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OFFON

OTTER TAIL CORPORATION

(OTTR)
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Otter Tail : 2021 Proxy Statement

03/03/2021 | 11:26am EDT

2021

PROXY STATEMENT AND

ANNUAL MEETING NOTICE

March 3, 2021

OTTER TAIL CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

Monday, April 12, 2021

10:30 A.M. (CDT)

Virtual Meeting Link: www.virtualshareholdermeeting.com/OTTR2021.

In order to be admitted to the Annual Meeting, you will need to enter the 16-Digit Control Number found on your proxy card, voting instruction form, or notice you previously received. You may vote during the Annual Meeting by following the instructions that will be available on the virtual meeting website.

Contact Shareholder Services for Information

E-mail

sharesvc@ottertail.com

Internet

www.ottertail.com

Phone

800-664-1259 or 218-739-8479

Mail

Otter Tail Corporation

P.O. Box 496

Fergus Falls, Minnesota 56538-0496

March 3, 2021

Dear Fellow Shareholders:

We invite you to join us at our 2021 Annual Meeting of Shareholders on Monday, April 12, 2021 at 10:30 A.M. (CDT). Due to the continuing public health threat of COVID-19, as a safety precaution, we are again hosting this year's meeting as a virtual-only meeting. It is again our desire to conduct a virtual meeting that approximates an in-person experience for our shareholders. An audio archive of the Annual Meeting, including the question and answer session, will be posted on Otter Tail Corporation's website at www.ottertail.com, within a few days after adjournment.

Otter Tail Corporation joins our nation in reflecting on 2020 as a year of both unprecedented challenges and unique opportunity. Our 2020 financial results are a testament to the perseverance of the people of Otter Tail Corporation. Through our combined efforts, despite a global pandemic, we achieved a 7.8% increase consolidated earnings per share of $2.34 compared to $2.19 in 2019. We increased our dividend 5.7%, marking the 81st consecutive year we have paid dividends on our common stock. Our utility executed on a record capital spending year, completing two significant projects that mark milestones in the future of our generation. The Merricourt Wind Energy Center and Astoria Natural Gas Station prepare us for the retirement of our Hoot Lake coal-fired power plant later this year. And, our Hoot Lake Solar project that was announced last fall and is under development, will generate enough energy to power approximately 10,000 homes and offers us a unique opportunity to re-use our existing Hoot Lake transmission rights, substation and land after its retirement.

We remain well-positioned to deliver shareholder value. Strong and stable electric operations continue to provide opportunities to drive earnings growth through capital investments in renewable generation, technology and infrastructure and transmission projects. Our utility also provides strong cash flow to support dividends. Our manufacturing businesses provide above-average earnings growth potential, with both platforms supported by a targeted capital growth plan. We look forward to sharing more about our 2021 results and our strategy for sustained success during the Annual Meeting.

Your vote is important. To express our appreciation for your participation, Otter Tail Corporation will make a $1 charitable donation to Mental Health America on behalf of every stockholder account that votes. Mental Health America supports mental health understanding, prevention and treatment, all of which have become more vital than ever as a result of the COVID-19 pandemic. Information concerning the matters to be considered and voted upon at the 2021 Annual Meeting along with instructions on how to vote your shares is set out in the attached Notice of 2021 Annual Meeting and Proxy Statement. Please be sure to hold on to your notice or your proxy card (if you received a printed copy of the proxy materials), which has your 16-digit Control Number required to be admitted into the Annual Meeting.

Thank you for your confidence and investment in Otter Tail Corporation.

Nathan I. Partain Chair of the BoardCharles S. MacFarlane

President and Chief Executive Office

NOTICE OF ANNUAL MEETING

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Otter Tail Corporation (the "Corporation") will be held as a virtual-only meeting on Monday, April 12, 2021 at 10:30 A.M. (CDT). You will not be able to attend the Annual Meeting in-person. You can attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting, by visiting www.virtualshareholdermeeting.com/OTTR2021. You will need to have your 16-Digit Control Number included on your Notice or your proxy card (if you received a printed copy of the proxy materials) to join the Annual Meeting. The Annual Meeting will be held to consider and act upon the following proposals:

  • 1. To elect three Directors to Otter Tail Corporation's Board of Directors to serve terms of three years expiring in April 2024 and until their successors are duly elected and qualified.

  • 2. To amend and restate the Articles of Incorporation to increase the maximum number of Directors from nine to eleven.

  • 3. To approve, in a non-binding advisory vote, the compensation provided to the Named Executive Officers as described in the Proxy Statement.

  • 4. To ratify the appointment of Deloitte & Touche, LLP as Otter Tail Corporation's independent registered public accounting firm for the year 2021.

  • 5. To transact such other business as may properly be brought before the meeting.

March 3, 2021

JENNIFER O. SMESTAD

Vice President

General Counsel and Corporate Secretary

Important Notice Regarding the Internet Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 12, 2021: Our Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K are available atwww.ottertail.com/annual.

YOUR VOTE IS IMPORTANT

Please vote your proxy by telephone or the Internet as described in the instructions on the Notice. If you received paper copies of the proxy materials, you could also sign, date and return the accompanying proxy card in the enclosed envelope, which does not require postage if mailed in the United States. If your shares are held of record in a brokerage account, please follow the instructions you receive from your broker. Your broker will submit a proxy card to Otter Tail Corporation reflecting the votes it receives.

The Proxy Statement and Annual Report on Form 10-K were either made available to you over the Internet or mailed to you beginning on or about March 3, 2021. Shareholders who are receiving a paper copy of the Proxy Statement and Annual Report on Form 10-K can elect to receive future reports over the Internet. If you are interested in this option, please contact Equiniti ("EQ") Shareholder Services by calling the toll-free number 800-468-9716 or by logging into your account on Shareowner Online at www.shareowneronline.com.

TABLE OF CONTENTS

Item

Page

Forward - Looking Statements

8

Proxy Statement Questions and Answers

9

Election of Directors

11

Corporate Governance

18

Amendment and Restatement of Articles To Increase Board Size

17

Contact with the Board of Directors

20

Committees of the Board of Directors

20

Director Compensation

21

Security Ownership of Certain Beneficial Owners

22

Compensation Discussion and Analysis

23

Report of Compensation and Human Capital Management Committee

31

Executive Compensation

32

Pay Ratio Disclosure

39

Advisory Vote on Executive Compensation

40

Report of Audit Committee

40

Ratification of Independent Registered Public Accounting Firm

41

Policy and Procedures Regarding Transactions with Related Persons

42

Shareholder Proposals for 2021 Annual Meeting

42

Other Business

42

Appendix A

A-1

FORWARD - LOOKING STATEMENTS

The statements contained in this Proxy Statement about our future performance and operations, including, without limitation, financial and operational results, use of renewable resources and carbon emissions reductions, strategies, visions, prospects, consequences and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission ("SEC"), and available on our website: www.ottertail.com. Inaddition, any forward-looking statements included herein represent our estimates only as of the date hereof and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws.

PROXY STATEMENT QUESTIONS AND ANSWERS

  • Q: Why am I receiving these materials?

  • A: The Board of Directors of Otter Tail Corporation provides these materials in connection with its solicitation of proxies for use at the Annual Meeting of Shareholders to be held on April 12, 2021. As a shareholder, you are invited to attend the Annual Meeting and are entitled to vote on the proposals described in this Proxy Statement.

  • Q: How can I attend the Annual Meeting?

  • A: You can attend the Annual Meeting by logging on to our virtual meeting website at www.virtualshareholdermeeting.com/OTTR2021and following the instructions provided by your broker on the voting instruction card, on your proxy card or on the Notice of Internet Availability of Proxy Materials (the "Notice").

    To participate in the Annual Meeting, you will need the 16-Digit Control Number included on these documents. If you do not have this control number at the time of the meeting, you will still be able to attend virtually, but you will not be able to vote or ask questions. The Annual Meeting will begin promptly at 10:30 a.m. (CDT). We encourage you to access the Annual Meeting prior to the start time. Online check-in will begin at 10:15 a.m. (CDT), and you should allow ample time for the check-in procedures.

  • Q: Why is Otter Tail holding a virtual Annual Meeting?

  • A: We decided to hold a virtual Annual Meeting again this year because of the public health and business risks associated with gathering our management, directors and shareholders for an in-person meeting during the COVID-19 pandemic. In addition to protecting the health of our management, directors and shareholders for this year, hosting a virtual meeting generally provides ease of access, real time communication and cost savings for our shareholders and Otter Tail Corporation, and it facilitates shareholder attendance and participation from any location.

  • Q: How can I ask questions during the Annual Meeting?

  • A: You will be able to submit questions before the meeting, at the time you register. In addition, you may submit questions in real time during the Annual Meeting through the virtual meeting website following the formal business portion of the meeting. The Chair and executive management will answer appropriate questions from shareholders regarding the Corporation. Such questions may be submitted in the field provided in the website during the Annual Meeting. To allow us to answer questions from as many shareholders as possible, we will limit each shareholder to two questions. It will help us if questions are succinct and cover only one topic. Submitted questions should follow our Rules of Conduct in order to be addressed during the meeting. Our Rules of Conduct will be posted on the website before the meeting.

  • Q: What can I do if I need technical assistance during the Annual Meeting?

  • A: If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website's log-in page.

  • Q: If I can't attend the Annual Meeting, how do I vote or listen to it later?

  • A: You do not need to attend the Annual Meeting to vote if you submitted your vote via proxy in advance. A replay of the meeting, including the questions answered during the meeting, will be available onwww.ottertail.com within a few days after adjournment.

    Only common shareholders of record at the close of business on February 12, 2021, are entitled to vote during the meeting or by proxy at the Annual Meeting. As of the record date, 41,510,455 shares of Otter Tail Corporation were issued and outstanding, of which a majority must be present during the meeting or by proxy in order to constitute a quorum for the Annual Meeting. Each shareholder is entitled to one vote per share.

  • Q: What proposals may I vote on at the Annual Meeting?

  • A: You may vote on whether:

    • • To elect three Directors to Otter Tail Corporation's Board of Directors to serve terms of three years expiring in April 2024, and until their successors are duly elected and qualified.

    • To amend and restate the Articles of Incorporation to increase the maximum number of Directors from nine to eleven.

    • • To approve, in a non-binding advisory vote, the compensation provided to the Named Executive Officers as described in this Proxy Statement.

    • • To ratify the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the year 2021.

    • • To transact such other business as may properly be brought before the meeting.

  • Q: How do I vote my shares?

  • A: Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we have sent to shareholders who have not requested printed copies of the proxy materials the Notice containing instructions on how to access this Proxy Statement and our Annual Report via the Internet. Shareholders who have received the Notice will not be sent a printed copy of our proxy materials in the mail unless requested.

    You may vote either during the virtual Annual Meeting or by granting a proxy. If you desire to grant a proxy, you have three voting options:

    • (1) by telephone;

    • (2) by Internet; or

    • (3) by mail.

9

If you intend to vote by proxy, please follow the instructions on the Notice you received for our Annual Meeting of Shareholders. If you received paper copies of our proxy materials, you also received a proxy card or voting instruction card for voting your shares. To register your vote, complete, date and sign the proxy or voting instruction card and return it in the enclosed envelope or vote your proxy by telephone or Internet in accordance with the voting instructions on the card. Voting by proxy will not affect your right to vote your shares if you wish to vote during the virtual meeting.

  • Q. May I change my vote?

  • A. You have the right to revoke your proxy any time before the Annual Meeting by:

    • providing written notice to an officer of Otter Tail Corporation and voting during the Annual Meeting;

    • • submitting another proper proxy by telephone or the Internet; or

    • • submitting a new written proxy bearing a later date at any time before the proxy is voted at the Annual Meeting.

  • Q: How are the votes counted?

  • A: In Proposal 1, the election of Directors, you may vote FOR one or more of the nominees or you may WITHHOLD your vote for one or more nominees. You may vote FOR, AGAINST or ABSTAIN with respect to Proposal 2, the amendment and restatement of the Articles of Incorporation to increase the maximum number of Directors from nine to eleven. You may vote FOR, AGAINST or ABSTAIN on Proposal 3, the non-binding advisory vote on the compensation provided to the Named Executive Officers as described in this Proxy Statement. You may vote FOR, AGAINST or ABSTAIN with respect to Proposal 4, the ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for 2021. If you return your signed proxy card, but do not mark the boxes showing how you wish to vote your shares will be voted FOR all proposals.

    Shares voted as "WITHHOLD" or "ABSTAIN" will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting.

    The impact of a "WITHHOLD" vote, in combination with the majority voting policy is described below. An "ABSTAIN" vote will have the effect of a vote "AGAINST" Proposals 2 through 4.

    If your shares are held in the name of a brokerage firm and you do not provide voting instructions to your broker, your shares will not be voted on any proposal for which your broker does not have discretionary authority to vote. Brokers have discretionary authority to vote on both Proposal 2, the amendment and restatement of the Articles of Incorporation to increase the maximum number of Directors from nine to eleven, and Proposal 4, the ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm, but they do not have discretionary authority to vote on the other proposals. If a broker submits "broker non-votes," meaning a proxy that indicates that the broker does not have discretionary authority as to certain shares to vote on one or more proposals, those shares will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the meeting, but will not be considered as present and entitled to vote with respect to such proposals. As a result, broker non-votes will have no effect on the voting of any of the proposals presented at the Annual Meeting.

  • Q: How many votes are needed to approve each proposal?

  • A: In Proposal 1, the election of Directors, a nominee will be elected by a favorable vote of plurality of the shares of voting stock present and entitled to vote, in person or by proxy, at the Annual Meeting. A plurality means that if shareholders are electing three Directors, the three Director nominees receiving the highest number of votes will be elected. Shareholders do not have the right to cumulate their vote for Directors. Any standing Director candidate who receives a greater number of "WITHHELD" votes than "FOR" votes for his or her election will be required to submit a letter of resignation to the Board for consideration by the Corporate Governance Committee as outlined in the Otter Tail Corporation's Corporate Governance Principles.

    In Proposal 2, the amendment and restatement of the Articles of Incorporation to increase the maximum number of Directors from nine to eleven, the affirmative vote of the holders of the majority (more than 50%) in voting power of the common shares, which are present or represented by proxy and entitled to vote, is required to approve the resolution.

    In Proposal 3, the non-binding advisory vote on the compensation provided to the Named Executive Officers as described in the Proxy Statement, the affirmative vote of the holders of a majority (more than 50%) in voting power of the common shares, which are present or represented by proxy and entitled to vote, is required to approve the resolution.

    In Proposal 4, the ratification of Deloitte & Touche, LLP to serve as the independent public accounting firm, the affirmative vote of the holders of a majority (more than 50%) in voting power of the common shares, which are present or represented by proxy and entitled to vote is required to ratify the appointment.

  • Q: Where and when will I be able to find the results of the voting?

  • A: Preliminary results will be announced at the Annual Meeting of Shareholders. Otter Tail Corporation will publish the final results in a current report on Form 8-K to be filed with the SEC within four business days following the Annual Meeting. You may also find the results on our website www.ottertail.com.

  • Q: Who bears the cost of soliciting votes for the Annual Meeting?

  • A: Otter Tail Corporation will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials. We have engaged Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902 ("Morrow Sodali") to help us solicit proxies from shareholders for a fee of $12,500, plus charges for additional services such as phone calls to stockholders and reimbursement for out-of-pocket expenses. In addition to soliciting proxies by mail and through Morrow Sodali, employees of Otter Tail Corporation may solicit them by telephone or in person. Employees receive no additional compensation for these solicitation activities.

ELECTION OF DIRECTORS

The Board of Directors of Otter Tail Corporation is composed of nine Directors divided into three classes. The members of each class are elected to serve three-year terms with the term of office of each class ending in successive years.

The Board of Directors, upon recommendation of the Corporate Governance Committee, nominates Ms. Karen M. Bohn, Mr. Charles S. MacFarlane and Mr. Thomas J. Webb for re-election to serve three-year terms ending at the time of the Annual Meeting of Shareholders in 2024, and until their successors are duly elected and qualified.

Under Minnesota law, the affirmative vote of a plurality of the common shares present and entitled to vote for Directors is required for the election of the nominees to the Board of Directors. Proxies, unless otherwise directed thereon, will be voted in favor of all nominees. The proxies solicited may be voted for a substitute nominee or nominees in the event that any of the nominees is unable to serve or for good reason will not serve, which is a contingency not now anticipated.

The Board of Directors has adopted a governance principle whereby a Director candidate in an uncontested election who receives a greater number of votes "WITHHELD" from his or her election than votes "FOR" such election must tender his or her resignation for the Board's consideration. After recommendation from the Corporate Governance Committee, the Board will determine whether to accept the resignation and publicly disclose that decision within 90 days from the date of the certification of the election results.

Biographies of the Director nominees and of the continuing Directors are found on the following pages, including an outline of his or her senior leadership roles, qualifications and experience to serve on the Board. Except as otherwise noted, each Director and Director nominee has held the same position or another executive position with the same employer for the past five years.

The Corporate Governance Committee reviews the overall composition of the Board, with the goal of achieving balance and diversity, as discussed under "Board Composition and Director Qualifications" on page 16.

The Board of Directors has determined that, with the exception of Mr. Charles S. MacFarlane, our President and Chief Executive Officer, all of the Directors and Director nominees are independent as defined by the Nasdaq Listing Standards. However, due to Mr. John D. Erickson's longstanding ties to Otter Tail Corporation, as described in his biography, he serves on no standing committees.

The Board of Directors recommends a vote FOR the election of all nominees to the Board of Directors.

Nominees for election for three-year terms expiring in April 2021:

Karen M. Bohn

Edina, Minnesota

Director since: 2003

Age at the time of the Annual Meeting: 67

Board Committees:

  • • Corporate Governance (Chair)

  • • Audit

Other Board Service:

  • • Ameriprise Certificate Company (Chair)

  • • Alerus Financial Corporation** (Governance Chair, Audit)

  • • RiverSource Life Insurance Co. of New York (Audit)

  • • Evangelical Lutheran Church of America Foundation

President of Galeo Group, LLC, a management consulting firm, since 1998.

Senior Leadership Roles

Prior to her role as President of Galeo Group, LLC, Ms. Bohn served at Piper Jaffray Companies between 1976 and 1998 in positions including Chief Administrative Officer from 1988 to 1998, President of Piper Jaffray Companies Foundation from 1993 to 1998, and Chief Executive Officer and the President of Piper Trust Company from 1994 to 1995.

Qualifications and Experience

Ms. Bohn contributes executive leadership experience from her extensive service at Piper Jaffray Companies, where she oversaw a wide range of corporate functions including corporate communications, community affairs, government relations, human resources, enterprise services, strategic and operational planning and retirement plans. The Board also benefits from Ms. Bohn's expertise developed over the course of her career in the financial services sector, as well as insights from her consulting practice in the areas of governance, leadership and strategy.

Charles S. MacFarlane

Fergus Falls, Minnesota Director since: 2015

Age at the time of the Annual Meeting: 56

Board Committees:

  • • None

Other Board Service:

  • • University of North Dakota Alumni Association Foundation

  • • Edison Electric Institute (EEI)

  • • Lake Region Healthcare Corporation Board of Trustees (Finance Committee)Chief Executive Officer since 2015 and President since 2014 of Otter Tail Corporation; Chief Executive Officer since 2007 and President from 2003 to 2014 of Otter Tail Power Company.

Senior Leadership Roles

In addition to his current roles at Otter Tail Corporation and Otter Tail Power Company, Mr. MacFarlane has held a number of other positions, including as Otter Tail Corporation's Chief Operating Officer from 2014 to 2015 and its Senior Vice President, Electric Platform and President, Otter Tail Power Company, from 2003 to 2014. Prior to joining Otter Tail Power Company in 2001, Mr. MacFarlane served as Director of Electric Distribution Planning, Engineering and Reliability at Xcel Energy, Inc. from 2000 to 2001 and as Director of Delivery Construction & Field Operations for Northern States Power Company, a subsidiary of Xcel Energy, Inc., from 1997 to 2000.

Qualifications and Experience

Mr. MacFarlane provides the Board with a direct link to the management team of Otter Tail Corporation and is critical to Board discussions on operations and the development and execution of the strategic direction of Otter Tail Corporation. Mr. MacFarlane also contributes business and utility expertise developed over the course of his career at Otter Tail Power Company and Xcel Energy, Inc. The Board also benefits from Mr. MacFarlane's deep understanding of the policy and regulatory environments and the service territory for Otter Tail Power Company.

Thomas J. Webb

Advisor to a variety of companies, including CenterPoint Energy, Inc.

Board Committees:

  • • Audit

  • • Compensation and Human Capital Management

Other Board Service:

  • • EnerBank USA (Chair) (2002-2018)

  • • Southwest Michigan First (Finance and Audit Committee Chair)

Richland, Michigan Director since: 2018

Age at the time of the Annual Meeting: 68

Retired Executive Vice President and Chief Financial Officer of CMS Energy Corporation, primarily a gas and electric utility, from 2002 to 2017, and Vice Chair during 2017.

Senior Leadership Roles

Prior to his roles at CMS Energy Corporation, Mr. Webb served as Executive Vice President and Chief Financial Officer for The Kellogg Company, a multinational food manufacturer, from 1999 to 2002, and as Chief Financial Officer at Visteon Corporation, a division of Ford Motor Company, from 1996 to 1999. He began his career at Ford Motor Co. in 1977, holding positions of increasing responsibility in finance and management for a period of more than 22 years in the United States and in Europe.

Qualifications and Experience

Mr. Webb contributes executive leadership experience and public company accounting, finance and financial reporting expertise from his years of service as Chief Financial Officer at CMS, Kellogg and Visteon. The Board also benefits from Mr. Webb's comprehensive understanding of utility operations, the utility industry and regulatory accounting from his 15 years at CMS.

Directors with terms expiring in April 2022:

Steven L. Fritze

Retired Chief Financial Officer of Ecolab, Inc., a provider of water, hygiene and energy technologies and services, from 2002 to 2012.

Senior Leadership Roles

  • • Audit (Chair)

  • • Corporate Governance

Other Board Service:

  • • Mortenson Construction, Inc. (Audit

    Chair)

  • • St. Paul and Minnesota Foundation

    (Audit and Finance Chair)

Mendota Heights, Minnesota Director since: 2013

Age at the time of the Annual Meeting: 67

Board Committees:

Dr. Kathryn O. Johnson

Age at the time of the Annual Meeting: 66

Board Committees:

  • • Compensation and Human Capital

    Management

  • • Corporate Governance

Other Board Service:

  • • Goodwill of the Great Plains

  • • South Dakota Board of Water and

    Natural Resources

  • • South Dakota Board of Regents

    (2005-2017) President (2011-2013)

  • • South Dakota Board of Minerals and

    Environment (1995-2005)

Mr. Fritze served in roles with increasing leadership responsibility before retiring as Chief Financial Officer at Ecolab, Inc., including as Senior Vice President of Finance from 2001 to 2002, Vice President and Controller from 1998 to 2001, Vice President and Treasurer, from 1995 to 1998, including a period of serving as Acting Chief Information Officer, and Vice President and Controller of Ecolab's largest division, Ecolab U.S. Institutional Division, from 1989 to 1995.

Qualifications and Experience

Mr. Fritze contributes public company accounting, finance, and financial reporting expertise from his service as Chief Financial Officer of Ecolab, as well as executive leadership experience gained over 32 years of service to Ecolab in a variety of roles. In these positions, Mr. Fritze's duties included responsibility for the control environment, accounting function, decision support analytics, and public company financial disclosures. Mr. Fritze also had accountability for information technology, investor relations, treasury, tax, global shared services and Global Lean Six Sigma. The Board benefits from Mr. Fritze's extensive experience with all aspects of public company financial reporting, control environment of a diverse global business and management of information technology systems. Mr. Fritze has also had extensive experience with mergers and acquisitions.

Hill City, South Dakota Director since: 2013

Owner and Principal of Johnson Environmental Concepts, which specializes in applying geochemistry to resource development in the mining industry and remediation of legacy contamination of soil and water, since 1990.

Senior Leadership Roles

Dr. Johnson owns and is the Principal of Johnson Environmental Concepts. She has also been a principal in Dakota Heartland, Inc. and other real estate development businesses in South Dakota since 1990. Starting in 2017, Dr. Johnson has served on the Pennington County Planning Commission, which deals with land use issues of permitting, platting and zoning. In 2019, Governor Noem appointed her to the South Dakota Board of Water and Natural Resources, which promotes water development projects, implements the state water plan and oversees financial assistance to communities for water and waste projects. She holds a Ph.D. in Geology from the South Dakota School of Mines and Technology.

Qualifications and Experience

Dr. Johnson provides a scientific approach to addressing the issues faced by Otter Tail Power Company and Otter Tail Corporation's manufacturing companies. Through her education, expertise and experience, she provides perspective regarding environmental regulations associated with air, water, land and water management. The Board also benefits from Dr. Johnson's working knowledge of South Dakota state government and an understanding of the communities served by Otter Tail Power Company.

Timothy J. O'Keefe

Grand Forks, North Dakota Director since: 2014

Age at the time of the Annual Meeting: 71

Board Committees:

  • • Compensation and Human Capital

    Management

  • • Corporate Governance

Other Board Service:

  • • Theodore Roosevelt Medora Foundation

  • • First National Bank of Bemidji

    (1983-1997)

Advisor to Longwater Opportunities (LWO), a private equity firm operating in manufacturing markets, since 2015.

Retired Chief Executive Officer of the University of North Dakota Foundation and Executive Vice President of the University of North Dakota Alumni Association, each of which is a non-profit organization, from 2002 to 2014.

Senior Leadership Roles

In addition to his executive leadership experience for non-profit organizations, Mr. O'Keefe has extensive business experience from owning and operating four McDonald's franchises from 1975 to 1996, during which he was involved in marketing and government relations for McDonald's franchisees. Mr. O'Keefe also consulted for major corporations during the period from 1996 to 1998.

Mr. O'Keefe also served as the Fargo Market President and Senior Manager for Alerus Financial, which offers banking, mortgage, wealth management and retirement services, from 1998 to 2002.

Qualifications and Experience

Mr. O'Keefe is an entrepreneur who contributes more than 35 years of senior leadership experience, including overseeing the operations of his own businesses, as well as those of large non-profit organizations. The Board benefits from Mr. O'Keefe's experience in the financial services industry. Mr. O'Keefe also provides an understanding of the regional policy and regulatory environment and the communities served by Otter Tail Power Company.

Directors with terms expiring in April 2023:

John D. Erickson

Fergus Falls, Minnesota Director since: 2007

Age at the time of the Annual Meeting: 62

Board Committees:

  • • None

Other Board Service:

  • • OE Holdings, LLC

  • • North Dakota State University

    Foundation (Nominating and

    Governance Committee)

  • • Lake Region Healthcare Corporation

    Board of Trustees (Chair)

Advisor to ECJV Holding, LLC, a subsidiary of Cascade Investments, LLC, since 2011.

Former President and Chief Executive Officer of Otter Tail Corporation from 2002 to 2011.

Senior Leadership Roles

Having joined Otter Tail Power Company in 1980, Mr. Erickson was appointed to roles of increasing responsibility throughout his career spanning more than 30 years.

Prior to his role as the President and Chief Executive Officer of Otter Tail Corporation, from 1998 to 2000, Mr. Erickson served as the Chief Financial Officer, Vice President of Finance and Treasurer. In 2000, Mr. Erickson was named as the Corporation's Executive Vice President, in addition to his ongoing responsibilities as Chief Financial Officer and Treasurer. Then, in 2001, Mr. Erickson was named as the Corporation's President, and its Chief Executive Officer in 2002.

He served as Otter Tail Power Company's President from 2001 to 2002 and as its Director of Revenue and Market Analysis from 1989 to 1998.

Qualifications and Experience

As former Chief Executive Officer, Mr. Erickson contributes public company executive leadership experience, financial expertise and a deep knowledge of the Corporation's business and the utility industry. During his tenure with the Corporation, he oversaw functions including operations, accounting, financial reporting, finance, and customer energy program marketing. The Board benefits from his comprehensive understanding of regulatory accounting, the regulatory environment, and the service territory for Otter Tail Power Company.

Nathan I. Partain

League City, Texas Director since: 1993

Retired President and Chief Investment Officer of Duff & Phelps Investment Management Co., from 2005 through 2020.

Chair since: 2011

Senior Leadership Roles

Age at the time of the Annual Meeting: 64

Board Committees:

  • • None

Other Board Service:

  • Duff & Phelps Fund Complex *

  • • NW Natural Holding Company**

Mr. Partain recently retired and now serves as a consultant for Duff & Phelps Investment Management Co. He is the retired President and Chief Investment Officer of Duff & Phelps Investment Management Co., as well as the retired President and Chief Executive Officer of DNP Select Income Fund, Inc., a closed-end utility income fund. Prior to joining Duff & Phelps, Mr. Partain held financial and regulatory positions with Gulf States Utilities Company. Mr. Partain is a Chartered Financial Analyst.

Qualifications and Experience

The Board benefits from Mr. Partain's executive leadership and governance expertise, which he has developed over many years of managing and overseeing funds at Duff & Phelps, his financial expertise, and his extensive knowledge of the utility industry gained from over 30 years of providing electric utility investment research and management services to institutional clients of Duff & Phelps.

James B. Stake

Edina, Minnesota Director since: 2008

Retired Executive Vice President of Enterprise Services at 3M Company, a diversified manufacturing company, from 2006 to 2008.

Age at the time of the Annual Meeting: 68

Senior Leadership Roles

Board Committees:

  • • Compensation and Human Capital (Chair)

  • • Audit

Other Board Service:

  • • C.H. Robinson Worldwide, Inc. ** (Audit Chair)

    Prior to his role as Executive Vice President of Enterprise Services, Mr. Stake held various positions of increasing responsibility leading global health care, industrial, and commercial businesses during his more than 30 years with 3M Company. Mr. Stake oversaw multiple business units for 3M, including more than a decade of foreign assignments in Europe and South America.

    Qualifications and Experience

  • • Ativa Medical Corporation (2008-2020)

Mr. Stake contributes more than 30 years of executive leadership experience with a diversified public company during his career at 3M Company, which is particularly relevant to the manufacturing companies at Otter Tail Corporation. He also contributes operational, marketing, and financial expertise from his leadership of these businesses, and has experience overseeing business risk management and information technology systems. The Board also benefits from his perspective on audit committee functions for another public company, based on his service as Audit Chair for C.H. Robinson Worldwide.

*The fund complex consists of registered investment companies that share a common board of directors, of which Mr. Partain is one of ten directors, and together the registered investment companies constitute a single "fund complex" under SEC rules. The registered investment companies are: DNP Select Income Fund Inc., Duff & Phelps Utility and Corporate Board Trust, Inc., DTF Tax-Free Income Inc. and Duff & Phelps Global Utility Income Fund, Inc.

** A public company with securities registered pursuant to section 12 of the Securities Exchange Act of 1934.

BOARD COMPOSITION AND DIRECTOR QUALIFICATIONS

The Corporate Governance Committee reviews with the Board, on an annual basis, existing Directors' skills and qualifications and the priorities for future Director candidates, in the context of the Board's overall composition. Though we currently do not have any racially or ethnically diverse Directors, our goal is a balanced and diverse Board, with members whose collective skills, backgrounds, and experience are complementary and, taken together, cover the areas that impact our businesses. In identifying the pool of potential candidates from which new director nominees are chosen, we include qualified female and racially or ethnically diverse candidates and require search firms to follow a similar process.

We believe our Directors possess the appropriate range and depth of expertise and experience to effectively oversee the Corporation's operations, risk and long-term strategy. The following is a high-level overview of skills and experience of both the nominees and continuing directors:

BOARD PROFILE

Experience of Skill

% of Board Members

Possessing

Experience or Skill

% of Board Members

Possessing

Utility Experience

Technology

Manufacturing Experience

Marketing / Sales

Other Public Company

Governance

Mergers / Acquisitions

Leadership and Strategic

Planning

Human Resources

Financial / Accounting

Public Policy

Tenure

Independence

Gender

Service Territory

0-5 Years over 10 Years

6-10 Years

Independent Not-IndependentMale

Female

Minnesota South Dakota

North Dakota Other

In addition to seeking out director candidates with skills and competencies that are important to our businesses, the Corporate Governance Committee considers factors including, but not limited to: a reputation for integrity, honesty and ethical conduct; demonstrated leadership and excellence in their fields of service; balance of tenure; diversity of background and personal characteristics (including gender, race, ethnicity, sexual orientation and gender identification), industry, geography, professional skills and life experiences; representation of the service territories of Otter Tail Power Company; understanding of relevant industries, technologies, and markets; financial literacy; independence; interest in and ability to understand the various constituencies of the Corporation and to act in the interests of its shareholders; and commitment to regularly attending and participating in meetings of the Board and its committees and annual meetings of shareholders.

AMENDMENT AND RESTATEMENT OF ARTICLES TO INCREASE BOARD SIZE

On February 11, 2021, Otter Tail Corporation's Board of Directors unanimously voted to approve, and to recommend that the Corporation's shareholders approve, an amendment and restatement of the Restated Articles of Incorporation dated July 1, 2009 (the "Articles") to include an amendment to increase the maximum number of directors from nine to eleven (the "Board Size Amendment").

CURRENT LIMITATIONS ON THE NUMBER OF DIRECTORS

The current Board consists of nine directors. In the absence of Cumulative Preferred Shares and/or Cumulative Preference Shares, the Corporation's Articles and the Restated Bylaws dated March 20, 2020 (the "Bylaws") each provide that the Board shall consist of no less than seven nor more than nine directors.

RATIONALE FOR THE BOARD SIZE AMENDMENT

The current size of the Board as prescribed by the Articles is seven to nine directors. The maximum number of directors are currently serving on the Board. The Board believes that the current restriction to nine directors limits the flexibility of the Board to add new directors even if a strong candidate is identified from time to time for succession planning and transition purposes. This candidate may contribute diversity in background (including gender, race or ethnicity) and/or represent one of Otter Tail Power Company's service territories. He or she may expand the Board's financial, technological or public policy expertise, or contribute to its oversight over risk management, human capital management and environmental and social matters. The Board periodically reviews the appropriate number of directors that are required for effectively and efficiently fulfilling the board's responsibilities to the Corporation and its shareholders and the ability to add more than nine directors will enhance the flexibility the Board may need in certain circumstances. See "Board Composition and Director Qualifications" in this Proxy Statement for additional information on how the Board identifies and evaluates its director candidates.

The Board Size Amendment is not expected to make it more or less difficult for a third party to acquire control of Otter Tail Corporation, or discourage a third party from attempting to acquire control of the Corporation. The Board Size Amendment preserves shareholders' and the Board's existing authority to increase or decrease the number of directors. For the Board, this authority is only as permitted by law, and includes the authority to increase or decrease the number of directors within the shareholder-approved range and to remove directors under very limited circumstances as permitted by Section 302A.223 of the Minnesota Business Corporation Act (the "MBCA"). Otter Tail Corporation is not aware of any attempts on the part of a third party to effect a change of control of the Corporation and the Board Size Amendment has been proposed for the reasons stated above and not for any possible anti-takeover effects it may have.

PROPOSED BOARD SIZE AMENDMENT

For the reasons stated above, the Board believes that the Board Size Amendment is in the best interests of Otter Tail Corporation and its shareholders and the Articles, as amended and restated to include the Board Size Amendment, should be approved by the shareholders.

Accordingly, Otter Tail Corporation is asking its shareholders to vote FOR the following resolution at the Annual Meeting:

RESOLVED, That the Restated Articles of Incorporation of Otter Tail Corporation be amended and restated so that Article VI, Division IV, Section E, Subsection 1(a) is amended as follows:

"(1) Except at such times as the holders of Cumulative Preferred Shares and/or Cumulative Preference Shares shall have voting rights for the election of directors, (a) the Board of Directors shall consist of such number of persons, notless than seven (7) nor more than eleven (11), as may be determined by the shareholders from time to time at annual meetings thereof (subject to the authority of the Board of Directors to increase or decrease the number of directors as permitted by law)."

REQUIRED VOTE

This proposal requires shareholder approval in accordance with the provisions of the Articles. Since the Board unanimously recommends that shareholders approve an amendment and restatement of the Articles to include the Board Size Amendment, the affirmative vote of the majority of the common shares present in person or by proxy and entitled to vote at the Annual Meeting may approve this proposal.

The Bylaws will also require the same amendment. The Board has adopted the Board Size Amendment to the Bylaws, in accordance with its authority under the Bylaws and Section 302A.181, Subdiv. 2 of the MBCA, but only subject to shareholder approval of the Articles, amended and restated to include the Board Size Amendment.

If it is approved, the Board Size Amendment would become effective upon the filing of the Articles, as amended and restated, with the Secretary of State of Minnesota, promptly after the 2021 Annual Meeting of Shareholders. The Board Size Amendment will not affect the number of directors who are currently nominated for re-election to the Board of Directors at the 2021 Annual Meeting of Shareholders.

The Board of Directors recommends a vote FOR adoption of the resolution approving the amendment and restatement of Otter Tail Corporation's Restated Articles of Incorporation to include the Board Size Amendment. Adoption of this resolution will require the affirmative vote of the majority of the common shares present in person or by proxy and entitled to vote at the Annual Meeting.

CORPORATE GOVERNANCE

Otter Tail Corporation is committed to sound corporate governance policies and practices that promote effective, transparent and accountable decision making by our Directors and executive officers. The Board believes that good corporate governance is the foundation for ensuring that Otter Tail Corporation is operated in an open, honest and ethical manner and in the best interest of our shareholders. The Corporate Governance Principles, which may be found on the Corporation's website at www.ottertail.com, have been adopted by the Board of Directors of the Corporation to assist Directors in the performance of their duties and the exercise of their responsibilities.

Highlights of our corporate governance policies and practices include:

  • Regular oversight of risk management and significant and emerging risks, including environmental and climate change, and cybersecurity risks;

  • Separate independent Chair and Chief Executive Officer roles, with periodic review of the Board leadership structure;

  • Eight of nine members of the Board of Directors are independent Directors;

  • Comprehensive Director nomination process, with attention to Board refreshment and Board composition;

  • Annual Board and Committee self-evaluations, which are reviewed and facilitated through a third party to enhance candid and thorough feedback;

  • Annual advisory vote on executive compensation;

  • Majority voting policy for the election of Directors in uncontested elections;

  • Director orientation program and continuing Director education opportunities;

  • Independent standing Committees with the authority to obtain independent advisors at the expense of the Corporation as the Committees deem necessary;

  • Compensation and Human Capital Management Committee, whose expanded duties include overseeing the attraction, development and retention of talent and programs and policies relating to diversity, equity and inclusion;

  • Adoption of the Rooney Rule, so that in identifying the pool of potential candidates from which new director nominees are chosen, we include qualified female and racially or ethnically diverse candidates and require search firms to follow a similar process;

  • Regular executive sessions after Board and Committee meetings;

  • Stock ownership guidelines that align Directors' and executive officers' interests with shareholder interests;

  • Direct access to the executive management team for Directors;

  • Annual review of succession plans and development plans for Chief Executive Officer and executive management;

  • No stockholder rights plan ("poison pill"); and

  • For non-employee directors, a limit on board service of no more than three public company boards, including this Board, absent review and approval by the Chairs of the Board and the Corporate Governance Committee. The Chief Executive Officer should not serve on more than two public company boards, including this Board.

BOARD LEADERSHIP

Pursuant to Otter Tail Corporation's Bylaws and Corporate Governance Principles, the Board of Directors determines the best Board leadership structure for Otter Tail Corporation. Otter Tail Corporation has a separate Chair of the Board and Chief Executive Officer, each of whom are elected annually by the Board. Otter Tail Corporation believes that its leadership structure is optimal for Otter Tail Corporation at this time. This structure allows the Chief Executive Officer to focus on managing the businesses of Otter Tail Corporation while the Chair oversees the functioning of theBoard. Both leaders work closely together on Board matters. The Chief Executive Officer's familiarity with the business, and the Chair's independent perspective, strengthen the Board's agenda and discussions.

RISK OVERSIGHT

The Board of Directors oversees the enterprise risk management program for Otter Tail Corporation. The Board of Directors is routinely called upon in the exercise of its business judgment to make complex and evolving risk assessments. Since the beginning of the COVID-19 pandemic, the Board and management have had regular updates to assess COVID-19's variable impact on each of the Corporation's businesses, to try to anticipate rapidly evolving risks to employee health and safety, operations and financial performance, and to develop risk mitigation strategies and business contingency planning.

These actions are in addition to the following practices, structure, and processes, which the Board has established in order to fulfill its risk management responsibilities and oversight of human capital:

  • Executive Risk Committee: The Executive Risk Committee is comprised of the executive officers of the Corporation. The Executive Risk Committee meets quarterly to identify and assess risks, and to ensure adequate mitigation strategies are implemented across the operating companies.

  • • Board Risk Oversight:

    Strategic Plan and Executive Officer Succession Planning: The Board of Directors assesses risks associated with the strategic plan annually and also reviews and discusses succession planning for the Otter Tail Corporation executive officers and other management positions.

    Annual and Quarterly Risk Review: The Board of Directors oversees a complete corporate risk assessment at least annually. The Board also reviews significant and emerging risks, including environmental and climate change, and cybersecurity risks, on a quarterly basis in conjunction with its review of the Business Risk Management report.

  • Committee Risk Oversight: While the Board is ultimately responsible for risk oversight, Otter Tail Corporation's three standing committees assist the Board in fulfilling its oversight responsibilities:

    • The Audit Committee reports to the Board on risks associated with financial reporting and controls, and it also reports to the Board on its review of the enterprise risk management program. The Audit Committee also oversees the Code of Conduct compliance program. The Audit Committee meets quarterly in executive sessions with the Chief Financial Officer, the Vice President of Internal Audit and Business Risk Management and other members of senior management, as well as with the external auditors to discuss our major financial risk exposures.

    • The Compensation and Human Capital Management Committee reports to the Board on risks arising from compensation policies and programs, particularly risks related to incentive and equity-based compensation plans, and it ensures that the Executive Compensation Policy is aligned with performance.

    • The Corporate Governance Committee reports to the Board on risks associated with corporate governance policies and practices; Board and committee organization, process, and structure; succession planning for our Directors, onboarding of new directors and director continuing education. The Corporate Governance Committee also oversees the identification of the pool of potential candidates from which new director nominees are chosen. In addition, the Corporate Governance Committee oversees the comprehensive annual Board, committee and director evaluation process.

DIRECTOR NOMINATION PROCESS

As discussed in greater detail under "Board Composition and Director Qualifications," our goal is a balanced and diverse Board, with members whose collective skills, backgrounds, and experiences are important to our businesses. Accordingly, the Board of Directors has not set minimum standards for director candidates. Rather, it seeks highly qualified individuals with diverse backgrounds and business and life experiences that will enable them to constructively review and guide management of Otter Tail Corporation. The Corporate Governance Committee considers and evaluates potential director candidates and makes recommendations to the full Board of Directors. Any shareholder may submit a recommendation for nomination to the Board of Directors by sending a written statement of the qualifications of the recommended individual to the President and Chief Executive Officer, Otter Tail Corporation, P.O. Box 496, Fergus Falls, MN 56538-0496. For the Board of Directors to consider a nominee recommendation for the 2022 Annual Meeting, shareholders should submit the recommendation and the required information by November 3, 2021 for inclusion in Otter Tail Corporation's Proxy Statement and form of proxy relating to that meeting. The Corporate Governance Committee will use the same process for evaluating all nominees, regardless of whether the nominee recommendation is submitted by a shareholder or some other source.

If a shareholder wants to nominate a candidate for election to the Board of Directors, outside of the Corporation's Proxy Statement, the shareholder must give written notice to the Corporate Secretary of Otter Tail Corporation for the nomination to be properly made. Notice must be received at Otter Tail Corporation's principal executive offices by January 12, 2022 for the candidate to be presented at the 2022 Annual Meeting. The notice must be made in accordance with our Bylaws and must set forth: (i) the name and address of the shareholder who intends to make the nomination and of the nominee or nominees, (ii) a representation that the shareholder is a holder of record of shares of Otter Tail Corporation entitled to vote at the meeting and that the shareholder intends to attend in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder, (iv) such other information regarding each nominee proposed by the shareholder as would have been required to be included in a Proxy Statement filed pursuantto the proxy rules of the SEC had each nominee been nominated, or intended to be nominated, by the Board of Directors, and (v) the consent of each nominee to serve as a Director of Otter Tail Corporation if so elected.

MEETINGS

Directors are expected to attend Board and committee meetings, as well as the Annual Meetings of Shareholders, on a regular basis. The full Board of Directors held a total of five regularly scheduled meetings and one special meeting in 2020. In addition to these meetings, the Board of Directors held a planning retreat with senior management in June 2020. During 2020, the Board of Directors met regularly in executive session with only the independent Directors. Each Director attended at least 75% of the total meetings of the Board of Directors and the meetings of the committees on which he or she served. Each of the Directors attended the Annual Meeting of Shareholders in 2020.

CONTACT WITH THE BOARD OF DIRECTORS

Questions may be sent to the entire Board of Directors, to a particular committee, or to an individual Director. The mailing address is Otter Tail Corporation, Board of Directors, P.O. Box 496, Fergus Falls, MN 56538-0496 and the e-mail address is boardofdirectors@ottertail.com. Although reviewed by the Vice President, General Counsel and Corporate Secretary, all questions are forwarded to the Board of Directors or to the appropriate committee or Director, as determined by the Vice President, General Counsel and Corporate Secretary.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established a standing Audit Committee, Compensation and Human Capital Management Committee, and Corporate Governance Committee whose charters and delegated responsibilities are reviewed annually and can be found at www.ottertail.com.

AUDIT COMMITTEE

Responsibilities: The Audit Committee reviews the financial results of Otter Tail Corporation, reviews accounting, audit and control procedures, and retains and supervises the independent registered public accounting firm. The Audit Committee has oversight responsibility for Otter Tail Corporation's Code of Conduct.

Membership: In 2020, this Committee was made up of four members of the Board of Directors: Ms. Karen M. Bohn, Mr. Steven L. Fritze (Chair), Mr. James B. Stake and Mr. Thomas J. Webb. The Board has determined that all current Committee members are independent Directors as defined by the Nasdaq Listing Standards and SEC regulations. The Board of Directors has determined that Mr. Fritze, Mr. Stake and Mr. Webb each meet the SEC definition of an audit committee financial expert and all members of the committee are financially literate.

Meetings: The Audit Committee held four meetings in 2020. The Audit Committee routinely meets in executive session with internal audit and the independent registered public accounting firm without management present. During 2020, the Committee received regular presentations on new accounting standards affecting Otter Tail Corporation.

For further information on the actions of the Audit Committee, please refer to the Report of the Audit Committee on page 40.

COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE

Responsibilities: In late 2020 the Board also added oversight of human capital management and employee benefit plans to the responsibility of the Committee. As part of its ongoing responsibilities, the Compensation and Human Capital Management Committee reviews and reports to the Board of Directors on all compensation programs, plans and policies involving Otter Tail Corporation's Board of Directors and Otter Tail Corporation's executive officers, and it develops, evaluates and recommends for approval all Otter Tail Corporation equity-based compensation plans. The Compensation and Human Capital Management Committee oversees the administration of the Corporation's stock incentive plans and Executive Annual Incentive Plan. In addition, the Committee oversees employee benefits, and oversees the management of human capital, including measures and objectives related to the attraction, development and retention of talent and programs and policies relating to diversity, equity and inclusion. The Compensation and Human Capital Management Committee periodically retains an outside compensation consultant to advise its decision-making process. The Compensation and Human Capital Management Committee sets compensation for the Directors, subject to ratification by the Board, and compensation for the Chief Executive Officer, the Chief Financial Officer, and the other Named Executive Officers, subject to ratification by a majority of the independent Directors.

Membership: In 2020, this Committee was composed of four members of the Board of Directors: Dr. Kathryn O. Johnson, Mr. Timothy J. O'Keefe, Mr. James B. Stake (Chair) and Mr. Thomas J. Webb. The Board has determined that all Committee members are independent Directors as defined by the Nasdaq Listing Standards and non-employee Directors as defined by rules under Section 16(b) of the Securities Exchange Act of 1934, as amended.

Meetings: The Compensation and Human Capital Management Committee held five meetings in 2020.

For further information on the actions of the Compensation and Human Capital Management Committee, please refer to the Compensation Discussion and Analysis ("CD&A") on page 23 and the Report of the Compensation and Human Capital Management Committee on page 31.

CORPORATE GOVERNANCE COMMITTEE

Responsibilities: The Corporate Governance Committee identifies and recommends to the Board of Directors qualified candidates for election as Directors, Director committee assignments and actions necessary for the proper governance of Otter Tail Corporation and for the evaluation of the performance of the Board of Directors, its Committees and the Chief Executive Officer. With input from the Chief Executive Officer, the CorporateGovernance Committee recommends certain executive officers for annual election. The Corporate Governance Committee reviews issues and developments related to corporate governance practices and makes recommendations to the Board of Directors on changes in structure, rules or practice necessary for compliance and for good corporate governance.

Membership: In 2020, this Committee was composed of four members of the Board of Directors: Ms. Karen M. Bohn (Chair), Mr. Steven L. Fritze, Dr. Kathryn O. Johnson and Mr. Timothy J. O'Keefe. The Board has determined that all committee members are independent Directors as defined by the Nasdaq Listing Standards.

Meetings: The Corporate Governance Committee held three meetings in 2020.

DIRECTOR COMPENSATION

Director compensation is designed to attract and retain qualified, non-employee Directors and to align their interests with those of our shareholders. The Compensation and Human Capital Management Committee periodically reviews compensation practices for non-employee Directors to ensure that Director compensation remains competitive with market practices and commensurate to the responsibilities undertaken by our Directors.

During May, June and July 2020, the non-employee Directors took a 25% reduction in all retainers paid in response to the economic impact of COVID-19. In 2020, a market analysis was conducted by Willis Towers Watson ("Willis"), using data from the National Association of Corporate Directors and the Peer Group (as listed on page 24).

ANNUAL RETAINERS

Notwithstanding the temporary 25% reduction in all retainers described above, normally:

  • • Non-employee Directors, except the Chair, receive an annual retainer of $65,000.

  • • The Chair receives an annual retainer of $130,000.

  • • Each Committee chair currently receives an additional retainer of $14,000 per year, except that the Audit Committee chair's retainer is $20,000.

Directors do not receive a meeting fee for attending Board or standing committee meetings. As an executive officer of Otter Tail Corporation, Mr. MacFarlane does not receive non-employee Director compensation for his service as a member of the Board of Directors.

RESTRICTED STOCK GRANTS

Each non-employee Director receives an annual grant of restricted stock with an approximate value of $80,000 granted under the terms of the 2014 Stock Incentive Plan on the date of the Annual Meeting. Each non-employee Director receives an additional grant of restricted stock with an approximate value of $10,000 for each standing committee on which they serve, and the Chair receives an additional grant of restricted stock with an approximate value of $25,000. All shares of restricted stock awarded to non-employee Directors are eligible for full dividend and voting rights and vest over a period of three years at the rate of 33.3% per year.

Non-employee Directors may elect to receive their annual retainers in the form of cash, stock or a combination of both.

DEFERRED COMPENSATION PLAN

Non-employee Directors may elect to defer the receipt of all or part of their cash compensation pursuant to the Otter Tail Corporation Deferred Compensation Plan for Directors. The deferral may be in the form of cash or stock units. Cash deferrals receive interest at a rate equal to 1% over the prime commercial rate of U.S. Bank National Association. Deferrals in the form of stock units are credited quarterly with dividend equivalents equal to the dividend rate on Otter Tail Corporation's common shares, and the deferred amount is paid out in common shares.

STOCK OWNERSHIP GUIDELINE

Otter Tail Corporation has established a stock ownership guideline for non-employee Directors, who are expected to hold Otter Tail Corporation stock equal to five times the value of the non-Chair annual retainer ($325,000) to be achieved within five years of beginning service on the Board of Directors. All existing non-employee Directors either meet the guideline or are within the five-year period provided to reach the guideline.

DIRECTOR COMPENSATION TABLE

The following table provides summary compensation information for each non-employee Director for the year ending December 31, 2020:

Fees Earned or

Name

Paid in Cash ($)1

Stock Awards ($)2, 3

Total ($)

Karen M. Bohn

74,062

98,677

172,739

John D. Erickson

60,937

80,735

141,672

Steven L. Fritze

79,687

98,677

178,364

Kathryn O. Johnson

60,937

98,677

159,614

Timothy J. O'Keefe

60,937

98,677

159,614

Nathan I. Partain

121,875

107,647

229,522

James B. Stake

74,062

98,677

172,739

Thomas J. Webb

60,937

98,677

159,614

  • (1) Includes the aggregate dollar amount of all retainers earned or paid in cash for services as a Director (both paid and deferred) including annual retainer and chair retainers. Fees reflect a 25% reduction in all retainers paid during May, June and July 2020 - in response to the COVID-19 pandemic.

  • (2) Represents the aggregate grant-date fair value of restricted stock awards granted to non-employee Directors in 2020 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Topic 718, Compensation Stock-Compensation.

  • (3) The number of shares of restricted stock held by each Director at fiscal year-end is as follows: Ms. Bohn, 4,849; Mr. Erickson, 4,049; Mr. Fritze, 4,849; Dr. Johnson, 4,849; Mr. O'Keefe, 4,849; Mr. Partain, 5,183; Mr. Stake, 4,849; and Mr. Webb, 4,299.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Listed in the following table are the number of common shares of Otter Tail Corporation beneficially owned by each Director, director nominee and executive officer named in the Summary Compensation Table, as well as the number of shares owned by all Directors and executive officers of Otter Tail Corporation as a group, as of December 31, 2020. The table also includes those persons known to Otter Tail Corporation to own beneficially (as defined by the SEC for Proxy Statement purposes) more than 5% of the outstanding common shares of Otter Tail Corporation as of the dates in their Schedule 13 filings:

Common Shares of Otter Tail Corporation

*

Amount and Nature of

Percent of

Name of Beneficial Owner

Beneficial Ownership1, 2

Class1

John S. Abbott3

32,855

*

Karen M. Bohn

39,650

*

John D. Erickson

157,605

*

Steven L. Fritze

20,933

*

Kathryn O. Johnson

18,353

*

Charles S. MacFarlane4

224,771

*

Kevin G. Moug5

89,318

*

Timothy J. O'Keefe

15,600

*

Nathan I. Partain6

65,924

*

Timothy J. Rogelstad7

39,637

*

Jennifer O. Smestad8

6,999

*

James B. Stake

42,494

*

Thomas J. Webb

6,500

*

All Directors, director nominees and executive officers as a group (13 persons)

760,639

1.8%

The Vanguard Group9

3,967,248

9.6%

100 Vanguard Boulevard

Malvern, PA 19355-2331

Cascade Investment, LLC10

3,456,499

8.3%

2365 Carillon Point

Kirkland, WA 98033

BlackRock, Inc. 11

2,932,565

7.1%

55 East 52nd Street

New York, NY 10055

Indicates ownership of less than 1% of the total outstanding common shares.

  • (1) Represents common shares beneficially owned both directly and indirectly as of December 31, 2020. Except as indicated by footnotes below, the beneficial owner possesses sole voting and investment powers with respect to the shares shown. No shares owned by any Director or executive officer were pledged as of December 31, 2020. The information provided is based upon 41,469,879 common shares outstanding as of December 31, 2020.

  • (2) Includes common shares held by the Trustee of Otter Tail Corporation's ESOP for the account of executive officers of Otter Tail Corporation with respect to which such persons have sole voting power and no investment power, as follows: Mr. MacFarlane, 2,692 shares; Mr. Moug, 341 shares; Mr. Rogelstad, 2,843 shares; Ms. Smestad, 452 shares; and all Directors and executive officers as a group, 6,328 shares.

  • (3) Includes 1,750 restricted stock units which vested on February 6, 2021 and 6,829 performance shares which vested on February 10, 2021.

  • (4) Includes 2,067 shares owned by Mr. MacFarlane's daughter as to which he, as custodian, has voting and investment power. Includes 7,500 restricted stock units that vested on February 6, 2021 and 27,315 performance share awards that vested on February 10, 2021.

  • (5) Includes 1,449 shares owned jointly with Mr. Moug's wife as to which he shares voting and investment power. Includes 2,350 restricted stock units that vested on February 6, 2021 and 9,252 performance shares that vested on February 10, 2021.

  • (6) Includes 3,000 shares owned jointly with Mr. Partain's wife as to which he shares voting and investment power.

  • (7) Includes 2,190 shares owned jointly with Mr. Rogelstad's wife as to which he shares voting and investment power. Includes 1,700 restricted stock units that vested on February 6, 2021 and 6,829 performance shares that vested on February 10, 2021.

  • (8) Includes 534 shares owned jointly with Ms. Smestad's husband as to which she shares voting and investment power. Includes 47 shares owned by

    Ms. Smestad's daughter, as to which she, as custodian, has voting and investment power. Includes 900 restricted stock units that vested on February 6, 2021 and 4,626 performance shares that vested on February 10, 2021.

  • (9) Based on information in an Amendment No. 9 to Schedule 13G filed by The Vanguard Group ("Vanguard") with the SEC on February 8, 2021 for its holdings as of December 31, 2020. Vanguard reported that it has sole voting power as to 0 shares, shared voting power as to 56,220 shares, sole investment power as to 3,881,094 shares, and shared investment power as to the remainder.

  • (10) Based on information in an Amendment No. 11 to Schedule 13D jointly filed by Cascade Investment, LLC ("Cascade") and William H. Gates, III, with the SEC on February 20, 2020 with respect to their holdings as of February 20, 2020. According to the filing, the common shares owned by Cascade may be deemed to be beneficially owned by Mr. Gates as the sole member of Cascade. Michael Larson, Business Manager and Chief Investment Officer, Cascade Investments, has voting and investment power with respect to the common shares beneficially owned by Cascade. Mr. Larson disclaims beneficial ownership of the common shares beneficially owned by Cascade and Mr. Gates.

  • (11) Based on information in an Amendment No. 6 to Schedule 13G filed by BlackRock, Inc. ("BlackRock") with the SEC on January 29, 2021 for its holdings as of December 31, 2020, BlackRock reported that it has sole voting power as to 2,877,826 shares and sole investment power as to 2,932,565 shares.

The information with respect to beneficial ownership of securities of Otter Tail Corporation is based on information furnished to Otter Tail Corporation by each person included in the table.

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Otter Tail Corporation believes that strong, effective leadership is the cornerstone of its continued growth and success. To be successful, Otter Tail Corporation must be able to attract, retain and motivate highly qualified executive officers with the competencies needed to excel in a rapidly changing marketplace and to understand issues relating to a diverse group of companies in several different industries.

Executive compensation at Otter Tail Corporation is focused on results. Total direct compensation includes base pay, annual cash incentive and stock-based long-term incentive. The mix of pay is designed to reflect a strong bias towards pay for performance by placing a majority of target compensation at risk. The only elements of total direct compensation that are not performance based are base pay and restricted stock units. Annual cash incentive and other stock-based long-term incentive are performance and metric based. The individual performance portion of the annual cash incentive has a discretionary element.

On May 5, 2020, in response to the continued spread of COVID-19 and related economic impacts, the Board of Directors approved a temporary base pay reduction of 25% for the Corporation's Chief Executive Officer and 15% for all of the Corporation's other Named Executive Officers, effective on May 1, 2020 and ending on July 31, 2020. During this time the executives could elect to receive previously earned paid time off (PTO) to replace reduced earnings. This temporary base pay reduction is reflected in the 2020 salaries presented in the Summary Compensation Table but did not reduce the base pay used to calculate incentive targets, severance benefits or retirement benefits. The Board also approved a temporary 25% reduction in its retainers, as described under Director Compensation.

While COVID-19 created tremendous challenges and opportunities for each of Otter Tail Corporation's businesses, the Board maintained the financial measures and performance goals approved at the beginning of 2020, after concluding that the payout was a reasonable reflection of the Corporation's performance and that the executive compensation program remained aligned with our compensation philosophy.

The Board and management will continue to evaluate the Corporation's executive compensation program in light of the volatility and uncertainty created by COVID-19 and to make adjustments as are necessary to ensure that this program continues to fulfill its underlying purpose and philosophy as articulated below.

At the 2020 Annual Meeting of Shareholders, Otter Tail Corporation provided shareholders an advisory vote on executive compensation. 93.5% of shareholders present and entitled to vote (excluding broker non-votes) approved, on an advisory basis, the compensation of Otter Tail Corporation's Named Executive Officers. Otter Tail Corporation conducts an advisory vote on executive compensation annually.

The Compensation and Human Capital Management Committee takes into account the result of the shareholder vote in determining executive compensation policies and decisions. The Compensation and Human Capital Management Committee views the 2020 vote as a strong expression of the shareholders' general satisfaction with Otter Tail Corporation's current executive compensation programs. While the Compensation and Human Capital Management Committee considers this shareholder satisfaction in determining the present framework of executive compensation programs, decisions regarding incremental changes in the compensation programs and individual compensation are made in consideration of Otter Tail Corporation's performance, current economic conditions and individual executive officer performance as described in more detail below.

PURPOSE AND PHILOSOPHY

The Compensation and Human Capital Management Committee of the Board of Directors is responsible for developing and recommending to the Board of Directors the goals and objectives of Otter Tail Corporation's compensation policies and practices for the executive officers, including the following individuals:

  • • Charles S. MacFarlane, our President and Chief Executive Officer.

  • • Kevin G. Moug, our Senior Vice President and Chief Financial Officer.

  • • Timothy J. Rogelstad, our Senior Vice President, Electric Platform, and President, Otter Tail Power Company.

  • • John S. Abbott, our Senior Vice President, Manufacturing Platform, and President, Varistar, which includes our manufacturing and plastics reporting segments.

  • • Jennifer O. Smestad, our Vice President, General Counsel and Corporate Secretary.

These individuals are referred to in this CD&A as the "Named Executive Officers." Each of these Named Executive Officers is included in the Summary Compensation Table, Total Realized Pay and the related tables beginning on page 33.

The Compensation and Human Capital Management Committee has adopted an Executive Compensation Policy, which outlines the overall executive compensation philosophy of Otter Tail Corporation and describes the components of executive compensation for executive officers.

In accordance with its Executive Compensation Policy, Otter Tail Corporation provides competitive compensation to its executive officers by combining base pay, annual cash incentive, stock-based long-term incentive, retirement plans and competitive health, dental, paid time off (PTO) and other traditional benefits.

  • • Base pay is designed to be market competitive and to reflect tenure, experience, skill set and individual performance.

  • • Annual cash incentive awards are designed to reward executives for Otter Tail Corporation's current year financial success and recognize the responsibilities of the executive officers for meeting Otter Tail Corporation's financial performance goals.

  • • Stock-based long-term incentive awards provided under the 2014 Stock Incentive Plan focus on long-term performance by aligning the executive officers' long-term financial interests with shareholders' interests.

  • • Retirement plans are provided to encourage long tenure among the executive officers.

  • • Health, PTO, dental and other benefits are designed to be competitive with companies with whom Otter Tail Corporation competes for executive talent.

The key elements of our executive compensation philosophy are:

  • • Pay is performance-based - Approximately 67% of executive officer target direct compensation is at risk and is contingent on company performance.

  • • Incentives are aligned with our business strategy. Performance goals and targets are aligned with our annual business plan, as well as our long-term growth model and strategic priorities.

  • • Safety is a metric for annual incentive pay. Safety is one of the Corporation's core values and the Corporation establishes safety targets to drive safe behaviors at all of our operating companies, for all of our employees.

Compensation policies promote accountability and mitigate incentive risks. For example:

  • • We place caps on incentive payouts - Our annual incentive and performance share awards are designed to pay out at a maximum of 190% and 150% of target respectively.

  • • Our Clawback Policy provides that, after an accounting restatement, Otter Tail Corporation will attempt to recoup amounts paid to current and former executive officers under incentive plans during the prior three years if those amounts would not have been paid based on the restated financial statements.

  • • Stock ownership ensures executives' long-term interest in the Corporation. We require all of our executive officers to own a meaningful amount of Otter Tail Corporation stock, as described under "Stock Ownership Guidelines."

MARKET CONDITIONS AND PEER GROUP

The Compensation and Human Capital Management Committee periodically retains a compensation consultant to provide market-based compensation data in connection with its consideration of the compensation of the executive officers. The Compensation and Human Capital Management Committee has retained Willis as its compensation consultant to assess the competitiveness of the compensation provided to executive officers of Otter Tail Corporation taking into consideration current market conditions.

The Compensation and Human Capital Management Committee, with Willis' assistance, uses this market-based compensation data to compare the compensation provided to the executive officers in the areas of total remuneration, annual incentive and long-term incentive. This information is also used in evaluating other components of executive compensation and practices, including incentive metrics, stock ownership guidelines and compensation policy matters. The analysis compares both the structure of compensation and the amount of compensation provided to each of the executive officer positions.

The Compensation and Human Capital Management Committee, in consultation with Willis, used published survey data (including the 2017 Willis Towers Watson Energy Services Survey, the 2017 Mercer Executive Survey - Energy Sector and the Willis Towers Watson CDB General Industry Survey) as the primary benchmark to evaluate 2018 executive compensation levels, with Peer Group data used as reference for validation of thesurvey data. This evaluation also served as the foundation for the 2019 and 2020 compensation decisions, along with advice from Willis as to general market trends. Willis found that the compensation structure continues to be in line with market practice.

Willis created a peer group of publicly traded utility, manufacturing and distribution companies of comparable size, heavily weighted to electric utilities to reflect the relative size of Otter Tail Corporation's operating companies and taking into account other considerations that Willis deemed relevant such as geographic location (the "Peer Group"). The Peer Group is reviewed annually by the Compensation and Human Capital Management Committee and changes, if necessary, are made to it.

The 2020 Peer Group consisted of the following companies:

Company Name

SIC Code (Primary)

ALLETE, Inc.

4931 Electric and other services combined

Apogee Enterprises, Inc.

3231 Glass products made of purchased glass

Avista Corp.

4931 Electric and other services combined

Black Hills Corporation

4911 Electric services

Chart Industries, Inc.

3443 Fabricated plate work (boiler shops)

El Paso Electric Co.

4911 Electric services

ESCO Technologies, Inc.

3825 Instruments to measure electricity

Franklin Electric Co., Inc.

3621 Motors and generators

Graco Inc.

3561 Pumps & pumping equipment

IDACORP, Inc.

4911 Electric services

MGE Energy Inc.

4931 Electric and other services combined

Northwest Natural Gas Company

4924 Natural gas distribution

Northwestern Corp.

4931 Electric and other services combined

ONE Gas, Inc.

4924 Natural gas distribution

PNM Resources, Inc.

4911 Electric services

Portland General Electric Co.

4911 Electric services

Tennant Company

3580 Refrigeration & service industry machinery

Unitil Corp.

4931 Electric and other services combined

There were no changes between the 2019 and 2020 Peer Groups, but the 2021 Peer Group will remove El Paso Electric Company, due to consolidation, and will replace Northwest Natural Gas Company with its parent, Northwest Natural Holding Company.

In addition to market-based compensation data, the Compensation and Human Capital Management Committee considers individual performance, historical compensation, internal equity and regional information. The Compensation and Human Capital Management Committee also received compensation recommendations from Mr. MacFarlane for Mr. Moug, Mr. Rogelstad, Mr. Abbott and Ms. Smestad. The Compensation and Human Capital Management Committee may, but is not required to, consider the recommendations.

The Compensation and Human Capital Management Committee annually reviews its engagement with Willis and assesses Willis' independence as a compensation consultant. In 2020, Willis provided services to Otter Tail Corporation totaling $327,873, of which $90,888 was for executive compensation consulting for the Compensation and Human Capital Management Committee. Fees for other services totaled $236,985, which included Property & Casualty Insurance brokerage.

The decision to engage Willis for these other services was recommended by management, subject to the Compensation and Human Capital Management Committee's approval. According to Willis' consulting independence protocols, the Willis personnel who provide the brokerage services operate separately and independently of the Willis advisers who perform executive compensation-related services. Those executive compensation advisers may not serve in broader relationship-management roles, and the compensation paid to those advisers is not directly tied to fees paid by Otter Tail Corporation. Upon review, the Compensation and Human Capital Management Committee concluded that any potential conflicts of interest were mitigated by these protocols. In reaching this conclusion, the Compensation and Human Capital Management Committee considered factors relevant to Willis' independence from management, including the six factors set forth in the Nasdaq Listing Standards.

ELEMENTS OF EXECUTIVE COMPENSATION

Base Pay

Base pay is set with reference to the market for similar jobs in the utility and general industry sectors as determined by the survey data. An individual executive's base pay also takes into consideration tenure, experience, skill set and individual performance.

Annual Cash Incentive

The Otter Tail Corporation Executive Annual Incentive Plan provides annual cash incentives to the executive officers for achieving annual performance targets for Otter Tail Corporation and its two platforms, the Electric Platform, and the Manufacturing Platform, depending on the executive officer's position and responsibilities. The annual cash incentive is designed to place a significant portion of each executive officer's annual cash compensation "at risk" depending upon the financial and workplace safety performance of Otter Tail Corporation for that year and on the executive officer's individual performance. The financial targets are aligned with the annual budget approved by the Board of Directors. The target annual cash incentive for each executive officer is measured as a percentage of the annualized base amount paid to Participants as of December 31, ranging from 50% to 100% of base pay. The target for annual cash incentive is set with reference to the market data for similar jobs in the utility and general industry sectors as determined by the published survey data, with Peer Group data used as reference for validation of the survey data.

The Compensation and Human Capital Management Committee sets threshold and maximum performance levels in addition to the target performance levels for the financial measures to incent the executive officers to strive for the best possible performance in a difficult year and a maximum performance level to reward exceptional performance. The annual cash incentive for these financial measures is capped at 200% of target.

Bonuses paid to each of the Named Executive Officers are based in part upon the achievement of individual goals established at the beginning of the year, and individual performance as determined by the Chief Executive Officer, subject to approval by the Compensation and Human Capital Management Committee and ratification by the independent members of the Board of Directors, for each Named Executive Officer except for the Chief Executive Officer, whose bonus was determined using the same criteria by the Compensation and Human Capital Management Committee, subject to ratification by the independent members of the Board of Directors.

As noted above, the Executive Annual Incentive Plan includes a non-financial measure for workplace safety. One of Otter Tail Corporation's five core values is safety. Otter Tail Corporation strives to provide safe workplaces and requires safe work practices throughout its businesses. The Compensation and Human Capital Management Committee believes that management's commitment to workplace safety is critical to achieving Otter Tail Corporation's goals regarding workplace safety. Safety is measured against the weighted average case rate for the industries in which Otter Tail Corporation and its subsidiaries operate. Subject to the Compensation and Human Capital Management Committee discretion, the incentive for safety is paid if the weighted average composite case rate of Otter Tail Corporation and its subsidiaries for the year is less than the weighted average composite case rate for the past three years for the industries in which Otter Tail Corporation and its subsidiaries operate. The annual cash incentive for safety measures is capped at 100%.

2020 Outcomes

For 2020 the financial measures for the Executive Annual Incentive Plan were:

  • • Corporate Earnings per Share;

  • • Corporate Return on Equity;

  • • Electric Platform Net Income;

  • • Electric Platform Return on Equity; and

  • • Manufacturing Platform Net Income.

These are financial measures that Otter Tail Corporation uses to compare results of operations from period to period for compensation purposes. In determining whether a financial measure has been met for the year, actual performance for each measure on a GAAP basis may be adjusted by the following items: (1) unusual, extraordinary or nonrecurring events; (2) changes in applicable accounting rules or principles or in the Corporation's methods of accounting; (3) results of discontinued operations; (4) asset write downs; (5) litigation or claim judgments or settlements; (6) changes in tax law affecting reported results; (7) severance, contract termination and other costs related to exiting business activities; (8) acquisitions; (9) gains or losses from the disposition of businesses or assets; (10) gains or losses from the early extinguishment of debt; and (11) other publicly identified one-time items. The Compensation and Human Capital Management Committee may exercise discretion and decline to make an adjustment for one or more of these items whether the exercise of that discretion reduces or increases the payout. In 2020, there were no adjustments to GAAP results for purposes of determining awards under the Executive Annual Incentive Plan.

The following tables show a breakdown of financial, workplace safety and individual performance goals for each Named Executive Officer's annual cash incentive for 2020, actual performance against each goal and actual payout for each Named Executive Officer as a percentage of their target award. Amounts of actual payouts may be found in the Summary Compensation Table, under the heading "Non-Equity Incentive Plan Compensation."

Weighting

Target

ExecutiveAward as % of SalarySafety7

Corporate CorporateElectricElectricManuf.

Ind.

EPS1

ROE2

NI3

ROE4

NI5

Perf.6

CorporateElectricManuf.

Charles S. MacFarlane 100% 40% 40%

10% 10%

Kevin G. Moug 55% 40% 40%

10% 10%

Timothy J. Rogelstad 50% 20%

25%

25%

20%

10%

John S. Abbott 55% 30%

40%

20%

10%

Jennifer O. Smestad 50% 35% 35%

20% 10%

Safety Goals7 vs. ActualPerformance Goals vs. Actual Performance

Performance (Payout 0% or 100%)

Payout

Range as

Ind.

% of

Corporate

Corporate

Electric

Electric

Manuf.

Perf.

Performance Levels

Target

EPS1

ROE2

NI3

ROE4

NI5

Payout 6

Corporate

Electric

Manuf.

Maximum

200 %

$2.42

12.00%

$73,900

10.50%

$36,450

200%

2.6

1.35

3.6

Target

100 %

$2.30

11.00%

$69,700

9.50%

$32,550

100%

2.6

1.35

3.6

Threshold

50 %

$2.18

10.00%

$65,500

8.50%

$28,640

-%

2.6

1.35

3.6

2020 Actual (GAAP)

$2.34

11.63%

$66,778

9.19%

$38,630

165%

1.4

1.20

1.8

2020 Actual Payout as % of Target

136%

163%

65%

85%

200%

165%

100 %

100%

100%

  • (1) Corporate Earnings Per Share. A weighted percentage of each Named Executive Officer's annual cash incentive depends on Corporate Earnings Per Share. Each Named Executive Officer receives the target payout if Otter Tail Corporation achieves the targeted Corporate Earnings Per Share. The target award amount is reduced incrementally for performance below the target to the threshold and increased incrementally for performance above the target to the maximum. The Corporate Earnings Per Share exceeded the target level in 2020. Payout was at 136% of target.

  • (2) Corporate Return on Equity. A weighted percentage of the annual cash incentive for Mr. MacFarlane, Mr. Moug and Ms. Smestad depends on Corporate Return on Equity. They receive the target payout if Otter Tail Corporation achieves the targeted Corporate Return on Equity. The target award amount is reduced for performance below the target and increased for performance above the target. The Corporate Return on Equity exceeded the target level in 2020. Payout was 163% of target.

  • (3) Electric Platform Net Income. A weighted percentage of the annual cash incentive for Mr. Rogelstad depends on Electric Platform Net Income. He receives the target payout if the Electric Platform achieves its targeted Net Income. The target award amount is reduced for performance below target and increased for performance above the target. The Electric Platform Net Income exceeded the threshold level in 2020. Payout was 65% of target.

  • (4) Electric Platform Return on Equity. A weighted percentage of the annual cash incentive for Mr. Rogelstad depends on Electric Platform Return on Equity. He receives the target payout if the Electric Platform achieves its targeted Return on Equity. The target award amount is reduced for performance below target and increased for performance above the target. The Electric Platform Return on Equity exceeded the threshold level for 2020. Payout was 85% of target.

  • (5) Manufacturing Platform Net Income. A weighted percentage of the annual cash incentive for Mr. Abbott depends on Manufacturing Platform Net Income. He receives the target payout if the Manufacturing Platform achieves its targeted Net Income. The target award amount is reduced for performance below target and increased for performance above the target. The Manufacturing Platform Net Income exceeded the maximum level for 2020. Payout was 200% of target.

  • (6) Individual Performance. Each Named Executive Officer receives a weighted percentage of the annual cash incentive based upon individual performance. The actual amount of the award will be determined by the Chief Executive Officer, who may award up to 200% of the target amount, and the award is subject to approval by the Compensation and Human Capital Management Committee and ratification by the independent members of the Board of Directors. The Chief Executive Officer's individual performance award is determined by the Compensation and Human Capital Management Committee, subject to ratification by the independent members of the Board of Directors. Payout based on individual performance averaged 165% of target for the Named Executive Officers in 2020.

  • (7) Safety Incentive. Each Named Executive Officer receives 10% of the total target payout if Otter Tail Corporation (Mr. MacFarlane, Mr. Moug and Ms. Smestad), the Electric Platform (Mr. Rogelstad) and the Manufacturing Platform (Mr. Abbott) achieve their respective targets for workplace safety. The safety target was met by Corporate, as well as the Manufacturing and Electric Platforms in 2020 and payout was at 100% of target.

Long-Term Incentives

Long-term incentive compensation for executive officers consists of performance share awards and restricted stock unit awards granted by the Compensation and Human Capital Management Committee under the Otter Tail Corporation 2014 Stock Incentive Plan.

The performance share awards are designed to tie the long-term incentives for the executive officers to Otter Tail Corporation stock performance and to further align the interests of the executive officers with shareholders.

  • • 50% of performance shares awarded to the Named Executive Officers vest based on Otter Tail Corporation's relative total shareholder return as compared to the total shareholder return ("TSR") of companies in the Edison Electric Institute Index ("EEI Index") for the three-year period beginning on the first day of the year in which the grant is awarded. The EEI Index is chosen because it is the sector that includes Otter Tail Corporation common shares. Total shareholder return (for both Otter Tail Corporation and the Peer Group) is determined by comparing the stock price appreciation plus the value of dividends reinvested over the three-year period. There were 39 members in the index as of December 31, 2020.

  • • 50% of performance shares awarded to the Named Executive Officers vest based on achieving targets for three-year adjusted Return on Equity ("ROE"). For purposes of calculation, three-year adjusted ROE is a non-GAAP measure which is equal to the average of adjusted ROE for each of the three years in the performance period. For each of those three years, adjusted ROE is equal to Otter Tail Corporation's adjusted earnings divided by the 13-month average of total outstanding common equity using the 13 months at the end of the fiscal year. Adjustments to earnings may include: (1) unusual, extraordinary or nonrecurring events; (2) changes in applicable accounting rules or principles or in the Corporation's methods of accounting; (3) results of discontinued operations; (4) asset write downs; (5) litigation or claim judgments or settlements; (6) changes in tax law affecting reported results; (7) severance, contract termination and other costs related to exiting business activities; (8) acquisitions; (9) gains or losses from the disposition of businesses or assets; (10) gains or losses from the early extinguishment of debt; and (11) other publicly identified one-time items. The Compensation and Human Capital Management Committee may exercise discretion and decline to make an adjustment for one or more of these items whether the exercise of that discretion reduces or increases the payout.

In both cases, the number of shares vested increases linearly if the target is exceeded and decreases linearly for performance below target but above threshold.

The restricted stock unit awards are also designed to align the interest of the executive officers with that of shareholders. They do so by rewarding continuity of service of the executive officers since the restricted stock unit awards vest ratably over a period of four years, and unvested restricted stock units are forfeited upon voluntary termination. In addition, the value of shares awarded increases or decreases with the return provided to shareholders through stock price appreciation.

In 2020, the Compensation and Human Capital Management Committee set targeted amounts for long-term incentive awards with reference to the market data for similar jobs in the utility and general industry sectors as determined by the published survey data, with Peer Group data used as reference for validation of the survey data.

  • • For performance shares, the target number of shares for each executive officer was calculated in part by dividing the targeted value delivered for each executive officer, which is determined using a market-based compensation analysis, by an indicative grant-date fair value based on a Monte-Carlo simulation model and on the present value of the return-on-equity component (excluding dividends). This blended rate was $45.78.

  • • For restricted stock units, the number of shares actually awarded to each executive officer was calculated by dividing the targeted value delivered for each executive officer, which is determined using a market-based compensation analysis, by the average closing per share price of Otter Tail Corporation common shares during the 20 trading days following January 1, 2020 ($52.70).

2020 Long-Term Incentive Awards - Performance Share Grants

The Compensation and Human Capital Management Committee approved, and the independent members of the Board of Directors ratified, the grants of performance shares on February 12, 2020. The performance shares are presented in the Grants of Plan-Based Awards Table. The three-year performance period for these awards is from January 1, 2020 through December 31, 2022. The actual payment of common shares may range from 0% to 150% of the target amount and will be paid in 2023.

2020 Long-Term Incentive Award - TSR

<>

Threshold

Target

Maximum

Performance Goal - Three-Year TSR performance relative to peer group

<25th percentile

25th percentile

50th percentile

75th percentile or greater

Payment Levels -

% of target shares

0%

25%

50%

75%

2020 Long-Term Incentive Award - Adjusted ROE

<>

Threshold

Target

Maximum

Performance Goal -Three-Year Adjusted ROE

<8.75%

8.75%

10.25%

11.25%

75%

Payment Levels -% of target shares

0%

25%

50%

For 50% of the performance shares granted, the target amount will be paid if the total shareholder return for Otter Tail Corporation is at the 50th percentile of the total shareholder returns of the companies that comprise the EEI Index over the three-year period or if the executive retires (Mr. Moug only). The threshold performance level is set at the 25th percentile of the total shareholder return and the maximum performance level is set at the 75th percentile of the total shareholder return. Payment is capped at the target amount should total shareholder return be negative.

Otter Tail Corporation believes the target is appropriate as it indicates performance consistent with the sector over the three-year performance period. Stronger-than-sector performance is awarded with additional shares. Weaker-than-sector performance is penalized, with the executive officers receiving fewer or no shares. The performance shares, to the extent they become payable, are paid in common shares of Otter Tail Corporation.

Whether the remaining 50% of the performance shares granted become payable will be based upon the three-year adjusted ROE of Otter Tail Corporation as compared to the established target. The target is established by the Compensation and Human Capital Management Committee based on an evaluation of prior years' annual adjusted ROE, Otter Tail Power Company authorized return on equity and EEI Index and regional peer utility return on equity history and trend. The actual payment of common shares may range from 0% to 150% of the target amount and will be paid in 2023. The target amount will be paid if the three-year adjusted ROE for Otter Tail Corporation is at the target performance (10.25%) or if the executive retires (Mr. Moug only). The threshold performance level is set at 8.75% and the maximum performance level is set at 11.25%. Otter Tail Corporation believes the target is appropriate as it indicates performance that is above the median return on equity performance in our industry. Stronger-than-target performance is rewarded with additional shares. Weaker-than-target performance is penalized with the executive officers receiving fewer or no shares. The performance shares, to the extent they become payable, are paid in common shares of Otter Tail Corporation.

2018-2020 Performance Share Outcomes

The table below summarizes the goals for three-year TSR, and three-year adjusted ROE, established for the performance shares granted in 2018, with a performance period from January 1, 2018 through December 31, 2020, and the combined payout. Three-year TSR relative to peers exceeded the threshold performance level. Three-year ROE on GAAP basis was 11.60%. Three-year adjusted ROE, which excludes the impact of ongoing costs related to discontinued operations and the effect of the Tax Cuts and Jobs Act on deferred tax balances, was above maximum, and the resulting combined payout exceeded the target.

Combined

% Payout

Threshold

8.25%

EEI Peer Group Median

15.80%

Target

9.75%

OTC Actual

10.60%

Actual*

11.60%

Percentile Ranking to EEI

35.14%

Maximum

10.75%

Payout % (0-150%)

70.28%

Payout % (0-150%)

150.00%

110.14%

% Weighting for 2018-2020 Award

50.00%

% Weighting for 2018-2020 Award

50.00%

Three-Year TSR

Three-Year Adjusted ROE

* The actual three-year adjusted ROE presented in the table is a non-GAAP financial measure. This measure should be considered a supplement to, and not a substitute for, the most directly comparable GAAP financial measure. For a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP counterpart, see Appendix A.

2020 Long-Term Incentive Awards - Restricted Stock Unit Grants

The Compensation and Human Capital Management Committee approved, and the independent members of the Board of Directors ratified, the grants of restricted stock units on February 12, 2020. The restricted stock units are presented in the Grants of Plan-Based Awards Table. The units vest at a rate of 25% per year over a four-year period with the first quarter vesting on February 6, 2021, and the remaining quarters on the same date in 2022, 2023 and 2024. They vest in full upon retirement except that, if Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott or Ms. Smestad retires on or before June 30 of the calendar year that includes the grant date, the shares vested will be prorated according to the number of months worked in the year of grant divided by 12. Following the grant date, the executive officers receive cash payments equal to the amount of cash dividends that would have been paid if shares had been issued instead of restricted stock units, subject to forfeiture in certain circumstances.

Other Benefits

The executive officers receive health, dental, life, PTO and other traditional benefits identical to or consistent with the non-executive employees of Otter Tail Corporation.

Retirement Income and Deferred Compensation

Otter Tail Corporation believes that long-term service by its executive officers has been fundamental to its success. Accordingly, Otter Tail Corporation provides executive officers security in retirement through its pension and supplemental retirement plans. The Named Executive Officers, except for Mr. Abbott, participate in the plans related to retirement income. Retirement benefits for Mr. Abbott and Ms. Smestad are described separately below.

Retirement income is provided to certain executive officers through the Otter Tail Corporation Pension Plan ("Pension Plan") and non-qualified Executive Survivor and Supplemental Retirement Plan ("ESSRP"). Combined, these plans deliver a defined pension benefit that increases with years of service and compensation. A further description of the benefits under these plans is in the narrative description to the Pension Benefits Table beginning on page 37.

Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad participate in the Executive Restoration Plus Plan ("ERPP"), which was adopted in 2012 for executive officers and certain others who are not eligible to participate in the Pension Plan or the ESSRP. Subject to its annual discretion, Otter Tail Corporation will contribute a sum equal to 6.5% of annual compensation for the plan year in excess of Internal Revenue Code Section 401(a)(17) compensation limit in effect for that year plus 3% of annual compensation to retirement accounts for Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad, provided they each are employed on the last day of the plan year. Annual Compensation is comprised of earnings (base and annual incentive compensation) as reflected on Internal Revenue Service Form W-2, including elective contributions to a qualified or non-qualified retirement plan or cafeteria plan. Contributions will be made for partial years when they retire. Mr. MacFarlane and Mr. Rogelstad also receive a special contribution to offset compensation loss resulting from freezing the ESSRP in 2019, described further below. A further description of the benefits under the ERPP is found beginning on page 36. Investment options for ERPP contributions and 2020 rates of return are as follows:

2020 Rate

2020 Rate

Investment Options

of Return

Investment Options

of Return

Invesco Stable Return

2.13%

Artisan Int'l Fund Instl

7.82%

TCW MetWest Total Return

9.18%

Legal & General MSCI AC World ex USA CIT

10.91%

PIMCO All Asset Instl

8.41%

SSGA Target Retirement Income K

9.71%

Fidelity US Bond Index

7.80%

SSGA Target Retirement 2020 K

11.11%

JPMorgan Large Cap Growth R6

56.42%

SSGA Target Retirement 2025 K

15.03%

Oakmark Fund Investor

12.90%

SSGA Target Retirement 2030 K

17.51%

Legal & General S&P 500 CIT

18.42%

SSGA Target Retirement 2035 K

18.39%

Fidelity Mid Cap Index

17.11%

SSGA Target Retirement 2040 K

18.93%

JPMorgan Small Cap Growth R6

59.96%

SSGA Target Retirement 2045 K

19.44%

Fidelity Small Cap Index

19.99%

SSGA Target Retirement 2050 K

19.85%

Goldman Sachs Small Cap Value Instl

2.06%

SSGA Target Retirement 2055 K

19.83%

Dodge & Cox Int'l Stock

2.10%

SSGA Target Retirement 2060 K

19.83%

On April 20, 2020, the Board of Directors of the Corporation amended and restated the ERPP to (i) change the definition of "retirement age," under most circumstances, from age 62 to the earlier of age 62 or qualifying for normal or early retirement under any retirement plan of Otter Tail Corporation that is applicable to the participant, and (ii) remove the language in the ERPP delaying payment if the payment is non-deductible under section 162(m) of the Internal Revenue Code, in response to changes made under the Tax Cuts and Jobs Act of 2017. Certain administrative amendments were also made to the ERPP.

In December 2019, the Board amended and restated the ESSRP, freezing participation in and benefit accruals under the restoration benefit component of the ESSRP as of December 31, 2019 for all participants except Mr. Moug, who is a grandfathered participant. To offset the resulting retirement compensation loss, Mr. MacFarlane and Mr. Rogelstad began participating in the ERPP in 2020, and a special employer contribution will be made annually to Mr. MacFarlane and Mr. Rogelstad's ERPP accounts until they retire, or reach age 62, whichever comes first. The ESSRP freeze and the special employer contributions are described under "Pension, ESSRP and ERPP Plans" beginning on page 36.

Mr. Moug may elect to participate in a non-qualified deferred compensation plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan offers a relatively low cost, competitive benefit consistent with plans offered by other employers. Participation in the Deferred Compensation Plan is limited to the executive officers of Otter Tail Corporation, other than officers who may defer compensation under the ERPP, and certain other employees of Otter Tail Corporation and its subsidiaries. Under the Deferred Compensation Plan, participants may defer up to 50% of their base pay and 100% of their annual cash incentive compensation. The amounts deferred are segregated into one or more accounts chosen by the participant and earn a return based on the performance of the investment option chosen by the participant. Each participant is solely at risk for investment returns. Investment options for the Deferred Compensation Plan and 2020 rates of return are as follows:

2020 Rate

Investment Options

of Return

Select Bond

8.98%

Large Cap Core Stock

22.74%

Growth Stock

34.97%

Index 500 Stock

18.18%

MidCap Growth Stock

25.41%

International Equity

(2.71%)

Deferred contributions are made pre-tax. There are no Otter Tail Corporation contributions to the Deferred Compensation Plan for executive officers.

Otter Tail Corporation also provides a 401(k) Retirement Savings Plan in which the employees of Otter Tail Corporation, including the Named Executive Officers, may participate. The plan permits all employees to set aside a portion of their income into the 401(k) Retirement Savings Plan and Otter Tail Corporation matches 50% of the first 5% set aside by an employee up to the statutory maximum. Employees hired after September 1, 2006, may be awarded an enhanced employer contribution. In 2020, that award was 4%. The participation of the executive officers is on the same terms as other participants in the plan.

Severance Benefits

Otter Tail Corporation has entered into change-in-control severance agreements with each of the executive officers, which provide financial protection in the event of a change in control that disrupts the executive officer's career. These agreements are designed to attract and retain high caliber executive officers, recognizing that change-in-control protections are commonly provided at comparable companies with which Otter Tail Corporation competes for executive talent. In addition, the change-in-control protections will enhance the impartiality and objectivity of the executive officers in the event of a change in control situation and better ensure that shareholder interests are protected. The protections contained in the change-in-control agreements provide for a "double trigger," which means that there must be both a change in control and a termination of employment for the provisions to apply. A more complete description of the change-in-control agreements is beginning on page 38.

Otter Tail Corporation also provides severance benefits to executive officers upon termination from employment under certain circumstances not involving a change in control pursuant to employment agreements or, in lieu of such agreements, an Executive Severance Plan adopted in February 2015. The employment agreements and the Executive Severance Plan are more fully described in the tabular disclosure in this Proxy Statement beginning on page 39.

EXECUTIVE COMPENSATION POLICIES

Stock Ownership Guidelines

Otter Tail Corporation has established common share ownership guidelines to ensure that the executive officers remain focused on long-term shareholder value. The ownership guidelines provide that an executive's minimum stock ownership requirement is based on the value of the executive's holdings as a multiple of the executive's base salary. The stock ownership guidelines are as follows: Mr. MacFarlane, five times base salary; Mr. Moug, Mr. Rogelstad and Mr. Abbott, two times base salary; and Ms. Smestad, one times base salary. For purposes of satisfying the ownership guidelines, unvested restricted stock units are included. Officers are given five years to meet the guidelines from the time they are subject to an initial or increased holding guideline. Additionally, for all awards granted on or after June 22, 2017, each executive must hold 100% of shares received (net of tax) pursuant to stock awards until the applicable ownership guideline has been met. The Compensation and Human Capital Management Committee may grant waivers of the ownership or holding requirements in special circumstances. At the date of this Proxy Statement, all executive officers met the ownership guidelines or are within their five-year accumulation period.

Hedging and Pledging Policy

Our Board of Directors believes that the interests of our executive officers and Directors should be aligned with the interests of our shareholders. As a result, we have adopted a hedging policy that prohibits all executive officers and Directors from engaging in transactions that are designed to hedge or offset any decrease in the market value of Otter Tail Corporation's securities, including short sales of Otter Tail Corporation's securities; transactions inputs, calls or other derivative securities; and hedging and monetization transactions, such as zero-cost collars and forward sale contracts. They are also prohibited from pledging these securities as collateral for a loan.

Clawback Policy

Our Clawback Policy provides that, after an accounting restatement, Otter Tail Corporation will attempt to recoup amounts paid to current and former executive officers under incentive plans during the prior three years if those amounts would not have been paid based on the restated financial statements.

Deductibility of Executive Compensation

Section 162(m) of the U.S. Internal Revenue Code ("Section 162(m)") imposes a $1,000,000 annual deduction limit on compensation payable to certain current and former executive officers. The Compensation and Human Capital Management Committee intends to pay competitive compensation consistent with our philosophy to attract, retain and motivate executive officers to manage our businesses in the best interests of Otter Tail Corporation and its shareholders. The Compensation and Human Capital Management Committee, therefore, may choose to provide non-deductible compensation to our executive officers if it deems such compensation to be in the best interests of Otter Tail Corporation and its shareholders.

Prior to the Tax Cuts and Jobs Act (the "Act"), Section 162(m) permitted a deduction for compensation in excess of $1,000,000 paid to a covered executive if specified requirements related to our performance were met and shareholder approval was obtained. The Act eliminated the exception to the deduction limit for qualified performance-based compensation (and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit). However, the Act also included a transition provision which exempts from the above changes performance-based compensation payable under a written binding agreement that was in effect on November 2, 2017, if such agreement is not subsequently materially amended. As a result of the transition rule, certain performance-based awards that were outstanding as of November 2, 2017 but which may vest and pay out in future tax years may be fully deductible if they qualify for transition relief.

Compensation Policies and Risk

Otter Tail Corporation believes that its compensation policies and practices for its employees are such that they do not create risk that is reasonably likely to have a material adverse effect on Otter Tail Corporation. As described in this Proxy Statement, the Named Executive Officers of Otter Tail Corporation are paid two forms of incentive compensation. Annual incentives are measured against corporate earnings per share, corporate ROE, platform net income, platform ROE, workplace safety and individual performance. These financial and safety measures are transparent, subject to review and the Clawback Policy, and can be verified by audit. Only a portion of annual incentive, individual performance, is discretionary. Otter Tail Corporation's long-term incentives are based upon total shareholder return and three-year adjusted ROE and are transparent and subject to review and the Clawback Policy. Otter Tail Corporation believes there is little room for manipulation and a relatively low level of risk. To the extent that incentive compensation is used for other employees at Otter Tail Corporation, consistent practices are followed. Otter Tail Corporation's employee compensation policies and practices, including those that apply to our executive officers, were reviewed and discussed first by the executive team, including its Vice President of Human Resources, and then by the Compensation and Human Capital Management Committee and the Board of Directors.

REPORT OF COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE

The Compensation and Human Capital Management Committee of Otter Tail Corporation's Board of Directors is composed of four independent Directors as defined by the Nasdaq Listing Standards and operates under a written charter adopted by the Board of Directors. The Compensation and Human Capital Management Committee reviewed and discussed with management the foregoing CD&A. Based upon that review and discussion with management and its independent review of the CD&A, the Compensation and Human Capital Management Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement and in Otter Tail Corporation's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC.

James B. Stake, Chair

Kathryn O. Johnson Timothy J. O'Keefe Thomas J. Webb

EXECUTIVE COMPENSATION

The following tables and accompanying narrative disclosure and footnotes should be read in conjunction with the CD&A, which sets forth the objectives of Otter Tail Corporation's executive compensation and benefit program.

SUMMARY COMPENSATION TABLE

The table below contains information about compensation for the last three fiscal years paid to the Named Executive Officers, who include individuals who served as Chief Executive Officer and Chief Financial Officer during 2020 and each of the other three most highly compensated executive officers who were serving as executive officers at the end of 2020.

Change in

Pension

Non-Equity

IncentiveValue & Non-QualifiedSalary

BonusStock Award

Plan

DeferredAll OtherCompensation Compensation Compensation

TotalName & Principal Position

Year

($)1

($)2

($)3

($)4

Earnings ($)5

($)6

($)

Charles S. MacFarlane

2020

679,688

119,625

President and Chief Executive Officer

2019

700,000

105,000

1,732,446 1,575,506

939,303 800,800

1,160,611

  • 494,370 5,126,043

    2,569,477

  • 7,750 5,758,533

    2018

    650,000

    97,500

    • 1,183,644 1,040,000

    362,855

  • 7,625 3,341,624

    Kevin G. Moug

    2020

    471,000

    37,562

    505,214

    Sr. Vice President and Chief Financial Officer

    2019

    457,320

    32,698

    472,074

    2018

    444,000

    31,746

    399,312

    Timothy J. Rogelstad

    2020

    378,263

    74,670

    350,257

    335,623 287,746 390,720 146,670

    477,782

  • 7,806 1,834,987

    726,735

  • 8,000 1,984,573

  • - 7,625 1,273,403

  • 734,882 92,311 1,777,061

    Sr. Vice President, Electric Platform;

    2019

    381,100

    57,165

    341,638

    • 155,921 1,037,165

  • 9,610 1,982,599

    President, Otter Tail Power Company

    2018

    370,000

    48,100

    295,911

    168,588

    John S. Abbott

    2020

    370,674

    69,878

    350,257

    277,011

    Sr. Vice President, Manufacturing Platform; President, Varistar Corporation

    2019

    370,000

    61,050

    341,638

    168,356

    2018

    350,000

    67,375

    295,911

    269,500

    Jennifer O. Smestad

    2020

    360,000

    57,600

    262,693

    206,305

    Vice President, General Counsel and Corporate Secretary

    2019

    340,000

    54,400

    239,643

    172,295

    2018

    315,000

    39,690

    199,656

    198,450

    30,599 - - - 315,674 285,516 62,049

    9,291

    922,489

  • 57,584 1,125,404

  • 67,903 1,008,947

  • 60,257 1,043,043

  • 96,729 1,299,001

  • 45,093 1,136,947

23,432

838,277

  • (1) Amounts shown in 2020 represent base pay received following a voluntary temporary pay reduction in response to anticipated economic effects of the spread of COVID-19. For a three-month period, base pay was reduced by 25% (in May, June and July 2020) for Mr. MacFarlane and 15% for each of Mr. Moug, Mr. Rogelstad, Mr. Abbott and Ms. Smestad. Each Named Executive Officer could elect to replace lost earnings with previously earned PTO, which is included in amounts shown. Excluding the temporary base pay reduction, annual base pay rates for each executive effective January 1, 2020 are $725,000 (Mr. MacFarlane), $471,000 (Mr. Moug), $393,000 (Mr. Rogelstad), $385,000 (Mr. Abbott) and $360,000 (Ms. Smestad).

  • (2) In each year bonuses paid to each of the Named Executive Officers were based in part upon the achievement of individual goals established at the beginning of the year, and individual performance as determined by the Chief Executive Officer, subject to approval by the Compensation and Human Capital Management Committee and ratification by the independent members of the Board of Directors, for each Named Executive Officer except for the Chief Executive Officer, whose bonus was determined using the same criteria by the Compensation and Human Capital Management Committee, subject to ratification by the independent members of the Board of Directors.

  • (3) Amounts shown reflect the aggregate grant date fair value of awarded performance shares (at target) and restricted stock units as computed in accordance with FASB ASC Topic 718, and using the same assumptions as are described in Note 15 to the consolidated financial statements in the Annual Report on Form 10-K of Otter Tail Corporation for 2020. The value of a maximum payout of 2020 performance shares at the grant date would be $1,949,940 for Mr. MacFarlane; $579,420 for Mr. Moug; $395,640 for Mr. Rogelstad and Mr. Abbot; and $296,730 for Ms. Smestad.

  • (4) Non-Equity Incentive Plan Compensation represents awards earned for achieving individual financial and safety performance goals under the Executive Annual Incentive Plan. See the CD&A for a more detailed description.

  • (5) This column represents the change in pension value and was determined using the same assumptions as are described at Note 10 to the consolidated financial statements in the Annual Report on Form 10-K of Otter Tail Corporation for each of 2020, 2019 and 2018. In 2020, the change in discount rates account for $833,470 of the change vs. prior year for Mr. MacFarlane, $440,275 for Mr. Moug, $545,835 for Mr. Rogelstad and $154,826 for Ms. Smestad. Mr. Abbott is not eligible to participate in the Pension Plan. All defined contribution plans are excluded from the calculation.

  • (6) Amounts reflected in All Other Compensation for 2020 consist of (i) amounts contributed by Otter Tail Corporation under the Otter Tail Corporation 401(k) Retirement Savings Plan for 2020 as follows: Mr. MacFarlane, $7,125; Mr. Moug, $7,125; Mr. Rogelstad, $7,125; Mr. Abbott, $18,525; and Ms. Smestad, $7,125; (ii) the amount of Otter Tail Corporation's contribution under the Employee Stock Ownership Plan for 2020 which was invested in common shares for the account of Mr. Rogelstad, $1,406; (iii) gift cards, which were provided to all Corporate employees at year-end as follows: Mr. Moug, $681; Mr. Abbott, $576; and Ms. Smestad, $1,153 and (iv) amounts contributed to the ERPP as follows: Mr. MacFarlane, $487,245 with $355,149 being a special contribution to offset benefits lost when the ESRPP was frozen; Mr. Rogelstad, $83,780, with $46,126 being a special contribution to offset benefits lost when the ESRPP was frozen; Mr. Abbott, $38,483; and Ms. Smestad, $88,451, of which $51,240 recognizes additional years of eligibility in the plan.

TOTAL REALIZED PAY

Total Realized Pay, which is the compensation actually received by the executive officers in a particular year, is an important additional measure of total compensation. Information related to Total Realized Pay is meant to supplement, rather than to replace, the information found in the Summary Compensation Table. Total Realized Pay reflects the compensation actually received during the year, which can differ substantially from Total Compensation as presented in the Summary Compensation Table. For example, Total Compensation as presented in the Summary Compensation Table contains estimated values of performance shares that are based on multiple assumptions that may or may not be realized and can only be realized at the end of a three-year performance period. In addition, Total Compensation as presented in the Summary Compensation Table may show change in the actuarial present value of pension benefits, which are based on multiple assumptions and discount rates.

Otter Tail Corporation calculates Total Realized Pay as the sum of:

  • • Base salary paid during the year, as reported in the Summary Compensation Table;

  • • Annual incentive award received during the year;

  • • The value realized upon the vesting of long-term incentive awards, including cash paid in lieu of dividends on unvested restricted stock units; and

  • • Other compensation received during the year as reported in the Summary Compensation Table, excluding employer contributions to retirement benefit plans.

When calculating Total Realized Pay, Otter Tail Corporation excludes the following amounts that will not actually be received until a future date:

  • • Change in pension value as reported in the Summary Compensation Table because it is largely driven by accounting and valuation assumptions that do not reflect the compensation realized by the executive officer in a particular year;

  • • Employer contributions to retirement benefit plans, including the Otter Tail Corporation 401(k) Retirement Savings Plan, the Employee Stock Ownership Plan and the ERPP; and

  • • The value of long-term incentive awards that do not vest in that year.

The following table compares Total Realized Pay for our Named Executive Officers employed as of December 31, 2020 to the total compensation amounts as presented in the Summary Compensation Table. As noted above, this table is not intended to be a substitute for the Summary Compensation Table:

Bonus andBase Salary

Annual Incentive Awards Received

Stock Compensation

ReceivedOther CompensationTotal Realized

Total Realized Pay as % of

Named Executive Officer

Year

($)1

($)2

($)3

($)4

Pay ($)

Summary Compensation

Table

Charles S. MacFarlane

2020

679,688

905,800

2019

  • 700,000 1,137,500

2018

650,000

Kevin G. Moug

2020

471,000

777,384 320,444

2,113,792 2,949,186 2,003,005 740,219

-

3,699,280

72 %

750

4,787,436

83 %

750

3,431,139

103 %

681

1,532,344

84 %

2019

457,320

  • 422,466 1,096,545

1,000

1,977,331

100 %

2018

444,000

390,421

723,330

Timothy J. Rogelstad

2020

378,271

213,086

518,962

750 -

1,558,501

122 %

1,110,318

62 %

2019

381,100

216,688

739,909

1,250

1,338,947

68 %

2018

370,000

176,024

466,839

1,000

1,013,863

110 %

John S. Abbott

2020

370,674

229,406

560,734

576

1,161,390

103 %

2019

370,000

336,875

742,452

750

1,450,077

144 %

2018

350,000

276,390

449,363

750

1,076,503

103 %

Jennifer O. Smestad

2020

360,000

226,695

49,979

1,153

637,827

49 %

2019

340,000

238,140

29,786

1,370

609,296

54 %

2018

315,000

34,823

12,533

1,199

363,555

43 %

  • (1) Base pay during the year, as reflected in the "Salary" column of the Summary Compensation Table.

  • (2) The total of bonuses and annual incentive awards received in the year.

  • (3) Value realized upon vesting of performance shares, restricted stock and restricted stock units during the year based on the fair market value of Otter Tail Corporation's common shares at the time of vesting, as reported in the "Stock Vested Table" and found at page 30, and cash paid in lieu of dividends on unvested restricted stock units.

  • (4) As reported in the "All Other Compensation" column of the Summary Compensation Table, excluding employer contributions to retirement benefit plans, which include the Otter Tail Corporation 401(k) Retirement Savings Plan, the Employee Stock Ownership Plan and the ERPP.

GRANTS OF PLAN-BASED AWARDS

The following table summarizes the 2020 grants of equity and non-equity awards to the Named Executive Officers.

All OtherEstimated Future Payouts Under

Non-Equity Incentive Plan

Awards2

Estimated Future Payouts Under Equity Incentive Plan Awards3

Name

Grant Date1

ThresholdTargetMaximumThresholdTargetMaximum

($)

($)

($)

(#)

(#)

($)

Stock Awards: No. of Shares of Stock or Units (#)4

Grant-Date Fair Value of Stock Awards ($)5

Charles S. MacFarlane

01-Jan-20

398,750

  • 725,000 1,377,500

    13-Feb-20

    13,800

    27,600

    41,400

    1,299,960

    13-Feb-20

    8,000 432,486

    Kevin G. Moug

    01-Jan-20

    142,478

    13-Feb-20

  • 259,050 492,195 3,700

    7,400

    11,100 386,280

    13-Feb-20

    2,200 118,934

    Timothy J. Rogelstad

    01-Jan-20

    108,075

    13-Feb-20

  • 196,500 373,350 2,800

    5,600

    8,400 263,760

    13-Feb-20

    1,600 86,497

    John S. Abbott

    01-Jan-20

    116,463

    13-Feb-20

  • 211,750 402,325 2,800

    5,600

    8,400 263,760

    13-Feb-20

    1,600 86,497

    Jennifer O. Smestad

    01-Jan-20

    99,000

    13-Feb-20

  • 180,000 342,000 2,100

4,200

6,300 197,820

13-Feb-20

1,200 64,873

  • (1) The grant date of all awards is the effective date established by the Compensation and Human Capital Management Committee and ratified by the independent members of the Board of Directors when approving such awards.

  • (2) Represents awards granted effective January 1, 2020 under the Executive Annual Incentive Plan and described in the CD&A. The amount actually earned in 2020 is reported in part under "Non-Equity Incentive Plan Compensation" and in part under "Bonus" in the Summary Compensation Table.

  • (3) Represents grants of performance shares that vest dependent upon the three-year total shareholder return as compared to the total shareholder returns for the companies comprising the EEI Index (50%) and upon Otter Tail Corporation's meeting a three-year target on adjusted ROE (50%). Holders of performance shares do not have any of the rights of a shareholder unless and until they receive common shares. The awards of performance shares are more fully described in the CD&A.

  • (4) Represents restricted stock units that vest ratably on February 6, 2021, February 6, 2022, February 6, 2023 and February 6, 2024 provided the Named Executive Officer is employed by Otter Tail Corporation on those dates. The Named Executive Officers do not have voting rights in the restricted units and receive cash payments equal to the amount of cash dividends that would have been paid on the shares covered by restricted stock units, subject to forfeiture in certain circumstances. The awards of performance shares are more fully described in the CD&A.

  • (5) The amounts shown represent the grant-date fair value of the stock awards as determined in accordance with FASB ASC Topic 718. Because the amounts indicated include the value ascribed to performance shares, which are awarded only if Otter Tail Corporation meets certain performance goals as described in footnote (3) and the CD&A, the amount may not reflect the value actually provided to the Named Executive Officers. See the CD&A for a more detailed description.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table summarizes the total outstanding equity awards as of December 31, 2020 for the Named Executive Officers.

Stock Awards

Equity Incentive

Equity IncentivePlan Awards:

Plan Awards:Number of Shares or Units of Stock That Have NotMarket Value of Shares or Units of Stock That Have Not

Number of Unearned Shares,

Market or

Payout Value of Unearned Shares,

Units or

Units or

Other Rights That Have Not

Other Rights That Have Not

Name

Year

Vested (#)1

Vested ($)1

Vested (#)2

Vested ($)2

Charles S. MacFarlane

2020

8,000

340,880

41,400 1,764,054

2019

5,925

252,464

41,400 1,764,054

2018

3,600

153,396

37,200 1,585,092

2017

1,725

73,502

-

-

Kevin G. Moug

2020

2,200

93,742

11,100 472,971

2019

1,725

73,502

11,700 498,537

2018

1,200

51,132

12,600 536,886

2017

625

26,631

-

-

Timothy J. Rogelstad

2020

1,600

68,176

8,400 357,924

2019

1,275

54,328

9,000 383,490

2018

900

38,349

9,300 396,273

2017

425

18,109

-

-

John S. Abbott

2020

1,600

68,176

8,400 357,924

2019

1,275

54,328

9,000 383,490

2018

900

38,349

9,300 396,273

2017

475

20,240

-

-

Jennifer O. Smestad

2020

1,200

51,132

6,300 268,443

2019

900

38,349

6,300 268,443

2018

600

25,566

6,300 268,443

2017

225

9,587

-

-

  • (1) Except for Ms. Smestad's 2017 restricted stock units, the awards for 2017, 2018, 2019 and 2020 are restricted stock units that vest ratably (25% per year) over a four-year period unless there is a qualifying retirement event, in which case they fully vest. Ms. Smestad's 2017 restricted stock units will vest fully on April 8, 2021. Market value of restricted stock units equals the closing price of a common share at fiscal year-end ($42.61) multiplied by the number of units.

  • (2) The unvested performance shares are reported at maximum as determined by SEC rules. The actual number of shares paid, which may range from 0% to 150% of target, will be determined by the Compensation and Human Capital Management Committee after it determines whether the performance goals have been met. This typically occurs in February of each year. Market value of performance shares equals the closing price of a common share at fiscal year-end ($42.61) multiplied by the number of shares.

STOCK VESTED IN LAST FISCAL YEAR

The following table provides information on stock vested during 2020 for the Named Executive Officers and the resulting value realized.

Stock Awards

Number of Shares

Value Realized on

Name

Acquired on Vesting (#)

Vesting ($)1

Charles S. MacFarlane

38,521

2,085,302

Kevin G. Moug

13,517

731,709

Timothy J. Rogelstad

9,472

512,746

John S. Abbott

10,243

554,444

Jennifer O. Smestad

900

45,983

(1) The value realized on the vesting of stock awards is based on the fair market value of Otter Tail Corporation's common shares at the time of vesting. The fair market value as used in this table is the average of the high and low price of Otter Tail Corporation's common shares on the date of vesting.

PENSION PLAN

The Pension Plan is a tax-qualified defined benefit pension plan. Employees of Otter Tail Corporation and non-union employees of Otter Tail Power Company hired prior to September 1, 2006, and union employees of Otter Tail Power Company hired prior to November 1, 2013 (January 1, 2009 for Coyote Station employees) are eligible to participate in the Pension Plan.

  • • Benefits for Mr. MacFarlane, Mr. Moug and Ms. Smestad are determined by multiplying 37% of final average earnings (as defined in the Plan) by a fraction, the numerator of which is the number of years of benefit accrual service up to 30 years and the denominator of which is 30. For these executive officers, final average earnings are determined using the 42 consecutive months out of the last 10 consecutive years prior to the participant's retirement that produces the highest average salary. In addition, for each year of benefit accrued service earned in excess of 30 years, the executive's benefit will increase by 1% up to a maximum of 110% of the benefit.

  • • For Mr. Rogelstad the benefit is determined by multiplying 38% of his final average earnings by a fraction, the numerator of which is the number of years of benefit accrual service up to 30 years and the denominator of which is 30. Final average earnings for Mr. Rogelstad is determined by using the 30 consecutive months out of the last 10 years prior to his retirement that produces the highest average salary.

  • • For all officers participating in the Pension Plan, a full pension benefit is paid if the executive officer retires after he or she reaches age 62. If the executive officer commences payment prior to age 62, the pension benefit reduces on a scale beginning at 5% at age 61 and ending at 39% at age 55, the earliest age at which the pension benefit may be received. The Pension Plan does not provide for a lump sum distribution.

Mr. Abbott is not eligible to participate in the Pension Plan.

EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN

Mr. MacFarlane, Mr. Moug and Mr. Rogelstad participate in the ESSRP. Participation in the ESSRP is determined by the Compensation and Human Capital Management Committee. The Board amended and restated the ESSRP, freezing participation in and benefit accruals under the restoration benefit component of the ESSRP (as described below) as of December 31, 2019 for all participants except Mr. Moug. Mr. MacFarlane, Mr. Moug and Mr. Rogelstad will receive retirement benefits under the ESSRP equal to the greater of the supplemental target benefit or the restoration benefit, as described below:

(1) Supplemental target benefit: A benefit equal to 65% of the participant's final average earnings (as defined in the ESSRP) offset by the participant's social security benefit and the amount of the participant's benefit from Otter Tail Corporation's tax-qualified defined benefit Pension Plan, provided the amount of this supplemental target benefit did not increase after December 31, 2010. The benefit amount accrues over a 15-year period. If this benefit is applicable, it will be paid for 15 years to the participant or the participant's beneficiary or for such longer period of time as the participant lives. Final average earnings for Mr. MacFarlane and Mr. Moug is defined as highest consecutive 42-month average of base salary and incentive bonus paid during the 10 years prior to the supplemental target benefit freeze as of December 31, 2010. Final average earnings for Mr. Rogelstad is defined as the average of the total cash payments (base pay and bonus) paid to the participant during the highest consecutive 30 months in the 10 years prior to the supplemental target benefit freeze as of December 31, 2010.

(2)Restoration benefit: The benefit calculated under Otter Tail Corporation's tax-qualified defined benefit Pension Plan, modified to include the participant's bonus in the computation of covered compensation and to exclude any statutory compensation and benefit limits, and offset by the participant's benefit from the tax-qualified defined Pension Plan. If this benefit is applicable, it will be paid in the same form as the participant's tax-qualified defined benefit Pension Plan benefit. With the exception of Mr. Moug, participants' restoration benefits were determined as of December 31, 2019 and will not increase after December 31, 2019.

Mr. MacFarlane, Mr. Moug and Mr. Rogelstad are all vested in their benefits under the ESSRP. As a result of the benefit freeze, the final average earnings as of December 31, 2019 for Mr. MacFarlane have been determined to be $1,366,621 and $589,102 for Mr. Rogelstad. Mr. Moug was granted an additional 5 years of service under the ESSRP as of January 1, 2005. The increase in years of service for Mr. Moug was designed to more equitably apply the reduction in benefits caused by the January 1, 2005 amendment to the ESSRP. The ESSRP does not provide for a lump sum distribution.

If a Named Executive Officer under the ESSRP dies while employed by Otter Tail Corporation, Otter Tail Corporation will pay the participant's beneficiary an amount equal to four times the participant's annual salary and bonus at the time of death. If an executive officer under the ESSRP dies after retirement or dies after termination for other reasons with a vested benefit, Otter Tail Corporation will pay the participant's beneficiary a lesser amount, depending upon the executive officer's age at death and his or her vested percentage.

If a Named Executive Officer retires prior to age 62 or terminates employment prior to retirement with a vested benefit in the ESSRP, the Named Executive Officer will receive a reduced benefit amount. If a participant dies while still employed, his or her beneficiary will receive the actuarial equivalent of the participant's benefit in 15 annual installments. Upon a change in control (as defined in the ESSRP), or in the event of the death of the executive officer while actively employed by Otter Tail Corporation, the executive officer becomes 100% vested in his or her accrued benefit. The Board of Directors has the right to amend, suspend or terminate the ESSRP, but no such action can reduce the benefits already accrued.

EXECUTIVE RESTORATION PLUS PLAN

Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad participate in the ERPP, which is a non-qualified defined contribution plan. The Plan permits a participant to defer up to 50% of salary in 1% increments and up to 100% of annual cash incentive compensation in 1% increments. In addition, subject to its annual discretion, Otter Tail Corporation will contribute a sum equal to 6.5% of the annual compensation for the plan year in excess of Internal Revenue Code Section 401(a)(17) compensation limit in effect for that plan year plus 3% of annual compensation to the deferral and retirement accounts for Messrs. MacFarlane, Rogelstad and Abbott and Ms. Smestad, provided they are each employed on the last day of theplan year. Contributions made for Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad under the ERPP are included in the Non-Qualified Deferred Compensation Table and in the Summary Compensation Table.

The Plan provides that each participant makes his or her own investment decisions on the amounts deferred and, on the amounts, contributed by Otter Tail Corporation and is solely at risk for investment returns. A participant's elected deferred sub-account will be fully vested at all times. A participant's employer contributions sub-account will be vested to the same extent he or she is vested in any employer contributions under the 401(k) Retirement Savings Plan provided, however, that a participant will become fully vested in their employer contribution sub-account upon death, becoming disabled, or a change in control, provided the date on which the participant becomes fully vested in the employer contributions as a result of any of those events occurs while the participant is actively employed by or associated with Otter Tail Corporation.

In April 2020, the Board of Directors amended the definition of retirement within the ERPP so as to provide consistent practice with the ESSRP. The Plan allows for full vesting of employer contributions if retiring at or after the earlier of age 62 or the qualifying age for normal or early retirement under any retirement plan of the Corporation that is applicable to the participant. The Plan also allows Otter Tail Corporation to make restorative or other discretionary contributions on behalf of participants.

To offset the retirement compensation lost as a result of freezing the ESSRP benefit accrual for Mr. MacFarlane and Mr. Rogelstad, which is discussed above, the Corporation has made and will continue to make a special employer contribution to each of Messrs. MacFarlane's and Rogelstad's ERPP accounts following the end of each year beginning in 2020, with the first such contribution made in 2021. Mr. MacFarlane is credited with 22.4% of his prior year's base salary and annual incentive, and Mr. Rogelstad is credited with 7.8% of his prior year's base salary and annual incentive. This is in addition to the normal contributions provided by the ERPP. This special employer contribution will continue until the executive retires, or reaches age 62, whichever comes first.

If a participant separates from service or becomes disabled, the vested portion of the participant's account will be paid in a lump sum. If a participant dies while still employed, the participant's vested account will be paid to the participant's beneficiary in a lump sum payment. The Board of Directors has the right to amend, suspend or terminate the ERPP, but no such action can reduce the benefits already accrued.

The following table summarizes the number of years of credited service and present accumulated value of the pension benefits for Mr. MacFarlane, Mr. Moug, Mr. Rogelstad and Ms. Smestad under the Otter Tail Corporation Pension Plan and ESSRP.

Present Value of

Number of Years

Accumulated

Payments During Last

Name

Plan Name

Credited Service (#)

Benefit ($)1

Fiscal Year ($)

Charles S. MacFarlane

Pension Plan

19.08

1,217,890

-

ESSRP

18.08

6,044,013

-

Kevin G. Moug2

Pension Plan

19.00

1,406,918

-

ESSRP

23.00

3,817,431

-

Timothy J. Rogelstad

Pension Plan

31.50

1,849,055

-

ESSRP

30.50

2,475,729

-

Jennifer O. Smestad

Pension Plan

19.00

1,043,400

-

ESSRP

-

-

-

  • (1) The present value of the accumulated benefit for the Pension Plan and ESSRP is calculated in accordance with FASB ASC Topic 715. See Note 10 to the consolidated financial statements in the 2020 Annual Report on Form 10-K of Otter Tail Corporation for the policy and assumptions made in the valuation of this accumulated benefit.

  • (2) Includes 5 years of additional credited service, which results in an additional accumulated benefit at present value of $1,055,372.

NON-QUALIFIED DEFERRED COMPENSATION

The following table presents information on non-qualified deferred compensation for the Named Executive Officers.

Non-Qualified Deferred Compensation1

Executive

Registrant

Aggregate

Aggregate

Aggregate

Contributions

Contributions

Earnings

Withdrawals /

Balance at

in Last FY

in Last FY

in Last FY

Distributions

Last FYE

Name

($)2

($)3

($)2

($)

($)

Charles S. MacFarlane

294,419

487,245

317,752

-

3,485,371

Kevin G. Moug

36,441

-

22,616

-

581,993

Timothy J. Rogelstad

26,478

83,780

31,036

-

278,524

John S. Abbott

185,337

38,483

197,938

-

1,572,129

Jennifer O. Smestad

52,796

88,451

39,497

-

334,231

  • (1) The terms of the deferred compensation plans are described in the CD&A.

  • (2) The amounts reported in the Executive Contributions column are also reported as compensation to the Named Executive Officers in the Summary Compensation Table while the amounts in the Aggregate Earnings column are not.

  • (3) The amounts reported in this column were contributed into the ERPP, whose terms are described in the Pension, ESSRP and ERPP Plans sections. The amounts reported in this column are also reported in the Summary Compensation Table.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Payments and benefits received by the Named Executive Officers upon termination is governed by the arrangements described below and quantified at the end of this section. We have estimated the amounts involved assuming that the termination became effective as of the last business day of 2020. The actual amounts to be paid out can only be determined at the time of the Named Executive Officer's departure from the Corporation.

Employees, including the Named Executive Officers, are entitled to payments and benefits that were earned prior to their termination, and as a result, these payments and benefits are not included in the tables below. These payments and benefits include prorated bonus, accrued PTO pay, contributions to and earnings in the Deferred Compensation Plan, Pension Plan, and ERPP contributions and earnings, and vested benefits in the Pension Plan and ESSRP.

POTENTIAL TERMINATION PAYMENTS UPON A CHANGE IN CONTROL

Otter Tail Corporation has entered into change-in-control severance agreements (the "Severance Agreements") with the Named Executive Officers. The Severance Agreements provide for certain payments and other benefits if, following a Change in Control, Otter Tail Corporation terminates the Named Executive Officer's employment without Cause, or the Named Executive Officer terminates his or her employment for Good Reason. Such payments and benefits include: (i) severance pay equal to two times the sum of the Named Executive Officer's salary (at the highest annual rate in effect during the two years prior to the termination) and average annual incentive compensation (for the two years prior to the termination); (ii) two years of continued life, health and disability insurance; (iii) the payment of legal fees and expenses relating to the termination; and (iv) the termination of any non-competition arrangement between Otter Tail Corporation and the Named Executive Officer. Severance and benefits will be paid by the Corporation or its successor in a lump sum not later than one day prior to the effective date of the termination. Under the Severance Agreements, "Cause" is defined as willful and continued failure to perform duties and obligations or willful misconduct materially injurious to Otter Tail Corporation; "Good Reason" is defined to include a material change in the employee's responsibility or status, a reduction in salary or benefits, or a mandatory relocation; and "Change in Control" is defined to include a change in control of the type required to be disclosed under SEC proxy rules, acquisition by a person or group of 35% of the outstanding voting stock of Otter Tail Corporation, a proxy fight or contested election that results in Continuing Directors (as defined in the Severance Agreements) not constituting a majority of Otter Tail Corporation's Board of Directors, or another event the majority of the Continuing Directors determines to be a Change in Control.

POTENTIAL TERMINATION PAYMENTS OUTSIDE OF A CHANGE-IN-CONTROL

Otter Tail Corporation has entered into an employment agreement (the "Employment Agreement") with Mr. Moug. Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad are participants in the Executive Severance Plan. The Employment Agreement provides that if Otter Tail Corporation terminates the employment of the Named Executive Officer for Cause or if the Named Executive Officer terminates the employment relationship without Good Reason (as defined in the Employment Agreements), the Named Executive Officer will receive base pay and benefits through the date of termination. Alternatively, if Otter Tail Corporation terminates the employment of the Named Executive Officer for any other reason, or if the Named Executive Officer terminates the employment relationship for Good Reason, Otter Tail Corporation will pay a severance payment equal to 1.5 times the sum of the Named Executive Officer's base pay plus such officer's most recent annual cash incentive payment in full satisfaction of Otter Tail Corporation's obligations to the Named Executive Officer, to be paid in a lump sum within fifteen days of termination. The Executive Severance Plan provides Mr. Rogelstad, Mr. Abbott and Ms. Smestad with a severance payment under similar circumstances equal to 1.5 times the sum of base pay plus the target annual cash incentive payment, and for Mr. MacFarlane, 2.0 times the sum of base pay plus the target annual cash incentive payment. Severance payments under the Executive Severance Plan will be paid by the Corporation or its successor, in a lump sum not later than one day prior to the effective date of the termination. In return, each of Mr. MacFarlane, Mr. Rogelstad, Mr. Abbott and Ms. Smestad, asa terminated executive, must release all claims relating to employment and termination and comply with certain additional covenants, including non-disparagement, non-compete, non-solicitation of employees and vendors and the assignment of intellectual property.

The following table presents information regarding potential payments pursuant to the agreements described above and the 2014 Stock Incentive Plan for each of the Named Executive Officers named below assuming the event took place on the last business day of the fiscal year, December 31, 2020.

Summary of Termination Payments1

No Change in Control

Change in Control

Name

For Cause ($)

Death/Disability ($)

Without Cause ($)

($)

Charles S. MacFarlane2

-

3,138,812

3,885,001

6,827,723

Kevin G. Moug3

-

883,252

1,778,635

3,493,846

Timothy J. Rogelstad4

-

666,128

1,092,537

1,941,641

John S. Abbott5

-

668,236

1,282,592

2,152,202

Jennifer O. Smestad6

-

477,462

959,891

1,739,743

  • (1) For purposes of these calculations, the price per share is the closing price of Otter Tail Corporation's common shares on December 31, 2020.

  • (2) For Mr. MacFarlane, Death/Disability consists of performance shares vesting at target in the amount of $2,327,232 and restricted stock units vesting in the amount of $811,580; Without Cause consists of pro rata portion of performance shares vesting at target in the amount of $985,001 and severance in the amount of $2,900,000; Change in Control is subject to double trigger vesting and consists of performance shares vesting at target in the amount of $2,327,232, severance in the amount of $3,646,428, restricted stock units vesting in the amount of $811,580, and a health benefit in the amount of $42,483.

  • (3) For Mr. Moug, Death/Disability consists of performance shares vesting at target in the amount of $640,832 and restricted stock units vesting in the amount of $242,420; Without Cause consists of pro rata portion of performance shares vesting at target in the amount of $269,937, restricted stock units vesting in the amount of $242,420, and severance in the amount of $1,266,278; Change in Control is subject to double trigger vesting and consists of performance shares vesting at target in the amount of $640,832, severance in the amount of $1,737,651, restricted stock vesting in the amount of $242,420 three additional years of credited service under the ESSRP in the amount of $830,460, and a health benefit in the amount of $42,483.

  • (4) For Mr. Rogelstad, Death/Disability consists of performance shares vesting at target in the amount of $489,056 and restricted stock units vesting in the amount of $177,072; Without Cause consists of pro rata portion of performance shares vesting at target in the amount of $208,287and severance in the amount of $884,250; Change in Control is subject to double trigger vesting and consists of performance shares vesting at target in the amount of $489,056, severance in the amount of $1,224,028, restricted stock units vesting in the amount of $177,072, and a health benefit in the amount of $51,485.

  • (5) For Mr. Abbott, Death/Disability consists of performance shares vesting at target in the amount of $489,056 and restricted stock units vesting in the amount of $179,180; Without Cause consists of pro rata portion of performance shares vesting at target in the amount of $208,287, restricted stock units vesting in the amount of $179,180 and severance in the amount of $895,125; Change in Control is subject to double trigger vesting and consists of performance shares vesting at target in the amount of $489,056, severance in the amount of $1,453,764, restricted stock units vesting in the amount of $179,180 and a health benefit in the amount of $30,202.

  • (6) For Ms. Smestad, Death/Disability consists of performance shares vesting at target in the amount of $354,144 and restricted stock units vesting in the amount of $123,318; Without Cause consists of pro rata portion of performance shares vesting at target in the amount of $149,891 and severance in the amount of $810,000; Change in Control is subject to double trigger vesting and consists of performance shares vesting at target in the amount of $354,144, severance in the amount of $1,222,045, restricted stock units vesting in the amount of $123,318 and a health benefit in the amount of $40,236.

PAY RATIO DISCLOSURE

Otter Tail Corporation provides fair and equitable compensation to its employees through a combination of competitive base pay, incentives, retirement plans and other benefits. We are disclosing the following pay ratio and supporting information, which compares the annual total compensation of our employees other than Mr. MacFarlane (including full-time, part-time, seasonal and temporary employees) and the annual total compensation of Mr. MacFarlane, our President and Chief Executive Officer, as required by Section 953(b) of the Dodd-Frank Act. The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

For 2020, our last completed fiscal year:

  • • The median of the annual total compensation of all employees of Otter Tail Corporation (other than our Chief Executive Officer) was $57,467; and

  • • The annual total compensation of our Chief Executive Officer, as reported in the Summary Compensation Table included in this Proxy Statement, was $5,126,043.

Based on this information, the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all other employees was 89 to 1.

To determine the pay ratio, we took the following steps: In order to identify the median employee:

  • • We determined that, as of December 31, 2020, our employee population consisted of approximately 2,211 individuals, all located in the United States. This population consists of our full-time, part-time, temporary and seasonal employees. We excluded a limited number of temporary agency employees, whose compensation was determined by the agency and who are not considered our employees for purposes of the pay ratio calculation.

  • • We compared the base pay of our employees as reflected in our payroll records for December 2020, which was our measurement period. We selected the determination date and measurement period because they were recent periods for which employee census and compensation information are readily available.

We selected annual salary as our compensation measure because it was readily available in our existing payroll systems, it was consistently calculated for each employee, and because it was a reasonable proxy for total compensation for purposes of determining the median employee.

We calculated such employee's annual total compensation for 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in that employee's annual total compensation of $57,467. The median employee's annual total compensation includes salary and overtime pay, as well as incentive payments, retirement plan benefits, company matching contributions to the 401(k) Retirement Savings Plan and the cost of health and other benefits.

With respect to the Chief Executive Officer, we used the amount reported as total compensation in the Summary Compensation Table included in this Proxy Statement. Any estimates and assumptions used to calculate total annual compensation are described in footnotes to the Summary Compensation Table.

ADVISORY VOTE ON EXECUTIVE COMPENSATION

As required pursuant to Section 14A of the Exchange Act, Otter Tail Corporation is providing its shareholders with a non-binding advisory vote on the compensation of the Named Executive Officers as described in the CD&A and the accompanying tables contained in this Proxy Statement. Otter Tail Corporation asks that you support the compensation of our Named Executive Officers as disclosed in this Proxy Statement. Because your vote is advisory, it will not be binding on the Board of Directors or Otter Tail Corporation. However, the Board of Directors will review the results of your voting and take those results into consideration when making future decisions regarding executive compensation. Otter Tail Corporation holds the vote annually.

As has been described in this Proxy Statement, executive compensation at Otter Tail Corporation is heavily weighted towards pay for performance and focused on driving strong financial performance. Both annual and long-term incentives have significant performance components attached to them. The Compensation and Human Capital Management Committee has established targets that permit payment of annual and long-term incentives only to the extent that Otter Tail Corporation's financial and safety metrics are met. Long-term incentives are tied to Otter Tail Corporation stock performing well in the market and on strong returns on equity. Historically, in years when Otter Tail Corporation has not met its financial and safety targets, the Named Executive Officers have not received annual incentives, or the amount of those incentives has been significantly reduced. Similarly, when Otter Tail Corporation's stock has not performed well, long-term incentives have not been paid or have been reduced.

Otter Tail Corporation believes it has designed compensation programs that are appropriate to attract and retain talented and dedicated key executives who are focused on Otter Tail Corporation's performance. Otter Tail Corporation also believes that the information provided above and in this Proxy Statement demonstrates that its executive compensation programs are appropriate to ensure that the interests of the Named Executive Officers are aligned with the long-term interests of Otter Tail Corporation's shareholders. Accordingly, Otter Tail Corporation is asking its shareholders to vote FOR the following resolution at the Annual Meeting:

"RESOLVED, That the shareholders approve, on an advisory basis, the compensation of Otter Tail Corporation's Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section of the Proxy Statement for the 2021 Annual Meeting of Shareholders, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in such Proxy Statement."

The Board of Directors recommends a vote FOR adoption of the resolution approving the compensation of Otter Tail Corporation's Named Executive Officers. Adoption of this resolution will require the affirmative vote of the majority of the common shares present in person or by proxy and entitled to vote at the Annual Meeting.

REPORT OF AUDIT COMMITTEE

The Audit Committee of Otter Tail Corporation's Board of Directors is composed of four independent Directors (as defined by the Nasdaq Listing Standards) and operates under a written charter adopted by the Board of Directors. The Audit Committee retains and supervises Otter Tail Corporation's independent registered public accounting firm, currently Deloitte & Touche, LLP.

Management is responsible for Otter Tail Corporation's internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of Otter Tail Corporation's consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee's responsibility is to monitor and oversee these processes.

In this context, the Audit Committee met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that Otter Tail Corporation's audited consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee reviewed and discussed the audited consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. Otter Tail Corporation's independent registered public accounting firm also provided to the Audit Committee the written disclosures and the letter requiredby the applicable requirements of the PCAOB regarding the independent accountant's communications with the Audit Committee concerning independence. The Audit Committee discussed with the independent registered public accounting firm that firm's independence.

Based on the Audit Committee's discussions with management and the independent registered public accounting firm and the Audit Committee's review of the audited consolidated financial statements and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Otter Tail Corporation's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC.

Steven L. Fritze, Chair

Karen M. Bohn James B. Stake Thomas J. Webb

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

At the Annual Meeting of Shareholders, the Board of Directors will propose that shareholders ratify the appointment of the firm of Deloitte & Touche, LLP as the independent registered public accounting firm to audit the consolidated financial statements of Otter Tail Corporation for 2021. This firm has no direct or indirect financial interest in Otter Tail Corporation.

The Audit Committee has appointed Deloitte & Touche, LLP as our independent registered public accounting firm for 2021. Shareholder ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the Board of Directors is submitting the appointment of Deloitte & Touche, LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm, but it retains sole responsibility for appointing and terminating the independent registered public accounting firm.

A partner of the independent registered public accounting firm of Deloitte & Touche, LLP will be present at the Annual Meeting to answer questions and to make a statement if they desire to do so. An affirmative vote of a majority of the common shares present and entitled to vote with respect to the ratification of the independent registered public accounting firm is required for ratification. Proxies, unless otherwise directed thereon, will be voted in favor of this proposal. The Board of Directors recommends a vote FOR the ratification of Deloitte & Touche, LLP as the independent registered public accounting firm for 2021.

FEES

Aggregate fees that Deloitte & Touche, LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates billed to Otter Tail Corporation for 2020 and 2019 are as follows.

2020

2019

Total Audit Fees1

$

1,319,639

$

1,551,195

Audit-Related Fees

-

-

Tax Fees2

21,588

18,743

Other Fees3

1,895

1,895

Total

$

1,343,122

$

1,571,833

  • (1) Fees include amounts for the annual audit of our consolidated financial statements and internal control over financial reporting, reviews of interim consolidated financial statements and comfort letters for securities offerings.

  • (2) Fees for 2020 include $10,500 for tax planning and $11,088 for tax compliance services. Fess for 2019 include $13,976 for tax planning and $4,767 for tax compliance services.

  • (3) Fees related to use of Deloitte's Accounting Research Tool.

PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICY

Otter Tail Corporation's Audit Committee has adopted, and the Board of Directors has ratified, the Audit and Non-Audit Services Pre-Approval Policy, which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent registered public accounting firm may be pre-approved. The independent registered public accounting firm has reviewed this policy and believes that implementation of the policy will not adversely affect the firm's independence.

Four categories of services have been defined by Otter Tail Corporation within the policy to provide a consistent framework for assessment, decision making, approval and reporting. The following is a summary of the key provisions of the policy.

Audit services are specified services directly related to performing the independent audit of Otter Tail Corporation and its subsidiaries. The independent registered public accounting firm will submit to the Audit Committee for pre-approval the scope and estimated fees associated with the current year audit at the August Audit Committee meeting.

Audit-related services are specified services that are related extensions of audit services and are logically performed by the independent registered public accounting firm. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.

Tax services are specified services related to tax matters. Using the independent registered public accounting firm for these matters creates efficiencies, minimizes disruption and preserves confidentiality. Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval.

Other services include (a) "synergistic" services for which utilizing the independent registered public accounting firm creates efficiencies, minimizes disruption and preserves confidentiality, or (b) "unique qualifications" services for which management has determined that the independent registered public accounting firm possesses unique or superior qualifications to provide the services. Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval.

"Restricted" non-audit services include nine specific restricted services outlined in the SEC's rule on auditor independence. These services are not to be performed by the independent registered public accounting firm.

The Audit Committee has delegated pre-approval authority to the Chief Financial Officer to pre-approve audit-related services, tax services and other services, as defined, up to an aggregate of $50,000 per quarter.

During 2019 and 2020, all of the services provided by Deloitte Entities for the services described above under audit fees, audit-related fees, tax fees and all other fees were pre-approved in accordance with the Pre-Approval Policy.

POLICY AND PROCEDURES REGARDING TRANSACTIONS WITH RELATED PERSONS

The Board of Directors of Otter Tail Corporation has adopted a Policy and Procedures Regarding Transactions with Related Persons. This policy delegates to the Audit Committee responsibility for reviewing, approving, or ratifying transactions with "Related Persons" that are required to be disclosed under the rules of the SEC. Under the policy, a "Related Person" includes any of the Directors, nominee for Director, or executive officers of Otter Tail Corporation, certain shareholders and any immediate family member of any of the foregoing persons. The policy applies to transactions in which Otter Tail Corporation is a participant and a Related Person will have a direct or indirect material interest and the amount involved exceeds $120,000. Under the policy, Otter Tail Corporation management is responsible for disclosing to the Audit Committee all material information related to any covered transaction in order to give the Audit Committee an opportunity to authorize, approve or ratify the covered transaction based upon its determination that the covered transaction is fair and reasonable and on terms no less favorable to Otter Tail Corporation than could be obtained in a comparable arm's length transaction with an unrelated third party. A copy of the Policy and Procedures Regarding Transactions with Related Persons can be found at www.ottertail.com. For 2020, Otter Tail Corporation is unaware of any related party transactions covered under this policy.

SHAREHOLDER PROPOSALS FOR 2022 ANNUAL MEETING

Any holder of common shares of Otter Tail Corporation who intends to present a proposal that may properly be acted upon at the 2022 Annual Meeting of Shareholders of Otter Tail Corporation must submit such proposal to Otter Tail Corporation so that it is received at Otter Tail Corporation's executive offices at P.O. Box 496, Fergus Falls, MN 56538-0496, on or before November 3, 2021 for inclusion in Otter Tail Corporation's Proxy Statement and form of proxy relating to that meeting.

If a holder of common shares wishes to present a proposal at the 2022 Annual Meeting of Shareholders, but does not wish to include it in the Proxy Statement and form of proxy relating to that meeting or wishes to nominate a candidate for Director, the holder must submit notice of the proposal or nomination in accordance with the procedures provided in the Otter Tail Corporation Bylaws to Otter Tail Corporation's executive offices on or before January 12, 2022 in order for the proposal to be considered timely.

OTHER BUSINESS

As of the date hereof, the Board of Directors of Otter Tail Corporation is aware of no other proposals to be presented to the Annual Meeting in addition to the items described above. If any other matters properly come before the Annual Meeting, the proxies will vote thereon at their discretion.

A copy of Otter Tail Corporation's Annual Report on Form 10-K for the year ended December 31, 2020, including financial statements and schedules thereto, filed with the SEC, is available without charge to shareholders. Address written requests to:

Corporate Secretary Otter Tail Corporation P.O. Box 496

Fergus Falls, MN 56538-0496

APPENDIX A

NON-GAAP FINANCIAL MEASURES

Financial measures used to determine cash incentives under the Executive Annual Incentive Plan and to determine performance shares awarded under the 2018-2020 Performance Share Grant are based on financial measures calculated in accordance with generally accepted accounting principles ("GAAP"), which are adjusted for items deemed to be unusual or extraordinary. The GAAP measure may be adjusted for items which fall under these categories as appropriate: (1) unusual, extraordinary or nonrecurring events; (2) changes in applicable accounting rules or principles or in the Corporation's methods of accounting; (3) results of discontinued operations; (4) asset write downs; (5) litigation or claim judgments or settlements; (6) changes in tax law affecting reported results; (7) severance, contract termination and other costs related to exiting business activities; (8) acquisitions; (9) gains or losses from the disposition of businesses or assets; (10) gains or losses from the early extinguishment of debt; and (11) other publicly identified one-time items.

For 2020, only GAAP financial measures were used in determining the 2020 cash incentive under the Executive Annual Incentive Plan. There were no adjustments made.

For 2020, the Corporate Three-Year Adjusted Return on Equity reflects adjustments from the most directly comparable GAAP financial measure in order to exclude the impact of discontinued operations for 2018. There were no adjustments made to the GAAP financial measure for 2019.

The following table provides a reconciliation of the Corporate Three-Year Adjusted Return on Equity, used to determine the shares awarded under the Corporation's 2018-2020 performance shares, to the GAAP calculation.

Three-

year

2018

2019

2020

Average

  • 11.52% 11.61%

  • 11.63% 11.59%GAAP Corporate Three-Year Return on Equity Adjustments:

    Impact of ongoing costs related to operations, not of a continuing nature Corporate Three-Year Adjusted Return on Equity

  • 0.05% -%

-%

11.57%

11.61%

11.63% 11.60%

Otter Tail Corporation's management believes that the Corporate three-year adjusted ROE reflects management's performance in operating the Corporation and provides a meaningful representation of the performance of our core business. However, management understands there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not a substitute for GAAP measures for purposes of analyzing financial performance, and they may be calculated differently from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

A-1

215 South Cascade Street

P.O. Box 496

Fergus Falls, Minnesota 56538-0496

4950 19th Avenue S., Suite 101

P.O. Box 9156

Fargo, North Dakota 58106-9156

www.ottertail.com

Disclaimer

Otter Tail Corporation published this content on 03 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2021 16:25:02 UTC.


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