Since 2005
Compensation Committee
Nominating and Governance Committee
Ms. Fagg brings experience to our board in construction and engineering, energy, and the responsible development of natural resources, which are all important aspects of our business. In addition to her industry experience, Ms. Fagg has over 20 years of business leadership and management experience, including over eight years as president, chief executive officer, and chairman of her own company, as well as knowledge and experience acquired through her service on a number of Montana state and community boards.
Career Highlights
Vice president of DOWL LLC, d/b/a DOWL HKM, an engineering and design firm, from April 2008 until her retirement on December 31, 2011.
President of HKM Engineering, Inc., Billings, Montana, an engineering and physical science services firm, from April 1, 1995 to June 2000, and chairman, chief executive officer, and majority owner from June 2000 through March 2008. HKM Engineering, Inc. merged with DOWL LLC on April 1, 2008.
Employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988, and vice president of operations and corporate development director from 1993 to April 1995.
Director of the Montana Department of Natural Resources and Conservation, Helena, Montana, the state agency charged with promoting stewardship of Montana’s water, soil, energy, and rangeland resources; regulating oil and gas exploration and production; and administering several grant and loan programs, for a four-year term from 1989 through 1992.
Other Leadership Experience
Board member of St. Vincent’s Healthcare since January 2016 and previously from October 2003 until October 2009, including a term as chair.
Former member of several state and community boards, including the First Interstate BancSystem Foundation, from June 2013 to 2016; the Montana Justice Foundation, whose mission is to achieve equal access to justice for all Montanans through effective funding and leadership, from 2013 into 2015; Board of Trustees of Carroll College from 2005 through 2010; Montana Board of Investments, the state agency responsible for prudently investing state funds, from 2002 through 2006; Montana State University’s Advanced Technology Park from 2001 to 2005; and Deaconess Billings Clinic Health System from 1994 to 2002.
Education
Bachelor’s degree in mathematics from Carroll College in Helena, Montana.
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David L. Goodin
Age 55
Director Since 2013
President and Chief Executive Officer
As chief executive officer of MDU Resources Group, Inc., Mr. Goodin is the only officer of the company that serves on our board. With over 33 years of significant, hands-on experience at our company, Mr. Goodin’s long history and deep knowledge and understanding of MDU Resources Group, Inc., its operating companies, and its lines of business bring continuity to the board.
Career Highlights
President and chief executive officer and a director of the company since January 4, 2013.
Prior to January 4, 2013, served as chief executive officer and president of Intermountain Gas Company, Cascade Natural Gas Corporation, Montana-Dakota Utilities Co., and Great Plains Natural Gas Co.
Began his career in 1983 at Montana-Dakota Utilities Co. as a division electrical engineer and served in positions of increasing responsibility until 2007 when he was named president of Cascade Natural Gas Corporation; positions included division electric superintendent, electric systems manager, vice president-operations, and executive vice president-operations and acquisitions.
Other Leadership Experience
Member of the U.S. Bancorp Western North Dakota Advisory Board since January 2013.
Director of Sanford Bismarck, an integrated health system dedicated to the work of health and healing, and Sanford Living Center, since January 2011.
Former board member of several industry associations, including the American Gas Association, the Edison Electric Institute, the North Central Electric Association, the Midwest ENERGY Association, and the North Dakota Lignite Energy Council.
Education
Bachelor of science degree in electrical and electronics engineering from North Dakota State University.
Masters in business administration from the University of North Dakota.
The Advanced Management Program at Harvard School of Business.
Registered professional engineer in North Dakota.

 
MDU Resources Group, Inc. Proxy Statement 7


Proxy Statement
 

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Mark A. Hellerstein
Age 64
Independent Director Since 2013
Audit Committee
Mr. Hellerstein has extensive business experience in the energy industry as a result of his 17 years of senior management experience and service as board chairman of St. Mary Land & Exploration Company (now SM Energy Company). As a certified public accountant, on inactive status, with extensive financial experience as a result of his employment as chief financial officer with several companies, including public companies, Mr. Hellerstein contributes significant finance and accounting knowledge to our board and audit committee.
Career Highlights
Chief executive officer of St. Mary Land & Exploration Company (now SM Energy Company), an energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids, from 1995 until February 2007; president from 1992 until June 2006; and executive vice president and chief financial officer from 1991 until 1992. He was first elected to the board of St. Mary in 1992 and served as chairman of the board from 2002 until May 2009.
Several positions prior to joining St. Mary in 1991, including chief financial officer of CoCa Mines Inc., which mined and extracted minerals from lands previously held by the public through the Bureau of Land Management; American Golf Corporation, which manages and owns golf courses in the United States; and Worldwide Energy Corporation, an oil and gas acquisition, exploration, development, and production company with operations in the United States and Canada.
Other Leadership Experience
Director of Transocean Inc., a leading provider of offshore drilling services for oil and gas wells, from December 2006 to November 2007.
Director of the Denver Children’s Advocacy Center, whose mission is to provide a continuum of care for traumatized children and their families, from August 2006 until December 2011, including chairman for the last three years.
Education and Professional
Bachelor’s degree in accounting from the University of Colorado.
Certified public accountant, on inactive status.
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A. Bart Holaday
Age 74

Independent Director Since 2008
Audit Committee
Nominating and Governance Committee
Mr. Holaday has extensive business knowledge and experience in the energy and financial management industries. Mr. Holaday brings to the board extensive finance and investment experience, as well as business development skills, through his senior management experience with investment funds and energy companies. Mr. Holaday is also a chartered financial analyst.
Career Highlights
President and owner of Dakota Renewable Energy Fund, LLC, which invests in small companies in North Dakota, since August 2007.
Head of the Private Markets Group of UBS Asset Management and its predecessor entities, managing more than $19 billion in investments, from December 1985 until retirement in 2001.
Vice president and principal of the InnoVen Venture Capital Group, a venture capital investment firm, from 1983 through 1985.
Founder and president of Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and production company, from 1980 through 1982.
Four years of senior management experience with Gulf Oil Corporation, a global energy and petrochemical company.
Eight years of senior management experience with the federal government, including the Department of Defense, Department of the Interior, and the Federal Energy Administration.
Other Leadership Experience
Member of the investment advisory board of Commons Capital LLC, a venture capital firm, since 1999.
Director of Hull Investments, LLC, a private entity firm that combines nonprofit activities and investments, since August 2011; Alerus Financial, a financial services company, since September 2007; and Adams Street Partners, LLC, a private equity investment firm, from January 2001 to March 2017.
Former member of the U.S. Securities and Exchange Commission advisory committee on the regulation of capital markets.
Education and Professional
Bachelor’s degree in engineering sciences from the U.S. Air Force Academy.
Rhodes Scholar, earning a bachelor’s degree and a master’s degree in politics, philosophy, and economics from Oxford University.
Law degree from George Washington Law School.
Honorary Doctor of Letters from the University of North Dakota.
Chartered Financial Analyst.

 
8 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

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Dennis W. Johnson
Age 67
Independent Director Since 2001
Audit Committee
Mr. Johnson brings to our board over 42 years of experience in business management, manufacturing, and finance, holding positions as chairman, president, and chief executive officer of TMI Corporation for 34 years, as well as through his prior service as a director of the Federal Reserve Bank of Minneapolis. As a result of his service on a number of state and local organizations in North Dakota, Mr. Johnson has significant knowledge of local, state, and regional issues involving North Dakota, a state where we have significant operations and assets.
Career Highlights
Chairman, president, and chief executive officer of TMI Corporation and chairman and chief executive officer of TMI Transport Corporation (as well as TMI Systems Design Corporation and TMI Storage Systems Corporation before they merged into TMI Corporation the end of 2015), manufacturers of casework and architectural woodwork in Dickinson, North Dakota; employed since 1974 and serving as president or chief executive officer since 1982.
Other Leadership Experience
President of the Dickinson City Commission from July 2000 through October 2015.
Director of the Federal Reserve Bank of Minneapolis for six years from 1993 through 1998.
Served on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chair); the Decorative Laminate Products Association; the North Dakota Technology Corporation; and the business advisory council of the Steffes Corporation, a metal manufacturing and engineering firm.
Served on North Dakota Governor Sinner’s Education Action Commission; the North Dakota Job Service Advisory Council; the North Dakota State University President’s Advisory Council; North Dakota Governor Schafer’s Transition Team; and chaired North Dakota Governor Hoeven’s Transition Team.
Education
Bachelor of science in electrical and electronics engineering and master of science in industrial engineering from North Dakota State University.
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William E. McCracken
Age 74

Independent Director Since 2013
Compensation Committee
Nominating and Governance Committee
Mr. McCracken is experienced in information technology and cybersecurity through his tenure at CA, Inc. and International Business Machines Corporation (IBM). This experience coupled with his service as the chair or a member of the board of other public companies and the National Association of Corporate Directors (NACD) enables him to provide insight into the operations, challenges, and complex issues our company is facing in today’s environment and to make significant contributions to the board’s oversight of operational risk management functions and corporate governance.
Career Highlights
President of Executive Consulting Group, LLC, a general business consulting firm, from 2002 to present.
Chief executive officer of CA, Inc., one of the world’s largest information technology management software companies, from January 2010 until January 7, 2013, after which he served as executive adviser to the new chief executive officer until March 31, 2013, and as a consultant to the company until December 31, 2013; also as director of CA, Inc. from May 2005 until January 7, 2013, serving as non-executive chairman of the board from June 2007 to September 2009, interim executive chairman from September 2009 to January 2010, and executive chairman from January 2010 to May 2010.
Several executive positions during his 36-year career with IBM, including serving on its Chairman’s Worldwide Management Council, a group of the top 30 executives at IBM, from 1995 to 2001.
Other Leadership Experience
Director of the NACD, a nonprofit membership organization for corporate board members, since 2010, and named by the NACD as one of the top 100 most influential people in the boardroom in 2009; served on that organization’s 2009 blue ribbon commission on risk governance, co-chaired its blue ribbon commission on board diversity in 2012, and co-chaired its blue ribbon commission on the board and long-term value creation in 2015.
Director of IKON Office Solutions, Inc., a provider of document management systems and services, from 2003 to 2008, where he served on its audit committee, compensation committee, and strategy committee.
Chair of the advisory board of the Millstein Center for Global Markets and Corporate Ownership at Columbia University and member since 2013, and the New York chairman of the Chairmen’s Forum since 2011.
Education
Bachelor of science in physics and mathematics from Shippensburg University.

 
MDU Resources Group, Inc. Proxy Statement 9


Proxy Statement
 

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Patricia L. Moss
Age 63

Independent Director Since 2003
Compensation Committee
Nominating and Governance Committee
Other Current Public Boards:
--Cascade Bancorp
--Aquila Tax Free Trust of Oregon

Ms. Moss has business experience and knowledge of the Pacific Northwest economy and state, local, and region issues where a significant portion of our operations are located. Ms. Moss provides our board with experience in finance and banking, as well as experience in business development through her work at Cascade Bancorp and Bank of the Cascades, and on the Oregon Investment Fund Advisory Council, the Oregon Business Council, and the Oregon Growth Board. Ms. Moss also has experience as a certified senior professional in human resources.
Career Highlights
 
President and chief executive officer of Cascade Bancorp, a financial holding company, Bend, Oregon, from 1998 to January 3, 2012; chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, from 1998 to January 3, 2012, serving also as president from 1998 to 2003; and chief operating officer, chief financial officer and secretary of Cascade Bancorp from 1987 to 1998.
Other Leadership Experience
 
Director of Cascade Bancorp and Bank of the Cascades since 1993, and vice chair of both boards since January 3, 2012.
Chair of the Bank of the Cascades Foundation Inc. since 2014; co-chair of the Oregon Growth Board, a state board created to improve access to capital and create private-public partnerships, since May 2012; and member of the Board of Trustees for the Aquila Tax Free Trust of Oregon, a mutual fund created especially for the benefit of Oregon residents, since June 2015 and January 2002 to May 2005.
Former director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses in Oregon; the Oregon Business Council, with a mission to mobilize business leaders to contribute to Oregon’s quality of life and economic prosperity; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial, and hardwood products; Clear Choice Health Plans Inc., a multi-state insurance company; and City of Bend’s Juniper Ridge management advisory board.
Education
 
Bachelor of science in business administration from Linfield College in Oregon and master’s studies at Portland State University.
Commercial banking school certification at the ABA Commercial Banking School at the University of Oklahoma.
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Harry J. Pearce
Age 74
Independent Director Since 1997
Chairman of the Board
Mr. Pearce provides our board with public company leadership with his multinational business management experience and proven leadership skills through his position as vice chairman at General Motors Corporation, as well as through his extensive service on the boards of large public companies, including Marriott International, Inc., Hughes Electronics Corporation, where he was chairman, and Nortel Networks Corporation, where he also was chairman. He also brings to our board his long experience as a practicing attorney. In addition, Mr. Pearce has focused on corporate governance issues and was the founding chair of Yale University’s Chairmen’s Forum, an organization comprised of non-executive chairmen of publicly traded companies.
Career Highlights
Chairman of the board of the company effective August 17, 2006; lead director from February 15, 2001 until August 17, 2006; and vice chairman of the board from November 16, 2000 until February 15, 2001.
Vice chairman and director of General Motors Corporation from January 1, 1996 to May 31, 2001; general counsel from 1987 to 1994.
Senior partner in the Pearce & Durick law firm in Bismarck, North Dakota, prior to joining General Motors in 1987.
Other Leadership Experience
Director of Hughes Electronics Corporation, a General Motors Corporation subsidiary and provider of digital television entertainment, broadband satellite network, and global video and data broadcasting, from 1992 to December 2003, and retiring as chairman in 2003.
Director of Marriott International, Inc., a major hotel chain, from 1995 to May 2015, and served on the audit, finance, compensation, and excellence committees.
Director of Nortel Networks Corporation, a global telecommunications company, from January 2005 to August 2009, also served as chairman of the board from June 2005.
Fellow of the American College of Trial Lawyers, and a member of the International Society of Barristers.
Founding chair of the Yale University’s Chairmen’s Forum; former member of the President’s Council on Sustainable Development, and co-chair of the President’s Commission on the United States Postal Service.
Education
Bachelor’s degree in engineering sciences from the U.S. Air Force Academy.
Juris doctor degree from Northwestern University’s School of Law.

 
10 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

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John K. Wilson
Age 62
Independent Director Since 2003
Audit Committee
Mr. Wilson has an extensive background in finance and accounting, as well as experience with mergers and acquisitions, through his education and work experience at a major accounting firm and his later public utility experience in his positions as controller and vice president of Great Plains Natural Gas Co., president of Great Plains Energy Corp., and president, chief financial officer, and treasurer for Durham Resources, LLC, and all Durham Resources entities.
Career Highlights
President of Durham Resources, LLC, a privately held financial management company, in Omaha, Nebraska, from 1994 to December 31, 2008; president of Great Plains Energy Corp., a public utility holding company and an affiliate of Durham Resources, LLC, from 1994 to July 1, 2000; and vice president of Great Plains Natural Gas Co., an affiliate company of Durham Resources, LLC, until July 1, 2000.
Executive director of the Robert B. Daugherty Foundation in Omaha, Nebraska, since January 2010.
Held positions of audit manager at Peat, Marwick, Mitchell (now known as KPMG), controller for Great Plains Natural Gas Co., and chief financial officer and treasurer for all Durham Resources entities.
Other Leadership Experience
Director of HDR, Inc., an international architecture and engineering firm, since December 2008, and director of Tetrad Corporation, a privately held investment company, since April 2010, both located in Omaha, Nebraska.
Former director of Bridges Investment Fund, Inc., a mutual fund, from April 2003 to April 2008; director of the Greater Omaha Chamber of Commerce from January 2001 through December 2008; member of the advisory board of U.S. Bank NA Omaha from January 2000 to July 2010; and the advisory board of Duncan Aviation, an aircraft service provider, headquartered in Lincoln, Nebraska, from January 2010 to February 2016.
Education and Professional
Bachelor’s degree in business administration, cum laude, from the University of Nebraska – Omaha.
Certified public accountant, on inactive status.
The board of directors recommends a vote “for” each nominee.
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected and which we do not anticipate, directors will be elected by a plurality of the votes cast.
Unless you specify otherwise when you submit your proxy, the proxies will vote your shares of common stock “for” all directors nominated by the board of directors. If a nominee becomes unavailable for any reason or if a vacancy should occur before the election, which we do not anticipate, the proxies will vote your shares in their discretion for another person nominated by the board.
Our policy on majority voting for directors contained in our corporate governance guidelines requires any proposed nominee for re-election as a director to tender to the board, prior to nomination, his or her irrevocable resignation from the board that will be effective, in an uncontested election of directors only, upon:
receipt of a greater number of votes “against” than votes “for” election at our annual meeting of stockholders; and
acceptance of such resignation by the board of directors.
Following certification of the stockholder vote, the nominating and governance committee will promptly recommend to the board whether or not to accept the tendered resignation. The board will act on the nominating and governance committee’s recommendation no later than 90 days following the date of the annual meeting.
Brokers may not vote your shares on the election of directors if you have not given your broker specific instructions on how to vote. Please be sure to give specific voting instructions to your broker so your vote can be counted.

 
MDU Resources Group, Inc. Proxy Statement 11


Proxy Statement
 

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Director Independence
The board of directors has adopted guidelines on director independence that are included in our corporate governance guidelines. The board of directors has determined that, except for Mr. Goodin, all current directors have no material relationship with us and are independent in accordance with our corporate governance guidelines and the New York Stock Exchange listing standards.
In determining director independence, the board of directors reviewed and considered information about any transactions, relationships, and arrangements between the non-employee directors and their immediate family members and affiliated entities on the one hand, and the company and its affiliates on the other, and in particular the following transactions, relationships, and arrangements:

Charitable contributions by the MDU Resources Foundation (Foundation) to the following nonprofit organizations, where a director, or a director’s spouse, serves or has served as a director, chair, or vice chair of the board of trustees, trustee or member of the organization or related entity: Charitable contributions by the Foundation to Sanford Health Foundation, Billings Catholic Schools Foundation, Community Resources Inc., the University of North Dakota Foundation, and the University of Jamestown and its foundation. None of the contributions made to any of these nonprofit entities during the last three fiscal years exceeded in any single year the greater of $1 million or 2% of the relevant entity’s consolidated gross revenues.
Stockholder Engagement
The company has an active stockholder outreach program. We believe in providing transparent and timely information to our investors. Each year we routinely engage directly or indirectly with our stockholders, including our top institutional stockholders. During 2016, the company held meetings, conference calls, and webcasts with a diverse mix of stockholders. Throughout the year, we held meetings with nine of the actively managed institutional investors included in our year-end top 30 stockholders. We engage periodically with our index fund investors, however, no direct meetings were held with this investor class in 2016. In our meetings, we discussed a variety of topics with stockholders including longer-term company strategy and our capital expenditure forecast, shorter-term operational and financial updates, and previously announced strategic initiatives. The company also met with proxy advisory firms to discuss corporate governance and executive compensation practices.
Board Leadership Structure
The board separated the positions of chairman of the board and chief executive officer in 2006, and our bylaws and corporate governance guidelines currently require that our chairman be independent. The board believes this structure provides balance and is currently in the best interest of the company and its stockholders. Separating these positions allows the chief executive officer to focus on the full-time job of running our business, while allowing the chairman of the board to lead the board in its fundamental role of providing advice to and independent oversight of management. The chairman consults with the chief executive officer regarding the board meeting agendas, the quality and flow of information provided to the board, and the effectiveness of the board meeting process. The board believes this split structure recognizes the time, effort, and energy the chief executive officer is required to devote to the position in the current business environment, as well as the commitment required to serve as the chairman, particularly as the board’s oversight responsibilities continue to grow and demand more time and attention. The fundamental role of the board of directors is to provide oversight of the management of the company in good faith and in the best interests of the company and its stockholders. Having an independent chairman is a means to ensure the chief executive officer is accountable for managing the company in close alignment with the interests of stockholders, including with respect to risk management as discussed below. An independent chairman is in a position to encourage frank and lively discussions and to assure that the company has adequately assessed all appropriate business risks before adopting its final business plans and strategies. The board believes that having separate positions and having an independent outside director serve as chairman is the appropriate leadership structure for the company at this time and demonstrates our commitment to good corporate governance.

 
12 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, environmental and regulatory risks, the impact of competition, weather conditions, limitations on our ability to pay dividends, pension plan obligations, cyberattacks or acts of terrorism, and third party liabilities. Management is responsible for the day-to-day management of risks the company faces, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The board believes establishing the right “tone at the top” and full and open communication between management and the board of directors are essential for effective risk management and oversight. Our chairman meets regularly with our president and chief executive officer and other senior officers to discuss strategy and risks facing the company. Senior management attends the quarterly board meetings and is available to address any questions or concerns raised by the board on risk management-related and any other matters. Each quarter, the board of directors receives presentations from senior management on strategic matters involving our operations. At least annually, the board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the company.
While the board is ultimately responsible for risk oversight at our company, our three standing board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in a general manner and specifically in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and, in accordance with New York Stock Exchange requirements, discusses policies with respect to risk assessment and risk management and their adequacy and effectiveness. Risk assessment reports are regularly provided by management to the audit committee or the full board. This opens the opportunity for discussions about areas where the company may have material risk exposure, steps taken to manage such exposure, and the company’s risk tolerance in relation to company strategy. The audit committee reports regularly to the board of directors on the company’s management of risks in the audit committee’s areas of responsibility. The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Board Meetings and Committees
During 2016 , the board of directors held four regular meetings and three special meetings. Each director attended at least 75% of the combined total meetings of the board and the committees on which the director served during 2016 . Director attendance at our annual meeting of stockholders is encouraged. All directors attended our 2016 Annual Meeting of Stockholders.
Harry J. Pearce was elected non-employee chairman of the board on August 17, 2006, and previously served as lead director from February 15, 2001 to August 17, 2006. He presides at the executive session of the non-employee directors held in connection with each regularly scheduled quarterly board of directors meeting. The non-employee directors also meet in executive session both with and without the chief executive officer at each regularly scheduled quarterly board of directors meeting. All of our non-employee directors are independent, as defined in our corporate governance guidelines and New York Stock Exchange listing standards.
The board has a standing audit committee, compensation committee, and nominating and governance committee. These committees are composed entirely of independent directors.
Nominating and Governance Committee
The nominating and governance committee met four times during 2016 . The committee members are Karen B. Fagg, chair, A. Bart Holaday, William E. McCracken, and Patricia L. Moss.
The nominating and governance committee provides recommendations to the board with respect to:
board organization, membership, and function;
committee structure and membership;
succession planning for our executive management and directors; and
our corporate governance guidelines.

 
MDU Resources Group, Inc. Proxy Statement 13


Proxy Statement
 

The nominating and governance committee assists the board in overseeing the management of risks in the committee’s areas of responsibility.
The committee identifies individuals qualified to become directors and recommends to the board the nominees for director for the next annual meeting of stockholders. The committee also identifies and recommends to the board individuals qualified to become our principal officers and the nominees for membership on each board committee. The committee oversees the evaluation of the board and management.
In identifying nominees for director, the committee consults with board members, our management, consultants, and other individuals likely to possess an understanding of our business and knowledge concerning suitable director candidates.
Our corporate governance guidelines include our policy on consideration of director candidates recommended to us. We will consider candidates that our stockholders recommend in the same manner we consider other nominees. Stockholders who wish to recommend a director candidate may submit recommendations, along with the information set forth in the guidelines, to the nominating and governance committee chair in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650.
Stockholders who wish to nominate persons for election to our board at an annual meeting of stockholders must follow the procedures set forth in section 2.08 of our bylaws. Our bylaws are available on our website. See “ Stockholder Proposals, Director Nominations, and Other Items of Business for 2018 Annual Meeting ” in the section entitled “ Information about the Annual Meeting ” for further details.
In evaluating director candidates, the committee, in accordance with our corporate governance guidelines, considers an individual’s:
background, character, and experience, including experience relative to our company’s lines of business;
skills and experience which complement the skills and experience of current board members;
success in the individual’s chosen field of endeavor;
skill in the areas of accounting and financial management, banking, business management, human resources, marketing, operations, public affairs, law, technology, risk management, governance, and operations abroad;
background in publicly traded companies including service on other public company boards of directors;
geographic area of residence;
diversity of business and professional experience, skills, gender, and ethnic background, as appropriate in light of the current composition and needs of the board;
independence, including any affiliation or relationship with other groups, organizations, or entities; and
compliance with applicable law and applicable corporate governance, code of conduct and ethics, conflict of interest, corporate opportunities, confidentiality, stock ownership and trading policies, and our other policies and guidelines of the company.
In addition, our bylaws contain requirements that a person must meet to qualify for service as a director.
The nominating and governance committee assesses the effectiveness of this policy annually in connection with the nomination of directors for election at the annual meeting of stockholders. The composition of the current board reflects diversity in business and professional experience, skills, and gender.
Audit Committee
The audit committee is a separately-designated committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee met eight times during 2016 . The audit committee members are Dennis W. Johnson, chair, Mark A. Hellerstein, A. Bart Holaday, and John K. Wilson. The board of directors has determined that Messrs. Johnson, Hellerstein, Holaday, and Wilson are “audit committee financial experts” as defined by Securities and Exchange Commission rules and are financially literate within meaning of the listing standards of the New York Stock Exchange. They also meet the independence standard for audit committee members under our director independence guidelines, the New York Stock Exchange listing standards, and Securities and Exchange Commission rules.

 
14 MDU Resources Group, Inc. Proxy Statement


Proxy Statement
 

The audit committee assists the board of directors in fulfilling its oversight responsibilities to the stockholders and serves as a communication link among the board, management, the independent registered public accounting firm, and the internal auditors. The audit committee:
assists the board’s oversight of
the integrity of our financial statements and system of internal controls;
the company’s compliance with legal and regulatory requirements;
the independent registered public accounting firm’s qualifications and independence;
the performance of our internal audit function and independent registered public accounting firm; and
management of risk in the audit committee’s areas of responsibility; and
arranges for the preparation of and approves the report that Securities and Exchange Commission rules require we include in our annual proxy statement. See the section entitled “ Audit Committee Report ” for further information.
Compensation Committee
During 2016, the compensation committee met five times. The compensation committee consists entirely of independent directors within the meaning of the company’s corporate governance guidelines and the New York Stock Exchange listing standards and who meet the definitions of outside or non-employee directors for purposes of Section 162(m) of the Internal Revenue Code and Rule 16-b under the Exchange Act. Members of the compensation committee are Thomas Everist, chair, Karen B. Fagg, William E. McCracken, and Patricia L. Moss.

The compensation committee assists the board of directors in fulfilling its responsibilities relating to the company’s compensation policy and programs. It has the direct responsibility for determining compensation for our Section 16 officers and for overseeing the company’s management of risk in its areas of responsibility. In addition, the compensation committee reviews and recommends any changes to director compensation policies to the board of directors. The authority and responsibility of the compensation committee is outlined in the compensation committee’s charter.
The compensation committee uses the analysis and recommendations from outside consultants, the chief executive officer, and the human resources department in making its compensation decisions. The chief executive officer, the vice president-human resources, and the general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The processes and procedures for consideration and determination of compensation of the Section 16 officers, as well as the role of our executive officers, are discussed in the Compensation Discussion and Analysis.
The compensation committee has sole authority to retain compensation consultants, legal counsel, or other advisers to assist in consideration of the compensation of the chief executive officer, the other Section 16 officers, and the board of directors, and the committee is directly responsible for the appointment, compensation, and oversight of the work of such advisers. The committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on executive compensation. The competitive analysis is conducted internally by the human resources department in the other years. Prior to retaining an adviser, the committee will consider all factors relevant to ensure the adviser’s independence from management. Annually the compensation committee conducts a potential conflicts of interest assessment raised by the work of any compensation consultant and how such conflicts, if any, should be addressed. The compensation committee requested and received information from its compensation consultant, Willis Towers Watson, to assist in its potential conflicts of interest assessment. Based on its review and analysis, the compensation committee did not identify any conflicts of interest with respect to Willis Towers Watson.
The board of directors determines compensation for our non-employee directors based upon recommendations from the compensation committee. The compensation committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on director compensation. The compensation committee employed a compensation consultant for an analysis of director compensation in 2015 but not in 2016 as the study was performed by the human resources department.

 
MDU Resources Group, Inc. Proxy Statement 15


Proxy Statement
 

Narrative Disclosure of our Compensation Policies and Practices as They Relate to Risk Management
The human resources department has conducted an assessment of the risks arising from our compensation policies and practices for all employees and concluded that none of these risks is reasonably likely to have a material adverse effect on the company. Based on the human resources department’s assessment and taking into account information received from the risk identification process, senior management and our management policy committee concluded that risks arising from our compensation policies and practices for all employees are not reasonably likely to have a material adverse effect on the company. After review and discussion with senior management, the compensation committee concurred with this assessment.
As part of its assessment of the risks arising from our compensation policies and practices for all employees, the human resources department identified the principal areas of risk faced by the company that may be affected by our compensation policies and practices for all employees, including any risks resulting from our operating businesses’ compensation policies and practices. In assessing the risks arising from our compensation policies and practices, the human resources department identified the following practices designed to prevent excessive risk taking:
Business management and governance practices:
risk management is a specific performance competency included in the annual performance assessment of Section 16 officers;
board oversight on capital expenditure and operating plans that promotes careful consideration of financial assumptions;
limitation on business acquisitions without board approval;
employee integrity training programs and anonymous reporting systems;