DEF 14A 1 d588124ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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Soliciting Material Pursuant to §240.14a-12

Prudential Financial, Inc.

 

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WE MAKE LIVES BETTER by SOLVING the FINANCIAL CHALLENGES of our CHANGING WORLD 2019 PROXY STATEMENT PRUDENTIAL FINANCIAL, INC. Notice of Annual Meeting of Shareholders to be held on May 14, 2019


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PRUDENTIALS ENVIRONMENTAL, SOCIAL AND GOVERNANCE FRAMEWORK Prudentials integrated ESG framework builds on our 140-year tradition of creating financial opportunities for individuals, families, institutions and communities. Social Capital Creating societal impact has been core to Prudential since its founding more than 140 years ago. Human Capital Prudential is committed to building a fully inclusive culture and equity in all talent hiring and management decisions. Business Model & Innovation Prudentials business model manages risk and deploys capital while creating solutions that put financial security within reach for all customers. Corporate Governance The Prudential Board is built on a foundation of sound governance practices and commitment to its shareholders. Environment Prudentials proactive engagement with employees, customers, vendors, investors and environmental groups informs its sustainability policies and practices. Our culture is one of our best assets. I would distill our culture down to our values, our practices and our people. It is a competitive advantage, and vital to the creation and protection of Prudentials long-term value. Thomas J. Baltimore, Prudential Lead Independent Director Gender Equality Low-Risk Environment, Social, ESG Rating 1and Governance A MSCI Named to Bloombergs Sustainalytics ISS QualityScore CDP Score Gender Equality Index ESG Risk Rating B


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Our environmental, social and governance practices underscore our determination to tackle the toughest problems to help shape our changing world for the better. Social Capital CORPORATE GIVING " Since 1976, The Prudential Foundation has made nearly $890 million in grants and contributions to nonprofits addressing social needs IMPACT INVESTING " Prudential manages one of the worlds largest impact investment portfolios, with more than $2.5 billion invested since 1976 " Investments in real assets, social purpose businesses and financial intermediaries generate financial return and create positive social impact " Our ongoing $25 million commitment to first-time venture capital funds supports diverse entrepreneurs and businesses addressing underserved communities PGIM REAL ESTATE ACCESS & AFFORDABILITY " A history of successful investment in affordable housing and transformative investment " $168.9 billion in assets under management or supervision1, as of December 31, 2018 " Signatory to UN Principles of Responsible Investing and A+ for strategy and governance " 40 GRESB Green Star Awards over five years Human Capital DIVERSITY " Senior vice president and above compensation tied to long-term diversity performance objectives WORKFORCE DEMOGRAPHICS (U.S.) " 52% of U.S. employees are women " 29% of U.S. employees are people of color EMPLOYEE TURNOVER (U.S.) " 11% Turnover Rate below national finance and insurance industrys average rate of 22% CORPORATE & COMMUNITY ENGAGEMENT " Prudential CARES aligns with our talent focus by enabling employees to leverage their business skills and expertise through participation in corporate-sponsored initiatives " Since 1976, The Prudential Foundation has provided more than $195.5 million in Matching Gifts to non-profit organizations. In 2018, the Foundation provided more than $8.5 million in Matching Gifts. " Employees have provided nearly $1 million in pro bono consulting to 42 non-profits and small businesses Business Model & Innovation SOLVING FINANCIAL CHALLENGES " Prudential solves the financial challenges of a changing world leading to better outcomes for people, employers and communities " Prudential reaches 50 million people in more than 40 countries through the workplace, and individually with savings, protection, retirement and investment solutions FINANCIAL WELLNESS " Financial wellness platform helps customers across all incomes achieve financial goals and protect against risks " Prudential Pathways(R) provides financial education to Prudentials extensive U.S. customer base including more than 350 employers representing 4 million employees " Pension Risk Transfer business enhances the retirement well-being of workers by helping companies fulfill pension promises 1PGIMs total net assets under management is equal to $147 billion across its PGIM Real Estate and PGIM Real Estate Finance businesses.

 


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Corporate Governance BOARD OVERSIGHT " Prudentials Corporate Governance & Business Ethics Committee oversees the Companys reputation, environmental stewardship, sustainability and corporate social responsibility strategy BEST-PRACTICE BOARD LEADERSHIP " Majority Independent Directors " Strong Lead Independent Director " Annual Election of Directors by majority of votes cast in an uncontested election " Independent committee leadership " 80% of non-employee directors are diverse " Annual Board evaluation by independent third party SHAREHOLDER RIGHTS " Proactive Adoption of Proxy Access " Special Meeting Threshold of 10% " No Poison Pill Environment GLOBAL ENVIRONMENTAL COMMITMENT " Advancing toward a global commitment with quantitative & qualitative targets " Global emissions data third-party-verified by Lloyds Register Quality Assurance CLIMATE CHANGE " CDP score increased from C to B in 2018 " Business continuation plans outline recovery strategy for natural disasters " Task Force on Climate-Related Financial Disclosures (TCFDs) voluntary recommendations supporter GREEN INVESTMENTS " Green programs constituted 29% of PGIM Real Estate Finances FHA/agency multifamily originations" PGIM Fixed Incomes green bond market value totaled $1.54 billion as of December 31, 2018 " Prudentials $5 million investment in the worlds first Blue Bond funds sustainable marine and fisheries projects 2018 MILESTONES Q1 " Fortune(R) Magazines Worlds Most Admired Companies ranks Prudential number 1 in the Insursance: Life and Health category " Ethisphere includes Prudential on its 2018 and 2019 Worlds Most Ethical Companies(R) list -- for the fifth consecutive year. " Barrons lists Prudential as one of the 100 Most Sustainable Companies Q2 " DiversityInc includes Prudential in its Top 50 Companies for Diversity " Military Times names Prudential a Best for Vets employer in 2018" Points of Light names Prudential to its Civic 50 for the fourth time" Prudential completes its 23rd annual Prudential Spirit of Community Awards honoring young volunteers " Prudential is nominated for the National Association of Corporate Directors NXT initiative " Prudential is named to Corporate Responsibility Magazines 100 Best Corporate Citizens Q3 " Named to Fortunes 2018 Change the World List " Prudential included in the Disability Equality Index(R) (DEI(R)) Best Places to Work, receiving a top score of 100% " Prudential of Korea celebrates the 20th anniversary of its Spirit of Community Awards program " Prudential awarded the 2018 Leading Disability Employer Seal by the National Organization on Disability" Working Mother includes Prudential in its 100 Best Companies for Working Mothers " Latina Style Magazine lists Prudential as one of the 50 Best Companies for Latinas Q4 " Prudential featured in Catalysts CEO Champions for Change Report " Forbes and JUST Capital rank Prudential the no. 1 company in the insurance industry on their Americas Most JUST Companies list


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                 Prudential Financial, Inc.

                 751 Broad Street,

                 Newark, NJ 07102

 

 

 

March 28, 2019

Letter from the Board of Directors

to Our Shareholders

The Board values this opportunity to share our perspectives regarding the work we undertook for our shareholders during 2018. Our objective is to guide and oversee management in the creation of long-term value through the execution of a sound business strategy, thoughtful succession planning, a commitment to corporate ethics, careful risk oversight, prudent risk management, talent development, and creating societal impact. In pursuit of these objectives, we are pleased to share with you an overview of the Board’s priorities and actions during the year.

BUSINESS STRATEGY

We believe that an optimal and effective board of directors is informed, active and constructively engaged with management, without undue disruption to the day-to-day business of the Company. Our Board meets regularly to discuss Prudential’s strategic direction. Our collective skills and experience in the areas of regulation, business operations, risk management and capital markets, among other areas, enable us to provide critical insights to the Company to help maximize shareholder value. At each Board meeting and during our annual strategy planning session, we engage with Prudential’s senior leadership in robust discussions about the Company’s overall strategy, priorities for its businesses, and long-term growth opportunities.

SUCCESSION PLANNING

The Board collaborates with our executive team to cultivate a deep talent bench and plan for senior leadership succession. In 2018, as part of our succession plan, we made changes among the Company’s most visible leadership roles. The appointments of Charlie Lowrey to succeed John Strangfeld as Chief Executive Officer (“CEO”) and Rob Falzon to succeed Mark Grier as Vice Chairman, are the culmination of a multiyear, rigorous succession-planning effort by the Board. This structure is modeled in part after the roles John and Mark established working together over the past decade. We are grateful to John and Mark for their leadership and the contributions both have made to Prudential. John will be leaving the Board on April 5, 2019, and Mark is expected to retire from the Company and leave the Board in August 2019. At that time, Rob Falzon will join the Board.

CULTIVATING A STRONG ETHICAL CULTURE

Our Corporate Governance and Business Ethics Committee has direct oversight for the Company’s overall ethical culture and human rights policy. The Board collaborates with management to establish and communicate the right ethical tone which guides our conduct and helps protect the Company’s reputation. We know that only by doing business the right way, every day, do we continue to earn our investors’ and customers’ trust. Our commitment to strong ethical values and doing business the right way is reflected in Ethisphere Institute’s naming of Prudential as a 2019 World’s Most Ethical Company®. This recognition is bestowed only on organizations that demonstrate a culture of ethics and transparency at every level.

BOARD RISK OVERSIGHT

The Board sets standards for managing risk and monitoring the management of those risks within the Company. The Risk Committee is comprised of the chairs of each Board committee, which recognizes the vital role of each committee in risk oversight and enables the directors to more closely coordinate the Board’s risk oversight function. The Risk Committee has metrics in place to monitor and review market, insurance, investment, and operational risk. We regularly review the Company’s risk profile, including its approach to capital management, its operational footprint, and its investment risks and strategies. The Board considers the breadth of the Company’s risk management framework when approving its strategy and risk tolerance, and verifies that strategic plans are commensurate with our ability to identify and manage risk.

TALENT DEVELOPMENT

The diversity of experiences, backgrounds and ideas of Prudential’s global employees enables us to develop solutions that address the financial needs of our customers. Therefore, recruiting, developing and retaining top diverse industry talent is a key

 

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priority for the Company. Talent development is discussed at every Board meeting, and once per year, the Board devotes time to discuss talent at each business and functional leadership level across the Company. This engagement gives us rich insight into the Company’s pool of talent and its succession plans.

CREATING POSITIVE SOCIETAL IMPACT

Prudential was founded on the belief that financial security should be attainable by everyone. Delivering business results and creating societal impact has guided our business model for more than 140 years. By leveraging the full breadth of Prudential’s business capabilities, the Company harnesses the power of the capital markets to promote economic opportunity and sustainable growth. To make sure the Company is delivering on its promise of inclusion, the Company has a Corporate Social Responsibility Oversight Committee. The Committee meets three times per year and is comprised of Board members and Prudential senior executives.

ENGAGEMENT AND OUTREACH

As a Board, one of our priorities is listening to and considering the views of our shareholders as we make decisions in the Boardroom. We accomplish this through a robust outreach and engagement program. In 2018, we spoke to investors who represent a majority of our outstanding shares. Topics discussed included Prudential’s sustainability and social strategy, Board composition and refreshment, Board leadership structure, succession planning, and our executive compensation program.

YOUR VIEW IS IMPORTANT TO US

We value your support, and we encourage you to share your opinions with us. You can do so by writing to us at the address below. You can also send an email to the independent directors at independentdirectors@prudential.com or provide feedback on our executive compensation program via our website at www.prudential.com/executivecomp. If you would like to write to us, you may do so by addressing your correspondence to Prudential Financial, Inc., Board of Directors, c/o Margaret M. Foran, Chief Governance Officer, 751 Broad Street, Newark, NJ 07102. We suggest you view short videos from our Lead Independent Director, Thomas J. Baltimore, and our Audit Committee Chairman, Douglas A. Scovanner, on our website at

www.prudential.com/directorvideos.

THE BOARD OF DIRECTORS OF PRUDENTIAL FINANCIAL, INC.

 

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Thomas J. Baltimore

  

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George Paz

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Gilbert Casellas

  

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Sandra Pianalto

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Mark B. Grier

  

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Christine Poon

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Martina Hund-Mejean

  

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Douglas A. Scovanner

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Karl J. Krapek

  

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John R. Strangfeld

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Peter R. Lighte

  

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Michael A. Todman

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Charles F. Lowrey

  

 

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Dear Fellow Shareholders:

 

You are invited to the Annual Meeting of Shareholders on May 14, 2019, at 751 Broad Street, Newark, NJ 07102, at 2:00 p.m. We hope that you will attend the meeting, but whether or not you attend, please designate the proxies on the proxy card to vote your shares.

 

We are pleased that shareholder voting has increased and are again offering a voting incentive to registered shareholders. Because of your active participation, we continue to support the work of American Forests to protect and restore America’s forest ecosystems.

 

Every shareholder’s vote is important. Thank you for your commitment to the Company and please vote your shares.

 

Sincerely,

 

 

 

 

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Charles F. Lowrey

Chief Executive Officer

Prudential Financial, Inc.

 

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Notice of Annual Meeting of Shareholders of

Prudential Financial, Inc.

 

 

     Place:

      Prudential’s Corporate

      Headquarters

      751 Broad Street

      Newark, NJ 07102

 

     Date:

      May 14, 2019

 

     Time:

      2:00 p.m.

   

 

AGENDA:

 

•    Election of 13 directors named in the Proxy Statement;

 

•    Ratification of appointment of PricewaterhouseCoopers LLP
as our independent registered public accounting firm for 2019;

 

•    Advisory vote to approve named executive officer compensation;

 

•    Shareholder proposal regarding the Right to Act by Written Consent,
if properly presented at the meeting; and

 

•    Shareholders also will act on such other business as may
properly come before the meeting or any adjournment or
postponement thereof.

 

   

 

Record date: You can vote if you were a shareholder of record on March 15, 2019.

 

If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, as described in the Proxy Statement.

 

By Order of the Board of Directors,

 

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Margaret M. Foran

Chief Governance Officer,

Senior Vice President and Corporate Secretary

 

March 28, 2019

 

Prudential Financial, Inc.

 

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Summary Information

To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company’s 2018 financial performance and key executive compensation actions and decisions, and our key corporate governance policies and practices. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and this Proxy Statement.

Business Highlights

 

   

 

We reported net income of $4.07 billion, or $9.50 per share of Common Stock in 2018, compared to $7.86 billion, or $17.86 per share, in 2017, based on U.S. generally accepted accounting principles (“GAAP”).

 

Net income in 2017 included a benefit of $2.87 billion, or $6.64 per share, as a result of the enactment of the Tax Cuts and Jobs Act.

 

 

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We reported after-tax adjusted operating income of $5.02 billion, or $11.69 per share of Common Stock in 2018, compared to $4.65 billion, or $10.58 per share, in 2017.(1)

 

 

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We reported GAAP book value of $116.34 per share of Common Stock as of December 31, 2018, compared to $125.63 per share as of year-end 2017.

 

Adjusted book value amounted to $96.06 per share of Common Stock as of December 31, 2018, compared to $88.67 per share as of year-end 2017.(1)

 

 

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(1)

Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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Summary Information 

 

 

 

   

 

We reported return on average equity based on net income of 8.2% for 2018, compared to 16.0% for 2017.

 

We reported operating return on average equity of 12.7% for 2018, compared to 12.9% for 2017.(1)

 

 

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We reported assets under management of $1.377 trillion as of December 31, 2018, compared to $1.394 trillion as of year-end 2017.

 

 

 

 

 

 

 

 

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We paid quarterly Common Stock dividends totaling $3.60 per share during 2018, an increase of 20% from 2017.

 

 

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(1)

Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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Summary Information 

 

 

 

 

COMPENSATION HIGHLIGHTS

 

The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices and to strengthen the link to performance and rigor of our program. Highlights of our program include:

 

    Pre-established award levels. We establish both target and maximum award levels under our annual incentive program.

 

    Mix of performance metrics. We use three equally weighted performance metrics to determine annual incentive awards: earnings per share (“EPS”) achieved versus guidance; annual growth in EPS; and return on equity (“ROE”) relative to peer life insurance companies.

 

    Significant portion of pay is performance based. 86% or more of our named executive officers’ (“NEOs”) target total direct compensation is performance based.

 

    Mandatory bonus deferral. Our NEOs are required to defer 30% of their annual incentive awards into our Book Value Performance Program. For Messrs. Tanji and Sleyster, the mandatory deferral is 10% for 2018 as their annual incentive awards relate to their prior roles. As NEOs, they will be subject to the 30% deferral going forward.

 

    Balance of absolute and relative performance metrics. The performance metrics under our annual incentive and long-term incentive programs balance our absolute performance and our relative performance versus peer life insurance companies.

 

    Robust clawback policy. We maintain a clawback policy for our executive officers covering all incentive-based
   

awards and addressing material financial restatements and misconduct (including failure to report), which includes a robust disclosure policy if such events occur.

 

  No excessive risk-taking. The Compensation Committee closely monitors the risks associated with our executive compensation program and individual executive compensation decisions to determine they do not encourage excessive risk-taking.  

 

  Meaningful stock ownership guidelines. We have rigorous stock ownership guidelines for all our executive officers.  

 

  Stock retention requirements. In addition to stock ownership guidelines, we have stock retention requirements covering shares acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units.  

 

  Robust shareholder engagement program. Each year, we engage with our shareholders and share their feedback with the Compensation Committee and the Board.  

 

 

  Diversity and inclusion performance metric. The 2018 performance shares and units awarded include a Diversity and Inclusion modifier, incentivizing Prudential leadership to grow the inclusion of diverse individuals in the executive ranks of the Company.  
 

 

For additional information, see the Compensation Discussion and Analysis (“CD&A”) in this Proxy Statement.

 

 

 

The compensation of our NEOs reflects both our 2018 performance and the rigor of our executive compensation program. The following table depicts the Compensation Committee’s perspective on total direct compensation for the NEOs for 2018, as discussed in the CD&A. This table is not a substitute for the compensation tables required by the SEC.

 

Named Executive Officer

 

  

2018 Base Salary(1)

 

    

2018 Annual Incentive
Award (as adjusted for
mandatory deferrals)(2)

 

    

2018 Long-Term
Incentive Award Value(3)

 

    

2018 Total Direct
Compensation

 

 

Charles F. Lowrey

 

           $

 

1,200,000

 

 

 

                   $

 

2,870,000

 

 

 

                   $

 

9,530,000

 

 

 

               $

 

13,600,000

 

 

 

John R. Strangfeld

 

           $

 

1,400,000

 

 

 

                   $

 

4,292,400

 

 

 

                   $

 

11,839,600

 

 

 

               $

 

17,532,000

 

 

 

Kenneth Y. Tanji

 

           $

 

600,000

 

 

 

                   $

 

990,000

 

 

 

                   $

 

2,710,000

 

 

 

               $

 

4,300,000

 

 

 

Robert M. Falzon

 

           $

 

1,000,000

 

 

 

                   $

 

2,149,000

 

 

 

                   $

 

7,521,000

 

 

 

               $

 

 

10,670,000

 

 

 

 

 

Mark B. Grier

 

           $

 

1,190,000

 

 

 

                   $

 

3,640,000

 

 

 

                   $

 

9,560,000

 

 

 

               $

 

14,390,000

 

 

 

Stephen Pelletier

 

           $

 

770,000

 

 

 

                   $

 

2,870,000

 

 

 

                   $

 

5,980,000

 

 

 

               $

 

9,620,000

 

 

 

Scott G. Sleyster

 

           $

 

700,000

 

 

 

                   $

 

1,620,000

 

 

 

                   $

 

3,980,000

 

 

 

               $

 

6,300,000

 

 

 

 

 

1.

For Messrs. Lowrey, Tanji, Falzon and Sleyster, the amounts represent their annualized salaries at the end of 2018. For Mr. Strangfeld, the amount represents his annualized salary at the end of his tenure as CEO.

 

2.

The following amounts are not included in the 2018 Annual Incentive Award column because they have been mandatorily deferred into our Book Value Performance Program: $1,230,000 for Mr. Lowrey, $1,839,600 for Mr. Strangfeld, $110,000 for Mr. Tanji, $921,000 for Mr. Falzon, $1,560,000 for Mr. Grier, $1,230,000 for Mr. Pelletier, and $180,000 for Mr. Sleyster.

 

3.

Represents long-term incentive awards granted in 2019 (or 2018, in the case of Mr. Strangfeld) for 2018 performance. Amounts include portions of the 2018 Annual Incentive Awards mandatorily deferred into our Book Value Performance Program.

 

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Summary Information

 

 

Corporate Governance Highlights

In 2018, management and Board members engaged with shareholders who hold a majority of our shares. During these discussions, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, our Board structure, our governance practices and policies, and our compensation framework and programs. Our 2018 corporate governance highlights include:

 

   

Shareholder Engagement. In 2018, management and Board members met with shareholders who own a majority of our shares. These interactions included attendance at a Board meeting where investors shared their views regarding Prudential and its industry.

 

 

   

Board Refreshment. Elected five new directors in the last four years, enhancing the Board’s breadth and depth of experience and diversity. Our average Board tenure is 6.7 years.

 

 

   

Board Recognition. Nominated for the National Association of Corporate Directors NXT Award in recognition of the Board’s diversity and inclusion commitment; Gilbert F. Casellas honored by the NACD’s Directorship 100 in recognition of his impact on boardroom practices and performance.

 

 

   

Leadership Recognition. Corporate Secretary Magazine nominee for Best Use of Technology, Best Large Cap Proxy Report, and Best ESG Reporting.

 

 

   

Executive Compensation Program. Received 96% shareholder support in 2018 on Say-on-Pay proposal.

 

Board of Directors Nominees and Committees(1)

 

Name/Age

 

 

Independent

 

  

Director Since

 

 

Committee Membership

 

 

Other Public Boards     

 

 

Thomas J. Baltimore, 55

 

 

Yes

  

 

Oct. 2008

 

 

•  Executive (Chair)

•  Compensation

•  Lead Independent Director (since 2017)

 

 

 

•  Investment (Chair)

•  Risk (Chair)

 

 

1     

 

Gilbert F. Casellas, 66

 

 

Yes

  

 

Jan. 2001

 

 

•  Corporate Governance &

   Business Ethics (Chair)

 

 

 

•  Executive

•  Risk

 

 

 

0     

 

Robert M. Falzon, 59(2)

 

 

No

              

 

0     

 

Mark B. Grier, 66(2)

 

 

 

No

 

  

 

Jan. 2008

 

 

 

•  Risk

 

     

 

0     

 

 

Martina Hund-Mejean, 58

 

 

 

Yes

 

  

 

Oct. 2010

 

 

 

•  Audit

 

     

 

0     

 

 

Karl J. Krapek, 70

 

 

Yes

  

 

Jan. 2004

 

 

•  Compensation (Chair)

 

 

•  Executive

•  Risk

 

 

 

2     

 

Peter R. Lighte, 70

 

 

Yes

  

 

Mar. 2016

 

 

•  Corporate Governance &

   Business Ethics

 

 

 

•  Investment

 

 

0     

 

Charles F. Lowrey, 61

 

 

No

  

 

Dec. 2018

 

 

•  Executive

 

     

 

0     

 

George Paz, 63

 

 

 

Yes

 

  

 

Mar. 2016

 

 

 

•  Audit

 

     

 

1     

 

 

Sandra Pianalto, 64

 

 

Yes

  

 

Jul. 2015

 

 

•  Corporate Governance &

    Business Ethics

 

 

 

•  Finance

 

 

3     

 

Christine A. Poon, 66

 

 

Yes

  

 

Sep. 2006

 

 

•  Executive

•  Finance (Chair)

 

 

 

•  Investment

•  Risk

 

 

3     

 

Douglas A. Scovanner, 63

 

 

Yes

  

 

Nov. 2013

 

 

•  Audit (Chair)

•  Executive

 

 

 

•  Risk

 

 

0     

 

Michael A. Todman, 61

 

 

 

Yes

 

  

 

Mar. 2016

 

 

 

•  Compensation

 

 

 

•  Finance

 

 

 

2     

 

 

(1)

John R. Strangfeld, our Non-Executive Chairman, will step down from the Board on April 5, 2019 and is not a nominee.

 

(2)

Robert M. Falzon will be elected as a Director upon the retirement of Mark B. Grier in August 2019.

Annual Meeting Proposals

 

Proposal

 

  

Recommendation of Board

 

 

Election of directors

 

  

 

FOR each of the nominees

 

 

Ratification of independent auditor

 

  

 

FOR

 

 

Advisory vote to approve named executive officer compensation

 

  

 

FOR

 

 

Shareholder proposal regarding the right to act by written consent

 

  

 

AGAINST

 

 

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  LOGO

 

 

Contents 

 

 

 

 

 

Voting Securities and Principal Holders

    35  

Compliance With Section 16(a) of the Exchange Act

    36  

General Information About the Meeting

    94  

Voting Instructions and Information

    94  

Board Recommendations

    95  

Attending the Annual Meeting

    95  

Submission of Shareholder Proposals and Director Nominations

    96  

Proxy Statement

The Board of Directors (the “Board”) of Prudential Financial, Inc. (“Prudential Financial” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Shareholders to be held on May 14, 2019, at 2:00 p.m., at Prudential Financial’s Corporate Headquarters, 751 Broad Street, Newark, NJ 07102, and at any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability were first sent to shareholders on or about March 28, 2019.

 

 

SHAREHOLDER PROPOSAL REGARDING THE RIGHT TO ACT BY WRITTEN CONSENT

 

 

 

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Item 1–Election of Directors

Our Board of Directors has nominated 13 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors, except Robert M. Falzon, whose term as a director will commence upon the retirement of Mark B. Grier in August 2019. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 2019 Annual Meeting. All directors attended the 2018 Annual Meeting.

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.

Director Criteria, Qualifications, Experience and Tenure

Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function and in the context of the Company’s strategic priorities. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.

BOARD HIGHLIGHTS

 

 

BOARD DIVERSITY

 

While the Company does not have a formal policy on Board diversity,
our Corporate Governance Principles and Practices place great
emphasis on diversity, and the Committee actively considers diversity
in recruitment and nominations of directors and assesses its
effectiveness in this regard when reviewing the composition of the
Board. The current composition of our Board reflects those efforts and
the importance of diversity to the Board.

 

 

    80% of our non-employee directors are diverse
      3  

 

director nominees have worked outside

the United States

 

      2

 

 

director nominees are African-American

 

      1

 

 

director nominee is Asian-American

 

      2

 

 

director nominees are Hispanic

 

      3

 

 

director nominees are Women

 

      1

 

 

director nominee is LGBT

 

 

 

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Item 1—Election of Directors: Director Nominees

 

 

 

LOGO

BOARD TENURE FOR 201 B NOMINEES Our directors' expertise combines to provide a broad mix of skills, qualifications and proven leadership abilities. The CorpOfate Governance and Business Ethics Committee ptactices a long term approach to board refreshment. With tile assistance of an independent search firm. the Committee regularly identifies individuals who have expertise that would complement and enhance tile current board's skills and experience. In addition, as part or our shareholder engagement dialogue, we routinely ask our investors for input regarding director recommendations.

It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions respectfully as a unit.

The Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board and contributions to the Board and their respective committees.

 

Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.

Director Nominees

 

The Board of Directors recommends that shareholders vote “FOR” each of the nominees.

 

 

    LOGO

 

 

 Thomas J. Baltimore  

 

   Age: 55

   Director Since: October 2008

   Lead Independent Director since May 2017

  

 

Prudential Committees:

 

  Executive (Chair)

 

  Compensation

 

  Investment (Chair)

 

  Risk (Chair)

 

  

 

Public Directorships:

 

  Park Hotels & Resorts, Inc.

   
    

Former Directorships Held During the Past Five Years:

 

  Duke Realty Corporation (April 2017)

 

  RLJ Lodging Trust (May 2016)

 

   
Mr. Baltimore has been the Chairman, President and CEO of Park Hotels & Resorts, Inc. (a NYSE-listed lodging real estate investment trust) since January 2017. Between May 2016 and January 2017, Mr. Baltimore was the President and CEO of the planned Hilton Real Estate Investment Trust. Previously, he was President and CEO of RLJ Lodging Trust (a NYSE-listed real estate investment company) from May 2011 to May 2016. He served as Co-Founder and President of RLJ Development, LLC (RLJ Lodging’s predecessor company) from 2000 to May 2011. He served as VP, Gaming Acquisitions, of Hilton Hotels Corporation from 1997 to 1998 and later as VP, Development and Finance, from 1999 to 2000. He also served in various management positions with Host Marriott Services, including VP, Business Development, from 1994 to 1996.   

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Investments

  Real Estate

  Risk Management

  Talent Management

    

 

 

 

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Item 1—Election of Directors: Director Nominees

 

 

 

 

    LOGO

 

 

 

 Gilbert F. Casellas

 

   Age: 66

   Director Since: January 2001

   (Director of Prudential Insurance since

   April 1998)

  

 

Prudential Committees:

  Corporate Governance and Business Ethics (Chair)

 

  Executive

 

  Risk

 

     
          
Mr. Casellas served as the Chairman of OMNITRU (a consulting and investment firm) from 2011 to 2017. He was the VP, Corporate Responsibility, of Dell Inc. (a global computer manufacturer) from 2007 to 2010. He served as a Member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC from June 2005 to October 2007. He was the President of Casellas & Associates, LLC (a consulting firm) from 2001 to 2005. During 2001, he served as President and CEO of Q-linx, Inc. and served as the President and COO of The Swarthmore Group, Inc. from January 1999 to December 2000. Mr. Casellas served as Chairman, U.S. EEOC from 1994 to 1998, and General Counsel, U.S. Department of the Air Force, from 1993 to 1994.

 

  

Skills & Qualifications

 

  Business Ethics

  Business Head/Administration

  Business Operations

  Corporate Governance

  Environmental/Sustainability/Corporate Responsibility

  Government/Public Policy

  Investments

 

 

  Risk Management

  Talent Management

 

 

    LOGO

 

 

 

 Robert M. Falzon

 

   Age: 59

   To be elected as a Director: August 2019

 

        
          
Mr. Falzon was elected Vice Chairman of Prudential Financial in December 2018. Previously, he served as Executive Vice President and CFO of Prudential Financial from 2013 to 2018, and has been a member of the Company’s Executive Leadership Team since 2013. Mr. Falzon also served as Senior Vice President and Treasurer of Prudential Financial from 2010 to 2013. Mr. Falzon has been with Prudential since 1983, serving in various positions including managing director at PGIM Real Estate (“PGIM RE”), head of PGIM RE’s Global Merchant Banking Group and CEO of its European business. He was also a Senior Portfolio Manager, a member of PGIM RE’s Global Investment and Management Committees, Chairman of the Global Real Estate Securities Investment Committee and the Currency Hedging Committee, and a member of the Investment Committee for Prudential Investment Management.   

Skills & Qualifications

 

  Business Ethics

  Business Head/Administration

  Business Operations

  Corporate Governance

  Environmental/Sustainability/Corporate Responsibility

  Finance/Capital Allocation

  Financial Services Industry

  Government/Public Policy

  Insurance Industry

  International

  Investments

 

 

  Real Estate

  Risk Management

  Talent Management

  Technology/Systems

 

 

 

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Item 1—Election of Directors: Director Nominees

 

 

 

 

    LOGO

 

 

 

Mark B. Grier

 

Age: 66

Director Since: January 2008

Mr. Grier is expected to retire from Prudential in August 2019 and will leave the Board at that time.

 

  

 

Prudential Committees:

 

    Risk

 

     
          
Mr. Grier has served as Vice Chairman of Prudential Financial since 2007 and a member of the Company’s Executive Leadership Team since 2002. Mr. Grier will be retiring from the Company no later than August 30, 2019 and will leave the Board at that time. Upon his retirement, it is expected that Robert Falzon’s service on the Board will commence. From April 2007 through January 2008, Mr. Grier served as Vice Chairman of Prudential Financial overseeing the International Insurance and Investments divisions and Global Marketing and Communications. Mr. Grier was CFO of Prudential Insurance from 1995 to 1997. Prior to joining Prudential, Mr. Grier was an executive with Chase Manhattan Corporation.

 

  

Skills & Qualifications

 

  Business Ethics

  Business Head/Administration

  Business Operations

  Corporate Governance

  Environmental/Sustainability/ Corporate Responsibility

  Finance/Capital Allocation

 

 

  Financial Services Industry

  Government/Public Policy

  Insurance Industry

  International

  Risk Management

  Talent Management

  Technology/Systems

 

    LOGO

 

 

 

Martina Hund-Mejean

 

Age: 58

Director Since: October 2010

 

  

 

Prudential Committees:

 

    Audit

 

     
          
Ms. Hund-Mejean has served as the CFO and a member of the Executive Committee at Mastercard Worldwide (a global transaction processing and consulting services company) since 2007. She has announced her intention to step down as CFO of Mastercard Worldwide effective April 1, 2019. Ms. Hund-Mejean served as Senior Vice President (SVP) and Corporate Treasurer at Tyco International Ltd. from 2003 to 2007; SVP and Treasurer at Lucent Technologies from 2000 to 2002; and held management positions at General Motors Company from 1988 to 2000. Ms. Hund-Mejean began her career as a credit analyst at Dow Chemical in Frankfurt, Germany.

 

  

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  International

  Investments

 

 

  Risk Management

  Talent Management

  Technology/Systems

 

 

   LOGO

 

 

 

Karl J. Krapek

 

Age: 70

Director Since: January 2004

 

  

 

Prudential Committees:

 

   Compensation (Chair)

 

   Executive

 

   Risk

 

 

Public Directorships:

   Northrop Grumman
Corporation

 

   Pensare Acquisition Corp.

   
          
Mr. Krapek served as the President and COO of United Technologies Corporation (UTC) from 1999 until his retirement in January 2002. Prior to that time, Mr. Krapek held other management positions at UTC, which he joined in 1982. Mr. Krapek is also the co-founder of The Keystone Companies, which was founded in 2002 and develops residential and commercial real estate.   

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Environmental/Sustainability/Corporate Responsibility

  Finance/Capital Allocation

  International

  Real Estate

 

 

  Risk Management

  Talent Management

  Technology/Systems

 

 

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Item 1—Election of Directors: Director Nominees

 

 

 

 

     LOGO

 

 

 

  Peter R. Lighte

 

    Age: 70

    Director Since: March 2016

 

  

 

Prudential Committees:

 

   Corporate Governance and Business Ethics

   Investment

     
          
Mr. Lighte served as the Vice Chairman, J.P. Morgan Corporate Bank, China (a global financial services company), from 2010 to 2014, and the founding Chairman of J.P. Morgan Chase Bank China, from 2007 to 2010. Prior to that, he headed the company’s International Client Coverage for Treasury and Securities Services in J.P. Morgan’s European Global Operating Services Division and was instrumental in re-establishing its corporate bank in London. Mr. Lighte previously served as the President of Chase Trust Bank in Tokyo from 2000 to 2002. He was also the founding representative in Beijing of Manufacturers Hanover Trust Company. Mr. Lighte has also taught at several academic institutions, including Middlebury College and the University of Santa Clara.

 

  

Skills & Qualifications

 

  Academia/Education

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  Government/Public Policy

 

 

  Insurance Industry

  International

  Investments

  Risk Management

  Talent Management

 

 

    LOGO

 

 

 

  Charles F. Lowrey

 

    Age: 61

    Director Since: December 2018

 

  

 

Prudential Committees:

 

   Executive

 

     
          
Mr. Lowrey was elected CEO and President of Prudential Financial and Prudential Insurance in December 2018. As of April 5, 2019, Mr. Lowrey will become the Chairman of the Board of Directors of Prudential Financial and Prudential Insurance. Previously, he was Executive Vice President and COO, International Businesses, of Prudential from 2014 to 2018. He also served as Executive Vice President and COO, U.S. Businesses, of Prudential from 2011 to 2014. He has been a member of the Company’s Executive Leadership Team since 2011. He was CEO and President of Prudential Investment Management, Inc. from January 2008 to February 2011 and CEO of PGIM Real Estate from February 2002 to January 2008. He joined the Company in March 2001, after serving as a managing director and head of the Americas for J.P. Morgan’s Real Estate and Lodging Investment Banking group, where he began his investment banking career in 1988. He also spent four years as a managing partner of an architecture and development firm he founded in New York City.   

Skills & Qualifications

 

  Business Ethics

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  Insurance Industry

  International

  Investments

  Real Estate

  Risk Management

  Talent Management

   

 

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   LOGO

 

 

 

 George Paz

 

   Age: 63

   Director Since: March 2016

 

  

 

Prudential Committees:

 

   Audit

 

 

Public Directorships:

 

 

   Honeywell International, Inc.

   
    

Former Directorships Held During the Past Five Years:

 

  Express Scripts Holding Company (December 2018)

 

   
Mr. Paz was Non-Executive Chairman of Express Scripts Holding Company (Express Scripts), a prescription benefit management company, from May 2016 to December 2018 and served as the Chairman and CEO of Express Scripts from May 2006 to May 2016 after being appointed CEO in April 2005. Mr. Paz also served as the President of Express Scripts from October 2003 to February 2014 and as a director from January 2004 to December 2018. He joined Express Scripts in 1998 as SVP and CFO. Prior to joining Express Scripts, Mr. Paz was a partner at Coopers & Lybrand from 1988 to 1993 and 1996 to 1998 and served as Executive Vice President and CFO for Life Partners Group from 1993 to 1995.

 

  

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  Government/Public Policy

  Insurance Industry

 

 

  Risk Management

  Talent Management

  Technology/Systems

 

 

    LOGO

 

 

 

 Sandra Pianalto

 

   Age: 64

   Director Since: July 2015

 

  

 

Prudential Committees:

 

   Corporate Governance and Business Ethics

 

   Finance

 

 

Public Directorships:

 

   Eaton Corporation plc

 

  FirstEnergy Corp.

 

   The J.M. Smucker Company

   
          
Ms. Pianalto served as the President and CEO of the Federal Reserve Bank of Cleveland (the Cleveland Fed) from February 2003 until her retirement in May 2014. She was the First Vice President and COO of the Cleveland Fed from 1993 to 2003 and served as its VP and Secretary to the Board of Directors from 1988 to 1993. Ms. Pianalto also served in various supervisory roles at the Cleveland Fed from 1983 to 1988. Prior to joining the Cleveland Fed, Ms. Pianalto was an economist at the Board of Governors of the Federal Reserve System and served on the staff of the Budget Committee of the U.S. House of Representatives.   

Skills & Qualifications

 

  Academia/Education

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  Government/Public Policy

 

 

  Risk Management

  Talent Management

 

 

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Item 1—Election of Directors: Director Nominees

 

 

 

 

    LOGO

 

 

 

Christine A. Poon

 

Age: 66

Director Since: September 2006

 

  

 

Prudential Committees:

 

   Executive

 

   Finance (Chair)

 

   Investment

 

   Risk

 

 

Public Directorships:

 

   Koninklijke Philips NV

 

   Regeneron Pharmaceuticals

 

   The Sherwin-Williams Company

   
        
Ms. Poon has served as Executive in Residence at The Max M. Fisher College of Business at The Ohio State University since September 2015 and served as Professor of Management and Human Resources at The Max M. Fisher College of Business from October 2014 to September 2015. Ms. Poon previously served as Dean and John W. Berry, Sr. Chair in Business at The Max M. Fisher College of Business at The Ohio State University from April 2009 until October 2014. She served as Vice Chairman and a member of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a Member of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals, from 2003 to 2005. Prior to joining Johnson & Johnson, she served in various management positions at Bristol-Myers Squibb for 15 years.

 

  

Skills & Qualifications

 

  Academia/Education

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  International

  Investments

  Marketing/Sales

  Risk Management

  Talent Management

   

 

    LOGO

 

 

 

Douglas A. Scovanner

 

Age: 63

Director Since: November 2013

 

  

 

Prudential Committees:

 

   Audit (Chair)

 

   Executive

 

   Risk

 

     
          
Mr. Scovanner has been the Founder and Managing Member of Comprehensive Financial Strategies, LLC, a management consulting firm, since October 2013. Previously, he served as CFO (1994 to 2012) and Executive Vice President (2000 to 2012) of the Target Corporation (a North American retailer). Prior to joining the Target Corporation, Mr. Scovanner held various management positions at The Fleming Companies, Inc., Coca-Cola Enterprises, Inc., The Coca- Cola Company and the Ford Motor Company from 1979 to 1994.

 

  

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Financial Services Industry

  Investments

  Real Estate

 

 

  Risk Management

  Talent Management

 

 

    LOGO

 

 

 

Michael A. Todman

 

Age: 61

Director Since: March 2016

 

  

 

Prudential Committees:

 

   Compensation

 

   Finance

 

 

Public Directorships:

 

   Brown-Forman Corporation

 

   Newell Brands

   
          
Mr. Todman served as Vice Chairman of the Whirlpool Corporation (Whirlpool), a global manufacturer of home appliances, from November 2014 to December 2015. Mr. Todman previously served as President of Whirlpool International from 2006 to 2007 and 2010 to 2014, as well as President, Whirlpool North America, from 2007 to 2010. Mr. Todman held several senior positions, including Executive Vice President and President of Whirlpool Europe from 2001 to 2005 and Executive Vice President, Whirlpool North America, in 2001.   

Skills & Qualifications

 

  Business Head/Administration

  Business Operations

  Corporate Governance

  Finance/Capital Allocation

  Government/Public Policy

  International

  Marketing/Sales

 

 

  Risk Management

  Talent Management

 

 

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LOGO

Baltimore, Thomas J., Jr. Scovanner, Douglas A. Casellas, Gilbert F. Falzon, Robert M. Grier, Mark B. Hund-Mejean, Martina Krapek, Karl J. Lighte, Peter R. Lowrey, Charles F. Paz, George Pianalto, Sandra Poon, Christine A. Todman, Michael A. Summary of Director Qualifications and ExperienceACADEMIA/EDUCATION experience is important because it brings perspective regarding organizational management and academic research relevant to our business and strategy.BUSINESS ETHICS experience is important given the critical role that ethics plays in the success of our businesses.BUSINESS HEAD/ADMINISTRATION experience is important since directors with administration experience typically possess strong leadership qualities and the ability to identify and develop those qualities in others.BUSINESS OPERATIONS experience gives directors a practical understanding of developing, implementing and assessing our operating plan and business strategy.CORPORATE GOVERNANCE experience supports our goals of strong Board and management accountability, transparency and protectionof shareholder interests.ENVIRONMENTAL/SUSTAINABILITY/CORPORATE RESPONSIBILITY experience strengthens the Boards oversight and assures that strategic business imperatives and long term value creation for shareholders are achieved within a responsible, sustainable business model.FINANCE/CAPITAL ALLOCATION experience is important in evaluating our financial statements and capital structure.FINANCIAL EXPERTISE/LITERACY is important because it assists our directors in understanding and overseeing our financial reportingand internal controls.FINANCIAL SERVICES INDUSTRY experience is important in understanding and reviewing our business and strategy.GOVERNMENT/PUBLIC POLICY experience is relevant to the Company as it operates in a heavily regulated industry that is directly affectedby governmental actions.INSURANCE INDUSTRY experience is important in understanding and reviewing our business and strategy.INTERNATIONAL experience is important in understanding and reviewing our business and strategy. INVESTMENTS experience is important in evaluating our financial statements and investment strategy.MARKETING/SALES experience is relevant to the Company as it seeks to identify and develop new markets for its financial products and services. REAL ESTATE experience is important in understanding and reviewing our business and strategy. RISK MANAGEMENT experience is critical to the Boards role in overseeing the risks facing the Company. TALENT MANAGEMENT experience is valuable in helping us attract, motivate and retain top candidates for positions at the Company. TECHNOLOGY/SYSTEMS experience is relevant to the Company as it looks for ways to enhance the customer experience and internal operations.

 

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Corporate Governance

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings through ongoing communication with each other and with management throughout the year.

The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary.

Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company’s businesses, including actively overseeing and reviewing, on at least an annual basis, the Company’s strategic plans.

In addition, we solicit feedback from shareholders on corporate governance and executive compensation practices and engage in discussions with various groups and individuals on these matters.

Process for Selecting Directors

The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 15 members, reflecting the Board’s current view of its optimal size. The Committee is assisted with its recruitment efforts by an independent third-party search firm, which recommends candidates that satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested.

 

 

 

LOGO Source Candidate Pool from Independent Search Firms Shareholders Independent Directors Our people In-Depth Review by the Committee Consider skills matrics Screen qualifications Consider diversity Review independence and potential conflicts Meet with directors Recommend Selected Candidate for Appointment to our Board Review by full Board Select Director(s) 5 directors since 2015

 

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Corporate Governance

 

 

Shareholder Nominations and

Recommendations of Director Candidates

Our By-laws permit a group of up to 20 shareholders who have owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of our Board seats for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws.

Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement.

Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.”

Director Attendance

During 2018, the Board of Directors held eight meetings. Together, the directors attended 99% of the combined total meetings of the full Board and the committees on which they served in 2018.

Director Independence

The current Board consists of 13 directors, three of whom are currently employed by the Company (Messrs. Lowrey, Grier and Strangfeld). As announced, Mr. Strangfeld will leave the Board on April 5, 2019 and will not stand for election at the 2019 Annual Meeting. Mr. Falzon, who will join the Board in August 2019 upon Mr. Grier’s retirement, is Vice Chairman of the Company. The Board conducted an annual review and affirmatively determined that all of the non-employee directors (Mses. Hund-Mejean, Pianalto and Poon, and Messrs. Baltimore, Casellas, Krapek, Lighte, Paz, Scovanner and Todman) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential’s Corporate Governance Principles and Practices.

Independent Director Meetings

The independent directors generally meet in an executive session at both the beginning and the end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair.

LOGO COMPREHENSIVE STEPS TO ACHIEVE BOARD EFFECTIVENESS The Board is committed to a rigorous self-evaluation process. Through evaluation, directors review the Board's performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve. 1. Process is Initiated Corporate Governance and Business Ethics Committee Chair initiates the annual board evaluation process with the help of an independent third-party consultant and our Capitalize Chief Governance officer. 2. Evaluation The evaluation solicits each director's opinion regarding the Board's effectiveness in monitoring and reviewing topics such as The strategic planning process The annual budget process and financial performance Management compensation, performance and ethics Risk strategy and management Succession planning 3. Feedback Analysis Directors are encouraged to speak to the independent third party with specific feedback on individual directors, committees or the Board in general. The independent third party synthesizes the results and comments and may have oral interviews with directors regarding the full Board or any committee on which the director serves. 4. Presentation of Findings In early 2019, the Corporate Governance and Business Ethics Chair, in conjunction with the third party consultant, presents the findings to each Committee, followed by review of the full Board. 5. Follow up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to full Board, where appropriate. The Board followed-up on its 2018 self-evaluation by reviewing materials about the competitive and regulatory environment as well as discussing talent at almost every scheduled Board meeting. For 2019, the Board has asked for more information in the following areas: Strategic Planning Technological Trends and Developments Competitive Environment and Industry and Evolving Markets

 

 

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Corporate Governance

 

 

 

Board Leadership

Currently, our Board leadership structure consists of a Lead Independent Director, and until April 5, 2019, a Non-Executive Chairman (who is our former CEO) as well as strong committee chairs. As previously announced, Mr. Lowrey, our CEO, will become Chairman on April 5, 2019. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as key business and strategic issues are discussed.

The Board regularly reviews its leadership structure, and the Board thoroughly evaluated whether to continue to combine or to split the chair and CEO roles in the months leading up to the Company’s recent CEO transition. After considering the perspectives of the independent directors, the views of our significant shareholders, voting results of recent independent chair proposals, academic research, practical experience at peer companies, and benchmarking and performance data, the Board determined that having the former CEO become Non-Executive Chairman, followed by Mr. Lowey as Chairman and CEO was in the best interests of the Company and its shareholders. The Board will continue to monitor the appropriateness of this structure.

 

 

In 2018, independent directors and our Chief Governance Officer engaged with shareholders who hold a majority of our shares on their views on our Board leadership structure. Our Lead Independent Director and our chair of the Corporate Governance and Business Ethics Committee, as well as the full Board, also met with certain of our shareholders in 2018. The discussions and feedback from these meetings have been shared with the Board and will be considered during the Board’s annual review of the appropriateness of its leadership structure.

 

 

Under our Corporate Governance Principles and Practices, the independent directors annually elect a Chairman of the Board and, if the individual elected as Chairman of the Board is the CEO, they also elect an independent director to serve as Lead Independent Director. The Lead Independent Director is generally expected to serve for a term of at least one year, but for no more than three years. Mr. Baltimore was elected as Lead Independent Director for his second term in May 2018. The responsibilities and authority of the Lead Independent Director include:

 

 

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

 

 

authorization to call meetings of the independent directors;

 

 

serving as a liaison between the Chairman and the independent directors;

 

 

approving information sent to the Board, including the quality, quantity, appropriateness and timeliness of such information;

 

 

approving meeting agendas for the Board;

 

 

approving meeting schedules to assure there is sufficient time for discussion of all agenda items;

 

 

authorization to retain outside advisors and consultants who report directly to the Board on Board-wide issues; and

 

 

ensuring that he or she be available, if requested by shareholders, when appropriate, for consultation and direct communication.

 

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Corporate Governance

 

 

 

PRUDENTIAL FOLLOWS THE INVESTOR STEWARDSHIP GROUP’S (ISG) CORPORATE GOVERNANCE FRAMEWORK FOR U.S. LISTED COMPANIES

 

   ISG Principle    Prudential Practice

 

Principle 1:

Boards are accountable to shareholders.

  

 

•   All directors stand for election annually

•   Proxy access with market terms

•   Board and Lead Independent Director letters and videos provide large and small investors insight into Board strategy and oversight objectives, and corporate governance practices

 

Principle 2:

Shareholders should be entitled to voting rights in proportion to their economic interest.

  

 

•   No dual class structure; each shareholder gets one vote per share

•   Majority voting in uncontested director elections, and directors not receiving majority support must tender their resignation for consideration by the Board

 

Principle 3:

Boards should be responsive to shareholders and

be proactive in order to understand their perspectives.

  

 

•   Management and Board members met with investors owning a majority of shares outstanding in 2018

•   Engagement topics included sustainability and social strategy, Board composition, leadership and refreshment, succession planning, and executive compensation program

 

Principle 4:

Boards should have a strong, independent leadership structure.

  

 

•   Strong Lead Independent Director with clearly defined duties that are disclosed to shareholders

•   Board considers appropriateness of its leadership structure at least annually

•   Strong Independent Committee Chairs

•   Proxy discloses why Board believes current leadership structure is appropriate

 

Principle 5:

Boards should adopt structures and practices that enhance their effectiveness.

  

 

•   As of April 5, 2019, 83% of Board members are independent

•   80% of our independent Board members are diverse

•   Annual Board evaluation by independent third party; results and next steps summarized in proxy statement

•   Active Board refreshment plan; five new Board members refreshment in last four years

•   Directors attended 99% of combined total Board and applicable committee meetings in 2018, and all directors attended the 2018 Annual Meeting

 

Principle 6:

Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

  

 

•   Executive Compensation program received approximately 96% shareholder support in 2018

•   Compensation Committee annually reviews and approves incentive program design, goals and objectives for alignment with compensation and business strategies

•   Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives

  

 

 

 

SHAREHOLDER ENGAGEMENT

This year, we continued our practice of engagement, communication, and transparency in a variety of ways, including the following:

 

   

released two videos featuring Board members, Thomas J. Baltimore, our Lead Independent Director, and Douglas A. Scovanner, Chair of our Audit Committee, sharing their views on Prudential’s Board and corporate governance practices;

 

 

   

promoted greater communication with our institutional shareholders on corporate governance issues by engaging with shareholders who collectively hold a majority of our shares;

 

 

   

advanced open Board communication by facilitating interaction between our directors and shareholders; and

 

 

   

provided multiple avenues for shareholders to communicate with the Company and the Board, and have received and responded to shareholder comments. Shareholders also continued to use the mechanisms available through www.prudential.com/governance to provide input.

 

 

 

 

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LOGO

 

 

A Message to our Shareholders from Prudential’s Lead Independent Director

 

 

Letter from the Lead Independent Director

As Prudential’s lead independent director, it is a privilege to share with you the Board’s view on the Company’s governance practices that we believe reflect our ongoing commitment to building long-term shareholder value.

Succession Planning

Succession planning is paramount to the Board’s oversight and is a point of discussion and deliberation at every Board meeting. In September 2018, John Strangfeld announced his retirement ending his 11-year tenure as Prudential’s CEO and Chairman. The Board was honored to announce the appointments of Charles Lowrey, former Executive Vice President and Chief Operating Officer, International Businesses, to the role of Chief Executive Officer, and Robert Falzon, former Executive Vice President and Chief Financial Officer, to the role of Vice Chairman, succeeding Mark Grier.

These transitions are indicative of the depth and breadth of the firm’s talent pool. Charlie and Rob are accomplished business leaders with significant related experience that will shape Prudential’s strategic vision and long-term strategy.

Board Effectiveness

It is our goal to operate our Board in the most effective manner possible, and we believe a rigorous annual evaluation by an independent third party is an essential component of good governance practices. Every year, the Corporate Governance and Business Ethics Committee works with an experienced, third-party consultant to complement our internal evaluation efforts by introducing an objective perspective and knowledge of best practices. We believe this approach adds rigor to the process.

Board Composition and Refreshment

We believe strong governance begins with an independent, engaged and diverse board – 80% of our independent board members are diverse. With these guiding principles, the Corporate Governance and Business Ethics Committee screens and recommends Board candidates for nomination with the goal of evolving the composition of our Board in line with the strategic needs of our global customers.

Using our skills matrix as a guide, individual conversations with directors, and the assistance of an independent search firm, the Committee identifies areas of expertise that would complement and enhance the current Board’s skills and experience. Over the past several years, we have added five new Board members.

Governance Policies and Practices

We maintain strong governance practices which we believe are important to our shareholders and protect the long-term vitality of the Company. Our accountability to you is illustrated in our policies such as: proxy access, a strong Lead Independent Director role, the right of shareholders to call a special meeting, the annual director elections by majority vote, and a robust clawback policy. My board colleague, Douglas Scovanner, chair of the Audit Committee, and I address these topics in two short videos. You can access the videos from the Corporate Governance section of our website at www.prudential.com/directorvideos. We see these videos as an important component of our ongoing efforts to share information with shareholders.

On behalf of our shareholders, your Board is committed to maintaining our diligence in overseeing the firm’s performance, risk management, and investment in our people and communities.

Sincerely,

 

LOGO

Thomas J. Baltimore

Lead Independent Director

 

 

LOGO

  

 

Prudential Lead Independent Director

 

Thomas J. Baltimore

 

Mr. Baltimore was elected by Prudential’s independent directors to serve as Lead Independent Director effective May 9, 2017. Mr. Baltimore brings significant experience and knowledge to the Lead Independent Director role. He has served as a Prudential director since 2008. During his tenure, he has chaired the Investment, Executive and Risk Committees, and served on the Compensation and Finance Committees. Due to his Board experience and leadership, Mr. Baltimore understands the Company’s long-term strategic priorities. In addition, he possesses a deep understanding of Prudential and its industry’s legal, regulatory, and competitive frameworks.

 

   

 

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Corporate Governance

 

 

Why our Board Structure Is Right for Prudential and its Shareholders

Prudential’s Board leadership structure is reviewed by our Corporate Governance and Business Ethics Committee regularly. Upon John Strangfeld’s retirement, the Board again gave careful deliberation to its structure and determined that a combined Chairman-CEO role continues to be in the best interest of our firm and shareholders. As independent directors, we believe the current structure promotes an effective Board that enables us to provide strategic guidance, challenge management’s perspectives, and meet with relevant internal and external constituents important to the Company’s operational and regulatory initiatives.

The independent directors annually select an independent member to serve as the Lead Independent Director. As required by the Lead Independent Director Charter, the Lead Independent Director is precluded from serving longer than three consecutive years.

Charles Lowrey, former executive vice president and chief operating officer of Prudential’s International Businesses, was appointed CEO on December 1, 2018. He will be appointed Chairman on April 5, 2019. Charlie’s successful leadership of the Company’s asset management, U.S. and international businesses enables him to bring a broad perspective of Prudential’s operations, a deep understanding of our people, and leadership skills that will serve the Company well as it continues to grow.

The Board believes a Chairman-CEO structure provides Prudential with a clear and effective leadership role to communicate the Company’s business and long-term strategy to its clients, shareholders and the public. The combination also provides for robust and frequent communication between the Board’s independent directors and Company management. On behalf of our shareholders, the Board is committed to advancing our momentum in the market. This transition is the result of a thoughtful, phased and long-term approach to succession planning.

 

 

Lead Independent Director: Key Responsibilities

 

    Calls meetings of the independent directors
    Facilitates communication between the independent directors and our Chairman
    Provides independent Board leadership
    Elected annually to serve no more than three years
    Sets agenda for all Board meetings and approves all Board material
    Communicates with shareholders and other key constituents, as appropriate
    Meets directly with the management and non-management employees of our firm
    Engages with our other independent directors to identify matters for discussion at executive sessions of independent directors and advises our Chairman of any decisions reached, and suggestions made at the executive sessions
    In collaboration with the Corporate Governance and Business Ethics Committee, addresses Board effectiveness, performance and composition
    Authorized to retain outside advisors and consultants who report directly to the Board on Board-wide issues
 

 

 

Culture at Prudential

 

At Prudential, nearly 50,000 employees from around the globe bring their diverse backgrounds and perspectives to work every day in
pursuit of the company’s shared purpose: making lives better by solving the financial challenges of a changing world.

 

Drawing on a wide range of expertise and experience across a multitude of disciplines, we are bound by our commitment to what we do
and how we work together.

 

This means that culture is a unique differentiator and a long-term competitive advantage for Prudential. It fuels our ability to execute in differentiated ways and is a critical underpinning of our talent strategy.

 

Therefore, we invest in understanding and developing our culture. We want to ensure that it is as inclusive and collaborative as it can be, and that it supports how we compete in an evolving marketplace.

 

In July 2018, Prudential asked thousands of employees across the United States to share their vision for our culture and for Prudential. Solicited in a spirit of candor and continual improvement, the results provided valuable guidance for our approach to business challenges and talent opportunities. These results were shared with the Board of Directors and senior leadership, and the feedback will help the company support a fully inclusive culture that unlocks the best-in-class execution, collaboration, and performance of our talent.

 

 

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Corporate Governance

 

 

Board Risk Oversight

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, through both the whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:

 

 

Audit Committee: insurance risk and operational risks, including model risk, as well as risks related to financial controls, legal, regulatory and compliance risks, and the overall risk management governance structure and risk management function;

 

 

Compensation Committee: the design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking;

 

 

Corporate Governance and Business Ethics Committee: the Company’s overall ethical culture, political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental risk (which includes climate risk), sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability;

 

 

Finance Committee: liquidity risk, risks involving our capital management, the incurrence and repayment of borrowings, the capital structure of the enterprise, funding of benefit plans and statutory insurance reserves;

 

 

Investment Committee: investment risk, market risk and the strength of the investment function; and

 

 

Risk Committee: the governance of significant risks throughout the Company, the establishment and ongoing monitoring of our risk profile, risk capacity and risk appetite, and coordination of the risk oversight functions of the other Board committees.

In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, Board committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2018, the Risk Committee received an update from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function.

The Risk Committee is comprised of the chairs of each of the other Board committees and Mark Grier, our Vice Chairman, who supervises the Chief Risk Officer of the Company. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees.

The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.

Cybersecurity Risk Oversight

In addition, the Board oversees the Company’s cyber risk management program. In order to respond to the threat of security breaches and cyberattacks, we have developed a program, overseen by the Company’s Chief Information Security Officer and our Information Security Office, that is designed to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. The Audit Committee, which is tasked with oversight of certain risk issues, including cybersecurity, receives periodic reports from the Chief Information Security Officer, the Chief Information Officer and the Head of Operational Risk. The Board and the Audit Committee also periodically receive updates about the results of exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and our internal response preparedness. The Audit Committee regularly briefs the full Board on these matters, and the full Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues.

 

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Corporate Governance

 

 

Executive Compensation Risk Oversight

We monitor the risks associated with our compensation programs and individual executive compensation decisions on an ongoing basis. Each year, management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.

Moreover, senior management is subject to share ownership and retention policies, and historically a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.

Succession Planning

The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level. As a result of this approach, the Board was well positioned to execute on its succession plan in 2018, including the appointment of Mr. Lowrey to succeed Mr. Strangfeld as CEO and Chairman and Mr. Falzon to succeed Mr. Grier as Vice Chairman.

In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High-potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

Communication with Directors

Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address:

Prudential Financial, Inc.

Board of Directors

c/o Margaret M. Foran, Chief Governance Officer,

Senior Vice President and Corporate Secretary

751 Broad Street

Newark, NJ 07102

Email: independentdirectors@ prudential.com

Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/ executivecomp.

The Chief Governance Officer and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.

 

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Corporate Governance

 

 

Committees of the Board of Directors

The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and the number of meetings held in 2018. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards. In addition, directors who serve on the Audit Committee and the Compensation Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under the NYSE listing standards.

 

Committees

  

Members in 2018

  

Description

 

Audit

Committee

 

Meetings in 2018: 10

  

 

 

Douglas A. Scovanner (Chair)

Martina-Hund Mejean

George Paz

  

 

 

The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees insurance risk and operational risks, risks related to financial controls, and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function.

 

Among other things, the Audit Committee:

 

(1) appoints the independent auditor and evaluates its qualifications, independence and performance;

 

(2) reviews the audit plans for and results of the independent audit and internal audits; and

 

(3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements.

 

The Board has determined that all of our Audit Committee members are financially literate and are audit committee financial experts as defined by the SEC.

 

 

Compensation

Committee

 

Meetings in 2018: 7

  

 

 

Karl J. Krapek (Chair)

Thomas J. Baltimore

Michael A. Todman

  

 

 

The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A.

 

 

Corporate

Governance & Business Ethics Committee

 

Meetings in 2018: 7

  

 

 

Gilbert F. Casellas (Chair)

Peter R. Lighte

Sandra Pianalto

  

 

 

The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship, sustainability, and corporate social responsibility throughout the Company’s global businesses.

 

Executive

Committee(1)

 

Meetings in 2018: 0

  

 

 

Thomas J. Baltimore (Chair)

Gilbert F. Casellas

Karl J. Krapek

Charles F. Lowrey

Christine A. Poon

Douglas A. Scovanner

John R. Strangfeld

  

 

 

The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by our By-laws or otherwise.

 

Finance

Committee

 

Meetings in 2018: 5

  

 

 

Christine A. Poon (Chair)

Sandra Pianalto

Michael A. Todman

  

 

 

The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, benefit plan funding and major capital expenditures.

 

Investment

Committee

 

Meetings in 2018: 4

  

 

 

Thomas J. Baltimore (Chair)

Peter R. Lighte

Christine A. Poon

  

 

 

 

The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties.

 

Risk

Committee

 

Meetings in 2018: 5

  

 

 

Thomas J. Baltimore (Chair)

Gilbert F. Casellas

Mark B. Grier

Karl J. Krapek

Christine A. Poon

Douglas A. Scovanner

  

 

 

The Risk Committee oversees the governance of significant risks throughout the enterprise by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board.

 

(1)

Charles Lowrey was elected to the Executive Committee on January 25, 2019

In addition to the above Committee meetings, the Board held eight meetings in 2018.

 

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Corporate Governance

 

 

Certain Relationships and Related Party Transactions

The Company has adopted a written Related Party Transaction Approval Policy that applies:

 

 

to any transaction or series of transactions in which the Company or a subsidiary is a participant;

 

 

when the amount involved exceeds $120,000; and

 

 

when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less than 10% beneficial owner of another entity).

The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’s judgment, appropriate or desirable under the circumstances.

In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also directors of Prudential Financial. In all cases, these transactions are conducted on an arm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the marketplace (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the marketplace and in accordance with applicable law.

Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there were three transactions that qualified as related party transactions since the beginning of 2018. The brother of Robert M. Falzon, our Vice Chairman, Michael F. Falzon, is our Vice President, Infrastructure Systems Development. In 2018, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was approximately $600,000. The son-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard, is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2018, the total compensation paid to Mr. Howard, including salary and bonus, was approximately $165,000. The daughter of Timothy L. Schmidt, our Senior Vice President and Chief Investment Officer, Carley J. Berger, is an associate in the actuarial department. In 2018, the total compensation paid to Ms. Berger, including salary and bonus, was approximately $130,000. In all three cases, the individuals’ compensation was similar to the compensation of other employees holding equivalent positions.

 

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Corporate Governance

 

 

Policy on Shareholder Rights Plan

We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders.

Political Contributions and Lobbying Expenditure Oversight and Disclosure

The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of PAC contributions. We also disclose semiannual information on dues, assessments and contributions of $10,000 or more to trade associations and tax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.”

 

 

The 2018 CPA-Zicklin Index of Corporate Political Disclosure and Accountability ranked Prudential as a Trendsetter company, the highest distinction. This is the fourth consecutive year that Prudential has been recognized for its disclosure, accountability, and political spending oversight.

Environmental, Sustainability and Corporate Social Responsibility

The Corporate Governance and Business Ethics Committee has oversight of environmental issues and policies. In addition, three of our Board members sit on the Board’s Corporate Social Responsibility Oversight Committee. These directors inform the Company’s social responsibility efforts in investing for financial and social returns, strategic philanthropy, employee engagement and corporate community involvement. 2018 investments include:

 

 

LOGO

$273 million in impact investments to non-profits and businesses that seek to create both a financial and social return. $52.5 million in grants to nonprofit organizations through The Prudential Foundation. $24.4 million in corporate contributions to non-profit organizations, including more than $5 million in projects serving U.S. veterans. More than 92,000 volunteer hours by U.S. Prudential employees impacting local communities across the country.

 

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Item 2–Ratification of the Appointment of the

Independent Registered Public Accounting Firm

The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (“independent auditor”) for 2019. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice.

If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers, but may nevertheless retain it as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders.

FEES PAID TO PRICEWATERHOUSECOOPERS

The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 2018 and 2017.

Worldwide Fees (in millions)

 

Service      2018        2017  

Audit(1)

    

$

52

 

    

$

52

 

Audit-Related(2)

    

$

6

 

    

$

5

 

Tax(3)

    

$

3

 

    

$

3

 

All Other(4)

    

 

 

    

$

1

 

Total

    

$

61

 

    

$

61

 

 

(1)

The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with review of documents filed with the SEC.

 

(2)

The aggregate fees for assurance and related services, including internal control and financial compliance reports, agreed-upon procedures not required by regulation, and accounting consultation on new accounting standards, acquisitions and potential financial reporting requirements.

 

(3)

The aggregate fees for services rendered for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects, and requests for rulings. In each of 2017 and 2018, tax compliance and preparation fees totaled approximately $2 million and tax advisory fees totaled approximately $1 million.

 

(4)

The aggregate fees for all other services rendered, including for 2017 fees for business advisory services.

PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnerships not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit, audit-related, tax and all other services paid by these entities of $15 million in 2018 and $14 million in 2017.

The Audit Committee has advised the Board of Directors that in its opinion the non-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining its independence.

PwC has been the Company’s independent auditor since it became a public company in 2001 and prior to that from 1996.

 

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Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

 

In determining whether to reappoint the independent auditor, the Audit Committee annually considers several factors, including:

 

   

the length of time the firm has been engaged;

 

   

the firm’s independence and objectivity;

 

   

PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the lead audit partner;

 

   

historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance;

 

   

data related to audit quality and performance, including recent PCAOB inspection reports on the firm; and

 

   

the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.

 

In accordance with SEC rules, independent audit partners are subject to rotation requirements limiting their number of consecutive years of service to our Company to no more than five. The process for selecting the Company’s lead audit partner includes Company management and the Audit Committee Chair vetting the independent auditor’s candidates. The full Audit Committee is consulted in connection with the final selection of the lead audit partner.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services so that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specific pre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Company’s Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the independent auditor.

All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered.

 

The Board of Directors recommends that shareholders vote “FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2019.

 

 

ENHANCING COMMUNICATION THROUGH AUDIT COMMITTEE REPORTING

The Center for Audit Quality and a group of nationally recognized U.S. corporate governance and policy organizations jointly released a paper entitled “Enhancing the Audit Committee Report: A Call to Action,” which encouraged audit committees of public companies to proactively consider strengthening their public disclosures to more effectively convey the critical work of audit committees to investors and stakeholders. Prudential was featured as an example of a company exhibiting voluntary practices strengthening audit committee disclosures.

 

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Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

REPORT OF THE AUDIT COMMITTEE

Three independent directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board.

In addition, the Board has determined that all of our Audit Committee members, Messrs. Paz and Scovanner and Ms. Hund-Mejean, satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.

Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent auditor, PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).

In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 2018 and Management’s Annual Report on Internal Control Over Financial Reporting with management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.

The Audit Committee received from the independent auditor the written disclosures and the letters required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence.

The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the firm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner, historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.

Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for filing with the SEC.

THE AUDIT COMMITTEE

Douglas A. Scovanner (Chair)

Martina Hund-Mejean

George Paz

 

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Item 3–Advisory Vote to Approve

Named Executive Officer Compensation

The Board is committed to excellence in governance and recognizes our shareholders’ interest in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve a non-binding advisory resolution on the compensation of our named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our 2018 executive compensation program and policies for our named executive officers through the following resolution:

RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement.

This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to our named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board will, however, as it has done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements.

At the 2017 Annual Meeting, shareholders approved, on an advisory basis, holding “Say on Pay” votes annually, and the Board has adopted a policy providing for annual “Say on Pay” votes. Accordingly, the next “Say on Pay” vote will occur in 2020.

 

The Board of Directors recommends that shareholders vote “FOR” the advisory vote to approve our named executive officer compensation.

 

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Item 4–Shareholder Proposal Regarding

Right to Act by Written Consent

In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote “AGAINST” the shareholder proposal.

John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California, 90278, beneficial owner of 50 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting.

Right to Act by Written Consent

Resolved, Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.

Hundreds of major companies enable shareholder action by written consent. Taking action by written consent in place of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle.

This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent. This proposal topic would have received a vote still higher than 67% at Allstate and Sprint if all shareholders at Allstate and Sprint had access to independent proxy voting advice. More than 100 Fortune 500 companies provide for shareholders to call special meetings and to act by written consent.

Written consent is a means to elect a director who could focus on the wisdom of stock repurchases:

Approved share repurchase plan of up to $1.5 Billion of common stock starting January 1, 2018

Approved share repurchase increase of $500 Million of common stock August 2016

There is a concern about share repurchases like the above. Stock buybacks can be a sign of short-termism for executives—sometimes boosting share price without boosting the underlying value, profitability, or ingenuity of the company. A dollar spent repurchasing a share is a dollar that cannot be spent on new equipment, an acquisition, entry into a new market or anything else.

Written consent is a means to elect a director who could focus on avoiding reoccurrences of events like these:

Putative Class Action Lawsuit over alleged improper charges on universal life policies holders to “cure defaults and/or reinstate lapses,” Pruco Life Insurance Company

May 2018

Regulator launched investigation over alleged role in Wells Fargo’s fraudulent accounts

December 2017

Criticism over alleged role in offshore tax havens

April 2017

The expectation is that, once this proposal is adopted, shareholders would not need to make use of this right of written consent because its mere existence will act as a guardrail to help ensue that our company is well supervised by the Board of Directors and management. Our Directors and management will want to avoid shareholder action by written consent and will thus be more alert in avoiding poor performance.

Please vote yes: Right to Act by Written Consent—Proposal 4

 

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Item 4–Shareholder Proposal Regarding

Right to Act by Written Consent

 

 

Board of Directors’ Statement in Opposition to the Proposal

Your Board recommends a vote against this proposal because it believes that the written consent process, as required by the proposal, is less transparent and less democratic than a shareholder meeting and deprives shareholders of a forum for discussion or the opportunity for them to make inquiries about proposed actions. Matters that are sufficiently important to require shareholder approval should be communicated in advance so they can be considered and voted upon by all shareholders. This proposal would allow a group of shareholders to take action by written consent without prior communication to all shareholders of the proposed actions or the reasons for the actions. We believe this proposal disenfranchises shareholders who would not have the opportunity to participate in the proposed process. Permitting shareholder action by written consent has the potential to create confusion, and the Board does not believe it is appropriate for a widely held public company.

Our Board believes that every shareholder should have the opportunity to consider and vote upon shareholder actions. Our shareholders have the right to call a special meeting at a 10% threshold. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process.

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company has a strong governance structure in place, and the Board’s philosophy and policies are responsive to shareholders. In addition to the unrestricted right for shareholders to call special meetings at a 10% threshold, the Company has many other governance provisions in place that empower shareholders, including:

 

 

a majority voting standard in uncontested director elections;

 

 

no Shareholder Rights Plan;

 

 

an annually elected Board;

 

 

no supermajority voting provisions;

 

 

independent board leadership, including a strong Lead Independent Director and strong committee chairs; and

 

 

proxy access.

Requiring that all shareholder business be acted upon at a meeting helps to confirm complete information is presented to shareholders to obtain their approval and is more democratic. The Board believes that the risk of abuse associated with the right to act by written consent, including bypassing procedural protections that offer transparency and advance notice, both of which are afforded with a shareholder meeting, make this proposal not in the best interest of all shareholders.

In summary, the Board believes the adoption of this proposal is unnecessary because of our commitment to good corporate governance and the right of shareholders to call a special meeting at a 10% threshold. Furthermore, the Board believes that the written consent proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings.

 

THEREFORE, YOUR BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS PROPOSAL.

 

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Voting Securities and Principal Holders

Beneficial Ownership

The following table shows all entities that are the beneficial owners of more than 5% of the Company’s Common Stock:

 

Name and Address of Beneficial Owner

 

    

Amount and Nature

 

      

Percent of Class

 

 

 

The Vanguard Group

100 Vanguard Boulevard, Malvern, PA 19355

    

 

 

 

32,028,683

 

(1) 

 
    

 

 

 

7.75%

 

 

 

BlackRock, Inc.

55 East 52nd Street, New York, NY 10055

    

 

 

 

27,744,199

 

(2) 

 
    

 

 

 

6.70%

 

 

 

Wellington Management Group LLP

280 Congress Street, Boston, MA 02210

    

 

 

 

20,906,480

 

(3) 

 
    

 

 

 

5.06%

 

 

 

(1)

Based on information as of December 31, 2018 contained in a Schedule 13G/A filed with the SEC on February 12, 2019 by The Vanguard Group. The Schedule 13G/A indicates that The Vanguard Group has sole investment power with respect to 31,457,136 of the shares, shared investment power with respect to 571,547 of the shares, sole voting power with respect to 481,973 of the shares, and shared voting power with respect to 98,092 of the shares.

 

(2)

Based on information as of December 31, 2018 contained in a Schedule 13G/A filed with the SEC on February 11, 2019 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole investment power with respect to all of the shares, sole voting power with respect to 22,872,236 of the shares, and shared investment and voting power with respect to none of the shares.

 

(3)

Based on information as of December 31, 2018 contained in a Schedule 13G filed with the SEC on February 12, 2019 by Wellington Management Group LLP. Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP (the “Wellington Group”). The Schedule 13G indicates that the Wellington Group has shared investment power with respect to all of the shares, shared voting power with respect to 4,855,934 of the shares, and sole investment and voting power with respect to none of the shares.

To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock.

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 8, 2019, by:

 

 

each Director, Director Nominee and Named Executive Officer, and

 

 

all current Directors and Executive officers of Prudential Financial as a group.

 

Name of Beneficial Owner

 

  

Common Stock

 

   

Number of shares
Subject to
Exercisable Options

 

    

Total Number of Shares
Beneficially Owned(1)

 

    

Director Deferred Stock
Units / Additional
Underlying

Units9(2),(3),(4)

 

    

Total Shares
Beneficially Owned
Plus Underlying
Units

 

 

Thomas J. Baltimore, Jr.

  

 

250

 

          

 

250

 

  

 

47,635

 

  

 

47,885

 

Gilbert F. Casellas

  

 

500

 

          

 

500

 

  

 

31,152

 

  

 

31,652

 

Martina Hund-Mejean

  

 

128

 

          

 

128

 

  

 

19,577

 

  

 

19,705

 

Karl J. Krapek

  

 

1,000

 

          

 

1,000

 

  

 

43,354

 

  

 

44,354

 

Peter R. Lighte

  

 

80

 

          

 

80

 

  

 

7,475

 

  

 

7,555

 

George Paz

  

 

500

 

          

 

500

 

  

 

7,472

 

  

 

7,972

 

Sandra Pianalto

  

 

451

 

          

 

451

 

  

 

7,033

 

  

 

7,484

 

Christine A. Poon

  

 

11,583

 

          

 

11,583

 

  

 

13,726

 

  

 

25,309

 

Douglas A. Scovanner

  

 

12,000

 

          

 

12,000

 

  

 

15,349

 

  

 

27,349

 

Michael A.Todman

  

 

450

 

          

 

450

 

  

 

7,475

 

  

 

7,925

 

John R. Strangfeld

     307,094 5    

 

827,205

 

  

 

1,134,299

 

  

 

243,908

 

  

 

1,378,207

 

Mark B. Grier

  

 

405,481

 

 

 

482,449

 

  

 

887,930

 

  

 

202,705

 

  

 

1,090,635

 

Charles F. Lowrey

  

 

56,982

 

 

 

159,230

 

  

 

216,212

 

  

 

171,695

 

  

 

387,907

 

Robert Falzon

  

 

64,809

 

 

 

106,490

 

  

 

171,299

 

  

 

135,787

 

  

 

307,086

 

Stephen Pelletier

  

 

8,596

 

 

 

32,378

 

  

 

40,974

 

  

 

200,841

 

  

 

241,815

 

Scott Sleyster

  

 

49,885

 

 

 

148,552

 

  

 

198,437

 

  

 

153,925

 

  

 

352,362

 

Kenneth Tanji

  

 

16,824

 

 

 

64,573

 

  

 

81,397

 

  

 

40,744

 

  

 

122,141

 

All directors and executive officers as a group (23 persons)

  

 

1,040,781

 

 

 

2,050,204

 

  

 

3,090,985

 

  

 

1,510,816

 

  

 

4,601,801

 

 

(1)

Individual directors and executive officers as well as all directors and executive officers as a group beneficially own less than 1% of the shares of Common Stock outstanding, as of March 8, 2019.

 

(2)

Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore, 47,635; Mr. Casellas, 31,152; Ms. Hund-Mejean, 19,577; Mr. Krapek, 43,354; Mr. Lighte, 7,475; Mr. Paz, 7,472; Ms. Pianalto, 7,033; Ms. Poon, 13,726; Mr. Scovanner, 15,349; Mr. Todman, 7,475; Mr. Strangfeld, 10,935; Mr. Pelletier, 34,166; and Mr. Sleyster, 80,111.

 

(3)

Includes the following shares representing the target number of shares to be received upon the attainment of ROE goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 83,821; Mr. Grier, 68,156; Mr. Lowrey, 52,586; Mr. Falzon, 42,434; Mr. Pelletier, 39,757; Mr. Sleyster, 26,007; and Mr. Tanji, 12,203.

 

(4)

Includes the following unvested stock options: Mr. Strangfeld, 149,152; Mr. Grier, 134,549; Mr. Lowrey, 119,109; Mr. Falzon, 93,353; Mr. Pelletier, 126,918; Mr. Sleyster, 47,807; and Mr. Tanji, 28,541.

 

(5)

Includes 4,400 shares held by the John and Mary K. Strangfeld Foundation.

 

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Voting Securities and Principal Holders

 

 

Compliance with Section 16(a) of the Exchange Act

Each Director and executive officer of the Company and any greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company believes that for transactions during 2018 all reports required by Section 16(a) were timely filed. Prior to 2018, six reports for Thomas Baltimore, Director, reporting an inadvertent purchase of 65 shares and inadvertent sales of a total of 315 shares were not timely filed due to an oversight by the broker effecting the transactions without any knowledge of Mr. Baltimore.

 

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Compensation of Directors

The Corporate Governance and Business Ethics Committee reviews the compensation of our non-employee directors periodically (generally every three years) and recommends changes to the Board when it deems appropriate.

For December 2018, our Non-Executive Chairman, John Strangfeld, was paid $125,000 for his service on the Board as a non-employee. It is expected that he will receive $375,000 for his service through April 5, 2019.

The following table describes the components of the non-employee directors’ compensation for 2018:

 

Compensation Element

 

  

Director Compensation Program

 

 

Annual Cash Retainer

 

  

 

$150,000, which may be deferred, at the director’s option

 

 

Annual Equity Retainer

  

 

$150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)

 

 

Board and Committee Fees

 

  

 

None

 

 

Chair Fee

  

 

$35,000 for the Audit and Risk Committees

$30,000 for the Compensation Committee

$20,000 for all other committees(1)

 

 

Lead Independent Director Fee

 

  

 

$50,000

 

 

Meeting Fee for members of the Company’s Corporate Social Responsibility Oversight Committee(2)

 

  

 

$1,250 per meeting

 

New Director Equity Award (one-time grant)

 

  

 

$150,000 in restricted stock units that vest after one year

 

 

Stock Ownership Guideline

  

 

Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer to be satisfied within six years of joining the Board(3)

 

 

(1)

Includes other standing committees and any non-standing committee of the Board that may be established from time to time, but excluding the Executive Committee.

 

(2)

This is a committee comprised of members of management and the Board. This Committee typically meets on a separate day following the Board and Board committee meetings. The non-employee directors on this committee currently consist of Mr. Casellas, Ms. Pianalto and Ms. Poon. The Corporate Social Responsibility Oversight Committee met three times in 2018.

 

(3)

As of December 31, 2018, each of our non-employee directors satisfied this guideline, with the exception of Ms. Pianalto, and Messrs. Lighte, Paz and Todman, who joined the Board within the last five years, each of whom has six years to satisfy the guideline after he or she joined the Board. For purposes of the stock ownership guideline, once a non-employee director satisfies his or her stock ownership level, the director will be deemed to continue to satisfy the guideline without regard to fluctuation in the value of the Common Stock owned by the director.

We maintain a Deferred Compensation Plan for Non-Employee Directors (the “Plan”). Since 2011, 50% of the annual Board and committee retainer has been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). A non-employee director can elect to invest the cash portion of his or her retainer and fees and equity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund, which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). As elected by the director, the Plan provides for distributions to commence upon or following termination of Board service or while a director remains on the Board.

Each director receives dividend equivalents on the restricted stock units contained in his or her deferral account under the Plan, which are equal in value to the dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional stock units.

Under our director compensation program, if a non-employee director satisfies the stock ownership guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the director’s option) and may be deferred beyond vesting at the director’s election. If a director does not satisfy the stock ownership guideline, the restricted stock units are automatically deferred until termination of Board service.

 

 

DIRECTOR STOCK OWNERSHIP GUIDELINE

Each director is expected, within six years of joining the Board, to own Common Stock or deferred stock units that have a value equivalent to six times his or her annual cash retainer.

 

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Compensation of Directors

 

 

2018 Director Compensation Table

Mr. Strangfeld retired as CEO on November 30, 2018, but remains on the Board as Non-Executive Chairman until April 5, 2019. As a member of the Board and an employee, he did not receive director compensation. As a non-employee Non-Executive Chairman, he received $125,000 for his service in December 2018. This amount is included in the 2018 Summary Compensation Table for Mr. Strangfeld under “All Other Compensation.”

 

     Fees Earned or Paid in                    

Name

 

  

Cash($)

 

      

Stock

Awards($)(1)

 

      

All Other

Compensation($)(2)

 

      

Total($)

 

 

 

Thomas J. Baltimore

 

    

 

255,000

 

 

 

      

 

150,000

 

 

 

                 

 

405,000

 

 

 

 

Gilbert F. Casellas

 

    

 

173,750

 

 

 

      

 

150,000

 

 

 

      

 

5,000

 

 

 

      

 

328,750

 

 

 

 

Martina Hund-Mejean

 

    

 

150,000

 

 

 

      

 

150,000

 

 

 

                 

 

300,000

 

 

 

 

Karl J. Krapek

 

    

 

180,000

 

 

 

      

 

150,000

 

 

 

      

 

5,000

 

 

 

      

 

335,000

 

 

 

 

Peter R. Lighte

     150,000          150,000          10,000 3          310,000  

 

George Paz

 

    

 

150,000

 

 

 

      

 

150,000

 

 

 

      

 

5,000

 

 

 

      

 

305,000

 

 

 

 

Sandra Pianalto

 

    

 

153,750

 

 

 

      

 

150,000

 

 

 

      

 

5,000

 

 

 

      

 

308,750

 

 

 

 

Christine A. Poon

 

    

 

172,500

 

 

 

      

 

150,000

 

 

 

                 

 

322,500

 

 

 

 

Douglas A. Scovanner

 

    

 

185,000

 

 

 

      

 

150,000

 

 

 

                 

 

335,000

 

 

 

 

Michael A. Todman

 

    

 

150,000

 

 

 

      

 

150,000

 

 

 

      

 

5,000

 

 

 

      

 

305,000

 

 

 

 

(1)

Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. The aggregate balance in each of the non-employee directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years and earned units deferred in 2018) and their value were as follows: Mr. Baltimore: 47,635 and $3,884,634; Mr. Casellas: 31,152 and $2,540,446; Ms. Hund-Mejean: 19,577 and $1,596,504; Mr. Krapek: 43,354 and $3,535,519; Mr. Lighte: 7,475 and $609,586; Mr. Paz: 7,472 and $609,342; Ms. Pianalto: 7,033 and $573,541; Ms. Poon: 13,726 and $1,119,355; Mr. Scovanner: 15,349 and $1,251,711; and Mr. Todman: 7,475 and $609,586.

 

(2)

Represents amounts for 2018 matching charitable contributions.

 

(3)

Both Mr. Lighte’s 2017 and 2018 contributions were matched in 2018.

 

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Compensation Discussion and Analysis

 

In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 2018 Summary Compensation Table and other compensation tables contained in this Proxy Statement. We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrived at the specific compensation decisions involving the NEOs for 2018.

 

NAMED EXECUTIVE OFFICERS (NEOS)

 

    Charles F. Lowrey, our CEO;

 

    John R. Strangfeld, our former CEO (and Non-Executive Chairman until April 5, 2019);

 

    Kenneth Y. Tanji, our Executive Vice President and CFO;

 

    Robert M. Falzon, our Vice Chairman (and former CFO);
    Mark B. Grier, our Vice Chairman;

 

    Stephen Pelletier, our Executive Vice President and Chief Operating Officer, U.S. Businesses; and

 

    Scott G. Sleyster, our Executive Vice President and Chief Operating Officer, International Businesses.
 

On December 1, 2018, as part of our previously announced succession plan:

 

   

Charles F. Lowrey, previously our Chief Operating Officer, International Businesses, was named CEO, succeeding John R. Strangfeld;

 

   

Robert M. Falzon, previously our Executive Vice President and CFO, was named Vice Chairman;

 

   

Kenneth Y. Tanji, previously our Senior Vice President and Treasurer, was named Executive Vice President and CFO; and

 

   

Scott G. Sleyster, previously our Senior Vice President and Chief Investment Officer, was named Executive Vice President and Chief Operating Officer, International Businesses.

Since two individuals served as each of CEO and CFO for a portion of 2018, there are seven NEOs for 2018.

 

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Compensation Discussion and Analysis: Executive Summary  

 

 

 

Executive Summary

Executive Compensation Highlights

The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices, respond to feedback from our shareholders, and strengthen the link to performance and rigor of our program. These changes have included:

 

  Strengthening the rigor of our Annual Incentive Program by setting target and maximum awards for senior executives, including the NEOs.  

 

  Establishing Long-Term Incentive Target Opportunities for the NEOs.  

 

  Requiring deferral of 30% of each NEO’s annual incentive award and 10% of other senior executives’ annual incentive awards into the Book Value Performance Program.  

 

  For awards granted in 2018, adding a modifier to the Performance Shares Program that will increase (or decrease) the number of shares and units earned by up to 10% depending on the increase (or decrease) in the representation of diverse persons among our senior management during the 2018 through 2020 performance period.  

 

  Increasing our CEO’s stock ownership guideline from five to seven times base salary.  
  Expanding the clawback policy for executive officers to cover all incentive-based awards, to address both a material financial restatement or misconduct, and to require disclosure to shareholders of action taken with regard to compensation recovery following a material financial restatement or misconduct.  

 

  Diversifying the performance metrics used to determine awards under our Annual Incentive Program and applying a greater weight to relative ROE performance versus peer companies as a factor under our Annual Incentive Program beginning in 2016 and Performance Shares Program beginning in 2017.  

 

  Limiting the contribution to earnings from specified classes of non-coupon investments and prepayment fee and call premium income when calculating the performance measures in our Annual Incentive Plan and Performance Shares Program.  
 

 

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Compensation Discussion and Analysis: Executive Summary  

 

 

Total Direct Compensation Summary

 

LOGO

 

(1)

30% of the Annual Incentive Awards were mandatorily deferred into the Book Value Performance Program.

 

(2)

Represents long-term awards granted in 2018 and 2019 for 2017 and 2018 performance, respectively.

 

LOGO

 

(1)

30% of the Annual Incentive Awards were mandatorily deferred into the Book Value Performance Program.

 

(2)

Represents long-term awards granted in February 2018 for 2017 performance.

 

(3)

Represents long-term awards granted in November 2018 for 2018 performance.

 

LOGO

 

(4)

Performance-based compensation

(5)

Includes mandatory deferral of 30% of annual incentive

(6)

Based on average amounts

 

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Compensation Discussion and Analysis: Executive Summary  

 

 

 

   

 

WHAT WE DO

           

 

WHAT WE DON’T DO

 

LOGO

 

 

Establish target and maximum awards under our Annual Incentive Program.

   

 

 

 

LOGO

 

 

 

 

CEO participation in our severance plan.

 

 

LOGO

 

Establish target awards in our Long-Term Incentive Program.

   

 

 

 

LOGO

 

 

 

Executive officer severance payments and benefits exceeding 2.99 times salary and cash bonus without shareholder approval.

 

 

LOGO

 

Apply a formulaic framework based on the Company’s financial results relative to pre-established targets for each incentive program.

   
 

 

LOGO

 

Exercise limited or no discretion to increase formulaic incentive compensation awards.

   

 

 

 

LOGO

 

 

 

Excise tax “gross-ups” upon change in control.

 

 

LOGO

 

 

Use balanced performance metrics for annual incentive and performance share/unit awards that consider both the Company’s absolute performance and its relative performance versus peers.

   

 

 

 

LOGO

 

 

 

Discounting, reloading or re-pricing of stock options without shareholder approval.

 

 

LOGO

 

 

Rigorous goal setting aligned to our externally disclosed annual and multiyear financial targets.

   

 

 

 

LOGO

 

 

 

“Single-trigger” accelerated vesting of equity-based awards upon change in control.

 

 

LOGO

 

 

86% or more of our NEOs’ target total direct compensation is performance based.

   

 

 

 

LOGO

 

 

 

Multiyear guaranteed incentive awards for senior executives.

 

 

LOGO

 

Defer 30% of our NEOs’ and 10% of other senior executives’ annual incentive awards into the Book Value Performance Program.

   

 

 

 

LOGO

 

 

 

Employment agreements with NEOs.

 

 

LOGO

 

Impose stock ownership requirements, and retention of 50% of equity-based awards.

   

 

 

 

LOGO

 

 

 

Employee hedging or pledging of Company securities.

 

 

LOGO

 

Maintain an enhanced clawback policy covering all executive officer incentive-based awards for material financial restatements and misconduct.

     
 

 

LOGO

 

 

Limit perquisites to items that serve a reasonable business purpose.

     
 

 

LOGO

 

Closely monitor risks associated with our compensation programs and individual compensation decisions to confirm that they do not encourage excessive risk-taking.

     
 

 

LOGO

 

Tie long-term diversity improvement to our performance share and unit awards.

     

Consideration of Most Recent “Say on Pay” Vote

 

Following our 2018 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on NEO compensation (the “Say on Pay” Vote) that was held at the meeting with respect to the 2017 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 96% of the votes cast on the proposal were voted in support of the compensation of our NEOs. After careful consideration, and given the extensive changes we have made in the recent past, the Committee did not make any changes to our executive compensation program and policies as a result of the most recent Say on Pay vote.   LOGO

Opportunity for Shareholder Feedback

The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of the NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program.

You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the NEOs (see “Item 3—Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision.

 

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Compensation Discussion and Analysis

 

 

Philosophy and Objectives of Our Executive Compensation Program

The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements.

Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles:

 

  Retain and hire top-caliber executives: Executive officers should have base salaries and employee benefits that are market competitive and that permit us to hire and retain world-class talent in our critical roles and high-caliber individuals at all levels;

 

  Pay for performance: A significant portion of the compensation of our executive officers should vary with business performance and each individual’s contribution to that performance;
  Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results;

 

  Align compensation with shareholder interests: The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock; and

 

  Reinforce succession planning process: The overall compensation program for our executive officers should reinforce our robust succession planning process.
 

 

2018 Incentive Programs

To create a strong link between our incentive compensation opportunities and our short-term and longer-term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program.

 

 

Annual Incentive Program. The Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on three equally-weighted performance metrics: (i) EPS achievement relative to our externally disclosed EPS targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to a group of peer companies.

 

 

Long-Term Incentive Program. Our Long-Term Incentive Program consists of three parts that incent long-term value creation: performance shares and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock (as well as, for awards granted in 2018, increases in our senior management diversity); book value units that reward increases in book value per share; and stock options that reward increases in the market value of our Common Stock.

 

ANNUAL COMPENSATION-RELATED RISK EVALUATION

We monitor the risks associated with our compensation programs, as well as the components of our programs and individual executive compensation decisions, on an ongoing basis. Our compensation risk assessment occurs in two parts: a review of the Company’s compensation programs and a review of compensation decisions and payments, with a focus on our senior executives. In January 2019, our Chief Risk Officer presented to the Committee a review of Prudential’s compensation programs, including the executive compensation program, to assess the risks arising from our compensation policies and practices. The Committee agreed with the review’s findings that these risks were within our ability to effectively monitor and manage and that these compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, in June 2018, our Chief Risk Officer presented a study of the payouts under the compensation programs. The Committee agreed with the study’s findings that our compensation practices, including payouts, adhere to best market practices and do not encourage undue or excessive risk-taking.

 

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Compensation Discussion and Analysis

 

 

The figure below illustrates the portions of our NEOs 2018 target total direct compensation that are driven by the various performance metrics under our incentive programs*. Our programs are designed to align the interests of our executives with the interests of our shareholders and to link the drivers of short-term and long-term value creation with our executive compensation.

 

 

LOGO

*The image above is a graphical representation of the components and drivers of total direct compensation. The illustration represents the average target total direct compensation values for our NEOs.

**Represents Book Value Performance Program (11%) and 30% mandatory deferral of Annual Incentive Awards (equates to 10.8% of target total direct compensation).

Our Annual Incentive Program and Long-Term Incentive Program share one common performance measure: our relative ROE, that is, our ROE as compared to the ROE of the North American Life Insurance subset of our peer group. The Committee believes that our relative ROE is a core value proposition for our shareholders and, accordingly, that relative ROE performance over both the short term and long term merits inclusion as a performance measure in each of our incentive programs.

 

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Compensation Discussion and Analysis

 

 

How We Make Compensation Decisions

Role of the Compensation Committee

The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:

 

 

annual review and approval of incentive program design, goals and objectives for alignment with our compensation and business strategies;

 

 

evaluation of individual performance results in light of these goals and objectives;

 

 

evaluation of the competitiveness of each executive officer’s total compensation package; and

 

 

approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, payouts, and retention programs.

Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the independent members of our Board for approval.

The Committee is supported in its work by our Chief Human Resources Officer, his staff, and the Committee’s executive Compensation Consultant, as described below.

The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.

Role of the Chief Executive Officer

Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon an assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion. Given our recent leadership transition, our former CEO and our current CEO made joint recommendations for compensation paid in respect of 2018.

Our CEO does not play any role with respect to any matter affecting his own compensation and is not present when the Committee discusses and formulates his compensation recommendation.

 

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Compensation Discussion and Analysis

 

 

Role of the Compensation Consultant

The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee, and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.

The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to performance.

During 2018, the Compensation Consultant performed the following specific services:

 

  Provided a presentation on executive compensation trends and external developments.

 

  Provided an annual competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and fair value expense.
  Provided recommendations on CEO total direct compensation to the Committee at its February meeting, without prior review by our CEO.

 

  Reviewed with our current and former CEOs their compensation recommendations with respect to the other officers.
 

 

  Reviewed Committee agendas and supporting materials in advance of each meeting, and raised questions/issues with management and the Committee Chair, as appropriate.

 

  Reviewed drafts and commented on the CD&A and related compensation tables for the Proxy Statement.
  Reviewed the compensation peer group used for competitive analyses.

 

  Attended Committee meetings when requested by the Committee Chair.

 

  Assisted with compensation actions related to the leadership succession plan.
 

 

The Compensation Consultant provided no services to management during 2018.

The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

The total amount of fees paid to the Compensation Consultant for services to the Committee in 2018 was $214,961. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the listing standards of the NYSE and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation Consultant from serving as an independent consultant to the Compensation Committee.

 

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Compensation Discussion and Analysis

 

 

Compensation Peer Group

The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services industries generally selected from the Standard & Poor’s 500 Financials Index (the “Peer Group”). The Committee periodically reviews and updates the Peer Group, as necessary, upon recommendation of the Compensation Consultant. We believe the Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.

 

 

Although included within the broad financial services sector, we exclude from the Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent.

 

For 2018, the Peer Group consisted of the following 20 companies:

 
 

North American Life

Insurance Companies             

 

Consumer Finance

Companies

 

Asset Management and
Custody Banks

  

Diversified Banks

 
 

•  AFLAC, Inc.

 

•  Lincoln National

 

•  Manulife Financial Corporation

 

•  MetLife, Inc.

 

•  Principal Financial Group

 

•  Sun Life Financial Inc.

 

•  American Express
Company

 

•  Capital One Financial Corporation

 

•  Ameriprise Financial, Inc.

 

•  The Bank of New York
Mellon Corporation

 

•  BlackRock, Inc.

 

•  Franklin Resources, Inc.

 

•  Northern Trust
Corporation

 

•  State Street Corporation

  

•  Bank of America Corporation

 

•  Citigroup Inc.

 

•  JPMorgan Chase & Co.

 

•  PNC Financial Services Group, Inc.

 

•  U.S. Bancorp

 

•  Wells Fargo & Company

 
          

Use of Competitive Data

We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.

The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs.

To assess the competitiveness of our executive compensation program, we analyze Peer Group compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short term versus long term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use.

The Committee generally compares the compensation of each NEO in relation to each of the 25th, the 50th and the 75th percentiles of the Peer Group for similar positions. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range. For example, due to their promotions in December 2018, Messrs. Lowrey’s and Tanji’s target total direct compensation is at or below the Peer Group median for their respective positions.

Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, differences in the competitive market pay range for similar positions, and considerations of internal equity.

 

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Components of Our Executive Compensation Program

In the following tables, for the principal components of our executive compensation program, we present their purpose, key characteristic and type of performance measured (if applicable). We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.

Total Direct Compensation

 

Compensation Component

 

 

Purpose

 

 

Key Characteristic

 

 

Performance Measured

 

 

Base Salary

 

 

•  Compensate executive officers fairly for the responsibility of the position held

 

 

Fixed

 

 

Individual

 

Annual Incentive Awards

 

 

•  Motivate and reward executive officers for achieving our short-term business objectives

 

•  Provide balance by rewarding performance relative to our Peer Group

 

 

Variable

 

 

Corporate and Individual

 

Long-Term Incentive Awards

 

 

•  Motivate executive officers by linking incentives to the achievement of our multiyear financial and other goals, our relative performance, and the performance of our Common Stock and book value over the long term

 

•  Reinforce the link between the interests of our executive officers and shareholders

 

 

Variable

 

 

Corporate

 

Other Forms of Compensation

 

Compensation Component

 

 

Purpose

 

 

Key Characteristic

 

   

 

Health & Welfare, and Retirement Plans

 

 

•  Provide benefits that promote employee health and support employees in attaining financial security

 

 

Fixed

 

 

Perquisites and Other Personal Benefits

 

 

•  Provide a business-related benefit to our Company, and assist in attracting and retaining executives

 

 

Fixed

 

 

Post-Employment Compensation

 

 

•  Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, also provide continuity of management

 

 

Fixed

 

 

 

In keeping with our commitment to diversity and inclusion in practice, the performance shares and units awarded to executives at the senior vice president level and above (and equivalents) in February 2018 were made subject to a performance objective intended to improve the representation of diverse persons among our senior management over the 2018 through 2020 performance period:

 

   

If we meet our goal of increased representation of diverse persons by five percentage points or more over this period, payouts will be increased by up to 10%.

 

   

If there is no change in representation, payouts will be decreased by 5%.

 

   

If such representation decreases over this period, payouts will be decreased by up to 10%.

 

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The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Shareholders should not apply these performance measures and goals to other contexts.

 

 

FORMULAIC FRAMEWORK FOR INCENTIVE PROGRAMS

Awards under each of our incentive programs are funded at the level determined by our financial results relative to pre-established targets and performance relative to peer companies under formulas for each incentive program. The Board believes it generally should exercise limited or no discretion to increase our NEOs’ formula-based awards. For the annual incentive program, the formula uses three equally weighted performance metrics, in each case based on after-tax adjusted operating income: (i) EPS relative to our externally disclosed EPS targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to the North American Life Insurance subset of our Peer Group. Similarly, under our performance shares program, payments are determined based on our average ROE results over the three-year performance period, as compared to both a performance scale set at the start of the period and the ROE results of the North American Life Insurance subset of our Peer Group over that period, giving equal weight to each. The Book Value Performance Program tracks our adjusted book value per share. Adjusted book value per share excludes the impact on attributed equity of accumulated other comprehensive income and of foreign currency exchange rate remeasurement included in net income or loss, as described in Appendix A to this Proxy Statement.

To more accurately reflect the operating performance of our business, the Committee has approved a pre-determined framework of adjustments to our reported financial results for incentive program purposes. Generally, these adjustments are made to exclude one-time or unusual items and external factors that are inconsistent with the assumptions reflected in our financial plans. The standard adjustments to reported financial results under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool and may affect other performance measures, such as the calculation of adjusted book value per share under our Book Value Performance Program.

 

 

Standard adjustments to reported financial results are made:

 

    to exclude the impact of market unlockings in our Individual Annuities, Individual Life and International Insurance businesses (including, for 2018, adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions);

 

    to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (mortality, morbidity, lapse, and similar factors and reserve refinements);

 

    to exclude integration costs or make other adjustments related to merger and acquisition activity (for 2018, we added back the earnings that were included in our 2018 EPS guidance attributable to our businesses in Italy and Poland, which were classified as divested and run-off businesses in 2018 following the signing of definitive agreements to sell those businesses);
    for accounting-related changes not included in our annual operating plan (for 2018, we excluded the impacts on our earnings stemming from the Tax Cuts and Jobs Act due to the change in our effective tax rate and the impact of related management actions);

 

    to exclude earnings from specified classes of non-coupon investments and prepayment fee and call premium income from fixed maturity investments outside of a range of -10% to +10% of these earnings, combined, that are included in our EPS guidance range (this resulted in an adjustment for 2018, as these earnings fell below our EPS guidance expectations by more than 10%); and

 

    for other items not considered representative of the results of operations for the period or not included in guidance, as approved by the Committee (there were none in 2018).
 

 

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Direct Compensation Components

Annually, the Compensation Committee reviews the competitive analysis of total direct compensation for the NEOs. Based on this evaluation, the Committee may selectively adjust the base salary, annual incentive award target, and long-term target amounts of the NEOs. In determining any adjustments, the Committee takes into account the following factors: level of experience and impact in the role; changes in market data; and compensation positioning overall and by component. Executives new to their current roles are positioned towards the lower end of their competitive range while executives with more experience are generally positioned at the higher end of the range.

BASE SALARY

Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and contributions. Base salaries are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities.

SALARY DECISIONS

In connection with the succession planning changes in 2018, the Committee made the following salary decisions effective as of December 1, 2018: Mr. Lowrey’s salary was increased to $1,200,000; Mr. Tanji’s salary was increased to $600,000; Mr. Falzon’s salary was increased to $1,000,000; and Mr. Sleyster’s salary was increased to $700,000.

Annual Incentive Awards

At least once a year, the Committee reviews the Annual Incentive Program and makes changes as needed. The Committee approved the 2018 Annual Incentive Program for our most senior executives, including the NEOs, on the following terms and conditions.

TARGET AWARD OPPORTUNITIES

The target and maximum annual incentive award opportunities for each of the NEOs for 2018 were as follows:

 

Named Executive Officers

 

  

Target Annual

Incentive Award
Opportunity

 

    

Maximum Annual

Incentive Award

Opportunity

 

 

Charles F. Lowrey

  

 

$4,000,000 

 

  

 

$  8,000,000 

 

John R. Strangfeld

  

 

$6,000,000 

 

  

 

$12,000,000 

 

Kenneth Y. Tanji

  

 

$   852,150 

 

  

 

$  1,704,300 

 

Robert M. Falzon

  

 

$3,000,000 

 

  

 

$  6,000,000 

 

Mark B. Grier

  

 

$5,100,000 

 

  

 

$10,200,000 

 

Stephen Pelletier

  

 

$4,000,000 

 

  

 

$  8,000,000 

 

Scott G. Sleyster

  

 

$1,539,000 

 

  

 

$  3,078,000 

 

Each year, the Committee establishes an annual Performance Factor that is the primary driver in determining the amount of the annual incentive awards for our NEOs.

For 2018, we used the following process to determine this Performance Factor:

Establish Initial Performance Factor

Consistent with the formulaic framework for our Annual Incentive Program, the Committee established an Initial Performance Factor based on the following three financial metrics, giving equal weight to each (i.e., each metric is weighted one-third):

 

  EPS for 2018, on an AOI basis, assessed relative to our EPS target range (the “EPS Target Factor”);

 

  Growth in EPS, on an AOI basis, for 2018 as compared to 2017 (the “EPS Growth Factor”); and

 

  ROE for 2018 as compared to the median ROE for 2018 achieved by the North American Life Insurance subset of the Peer Group (the “Relative ROE Factor”).

The Initial Performance Factor was applied to the target annual incentive award opportunity for each NEO to determine that NEO’s annual incentive funding.

For purposes of the 2018 Annual Incentive Program, EPS and ROE were calculated as follows:

 

  EPS is Earnings Per Share of Common Stock (diluted), based on after-tax adjusted operating income (“AOI”).

 

  ROE is determined using after-tax AOI divided by adjusted book value, and for our peer companies is determined based on the comparable financial metric from each peer company’s quarterly financial reports, in each case, based on a rolling quarterly average for the four quarters ended September 30, 2018.

For more information regarding our 2018 annual measures of EPS, AOI and ROE, as well as adjusted book value, see Appendix A to this Proxy Statement.

 

 

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We applied our preset formulaic framework to our January 2019 estimate of our 2018 reported AOI, EPS, and ROE.

Standard Adjustments

We make standard adjustments to estimated AOI, EPS, and ROE under our formulaic framework that may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool. For 2018, these standard adjustments resulted in the following changes to EPS:

 

EPS (January Estimate)

  

$

11.68

 

Market Unlockings

  

 

+ 0.11

 

Actuarial Assumptions

  

 

+ 0.31

 

M&A Adjustments

  

 

+ 0.03

 

Adjustments for the Tax Cuts and Jobs Act

  

 

- 0.66

 

Non-Coupon Investments/Prepayment Fee and Call Premium Income

  

 

+ 0.15

 

EPS (Annual Incentive Program)

  

$

11.62

 

The market unlockings adjusted our reported results for our Individual Annuities, Individual Life and International Insurance businesses to exclude the impact of actual market performance relative to our plan assumption. The adjustment for 2018 market unlockings increased EPS under the Annual Incentive Program by approximately $0.11.

Annually, based on Company-specific data, industry data, and the current long-term economic outlook, we update our actuarial assumptions on long-term market returns and customer behavioral expectations (e.g., mortality, morbidity, and lapses). These updates and related refinements result in a cumulative revaluation of our reserves and the carrying values of our deferred acquisition costs. While GAAP requires these updates to be reported in the current period, they are not representative of annual performance since they relate to outcomes in both prior and future years. For these reasons, they are excluded from EPS under the Annual Incentive Program (regardless of whether they are positive or negative). In 2018, the adjustments to account for these updates increased EPS under the Annual Incentive Program by approximately $0.31.

Our EPS guidance for 2018 included a full year of earnings attributable to our Pramerica of Italy and Pramerica of Poland operations. However, we classified those businesses as divested and run-off businesses in 2018 upon the signing of definitive agreements to sell them, and earnings from those operations were excluded from EPS at that time. As a result, we increased EPS under the Annual Incentive Program by approximately $0.03 to add back earnings from those operations.

As the adoption of the Tax Cuts and Jobs Act was uncertain at the time we issued our EPS guidance for 2018, we did not assume any impacts from the Tax Act in our guidance range. As a result, we have excluded the impact of the Tax Act on earnings when calculating EPS under the Annual Incentive

Program. This adjustment resulted in a decrease to EPS under the Annual Incentive Program of approximately $0.66.

Finally, we limit earnings volatility from specified classes of non-coupon investments and prepayment fee and call premium income by excluding these earnings that are outside of a range of -10% to +10% from that assumed in our EPS guidance range. For 2018, this adjustment increased EPS under the Annual Incentive Program by approximately $0.15 as these earnings fell below our EPS guidance expectations by more than 10%.

In the aggregate, these standard adjustments under our preset formulaic framework had a net negative effect of $0.06 to EPS under the Annual Incentive Program.

Step 1: Establish EPS Target Factor

The following table depicts the EPS scale target range for 2018. This target range is aligned to our publicly disclosed EPS guidance range. Our adjusted EPS for 2018 of $11.62 per share of Common Stock corresponds to an EPS Target Factor of 1.034.

 

    

2018 EPS(1)    

 

   

EPS Target Factor(2)   

 

 
   

 

$14.89 or above    

 

 

 

1.50   

 

 

 

$11.70    

 

 

 

1.05   

 

Target Range

 

 

$11.45    

 

 

 

1.00   

 

   

 

$11.20    

 

 

 

0.95   

 

   

 

$8.02 or below    

 

 

 

0.50   

 

(1)

Determined on an AOI basis, subject to certain adjustments.

(2)

The EPS Target Factor is interpolated on a straight-line basis between the EPS data points.

Step 2: Establish EPS Growth Factor

Our adjusted EPS for 2018 was $11.62 per share of Common Stock, an increase of $0.54 per share from our adjusted EPS of $11.08 for 2017. This corresponds to an EPS Growth Factor of 1.049.

Step 3: Establish Relative ROE Factor

Our adjusted ROE for 2018 was 13.5%, which is 0.2 percentage points lower than the median 2018 ROE for the North American Life Insurance subset of the Peer Group. This corresponds to a Relative ROE Factor of 0.983 based on the scale depicted below.

 

      ROE +/- Peer Median(1)                Relative ROE Factor(2)            
    

3%

       

1.25

    
    

2%

       

1.17

    
    

1%

       

1.08

    
    

0%

       

1.00

    
    

-1%

       

0.92

    
    

-2%

       

0.83

    
    

-3%

       

0.75

    
(1)

Determined on an AOI basis, subject to certain adjustments as discussed above.

(2)

The Relative ROE Factor is interpolated on a straight-line basis between the ROE +/- Peer Median data points.

 

 

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Step 4: Determine Final Performance Factor.

Weighting each of the EPS Target Factor (1.034), the EPS Growth Factor (1.049), and the Relative ROE Factor (0.983) by one-third, we arrived at an Initial Performance Factor of 1.022.

Once the Initial Performance Factor is determined, the Board believes it generally should not exercise meaningful discretion to increase the Performance Factor for strategic or other considerations. For the last four years, the Committee has not made any discretionary adjustments based on these considerations.

Based on the foregoing, the Final Performance Factor for 2018 was determined to be 1.022. This factor was then applied to the target award opportunity for each NEO to determine that NEO’s annual incentive award, with minor adjustments primarily due to rounding.

The following table summarizes the calculation of the Final Performance Factor.

Summary of 2018 Performance Factor Mechanics

 

   

 

Step 1: Establish EPS Target Factor

     

 

2018 EPS (on AOI basis)

  

 

$

 

11.68

 

 

 

Standard adjustments

  

 

$

 

- 0.06

 

 

 

EPS under Annual Incentive Program

  

 

$

 

11.62

 

 

 

EPS of $11.62 translates to an EPS Target Factor of

  

 

 

 

1.034(1)

 

 

 

Step 2: Establish EPS Growth Factor

     

 

2018 EPS (on AOI basis)

  

 

$

 

11.68

 

 

 

Standard adjustments

  

 

$

 

- 0.06

 

 

 

EPS under Annual Incentive Program

  

 

$

 

11.62

 

 

 

2017 EPS under Annual Incentive Program

  

 

$

 

11.08

 

 

 

EPS Growth under Annual Incentive Program

  

 

$

 

0.54

 

 

 

EPS Growth of $0.54 translates to an EPS Growth Factor of

  

 

 

 

1.049

 

 

 

Step 3 : Establish Relative ROE Factor

     

 

2018 ROE Performance

  

 

 

 

13.5%

 

 

 

2018 Peer Median ROE Performance

  

 

 

 

13.7%

 

 

 

ROE performance as compared to median ROE performance for life insurer peers

  

 

 

 

-0.2%

 

 

 

Unfavorable ROE of -0.2% translates to a Relative ROE

Factor of

  

 

 

 

0.983(1)

 

 

 

Step 4: Determine Final Performance Factor

     

 

EPS Target Factor (1.034) times 1/3

  

 

 

 

0.345

 

 

 

EPS Growth Factor (1.049) times 1/3

  

 

 

 

0.349

 

 

 

Relative ROE Factor (0.983) times 1/3

  

 

 

 

0.328

 

 

 

Initial Performance Factor

  

 

 

 

1.022

 

 

        

 

Discretionary Adjustments made by Committee for 2018

  

 

 

 

None

 

 

 

  Final Performance Factor

  

 

1.022 

(1)

Based on interpolation on the scales above.

 

 

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Annual Incentive Award Decisions for 2018

The principal driver of the actual annual incentive awards for the NEOs is the Final Performance Factor. The Committee also considers individual performance and contributions in determining final awards.

At the beginning of 2018, Mr. Strangfeld discussed with the Committee, and each other NEO discussed with his manager, the key factors for determining awards under our Annual Incentive Program and the NEO’s expected contributions to that performance.

 

 

Mr. Lowrey

 

       
       
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ANNUAL INCENTIVE AWARD DECISION

 

Consistent with the Final Performance Factor, Mr. Lowrey’s incentive award was $4,100,000, or approximately 1.025 times his target award amount. This award compares to an annual incentive award of $4,440,000 for 2017, representing a decrease of 7.7%.
Of the $4,100,000, $1,230,000 was mandatorily deferred into the Book Value Performance Program.

 

 

       
       

     

 

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Lowrey, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 
 

 

•   His individual development that led to execution of the Company’s leadership succession, culminating in the appointment of Mr. Lowrey as Chief Executive Officer effective December 1, 2018;

 

• His comprehensive succession planning for the International Businesses, including the successful transition of the leadership of the International Businesses to Mr. Sleyster, who replaced Mr. Lowrey as Executive Vice President and Chief Operating Officer, International Businesses, effective December 1, 2018;

 

• Leading the International Insurance business that earned pre-tax AOI of $3.3 billion for 2018, a 2% increase from 2017, excluding the impact of changes in currency exchange rates;

 

• His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets through multiple distribution channels, including a 16% increase in U.S. dollar product sales in Japan in 2018 compared to 2017;*

 

• His leadership in growing our Life Planner count by 2% in 2018 compared to 2017, including achieving record levels in Japan and Brazil;

 

*  Sales are based on annualized new business premiums.

   

 

 

• His leadership of our Latin America operations that experienced continued business momentum in 2018, including the expansion of distribution capabilities in our Brazil operations;

 

• His role in the Company’s constructive engagement with international regulators on emerging issues, including his leadership in influencing the development of revised insurance capital standards;

 

• Continuing to evolve the International Businesses’ strategy by focusing on key markets, including further advancing our business strategy in Africa and completing the sale of our Pramerica of Poland subsidiary; and

 

• Enhancing collaboration across our International and U.S. Businesses, including expansion of our Financial Wellness platform.

 

 
     
       

 

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Mr. Strangfeld

 

         
         
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ANNUAL INCENTIVE AWARD DECISION

 

Based on the Final Performance Factor and the Committee’s evaluation of his performance as CEO during 2018, in February 2019, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $6,132,000 for Mr. Strangfeld for 2018, representing approximately 1.022 times his target award amount. This award compares to an annual incentive award of $6,660,000 for 2017, representing a decrease of 7.9%. Of the $6,132,000, $1,839,600 was mandatorily deferred into the Book Value Performance Program.

 

 

       
         

 

 

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Strangfeld as CEO, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 

 
 

• Facilitating the Company’s leadership succession plans, including the appointment of Charles M. Lowrey as Chief Executive Officer and Robert M. Falzon as Vice Chairman;

 

• After-tax AOI of $5.02 billion and EPS, based on after-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based on after-tax AOI, increased 10.5% versus 2017;

 

• Operating return on average equity of 12.7% for 2018, at the high-end of our objective of 12% to 13% over the near-to-intermediate term;

 

• Growth in adjusted book value per share of our Common Stock to $96.06 at December 31, 2018 versus $88.67 per share at December 31, 2017, an increase of $7.39, or 8.3%, after payment of four quarterly dividends totaling $3.60 per share;

 

• Returned $3.0 billion of capital to shareholders, representing an increase in shareholder distributions of approximately 20% from 2017. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;

 

• For PGIM, 16th consecutive year of positive institutional third-party net flows;

 

• For Retirement, net flows of $12.6 billion for 2018, including $16 billion of pension risk transfer transactions and record Full Service plan sales;

 

 

*  Sales are based on annualized new business premiums.

   

 

• Individual Annuities gross sales of $8.3 billion, up 40% from 2017;

 

• Continued business growth in International Insurance, with constant dollar revenues up 3% from 2017;

 

• For Group Insurance, gross sales of $559 million, up 27% from 2017;*

 

• Introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns;

 

• Continued progress in implementing our U.S. Financial Wellness strategy, including growth in our Prudential Pathways program and the launch of LINK by Prudential, providing customers with a personalized online experience;

 

• The Company’s constructive engagement and advocacy with U.S. federal, state and international regulators, including its successful advocacy with the Financial Stability Oversight Council and the resulting decision to rescind Prudential’s designation as a nonbank systemically important financial institution; and

 

• Our successful campaign of corporate and community engagement, including dedicated efforts to revitalize Newark, NJ and to promote education, training and meaningful employment for Veterans and military spouses throughout the U.S.

 

 

    

 
     
         

 

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OTHER NEOS

In the case of the other NEOs, Messrs. Lowrey and Strangfeld formulated recommendations for each individual based on the Final Performance Factor and the assessment of their performance and presented these recommendations to the Committee for its consideration. Based on the Final Performance Factor, as well as these recommendations and its own evaluation of their performance, the Committee recommended, and the independent members of our Board approved, the following annual incentive awards for each of the other NEOs:

 

   

Mr. Tanji

 

       
       
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ANNUAL INCENTIVE AWARD DECISION

 

Mr. Tanji’s incentive award was $1,100,000, or approximately 1.29 times his target award amount. Of the $1,100,000, $110,000 was mandatorily deferred into the Book Value Performance Program.

   

   

 

   

 

   

       
 

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Tanji, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 
 

 

• His individual development that contributed to the Company’s leadership succession plans, including the appointment of Mr. Tanji as Executive Vice President and Chief Financial Officer effective December 1, 2018;

 

• His leadership of talent management and succession planning initiatives for the Finance organization, including the successful transition of his prior responsibilities as Senior Vice President
and Treasurer;

 

• His acumen in capital management and cash flow planning, including the return of $3.0 billion to shareholders during 2018 through our share repurchase program and Common Stock dividends, representing an increase in shareholder distributions of approximately 20% from 2017. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;

 

   

 

• His effective oversight of our liquidity position, including $5.5 billion of highly liquid assets* at the parent company level at December 31, 2018;

 

• His leadership of strategies to manage the impacts of the Tax Cuts and Jobs Act on our statutory capital and financial leverage position;

 

• His role in the Company’s constructive engagement with state insurance regulators, including facilitating the completion of their first consolidated group-wide examination of Prudential with no reportable findings; and

 

• His key role in management of the statutory capital position of our insurance companies, resulting in capital above our “AA” financial strength targeted levels for our major U.S. insurance subsidiaries and strong solvency margins in our international insurance subsidiaries as of December 31, 2018.

 
 

*  Predominantly includes cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc.

 

 
       

 

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Mr. Falzon

 

       
       
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ANNUAL INCENTIVE AWARD DECISION

 

Consistent with the Final Performance Factor, Mr. Falzon’s annual incentive award was $3,070,000, or approximately 1.023 times his target award amount. This award compares to an annual incentive award of $3,330,000 for 2017, representing a decrease of 7.8%. Of the $3,070,000, $921,000 was mandatorily deferred into the Book Value Performance Program.

   

   

 

   

 

   

       
 

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Falzon, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 
 

 

• His individual development that led to execution of the Company’s overall leadership succession plans, including the appointment of Mr. Falzon as Vice Chairman effective December 1, 2018;

 

• His leadership of talent management and succession planning initiatives for the Finance organization, including the successful transition of his prior responsibilities as Chief Financial Officer to Mr. Tanji, effective December 1, 2018;

 

• After-tax AOI of $5.02 billion and EPS, based on after-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based on after-tax AOI, increased 10.5% versus 2017;

 

• Operating return on average equity of 12.7% for 2018, at the high-end of our objective of 12% to 13% over the near-to-intermediate term;

 

• His acumen in capital management and cash flow planning, including the return of $3.0 billion to shareholders during 2018, through our share repurchase program and Common Stock dividends. The Company has one of the highest dividend yields

 

   

 

among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;

 

• His key role in management of the statutory capital position of our insurance companies, resulting in capital above our “AA” financial strength targeted levels for our major U.S. insurance subsidiaries and strong solvency margins in our international insurance subsidiaries as of December 31, 2018;

 

• His effective oversight of our liquidity position, including $5.5 billion of highly liquid assets* at the parent company level at December 31, 2018;

 

• His effective supervision of internal financial and accounting functions as Chief Financial Officer; and

 

• His leadership in the Company’s ongoing engagement and advocacy with U.S. federal, state and international regulators, including its successful advocacy with the Financial Stability Oversight Council and the resulting decision to rescind Prudential’s designation as a nonbank systemically important financial institution.

 

 
 

*  Predominantly includes cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc.

 

 
       

 

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Mr. Grier

 

        
          
    LOGO       

 

ANNUAL INCENTIVE AWARD DECISION

 

Consistent with the Final Performance Factor, Mr. Grier’s incentive award was $5,200,000, or approximately 1.020 times his target award amount. This award compares to an annual incentive award of $5,660,000 for 2017, representing
a decrease of 8.1%. Of the $5,200,000, $1,560,000 was mandatorily deferred into the Book Value Performance Program.

 

 

          
   

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Grier, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 

 
   

 

• After-tax AOI of $5.02 billion and EPS, based on after-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based on after-tax AOI, increased 10.5% versus 2017;

 

• Operating return on average equity of 12.7% for 2018, at the high-end of our objective of 12% to 13% over the near-to-intermediate term;

 

• Growth in adjusted book value per share of our Common Stock to $96.06 at December 31, 2018, versus $88.67 per share at December 31, 2017, an increase of $7.39, or 8.3%, after payment of four quarterly dividends totaling $3.60 per share;

 

• His leadership in enhanced capital management, including the return of $3.0 billion to shareholders during 2018, through our share repurchase program and Common Stock dividends, representing an increase in shareholder distributions of approximately 20% from 2017;

    

• His oversight of risk management, including the continued implementation of new risk management frameworks and risk mitigation initiatives;

 

• Facilitating the Company’s leadership succession, including the ongoing transition of his responsibilities to Mr. Falzon; and

 

• His successful service as spokesman for both our Company and industry regarding the evolving regulatory initiatives affecting the insurance and financial services industries,
and his leadership of the Company’s advocacy with the Financial Stability Oversight Council concerning the rescinding of Prudential’s designation as a nonbank systemically important financial institution.

 
       
          

 

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Compensation Discussion and Analysis

 

 

 

     

Mr. Pelletier

 

        
          
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ANNUAL INCENTIVE AWARD DECISION

 

Consistent with the Final Performance Factor, Mr. Pelletier’s incentive award was $4,100,000, or approximately 1.025 times his target award amount. This award compares to an annual incentive award of $4,700,000 for 2017, representing a decrease of 12.8%. Of the $4,100,000, $1,230,000 was mandatorily deferred into the Book Value Performance Program.

 

 
          
   

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Pelletier, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 
   

 

• His leadership of the U.S. Businesses and implementation of our Financial Wellness strategy, including:

 

• the launch of LINK by Prudential, providing customers with a personalized online experience;

 

• growth in our Prudential Pathways program; and

 

• enhanced customer engagement strategies such as a digital financial wellness platform;

 

• For PGIM, 16th consecutive year of positive institutional third-party net flows;

 

• Retirement net flows of $12.6 billion for 2018, including the continued expansion of our leading position in the pension risk transfer market, with $16 billion of pension risk transfer transactions in 2018 and record Full Service plan sales in 2018;

 

*   Sales are based on annualized new business premiums.

    

 

• Individual Annuities gross sales of $8.3 billion, up 40% from 2017;

 

• Enhancing collaboration across our U.S. and International Businesses, including expansion of our Financial Wellness platforms;

 

• For Group Insurance, gross sales of $559 million, up 27% from 2017;*

 

• His role in the introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns; and

 

• His role in talent management and succession planning for the U.S. Businesses, including the transition of several new leadership positions within the organization.

 
          

 

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Mr. Sleyster

 

      
          
   

LOGO

    

 

ANNUAL INCENTIVE AWARD DECISION

 

Mr. Sleyster’s incentive award was $1,800,000, or approximately 1.17
times his target award amount. Of the $1,800,000, $180,000 was mandatorily deferred into the Book Value Performance Program.

 
          
   

 

KEY PERFORMANCE ACHIEVEMENTS

 

In assessing the individual performance of Mr. Sleyster, the Committee identified and examined a broad range of corporate and individual performance factors, including:

 

      
   

• His individual development that contributed to the Company’s leadership succession, including the appointment of Mr. Sleyster as Executive Vice President and Chief Operating Officer, International Businesses effective December 1, 2018 and the successful transition of the role of Chief Investment Officer;

 

• His role as Chief Investment Officer and leadership of the overall investment function during 2018, including the generation of net investment income (excluding non-coupon investments and prepayment fee and call premium income) of $3.3 billion in 2018, an increase of 4% from 2017;

 

• His oversight of the Company’s variable annuities hedging program and other risk mitigation initiatives;

 

• His partnership with the Company’s businesses on numerous product enhancements and the development of comprehensive asset/liability matching strategies for all product offerings;

 

    

• His leadership in growing the Company’s alternative asset strategy, which has included investments in limited partnerships and limited liability companies, real estate, derivative instruments and other investments;

 

• His role in supporting strategic priorities of the International Businesses, including the advancement of our business strategy in Asia and Africa; and

 

• His leadership in integrating ESG-related investment initiatives into the investment function and leading an ESG-based dialogue across our businesses.

 

 
          

 

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Compensation Discussion and Analysis

 

 

Long-Term Incentive Program

We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multiyear financial performance.

TARGET AWARD OPPORTUNITIES

In February 2019, the Committee established a target long-term award opportunity for each of the NEOs (other than Mr. Strangfeld). To set these long-term award targets, the Committee considered:

 

   

a competitive market analysis of the NEO’s total compensation and the portion of total compensation provided as long-term incentives, relative to similar roles at companies in our compensation peer group;

   

the NEO’s individual performance and his or her expected future contributions;

   

the NEO’s level of experience in his or her role; and

   

retention considerations.

The specific long-term target award opportunity for each NEO (other than Mr. Strangfeld) is as follows:

 

Named Executive Officers   

Target Long-Term

Award Opportunity

 
Charles F. Lowrey      $8,300,000  
Kenneth Y. Tanji      $2,600,000  
Robert M. Falzon      $6,600,000  
Mark B. Grier      $8,000,000  
Stephen Pelletier      $4,750,000  
Scott G. Sleyster      $3,800,000  

Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.

The mix of long-term incentives granted in 2019 to the NEOs is shown in the table below:

 

Performance Shares and Units      60
Stock Options      20
Book Value Units      20

Long-term incentive awards may also be granted when an individual is promoted to a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special awards in the form of restricted stock units to recognize major milestones, or selective awards in situations involving a leadership transition.

In addition, for all long-term incentive awards granted prior to 2019, the total payout amount to any NEO subject, or who would have otherwise been subject, to Section 162(m) may not exceed 0.4% of the highest pre-tax AOI reported for any of the three fiscal years ended prior to the year of payment, provided that there is positive AOI in at least one fiscal year during which the award is outstanding for at least 276 days of that year.

 

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PERFORMANCE SHARES AND UNITS

Performance shares and units align the majority of our long-term incentive values to: (i) the achievement of our ROE objective and (ii) our relative ROE performance as compared to our life insurer peers, in each case over a three-year performance period. Award payouts generally range from 0% to 125% of the target number of shares and units. For the February 2016 awards with respect to the 2016 to 2018 performance period, the preliminary payout was based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee, subject to a relative performance modifier. The modifier provides a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group and is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier increased or decreased the award payment by up to 10% within the 0% to 125% range.

For the remaining awards, the preliminary payout is based on two equally weighted financial metrics: (i) average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee and (ii) average ROE achievement over the three-year performance period relative to the median ROE results over this period of the North American Life Insurance subset of the Peer Group. This methodology for the performance shares and units program further solidifies the balance between absolute performance and performance relative to our life insurer peers. Accordingly, the use of a relative performance modifier was eliminated starting with the February 2017 awards.

In addition, the February 2018 awards with respect to the 2018 to 2020 performance period granted to officers at the senior vice president level and above and equivalents (including the NEOs) are subject to a modifier that can increase (or decrease) the payout by up to 10% based on the achievement of our diversity and inclusion goals over the three-year performance period.

Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units.

ROE is determined using after-tax AOI divided by adjusted book value. The ROE figures are also subject to standard adjustments as part of our formulaic framework.

While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned shares and units based on quantitative and qualitative factors, the Committee has rarely exercised discretion and did not exercise discretion for the 2016 awards that paid out in February 2019.

STOCK OPTIONS

Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of 10 years. One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on the NYSE on the date of grant.

BOOK VALUE PERFORMANCE PROGRAM

The Book Value Performance Program is intended to link the incentive payments to adjusted book value per share—a key metric in valuing insurance companies, banks, and investment firms that is closely followed by investors. We calculate adjusted book value per share by dividing our adjusted book value by the number of shares of our Common Stock outstanding. Our calculations of adjusted book value and adjusted book value per share, as described in Appendix A to this Proxy Statement, exclude certain balance sheet items that are not, and may never be, reflected in the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the adjusted book value per share metric takes into consideration realized gains and losses in our investment portfolio.

The Tax Cuts and Jobs Act enacted in December 2017 has had a beneficial impact on our adjusted book value due to the remeasurement of net deferred tax liabilities resulting from the reduction in the U.S. tax rate. The Committee excludes this benefit from the calculation of adjusted book value per share for purposes of valuing the book value units that were granted prior to enactment of the Tax Cuts and Jobs Act.

 

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Compensation Discussion and Analysis

 

 

The key features of the Book Value Performance Program for our NEOs are:

 

 

Awards are granted and denominated in book value units that are funded from two sources:

 

   

the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and

 

   

a mandatory deferral of 30% of their annual incentive award.

 

 

Once granted, these units track the value of adjusted book value per share of our Common Stock, which excludes total accumulated other comprehensive income and the non-economic effects of foreign currency exchange rate remeasurement of non-yen liabilities and assets included in net income or loss.

 

 

One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.

 

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(1)

Excluding total accumulated other comprehensive income, the cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement and the remeasurement of certain deferred taxes included in net income.

 

(2)

December 31, 2017 amount has been revised as a result of the elimination of Gibraltar Life’s one-month reporting lag in 2018.

 

(3)

Does not include the impact of changes in share count or adjustments to earnings for purposes of calculating diluted earnings per share.

 

(4)

Includes realized investment gains and losses and related charges and adjustments, and results from divested and run-off businesses.

 

(5)

Includes amounts related to the cumulative effect of changes in accounting principles and foreign currency exchange rate remeasurement formerly recorded in accumulated other comprehensive income.

 

(6)

Used for grants of book value units made prior to the enactment of the Tax Cuts and Jobs Act in December 2017.

For a reconciliation of Adjusted Book Value to the most comparable GAAP measure, see Appendix A to this Proxy Statement.

 

 

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The NEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows:

 

     Number of Book
Value Units
Held at
January 1, 2018
(#)
  Value of Book
   Value Units Held at
January 1, 2018(¹)
($)
  Value of Book Value
Units
   Distributed in 2018(²)
($)
  Number of Book
Value Units
   Awarded in 2018
(#)
  Value of Book
Value Units
   Awarded in 2018(³)
($)
  Number of Book
Value Units Held at
   December 31, 2018
(#)
 

Value of Book
   Value Units Held at
December 31,
2018(4)

($)

Charles F. Lowrey       60,942       5,212,979       2,764,738       25,851       2,282,126       54,472       5,116,665
John R. Strangfeld       103,036       8,813,699       4,611,376       66,298       5,998,170       115,425       10,888,761
Kenneth Y. Tanji       7,824       669,265       349,602       3,733       329,549       7,470       702,433
Robert M. Falzon       43,996       3,763,418       1,925,249       20,380       1,799,146       41,869       3,934,906
Mark B. Grier       85,174       7,285,784       3,816,282       37,360       3,298,141       77,920       7,320,727
Stephen Pelletier       53,692       4,592,814       2,358,338       26,734       2,360,078       52,856       4,971,553
Scott G. Sleyster       21,765       1,861,778       915,192       12,370       1,092,024       23,436       2,206,445

 

(1)

Represents the aggregate market value of the number of book value units held at January 1, 2018 obtained by multiplying the book value per share of $85.54 as of December 31, 2017 by the number of book value units outstanding.

 

(2)

Represents the aggregate market value distributed on March 2, 2018 for all NEOs.

 

(3)

Represents the aggregate market value awarded on February 13, 2018 for all NEOs, and November 30, 2018 for Mr. Strangfeld.

 

(4)

Represents the aggregate market value of the number of book value units held at December 31, 2018, obtained by multiplying the book value per share of $96.06 by the number of outstanding book value units granted in 2018, and multiplying the book value per share (adjusted for tax reform legislation) of $92.01 by the number of outstanding book value units granted prior to 2018.

LONG-TERM INCENTIVE AWARD DECISIONS FOR 2018

In connection with the retirement of John R. Strangfeld as CEO, in November 2018, the Committee granted a long-term incentive award to Mr. Strangfeld for the 2018 performance year of $10 million to reward performance and long-term value creation. The award is equal to the target long-term incentive award opportunity established by the Committee for Mr. Strangfeld for 2018. In approving this award, the Committee considered a number of factors, including Mr. Strangfeld’s nearly full year of service in 2018, his long service as a high performing CEO, his agreement to remain on the Board through a transition period ending on April 5, 2019 and his key role in supporting a smooth leadership succession, which the Committee and the Board believe will drive continued value creation.

In February 2019, the Committee granted long-term incentive awards to each of the NEOs other than Mr. Strangfeld. The award amount was based upon the competitive analysis of long-term incentive compensation and total direct compensation for each of the NEOs. To determine the amount of the specific long-term incentive award for each NEO, the Committee considered each individual’s performance during 2018 and market data for the comparable executive officer position at the companies in the Peer Group, as well as his or her potential future contributions to the Company, the current value of prior year long-term incentive awards and retention considerations.

These awards, including Mr. Strangfeld’s award, were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award under this program). With respect to the NEOs (other than Mr. Strangfeld, whose award is discussed below), the Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 2018 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance shares and units (which provide value based upon attainment of specific performance goals and performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in our adjusted book value per share).

 

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Compensation Discussion and Analysis

 

 

 

 

The following table presents the long-term incentive awards granted to Mr. Strangfeld in November 2018 and to each other NEO in February 2019, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of their annual incentive award. Awards are expressed as target compensation dollar values in the table. The 2019 awards generally will not be reported in the Summary Compensation Table until the 2020 Proxy Statement. For discussion of the long-term incentive awards granted in February 2018 for 2017 performance and included in this year’s Summary Compensation Table, see the CD&A in our 2018 Proxy Statement.

 

Named Executive Officer    
Compensation Value of
Book Value Units(1)
 
 
   
Compensation Value of
Stock Options
 
 
   
Compensation Value of
Performance Shares
 
 
   
Compensation Value of
Performance Units
 
 
       Total  

 

Charles F. Lowrey

 

 

 

 

 

 

2,890,000

 

 

 

 

 

 

 

 

 

1,660,000

 

 

 

 

 

 

 

 

 

2,490,000

 

 

 

 

 

 

 

 

 

2,490,000

 

 

 

 

    

 

 

 

 

9,530,000

 

 

 

 

 

John R. Strangfeld

 

 

 

 

 

 

3,839,600

 

 

 

 

 

 

 

 

 

2,000,000

 

 

 

 

 

 

 

 

 

3,000,000

 

 

 

 

 

 

 

 

 

3,000,000

 

 

 

 

    

 

 

 

 

11,839,600

 

 

 

 

 

Kenneth Y. Tanji

 

 

 

 

 

 

630,000

 

 

 

 

 

 

 

 

 

520,000

 

 

 

 

 

 

 

 

 

780,000

 

 

 

 

 

 

 

 

 

780,000

 

 

 

 

    

 

 

 

 

2,710,000

 

 

 

 

 

Robert M. Falzon

 

 

 

 

 

 

2,241,000