DEF 14A 1 d215792ddef14a.htm DEF 14A DEF 14A
Table of Contents

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

(Amendment No.     )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨    Preliminary Proxy Statement
¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x    Definitive Proxy Statement
¨    Definitive Additional Materials
¨    Soliciting Material Pursuant to §240.14a-12

THE BANK OF NEW YORK MELLON CORPORATION

 

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x   No fee required.
¨  

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)  

Title of each class of securities to which transaction applies:

   

 

  (2)  

Aggregate number of securities to which transaction applies:

 

   

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

   

 

  (4)  

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  (5)  

Total fee paid:

   

 

¨   Fee paid previously with preliminary materials.
¨  

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  (1)  

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Table of Contents

LOGO

TWO THOUSAND SIXTEEN
Notice of Annual Meeting and Proxy Statement
BNY MELLON Invested


Table of Contents

 

Table of Contents

 

LETTER TO STOCKHOLDERS

  Page 1
     

NOTICE OF ANNUAL MEETING

  Page 2
     

INTRODUCTION

  Page 3
     

ITEM 1 – ELECTION OF DIRECTORS

  Page 6

Resolution

  Page 7

Nominees

  Page 8

Corporate Governance and Board Information

  Page 16

Director Compensation

  Page 28
     

ITEM 2 – ADVISORY VOTE ON COMPENSATION

  Page 30

Resolution

  Page 31

Compensation Discussion and Analysis

  Page 32

Executive Compensation Tables

  Page 54
     

ITEM 3 – APPROVAL OF THE 2016 EXECUTIVE INCENTIVE COMPENSATION PLAN

  Page 66

Resolution

  Page 66

Key Terms of the 2016 EICP

  Page 67

Plan Benefits

  Page 70
     

ITEM 4 – RATIFICATION OF KPMG LLP

  Page 71

Resolution

  Page 71

Report of the Audit Committee

  Page 72

Services Provided by KPMG LLP

  Page 73
     

ITEM 5 – STOCKHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIRMAN

  Page 74

Stockholder Proposal

  Page 74

Board of Directors’ Response

 

Page 75

     

 

 

     


Table of Contents

 

ADDITIONAL INFORMATION

  Page 77

Equity Compensation Plans

  Page 78

Information on Stock Ownership

  Page 79

Annual Meeting Q&A

  Page 81

Other Information

  Page 84

Helpful Resources

  Page 87
     

ANNEX A: NON-GAAP RECONCILIATION

  Page 88
     

ANNEX B: 2016 EICP

  Page 92

 

 

     


Table of Contents
 
  LETTER FROM THE CEO  

 

LOGO

March 11, 2016

Dear Fellow Stockholder:

On behalf of the Board of Directors, we are pleased to invite you to our 2016 Annual Meeting of Stockholders to be held on Tuesday, April 12, 2016 at 9 a.m., Eastern time, at 101 Barclay Street, New York, New York 10286.

At this year’s Annual Meeting, you will be asked to vote on several items, including the election of directors, our 2015 executive compensation program and our 2016 executive incentive compensation plan (the “2016 EICP”). Detailed information about the director nominees, including their specific experience and qualifications, begins on page 6. Our Compensation Discussion and Analysis, which explains our continued commitment to pay for performance, alignment with stockholders’ interests and appropriate risk-taking in the context of our 2015 compensation decisions, begins on page 32. A summary of the key terms of the 2016 EICP and why we are seeking shareholder approval of the plan begins on page 66. We appreciate the opportunity to provide you with these details of your Board’s actions in 2015 and recommendations for 2016. We encourage you to read the proxy statement carefully for more information.

Your vote is important to us, and we hope that you will participate in the Annual Meeting, either by attending and voting in person or by voting through any of the acceptable means described in this proxy statement, as promptly as possible. Instructions on how to vote begin on page 81. You may also listen to the meeting at https://www.bnymellon.com/us/en/investor-relations/index.jsp.

Thank you for your continued support of BNY Mellon, and we look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

LOGO

Gerald L. Hassell

Chairman and CEO

  

 

 

BNY Mellon   LOGO   2016 Proxy Statement       1


Table of Contents
 
  NOTICE OF ANNUAL MEETING  

 

TUESDAY, APRIL 12, 2016

9:00 a.m., Eastern time

101 Barclay Street, New York, New York 10286

Record Date: February 12, 2016

 

     AGENDA     BOARD  RECOMMENDATION  
     
    1.    To elect the 11 nominees named in this proxy statement to serve on our Board of Directors until the 2017 annual meeting   FOR each director nominee
     
    2.    To provide an advisory vote for approval of the 2015 compensation of our named executive officers, as disclosed in this proxy statement   FOR
     
    3.    To approve The Bank of New York Mellon Corporation 2016 Executive Incentive Compensation Plan   FOR
     
    4.    To ratify the appointment of KPMG LLP as our independent auditor for 2016   FOR
     
    5.    To consider a stockholder proposal regarding an independent Board chairman, if properly presented   AGAINST

We will also act on any other business that is properly raised.

March 11, 2016

By Order of the Board of Directors,

 

LOGO

Craig T. Beazer

Corporate Secretary

IT IS IMPORTANT THAT YOU CAREFULLY READ YOUR PROXY STATEMENT AND VOTE.

 

     LOGO

  

VIA THE INTERNET

Visit the website listed

on your proxy card

 

   LOGO   

BY TELEPHONE

Call the telephone number

listed on your proxy card

 

   LOGO   

IN PERSON

Attend the annual meeting (see page 81 for more information)

 

   LOGO   

BY MAIL

Mail in a completed
proxy card

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held
on April 12, 2016: Our 2016 proxy statement and 2015 Annual Report to stockholders are available
at www.envisionreports.com/bk.

 

 

 

 

2       BNY Mellon   LOGO   2016 Proxy Statement


Table of Contents
 
  INTRODUCTION  
 

This introduction highlights certain information included in the proxy statement. You should read the entire proxy statement carefully before voting.

 

2015 Business Highlights

 

LOGO

On Track to Achieve Our Three-Year Financial Goals

 

 

p 19%*

 

Operating EPS

 

   

 

p 2%*

 

Adjusted revenue

 

                      

 

 

q  2%*

 

Adjusted noninterest expense

   

Adjusted pre-tax operating margin up 270 basis points to 31%*

Awards and Recognition

 

         

Investment Services

 

#1 in The Expert category

R&M Investor Services Survey, 2015

 

Top Service Provider

Mutual Fund Service Guide, 2015

 

Best Managed Accounts Platform

Hedgeweek, 2015

 

#1 in Product Capability,

Tri-Party Securities Financing Survey

Global Custodian, 2015

 

Investment Management

 

Top National Private Asset

Manager and Top Private Bank

Offering for Family Offices

Family Wealth Report, 2015

 

Highest Growth Product

Standish Global Fixed Income strategy

Morningstar’s World Bond category, 2015

 

LDI Manager of the Year

(third consecutive year)

c/o European Innovation Awards, 2015

 

Treasury Services

 

Best Trade Outsourcing Bank

Global Trade Review, 2015

 

 

Technology

 

Top Company for Women in Technology

Anita Borg Institute, 2015

 

Tech Project of the Year

The Banker, 2015

 

 

Corporate Social Responsibility

 

World and North American Indices

Dow Jones Sustainability Indices, 2015

         

 

* 2015 vs. 2014. Operating EPS, adjusted revenue, adjusted noninterest expense and adjusted pre-tax operating margin are non-GAAP measures. For a reconciliation and explanation of these non-GAAP measures, see Annex A.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       3


Table of Contents
 
  INTRODUCTION  

 

DIRECTOR NOMINEES

Our directors contribute to the strength of our Board through their experience, diversity, differing perspectives and institutional knowledge.

 

                        COMMITTEE MEMBERSHIPS    
  Name   Occupation   Independent   Audit   Corp. Gov. & Nom.(1)   Corp. Social Resp.   Executive(1)   Finance   Human Res. & Comp.   Risk   Technology

Nicholas M. Donofrio

Age 70, Director since 1999

  Retired EVP, Innovation & Technology of IBM Corporation  

 

  

         

 

  

 

 

  

         

 

  

 

 

C  

Joseph J. Echevarria

Age 59, Director since 2015

  Retired CEO of Deloitte LLP  

 

  

 

 

C   

     

 

  

     

 

  

           

Edward P. Garden

Age 54, Director since 2014

  Chief Investment Officer and a founding partner of Trian Fund Management, L.P.  

 

  

                 

 

  

 

 

  

 

 

  

   

Jeffrey A. Goldstein

Age 60, Director since 2014

  Managing Director, Hellman & Friedman LLC  

 

  

                 

 

C  

 

 

  

 

 

  

   

Gerald L. Hassell

Age 64, Director since 1998

  Chairman & CEO of The Bank of New York Mellon Corporation                  

 

  

               

John M. Hinshaw

Age 45, Director since 2014

  EVP and Chief Customer Officer of Hewlett Packard Enterprise Company  

 

  

                     

 

  

 

 

  

 

 

  

Edmund F. “Ted” Kelly

Age 70, Director since 2004

  Retired Chairman of Liberty Mutual Group  

 

  

                     

 

  

 

 

C  

 

 

  

John A. Luke, Jr.

Age 67, Director since 1996

  Non-Executive Chairman of WestRock Company  

 

  

 

 

  

 

 

  

     

 

  

               

Mark A. Nordenberg

Age 67, Director since 1998

  Chancellor Emeritus, Chair of the Institute of Politics and Distinguished Service Professor of Law of the University of Pittsburgh  

 

  

 

 

  

 

 

  

 

 

C  

                 

 

  

Catherine A. Rein

Age 73, Director since 1981

  Retired Senior EVP & Chief Administrative Officer of MetLife, Inc.  

 

  

 

 

  

 

 

  

     

 

  

               

Samuel C. Scott III

Age 71, Director since 2003

  Retired Chairman, President & CEO of Ingredion Incorporated  

 

  

 

 

  

     

 

  

 

 

  

     

 

C  

       

 

1 William C. Richardson, currently Chairman of our Corporate Governance and Nominating Committee, is retiring as a director of our company immediately after our Annual Meeting. Wesley W. von Schack, currently Chairman of our Executive Committee, is resigning as a director of our company, effective following our Annual Meeting.

 

 

4       BNY Mellon   LOGO   2016 Proxy Statement


Table of Contents
 
  INTRODUCTION  

 

GOVERNANCE AND COMPENSATION

 

 

Robust Stockholder Rights   Active, Independent Board   Our Culture

•   No staggered board

 

•   Special meeting rights for stockholders, individually or in a group, holding 20% of our outstanding common stock

 

•   Proxy access allowing stockholders, individually or in a group of up to 20, holding 3% of our outstanding stock for at least 3 years to nominate up to 20% of the Board

 

•   No plurality voting in uncontested director elections (each director must be elected by majority of votes cast)

 

•   No supermajority voting: stockholder actions require only majority of votes cast (not majority of shares present and entitled to vote)

 

•   No “poison pill” (stockholders’ rights plan)

 

•   Continued, active engagement with our stakeholders

 

•   Independent board: our Board is comprised solely of independent directors other than our CEO and meets in regular executive sessions

 

•   Independent Lead Director: selected by our independent directors and empowered with broad authority

 

•   Committee Chairman rotation: our committee chairmen are required to rotate at five-year intervals

 

•   High rate of attendance: average 2015 attendance at Board and committee meetings was 90%

 

•   Risk-aware: we protect against excessive risk-taking through multiple lines of defense, including Board oversight

 

•   Honest and accountable: our codes of conduct apply to all employees and directors to provide a framework for ethical conduct

 

•   Innovative and evolving: we encourage directors to participate in continuing education programs, and have continued to enhance our integrated learning and development platform for employees through BNY Mellon University (“BKU”)

Awarded 2015 Total Direct Compensation(1)

 

         

Annual

Incentive

 

Long-Term

Incentive

  Total
Incentive
 

 

Awarded Total
Direct
Compensation(1)

 

Named Executive Officers
(NEOs)
  Salary   Cash   RSUs  

% of

Target

  PSUs  

% of

Target

 

% of

Target

 

Gerald L. Hassell

Chairman & CEO

 

 

$1,000,000

 

 

$2,419,200

 

 

$9,676,800

 

 

144%

 

 

$4,140,000

 

 

115%

 

 

135%

 

 

$17,236,000

Thomas P. (Todd) Gibbons

Vice Chairman & CFO

 

 

   $650,000

 

 

$2,426,760

 

 

$2,966,040

 

 

144%

 

 

$1,845,750

 

 

115%

 

 

135%

 

 

  $7,888,550

Curtis Y. Arledge(2)

Vice Chairman & CEO of

Investment Management

 

 

   $650,000

 

 

$3,364,200

 

 

$4,111,800

 

 

80%

 

 

$3,204,000

 

 

  80%

 

 

  80%

 

 

$11,330,000

Karen Peetz

President

 

 

   $650,000

 

 

$1,647,726

 

 

$2,013,887

 

 

120%

 

 

$1,305,000

 

 

100%

 

 

114%

 

 

  $5,616,613

Brian T. Shea(3)

Vice Chairman & CEO of

Investment Services

 

 

   $600,000

 

 

$2,459,646

 

 

$3,006,234

 

 

145%

 

 

$1,863,000

 

 

115%

 

 

136%

 

 

  $7,928,880

 

1 The amounts reported as Awarded Total Direct Compensation differ substantially from the amounts determined under SEC rules as reported for 2015 in the “Total” column of the Summary Compensation Table set forth on page 54. The above table is not a substitute for the Summary Compensation Table.
2 Mr. Arledge is no longer serving as Vice Chairman and CEO of Investment Management, and his employment with BNY Mellon is scheduled to terminate on March 23, 2016. As a result, Mr. Arledge is eligible to vest only in a pro-rated amount of his 2015 long-term incentive award, as further discussed on page 51.
3 Mr. Shea’s salary increased from $550,000 to $600,000 effective July 1, 2015.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       5


Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS  

 

Item 1. Election of Directors

 

RESOLUTION

  Page  7
     

NOMINEES

  Page  8

Director Qualifications

  Page 14

Majority Voting Standard

  Page 15
     

CORPORATE GOVERNANCE AND BOARD INFORMATION

  Page 16

Our Corporate Governance Practices

  Page 16

Board Leadership Structure

  Page 18

Director Independence

  Page 19

Oversight of Risk

  Page 21

Board Meetings and Committee Information

  Page 22

Compensation Consultants to the HRC Committee

  Page 26

Succession Planning

  Page 27

Contacting the Board

  Page 27
     

DIRECTOR COMPENSATION

  Page  28

 

 

 

6       BNY Mellon   LOGO   2016 Proxy Statement


Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS    > Resolution

 

Proposal

We are asking stockholders to elect the 11 nominees named in this proxy statement to serve on the Board of Directors of The Bank of New York Mellon Corporation (the “company,” “BNY Mellon,” “we” or “us”) until the 2017 Annual Meeting of stockholders or until their successors have been duly elected and qualified.

Background

 

•   Each nominee currently serves on our Board of Directors.

 

•  10 nominees are currently independent directors and one nominee serves as the company’s Chairman and Chief Executive Officer.

 

•  Richard J. Kogan  and William C. Richardson, currently directors of our company, will not be standing for re-election at our Annual Meeting. Wesley W. von Schack, currently a director of our company, is resigning, effective following our Annual Meeting.

 

•   The Board and the Corporate Governance and Nominating Committee (“CG&N Committee”) have concluded that each of our nominees should be recommended for re-nomination as a director as described on page 14 after considering, among other things, the nominee’s (1) professional background and experience, (2) senior level policy-making positions, (3) other public company board experience, (4) diversity, (5) intangible attributes, (6) prior BNY Mellon Board experience, and (7) Board attendance and participation.

 

•   The nominees have skills and expertise in a wide range of areas, including technology, accounting, private equity, financial regulation, financial services, insurance, risk management and legal matters.

   LOGO

Voting

We do not know of any reason why any nominee named in this proxy statement would be unable to serve as a director if elected. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as may be nominated in accordance with our by-laws, as described on page 15. Proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.

Each director will be elected if more votes are cast “for” the director’s election than are cast “against” the director’s election, with abstentions and broker non-votes not being counted as a vote cast either “for” or “against” the director’s election. Pursuant to our Corporate Governance Guidelines, if any incumbent director fails to receive a majority of the votes cast, the director will be required to tender his or her resignation promptly after the certification of the stockholder vote. Our CG&N Committee will promptly consider the tendered resignation and recommend to the Board whether to accept or reject it, or whether other actions should be taken. More information on our voting standard and the CG&N Committee’s consideration of tendered resignations is provided on page 15 below.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       7


Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS    > Nominees

 

 

LOGO

 

 

Nicholas M. Donofrio

 

Age 70

 

Independent Director of BNY Mellon and predecessor companies since 1999

 

Retired Executive Vice President,

Innovation and Technology of

IBM Corporation

 

Committees: Corporate Social Responsibility, Executive, Risk, Technology (Chairman)

 

Other Current Public Company Board Service: Advanced Micro Devices, Inc.; Delphi Automotive PLC

 

LOGO

 

 

Joseph J. Echevarria

 

Age 59

 

Independent Director since 2015

 

Retired CEO of Deloitte LLP

 

Committees: Audit (Chairman), Corporate Social Responsibility, Finance

 

Other Current Public Company Board Service: Pfizer Inc.

 

 

 

Mr. Donofrio served as Executive Vice President, Innovation and Technology of International Business Machines (“IBM”) Corporation, a developer, manufacturer and provider of advanced information technologies and services, from 2005 until his retirement in 2008. Mr. Donofrio previously served as Senior Vice President, Technology and Manufacturing of IBM Corporation from 1997 to 2005 and spent a total of 44 years as an employee of IBM Corporation. In addition to the public company board service noted above, Mr. Donofrio currently serves as a director of Liberty Mutual Group. He previously served as a director of The Bank of New York Company, Inc. (“The Bank of New York”) from 1999 to 2007 and has served as a director of the company since 2007.

Mr. Donofrio holds seven technology patents and is a member of numerous technical and science honor societies. Mr. Donofrio serves as a director of the National Association of Corporate Directors, is Co-Chair Emeritus and a member of the Board of Trustees of the New York Hall of Science, is a director of Sproxil, Inc. and O’Brien & Gere, is on the board of advisors of StarVest Partners, L.P., and is a member of the Board of Trustees of Syracuse University. Mr. Donofrio earned a Bachelor of Science degree from Rensselaer Polytechnic Institute and a Master of Science degree from Syracuse University.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Expertise in technology issues

 

 

Senior level policy-making experience in the field of engineering

 

 

Teaching and training in the area of innovation

Mr. Echevarria served as Chief Executive Officer of Deloitte LLP, a global provider of professional services, from 2011 until his retirement in 2014. Mr. Echevarria previously served in increasingly senior leadership positions during his 36-year career at the firm, including U.S. Managing Partner for Operations, prior to being named Chief Executive Officer. In addition to the public company board service noted above, Mr. Echevarria currently serves as a Trustee of the University of Miami and a Member of the Private Export Council, the principal national advisory committee on international trade. He also serves as a board member and Chief Executive Officer of President Obama’s My Brother’s Keeper Alliance. Mr. Echevarria has served as a director of the company since 2015. Mr. Echevarria earned his bachelor’s degree in business administration from the University of Miami.

 

Skills and Expertise:   

 

   LOGO    LOGO    LOGO    LOGO    LOGO

 

 

Leadership of a large, global company

 

 

Financial expert, with expertise in accounting, regulatory and compliance issues

 

 

Senior level policy-making experience in the field of professional services

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

8       BNY Mellon   LOGO   2016 Proxy Statement


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

Edward P. Garden

 

Age 54

 

Independent Director since 2014

 

Chief Investment Officer and a founding partner of Trian Fund Management, L.P.

 

Committees: Finance, Human Resources and Compensation, Risk

 

Other Current Public Company Board Service: None

 

LOGO

 

 

Jeffrey A. Goldstein

 

Age 60

 

Independent Director since 2014

 

Managing Director, Hellman & Friedman LLC and Former Under Secretary of the Treasury for Domestic Finance

 

Committees: Finance (Chairman), Human Resources and Compensation, Risk

 

Other Current Public Company Board Service: None

 

 

 

Mr. Garden has been Chief Investment Officer and a founding partner of Trian Fund Management, L.P. (“Trian”), a multi-billion dollar alternative investment management firm, since November 2005. He has served as a director of the company since 2014.

Mr. Garden served as a director of Family Dollar Stores, Inc., a discount retailer, from September 2011 until its acquisition by Dollar Tree, Inc. in July 2015, and as a director of The Wendy’s Company from December 2004 to December 2015. Mr. Garden has also entered into an agreement with Pentair plc, pursuant to which at its 2016 annual general meeting of shareholders, Pentair will recommend to its shareholders that they approve an amendment to increase the size of the board by one director and immediately after such approval, Pentair will appoint Mr. Garden as a director to fill the vacancy. Previously he served as Vice Chairman and a director of Triarc Companies, Inc. from December 2004 through June 2007 and Executive Vice President from August 2003 until December 2004. From 1999 to 2003, Mr. Garden was a managing director of Credit Suisse First Boston, where he served as a senior investment banker in the Financial Sponsors Group. From 1994 to 1999, he was a managing director at BT Alex Brown, where he was a senior member of the Financial Sponsors Group and, prior to that, co-head of Equity Capital Markets. Mr. Garden graduated from Harvard College with a B.A. in Economics.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

 

Experience in finance

 

 

Expertise in financing, operating and investing in companies

 

 

Extensive service on the boards of several large public companies

 

Mr. Goldstein has been a Managing Director at Hellman & Friedman LLC, a private equity firm, since 2011 and was previously at the firm from 2004 to 2009. He was Under Secretary of the Treasury for Domestic Finance and Counselor to the Secretary of the Treasury from 2009 to 2011. Mr. Goldstein has served as a director of the company since 2014.

Mr. Goldstein worked at James D. Wolfensohn Inc. and successor firms for 15 years. When Wolfensohn & Co. was purchased by Bankers Trust in 1996, he served as co-chairman of BT Wolfensohn and as a member of Bankers Trust’s management committee. In 1999, Mr. Goldstein became a managing director of the World Bank. He also served as its Chief Financial Officer beginning in 2003. In July of 2009, President Barack Obama nominated Mr. Goldstein to be Under Secretary of the Treasury for Domestic Finance. In July 2011, Secretary of the Treasury Timothy F. Geithner awarded Mr. Goldstein with the Alexander Hamilton award, the highest honor for a presidential appointee. Earlier in his career Mr. Goldstein taught economics at Princeton University and worked at the Brookings Institution. Mr. Goldstein earned a Bachelor of Arts degree from Vassar College and a Master of Arts, Master of Philosophy and a Ph.D. in economics from Yale University.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Experience in private equity and finance

 

 

Expertise in the operations of large financial institutions

 

 

Experience in financial regulation and banking

 

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

BNY Mellon   LOGO   2016 Proxy Statement       9


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

Gerald L. Hassell

 

Age 64

 

Management Director of BNY Mellon and predecessor companies since 1998

 

Chairman and Chief Executive Officer of The Bank of New York Mellon Corporation

 

Committees: Executive

 

Other Current Public Company Board Service: Comcast Corporation

LOGO

 

 

John M. Hinshaw

 

Age 45

 

Independent Director since 2014

 

Executive Vice President and Chief Customer Officer of Hewlett Packard Enterprise Company

 

Committees: Human Resources and Compensation, Risk, Technology

 

Other Current Public Company Board Service: None

 

 

Mr. Hassell has served as our Chief Executive Officer since 2011 and served as our President since the merger of The Bank of New York and Mellon Financial Corporation (“Mellon”) in 2007 (the “merger”) through 2012. Prior to the merger, Mr. Hassell served as President of The Bank of New York from 1998 to 2007. He served as a director of The Bank of New York from 1998 to 2007 and has served as a director of the company since 2007. Since joining The Bank of New York’s Management Development Program more than three decades ago, Mr. Hassell has held a number of key leadership positions within the company in securities servicing, corporate banking, credit, strategic planning and administration services.

In addition to the public company board service noted above, Mr. Hassell is also a director of the National September 11 Memorial & Museum and the Lincoln Center for the Performing Arts, and is Vice Chair of Big Brothers/Big Sisters of New York. Mr. Hassell holds a Bachelor of Arts degree from Duke University and a Master in Business Administration degree from the New York University Stern School of Business.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

 

 

Knowledge of the company’s businesses and operations

 

 

Participation in financial services industry associations

 

 

Experience in the financial services industry

Mr. Hinshaw has served as the Executive Vice President and Chief Customer Officer of Hewlett Packard Enterprise Company since November 2015. From November 2011 to November 2015, Mr. Hinshaw served as Executive Vice President of Technology and Operations at Hewlett-Packard Company. He is also a member of the Executive Council at Hewlett Packard Enterprise Company. Mr. Hinshaw has served as a director of the company since 2014.

Prior to joining Hewlett-Packard Company, Mr. Hinshaw served as Vice President and General Manager for Boeing Information Solutions at The Boeing Company. Before that, he served as Boeing’s Chief Information Officer and led their companywide corporate initiative on information management and information security. Mr. Hinshaw also spent 14 years at Verizon Communications where, among several senior roles, he was Senior Vice President and Chief Information Officer of Verizon Wireless, overseeing the IT function of the wireless carrier. Mr. Hinshaw is also a board member of DocuSign, Inc., a provider of electronic signature transaction management, and the National Academy Foundation, an educational non-profit organization. He received a B.B.A. in Computer Information Systems and Decision Support Sciences from James Madison University.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Technology and management expertise

 

 

Experience in the operations of large, complex companies

 

 

Leadership roles in several different industries

 

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

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ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

Edmund F. “Ted” Kelly

 

Age 70

 

Independent Director of BNY Mellon and predecessor companies since 2004

 

Retired Chairman of Liberty Mutual Group

 

Committees: Human Resources and Compensation, Risk (Chairman), Technology

 

Other Current Public Company Board Service: EMC Corporation

 

LOGO

 

 

John A. Luke, Jr.

 

Age 67

 

Independent Director of BNY Mellon and predecessor companies since 1996

 

Non-Executive Chairman of WestRock Company

 

Committees: Audit, Corporate Governance and Nominating, Executive

 

Other Current Public Company Board Service: The Timken Company; WestRock Company

 

 

Mr. Kelly served as Chairman (from 2000 to 2013), President (from 1992 to 2010) and Chief Executive Officer (from 1998 to 2011) of Liberty Mutual Group, a multi-line insurance company. Mr. Kelly served as a director of Mellon from 2004 to 2007 and has served as a director of the company since 2007.

Mr. Kelly’s experience also includes senior-level management positions at Aetna Life & Casualty Company. Mr. Kelly was a director of Citizens Financial Group Inc., where he served as Chair of the Audit Committee and Chair of the Joint Risk Assessment Committee. In addition to the public company board service noted above, Mr. Kelly is also a member of the Board of Governors of the Property Casualty Insurers Association of America and a director of the Financial Services Roundtable; a member of the boards of the United Way of Massachusetts Bay, the American Red Cross of Massachusetts Bay, the American Ireland Fund and The Massachusetts Mentoring Partnership, among others; a past member of the Board of Trustees for Boston College and former President of the Boston Minuteman Council of the Boy Scouts of America. Mr. Kelly received a Bachelor of Arts degree from Queen’s University in Belfast and a Ph.D. from the Massachusetts Institute of Technology.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Leadership of a large public company in a highly regulated industry

 

 

Experience in risk management

 

 

Senior-level policy-making experience in the insurance industry

Mr. Luke has served as non-executive Chairman of WestRock Company, a global paper and packaging company, since July 2015 when it was formed by the merger of Rock-Tenn Company and MeadWestvaco Corporation. Mr. Luke previously served as Chairman and Chief Executive Officer of MeadWestvaco Corporation from 2002 to July 2015. Mr. Luke served as a director of The Bank of New York from 1996 to 2007 and has served as a director of the company since 2007.

In addition to the public company board service noted above, Mr. Luke is also a director of FM Global and a former director and chairman of the National Association of Manufacturers and the American Forest & Paper Association. He is a trustee of the American Enterprise Institute for Public Policy Research, serves on the boards of the US China and India Business Councils and is a former member of the President’s Export Council. Mr. Luke is also a trustee of the Colonial Williamsburg Foundation, the Virginia Museum of Fine Arts, and is rector and member of the Board of Visitors of Virginia Commonwealth University. Mr. Luke served as an officer with the U.S. Air Force in Southeast Asia during the Vietnam conflict. He earned a Bachelor of Arts degree from Lawrence University and a Master in Business Administration degree from The Wharton School of Business at the University of Pennsylvania.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Leadership of a large public company

 

 

Experience managing finance, operations and marketing of an international business

 

 

Senior level policy-making experience in the manufacturing industry

 

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

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Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

Mark A. Nordenberg

 

Age 67

 

Independent Director of BNY Mellon and predecessor companies since 1998

 

Chancellor Emeritus, Chair of the Institute of Politics and Distinguished Service Professor of Law of the University of Pittsburgh

 

Committees: Audit, Corporate Governance and Nominating, Corporate Social Responsibility (Chairman), Technology

 

Other Current Public Company Board Service: None

 

LOGO

 

 

Catherine A. Rein

 

Age 73

 

Independent Director of BNY Mellon and predecessor companies since 1981

 

Retired Senior Executive Vice President and Chief Administrative Officer of MetLife, Inc.

 

Committees: Audit, Corporate Governance and Nominating, Executive

 

Other Current Public Company Board Service: None

 

 

 

Mr. Nordenberg served as Chancellor and Chief Executive Officer of the University of Pittsburgh, a major public research university, from 1996 to August 2014. He currently serves as Chancellor Emeritus, Chair of the Institute of Politics and Distinguished Service Professor of Law at the University. Mr. Nordenberg served as a director of Mellon from 1998 to 2007 and has served as a director of the company since 2007.

Mr. Nordenberg joined the University of Pittsburgh’s law faculty in 1977 and served as Dean of the School of Law from 1985 until 1993. Mr. Nordenberg was the interim Provost and Senior Vice Chancellor for Academic Affairs from 1993 to 1994, and interim Chancellor from 1995 to 1996. A specialist in legal process and procedure, including civil litigation, he has published books, articles and reports on this topic, and has served as a member of both the U.S. Advisory Committee on Civil Rules and the Pennsylvania Supreme Court’s Civil Procedural Rules Committee. He is a former director and executive committee member of the Association of American Universities and has served on the boards of national and regional organizations promoting innovation and economic progress. Mr. Nordenberg received his Bachelor of Arts degree from Thiel College and his Juris Doctorate degree from the University of Wisconsin School of Law.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Legal expertise

 

 

Leadership of a major research university

 

 

Experience in the operations and management of a large institution

Ms. Rein served as Senior Executive Vice President and Chief Administrative Officer of MetLife, Inc., an insurance and financial services company, from 2005 to 2008. Prior to that, Ms. Rein served as President and Chief Executive Officer of Metropolitan Property and Casualty Insurance Company from 1999 to 2005. Ms. Rein served in key leadership positions at MetLife, Inc. from 1985 to 1998. Ms. Rein served as a director of The Bank of New York from 1981 to 2007 and has served as a director of the company since 2007.

Before joining MetLife, Ms. Rein served as vice president and general counsel for The Continental Group, Inc., a global diversified packaging company. Prior to that, she was associated with the New York City law firm of Dewey, Ballantine, Bushby, Palmer & Wood. Ms. Rein is an emeritus member of the Board of Visitors of the New York University Law School, previously chaired the MetLife Foundation, is a director emeritus of Corning Incorporated and served from 2001 to 2015 on the board of FirstEnergy Corp. Ms. Rein received a Bachelor of Arts degree from The Pennsylvania State University and a Juris Doctorate degree from New York University School of Law.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

 

Leadership of a large public company in a highly regulated industry

 

 

Experience as general counsel

 

 

Senior-level policy-making experience in the insurance industry

 

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

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ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

Samuel C. Scott III

 

Age 71

 

Independent Director of BNY Mellon and predecessor companies since 2003

 

Retired Chairman, President and Chief Executive Officer of Ingredion Incorporated (formerly Corn Products International, Inc.)

 

Committees: Audit, Corporate Social Responsibility, Executive, Human Resources and Compensation (Chairman)

 

Other Current Public Company Board Service: Abbott Laboratories; Motorola Solutions, Inc.

 

 

 
 

Prior to his retirement in 2009, Mr. Scott served as Chairman (since 2001), Chief Executive Officer (since 2001) and President and Chief Operating Officer (since 1997) of Corn Products International, Inc., a leading global ingredients solutions provider now known as Ingredion Incorporated. Mr. Scott previously served as President of Bestfoods Corn Refining from 1995 to 1997 and President of American Corn Refining from 1989 to 1997. In addition to the public company board service noted above, Mr. Scott also serves on the boards of, among others, Chicago Sister Cities, Northwestern Medical Group, the Chicago Urban League and The Chicago Council on Global Affairs. Mr. Scott received both a Bachelor of Science degree and a Master in Business Administration degree from Fairleigh Dickinson University. Mr. Scott served as a director of The Bank of New York from 2003 to 2007 and has served as a director of the company since 2007.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Senior level policy-making experience in the food industry

 

 

Leadership of international company

 

 

Experience in the operations and management of a large public company

 

 

 

 

 

 

LOGO  Leadership        

  LOGO  Technology   LOGO  Global   LOGO  Finance   LOGO  Governance   LOGO  Research   LOGO  Diversity

 

 

BNY Mellon   LOGO   2016 Proxy Statement       13


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

Director Qualifications

 

The CG&N Committee assists the Board in reviewing and identifying individuals qualified to become Board members. The CG&N Committee utilizes Board-approved criteria, set forth in our Corporate Governance Guidelines (see “Helpful Resources” on page 87), in recommending nominees for directors at Annual Meetings and to fill vacancies on the Board. Directors chosen to fill vacancies will hold office for a term expiring at the end of the next Annual Meeting.

In selecting nominees for election as directors, our CG&N Committee considers:

 

 

Professional background and experience. The individual’s specific experience, background and education, including skills and knowledge essential to the oversight of the company’s businesses.

 

 

Senior-level management positions. The individual’s sustained record of substantial accomplishments in senior-level management positions in business, government, education, technology or not-for-profit enterprises.

 

 

Judgment and Challenge. The individual’s capability of evaluating complex business issues and making sound judgments and constructively challenging management’s recommendations and actions.

 

 

Diversity. The individual’s contribution to the diversity of the Board (in all aspects of that term), including diversity of viewpoint, professional experience, education, skills and other individual qualities and attributes that contribute to Board heterogeneity, as well as race, gender, national origin and sexual preference.

 

 

Intangible attributes. The individual’s character and integrity and interpersonal skills to work with other directors on our Board in ways that are effective, collegial and responsive to the needs of the company.

 

 

Time. The individual’s willingness and ability to devote the necessary time and effort required for service on our Board.

 

 

Independence. The individual’s freedom from conflicts of interest that could interfere with their duties as a director.

 

 

Stockholders’ interests. The individual’s strong commitment to the ethical and diligent pursuit of stockholders’ best interests.

The CG&N Committee seeks individuals with leadership experience in a variety of contexts and, among public

company leaders, across a variety of industries. The CG&N Committee will evaluate all candidates suggested by other directors or third-party search firms (which the company retains from time to time, including over the past year, to help identify potential candidates) or recommended by a stockholder for nomination as a director in the same manner. For information on recommending a candidate for nomination as a director see “Contacting the Board’ on page 27.

The Board and the CG&N Committee have concluded that each of our current Board members should be recommended for re-nomination as a director. In considering whether to recommend re-nomination of a director for election at our Annual Meeting, the Board and the CG&N Committee considered, among other factors:

 

 

The criteria for the nomination of directors described above,

 

 

Feedback from the annual Board and committee evaluations,

 

 

Attendance and preparedness for Board and committee meetings,

 

 

Outside board and other affiliations, for actual or perceived conflicts of interest,

 

 

The overall contributions to the Board, and

 

 

The needs of the company.

Our Board believes the nominees meet the criteria described above with diversity and depth and breadth of experience that enable them to effectively oversee management of the company. No director has a family relationship to any other director, nominee for director or executive officer.

Richard J. Kogan and William C. Richardson, who were elected as directors at our 2015 Annual Meeting, will not be standing for re-election. The Board is grateful to each of Mr. Kogan and Dr. Richardson for his invaluable contributions as a director during his more than 17 years of service and nearly 20 years of service, respectively, to the company and The Bank of New York. Wesley W. von Schack, who was elected as director at our 2015 Annual Meeting, is resigning effective following our Annual Meeting. The Board is grateful to Mr. von Schack for his invaluable contributions as a director during his nearly 27 years of service to the company and Mellon. The Board will miss the camaraderie, commitment and perspective of each of these departing directors.

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Nominees

 

Majority Voting Standard

 

Under our by-laws, in any uncontested election of directors, each director will be elected if more votes are cast “for” the director’s election than are cast “against” the director’s election, with abstentions and broker non-votes not being counted as a vote cast either “for” or “against” the director’s election. A plurality standard will apply in any contested election of directors, which is an election in which the number of nominees for director exceeds the number of directors to be elected. Pursuant to our Corporate Governance Guidelines, if any incumbent director fails to receive a majority of the votes cast in any uncontested election, the director will be required to tender his or her resignation to the Lead Director (or such other director designated by the Board if the director failing to receive the majority of votes cast is the Lead Director) promptly after the certification of the stockholder vote.

Our CG&N Committee will promptly consider the tendered resignation and recommend to the Board whether to accept or reject it, or whether other actions should be taken. In considering whether to accept or reject the tendered resignation, the CG&N Committee will consider whatever factors its members deem relevant, including any stated reasons for the “against” votes, the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to the company, and the mix of skills and

backgrounds of the Board members. The Board will act on the CG&N Committee’s recommendation no later than 90 days following the certification of the election in question. In considering the recommendation of the CG&N Committee, the Board will consider the factors considered by the CG&N Committee and such additional information and factors as it deems relevant.

Following the Board’s decision, the company will publicly disclose the Board’s decision in a Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”). If the Board does not accept the director’s resignation, it may elect to address the underlying stockholder concerns or to take such other actions as it deems appropriate and in the best interests of the company and its stockholders. A director who tenders his or her resignation pursuant to this provision will not vote on the issue of whether his or her tendered resignation will be accepted or rejected. If the Board accepts an incumbent director’s resignation pursuant to this provision, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill the resulting vacancy pursuant to our by-laws. If the Board does not accept an incumbent director’s resignation pursuant to this provision, he or she will continue to serve on the Board until the election of his or her successor.

 

 

 

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Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS    > Corporate Governance and Board Information

 

Our Corporate Governance Practices

We believe that the strength of BNY Mellon’s business is a direct reflection of the high standards set by our governance structure. It provides guidance in managing the company from the Board of Directors on down for the benefit of all our stakeholders including our investors, clients, employees and communities.

 

 

Independence

 

 

 

•   Our Board is comprised of all independent directors, other than our Chief Executive Officer, and our independent directors meet in executive sessions at each regularly scheduled Board and committee meeting.

 

•   Our independent Lead Director is selected by our independent directors and has broad powers, including approval of Board meeting agendas, materials and schedules and leading executive sessions.

 

•   We have seven standing committees made up entirely of independent directors.

 

 

Active

Engagement

 

 

 

•   We have a high rate of director attendance at Board and committee meetings in 2015, averaging 90%.

 

•   We have continued to actively engage with our stakeholders through multiple initiatives, resulting in conversations with investors representing about 54% of our outstanding shares, as well as with proxy advisory firms and other stakeholders.

 

•   Our Board has publicly endorsed the Shareholder-Director Exchange (SDX) Protocol as a guide to support effective engagement between shareholders and directors.

 

•   Stockholders and other interested parties can directly contact our Board (see “Helpful Resources” on page 87).

 

 

Ongoing Improvements

 

 

 

•   We recently amended our Corporate Governance Guidelines to require that the Corporate Governance and Nominating Committee rotate committee Chairmen at five-year intervals and consider enhanced director qualifications in connection with director nominations.

 

•   Following engagement with stockholders, we adopted proxy access permitting up to 20 stockholders, who have owned at least 3% of our common stock for at least 3 years, to submit director nominees (up to 20% of the Board) if the stockholder(s) and nominee(s) satisfy the requirements in our by-laws.

 

•   Our by-laws permit holders in the aggregate of 20% of our outstanding common stock to call a special shareholder meeting.

 

•   Each year, our Board and each of our Audit, Corporate Governance and Nominating, Corporate Social Responsibility, Finance, Human Resources and Compensation, Risk and Technology Committees conduct self-evaluations (see “Evaluation of Board and Committee Effectiveness” on page 17).

 

•   Our Board participates in Board information sessions during regularly scheduled and special meetings, during which they receive business updates from senior management, risk executives and our General Counsel.

 

•   Directors are encouraged to participate in continuing education programs and our company reimburses directors for such expenses. In addition, new directors participate in our director orientation program in their first six months as a director.

 

 

Robust

Programs

 

 

 

•   A significant portion of director compensation is paid in deferred stock units, which must be held as long as the director serves on the Board.

 

•   We have adopted codes of conduct applicable to our directors, as well as all of our employees, to provide a framework for the highest standards of professional conduct and to foster a culture of honesty and accountability.

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

What We

Don’t Do

 

  

 

•  No staggered board.

 

•  No “poison pill” (stockholders’ rights plan).

 

•  No supermajority voting. Action by stockholders requires only a majority of the votes cast (not a majority of the shares present and entitled to vote).

 

•  No plurality voting in uncontested director elections. Each director must be elected by a majority of the votes cast.

 

 

Corporate Governance Developments

Our Board, led by our CG&N Committee, continually seeks to improve our governance structures, and has recently made the following enhancements:

 

 

Adopted proxy access by-law amendment,

 

 

Amended Corporate Governance Guidelines such that no committee chair shall serve in such capacity for more than five consecutive years, and

 

 

Expanded the description of Director Qualifications in the Corporate Governance Guidelines to reflect the robust criteria that the CG&N Committee considers in connection with prospective and re-nominated directors.

During 2015, our Board elected new chairs to the Audit, CG&N and Risk Committees. We would anticipate the election of a new chair to the Corporate Social Responsibility and Human Resources and Compensation Committees in 2016.

With the resignation of Mr. von Schack, effective following the Annual Meeting, our independent directors intend to elect Mr. Echevarria as Lead Director consistent with our Board’s succession planning.

Evaluation of Board and Committee Effectiveness

Annually, the Board and each of our Audit, CG&N, Corporate Social Responsibility, Finance, Human Resources and Compensation, Risk and Technology Committees conduct a self-evaluation to continually enhance performance. Each of the committee self-evaluations is conducted in an executive session led by the Chairman of the committee.

With respect to the Board’s self-evaluation, in the first quarter of each year, the Lead Director interviews each director to obtain his or her assessment of the effectiveness of the Board. Areas of consideration in the Board self-evaluations include director contribution and performance, Board structure and size, Board dynamics, the range of business, professional and other backgrounds of directors necessary to serve the company and the range and type of information provided to the Board by management. The Lead Director summarizes the individual assessments for discussion with the Board and, if necessary, committees. The Board and management then work together to enhance Board and committee effectiveness.

Active Stockholder Engagement Program

In 2015, our Board formally endorsed the SDX Protocol which offers guidance to public company boards and shareholders on when engagement is appropriate, and how to make these engagements valuable and effective. However, before this action we were effectively following that protocol while we conducted extensive governance reviews and investor outreach throughout the year. Our independent directors have been engaged in these outreach discussions, along with management, to ensure that management and our Board are aware of and consider stockholders’ perspectives on a variety of issues, including governance, strategy and performance, and address those matters effectively. For example, our Board decided to implement proxy access after considering feedback from stockholders regarding specific prospective provisions and the maturity of proxy access by-law amendments among public companies. Additionally, following feedback from stockholders regarding the mechanics of our annual Board and committee self-evaluation process, we have added enhanced our proxy statement to include discussion regarding this important process.

 

 

 

BNY Mellon   LOGO   2016 Proxy Statement       17


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

Board Leadership Structure

Our Board has reviewed its current leadership structure — which consists of a combined Chairman and Chief Executive Officer with an independent Lead Director — in light of the Board’s composition, the company’s size, the nature of the company’s business, the regulatory framework under which the company operates, the company’s stockholder base, the company’s peer group and other relevant factors. Our Board has determined that a combined Chairman and Chief Executive Officer position, with an independent Lead Director, continues to be the most appropriate Board leadership structure for the company.

 

 

Efficient and Effective Action

 

  

 

A combined Chairman/Chief Executive Officer:

 

•  Is in the best position to be aware of major issues facing the company on a day-to-day and long-term basis, and to identify and bring key risks and developments facing the company to the Board’s attention (in coordination with the Lead Director as part of the agenda-setting process), and

 

•  Eliminates the potential for uncertainty as to who leads the company, providing the company with a single public “face” in dealing with stockholders, employees, regulators, analysts and other constituencies.

 

A substantial majority of our peers also utilize a similar board structure with a combined Chairman and Chief Executive Officer, as well as a lead or presiding independent director.

 

 

Strong Counterbalances

 

  

 

As set forth in our Corporate Governance Guidelines, our Lead Director:

 

•  In coordination with the Chairman/Chief Executive Officer, reviews and approves agendas for Board meetings, materials and information sent or presented to the Board and meeting schedules,

 

•  Has the authority to add items to the agenda for any Board meeting,

 

•  Presides at executive sessions of independent directors, which are held at each regular Board and committee meeting,

 

•  Serves as a non-exclusive liaison between the other independent directors and the Chairman/Chief Executive Officer,

 

•  Can call meetings of the independent directors in his discretion and chairs any meeting of the Board or stockholders at which the Chairman is absent,

 

•  Is available to meet with major stockholders and regulators under appropriate circumstances, and

 

•  In conjunction with the chairman of the Human Resources and Compensation Committee (“HRC Committee”), discusses with the Chairman/Chief Executive Officer the Board’s annual evaluation of his performance as Chief Executive Officer.

 

In addition, the powers of the Chairman under our by-laws are limited — other than chairing meetings of the Board and stockholders, the powers conferred on the Chairman (e.g., ability to call special meetings of stockholders or the Board) can also be exercised by the Board or a specified number of directors or, in some cases, the Lead Director, or are administrative in nature (e.g., authority to execute documents on behalf of the company).

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

Director Independence

 

Our Board has determined that 10 of our 11 director nominees are independent. Our independent director nominees are Nicholas M. Donofrio; Joseph J. Echevarria; Edward P. Garden; Jeffrey A. Goldstein; John M. Hinshaw; Edmund F. “Ted” Kelly; John A. Luke, Jr.; Mark A. Nordenberg; Catherine A. Rein and Samuel C. Scott III. As our Chairman and Chief Executive Officer, Gerald L. Hassell is not independent. The Board has also determined that Mr. Kowalski, who did not stand for reelection as a director last year, was independent during the period in 2015 in which he served as a director, and that Mr. Kogan and Dr. Richardson, who are not standing for reelection as directors this year, and Mr. von Schack, who is resigning effective following our Annual Meeting, are independent.

Our Standards of Independence

For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. Our Board has established standards (which are also included in our Corporate Governance Guidelines) based on the specified categories and types of transactions, which conform to, or are more exacting than, the independence requirements of the New York Stock Exchange, or NYSE.

Our Board will also determine that a director is not independent if it finds that the director has material business arrangements with us that would jeopardize that director’s judgment. In making this determination, our Board reviews business arrangements between the company and the director and between the company and any other company for which the director serves as an officer or general partner, or of which the director directly or indirectly owns 10% or more of the equity. Our Board has determined that these arrangements will not be considered material if:

 

 

they are of a type that we usually and customarily offer to customers or vendors;

 

 

they are on terms substantially similar to those for comparable transactions with other customers or vendors under similar circumstances;

 

 

in the event that the arrangements had not been made or were terminated in the normal course of business, it is not reasonably likely that there would be a material adverse effect on the financial condition, results of operations or business of the recipient; or

 

 

in the case of personal loans, the loans are subject to and in compliance with Regulation O of the Board of Governors of the Federal Reserve System.

Our Board may also consider other factors as it may deem necessary to arrive at sound determinations as to the independence of each director, and such factors may override the conclusion of independence or non-independence that would be reached simply by reference to the factors listed above.

In determining that each of the directors, other than Mr. Hassell, is independent, our Board reviewed these standards, the corporate governance rules of the NYSE and the SEC, and the individual circumstances of each director.

The following categories or types of transactions, relationships and arrangements were considered by the Board in determining that a director is independent. None of these transactions, relationships and arrangements rose to the level that would require disclosure under our related party transactions policy described on page 84, and none of the transactions described below were in an amount that exceeded the greater of $1 million or 2% of the other entity’s consolidated gross revenues, which is one of our standards for director independence:

 

 

Purchases of goods or services in the ordinary course of business. The company and its subsidiaries purchased goods and services from the following organizations during a period in 2015 when one of our current or former independent directors served as an executive officer of, or was otherwise employed by, such organization: Hewlett Packard Enterprise Company and its predecessor Hewlett-Packard Company (Mr. Hinshaw); Tiffany & Co. (Mr. Kowalski); and the University of Pittsburgh (Mr. Nordenberg). All of these purchases were made in the ordinary course of business. These purchases, when aggregated by seller, did not exceed 0.04% of the seller’s annual revenue for its last reported fiscal year or 0.14% of our annual revenue for 2015.

 

 

Sales of goods or services in the ordinary course of business. The company and its subsidiaries provided various financial services – including asset management services, asset servicing, global markets services, issuer services, treasury services, leasing, liquidity investment services or credit services – to the following organizations during a period in 2015 when one of our current or former independent directors served as an executive officer of, or was otherwise employed by, such organization: Trian Fund Management L.P. (Mr. Garden); Hellman & Friedman LLC (Mr. Goldstein); Hewlett Packard Enterprise Company and its predecessor Hewlett-Packard Company (Mr. Hinshaw);

 

 

 

 

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Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

  Tiffany & Co. (Mr. Kowalski); MeadWestvaco Corporation (Mr. Luke); and the University of Pittsburgh (Mr. Nordenberg). All of the services were provided in the ordinary course of our business and at prevailing customer rates and terms. The amount of fees paid to us by each purchaser was less than 0.20% of the purchaser’s annual revenue for its last reported fiscal year and less than 0.03% of our annual revenue for 2015.

 

 

Customer relationships. We and our subsidiaries provide ordinary course services, including asset management services, banking services, broker services and credit services, to Messrs. Kowalski, Luke, Nordenberg and Richardson and Ms. Rein, in each case on terms substantially similar to those offered to other customers in similar circumstances.

 

 

Charitable contributions. We made (directly, through our subsidiaries or by the BNY Mellon Foundation or the BNY Mellon Foundation of Southwestern Pennsylvania) charitable contributions to not-for-profit, charitable or tax-exempt organizations for which one of our independent directors served as a director, executive officer or trustee during 2015, namely Messrs. Donofrio, Echevarria, Goldstein, Hinshaw, Kogan, Nordenberg, Richardson, Scott and von Schack. In 2015, charitable contributions to these organizations totaled approximately $450,000 in the aggregate, and no organization received a contribution greater than $142,000.

 

Beneficial ownership or voting power. In the ordinary course of our investment management business, we beneficially own or have the power to vote (directly or through our subsidiaries or through funds advised by our subsidiaries) shares of companies for which one of our independent directors served as an executive officer in 2015, namely Hewlett Packard Enterprise Company (Mr. Hinshaw) and MeadWestvaco Corporation (Mr. Luke, until July 1, 2015). As of December 31, 2015, we, our subsidiaries or funds advised by our subsidiaries, in the aggregate, owned or had the power to vote less than 1.06% of the outstanding shares of Hewlett Packard Enterprise Company. As of June 30, 2015, the last day on which Mr. Luke was an executive officer of MeadWestvaco Corporation, we, our subsidiaries or funds advised by our subsidiaries, in the aggregate, owned or had the power to vote less than 1.78% of the outstanding shares of such company. In addition, as of March 31, 2015, the last day on which Mr. Kowalski was an executive officer of Tiffany & Co., we, our subsidiaries or funds advised by our subsidiaries, in the aggregate, owned or had the power to vote less than 0.91% of the outstanding shares of such company.

Our Board determined that none of the transactions, relationships and arrangements described above constituted a material relationship between the respective director and our company or its subsidiaries for the purpose of the corporate governance rules of the NYSE and SEC and our Corporate Governance Guidelines. As such, our Board determined that these transactions, relationships and arrangements did not affect the independence of such director and did not impair such director’s ability to act in the stockholders’ best interests.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

Oversight of Risk

Successful management of our company requires understanding, identification and management of risk. We oversee risk through multiple lines of defense.

 

Entity    Primary Responsibilities for Risk Management
   
Risk Committee,

consisting entirely of
independent directors

  

•   Review and approval of the enterprise-wide risk management practices of the company.

 

•   Review and approval of the company’s risk appetite statement on an annual basis, and approval of any material amendment to the statement.

 

•   Review of significant financial and other risk exposures and the steps management has taken to monitor, control and report such exposures.

 

•   Evaluation of risk exposure and tolerance, and approval of Board level limits or exceptions.

 

•   Review and evaluation of the company’s policies and practices with respect to risk assessment and risk management.

 

•   Review, with respect to risk management and compliance, of (1) reports and significant findings of the company’s Risk Management and Compliance department (the “Risk department”) and the Internal Audit department (“Internal Audit”), (2) significant reports from regulatory agencies and management’s responses, and (3) the Risk department’s scope of work and its planned activities.

 

   
Audit Committee,
consisting entirely of
independent
directors
  

•   Review and discussion of policies with respect to risk assessment and risk management.

 

•   Oversight responsibility with respect to the integrity of our company’s financial reporting and systems of internal controls regarding finance and accounting, as well as our financial statements.

 

•   Review of the Risk Committee’s annual report summarizing its review of the company’s methods for identifying and managing risks.

 

•   Review of the Risk Committee’s semi-annual reports regarding corporate-wide compliance with laws and regulations.

 

•   Review of any items escalated by the Risk Committee that have significant financial statement impact or require significant financial statement/regulatory disclosures.

 

   
Management   

•   Chief Risk Officer: Implement an effective risk management framework and daily oversight of risk.

 

•   Internal Audit: Provide reliable and timely information to our Board and management regarding our company’s effectiveness in identifying and appropriately controlling risks.

 

•   Senior Risk Management Committee: Provide a senior focal point within the company to monitor, evaluate and recommend comprehensive policies and solutions to deal with all aspects of risk and to assess the adequacy of any risk remediation plans in our company’s businesses.

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

We also encourage robust interactions among the different parties responsible for our risk management. Since the financial crisis emerged in September 2008, the Risk and Audit Committees of our Board have held joint sessions at the beginning of each of their regular meetings to hear reports and discuss key risks affecting our company and our management of these risks.

All independent directors are typically present during joint sessions, because all independent directors are currently members of either our Risk or Audit Committee. In addition, the Risk Committee reviews the appointment, performance and replacement of our Chief Risk Officer, and the Senior Risk Management Committee’s activities, and any significant changes in its key responsibilities, must be reported to the Risk Committee. Our company has also formed several risk management sub-committees to identify, assess and manage risks. Each risk management sub-committee reports its activities to the Senior Risk Management Committee and any significant changes in the key responsibilities of any sub-committee, or a change in chairmanship of any sub-committee, must be approved by our Chief Risk Officer and subsequently reported to the Senior Risk Management Committee.

Our company also has a comprehensive internal risk framework, which facilitates risk oversight by our Risk Committee. Our risk management framework is designed to:

 

 

provide that risks are identified, monitored, reported, and priced properly;

 

 

define and measure the type and amount of risk the company is willing to take;

 

 

communicate the type and amount of risk taken to the appropriate management level;

 

 

maintain a risk management organization that is independent of risk-taking activities; and

 

 

promote a strong risk management culture that encourages a focus on risk-adjusted performance.

Our primary risk exposures as well as our risk management framework and methodologies are discussed in further detail on pages 69 through 74 in our 2015 Annual Report. See “How We Address Risk and Control” on page 53 below for a discussion of risk assessment as it relates to our compensation program.

 

 

Board Meetings and Committee Information

Board Meetings

Our Corporate Governance Guidelines provide that our directors are expected to attend our Annual Meeting of stockholders and all regular and special meetings of our Board and committees on which they sit. All of our directors then in office attended our 2015 Annual Meeting of stockholders.

Our Board held 17 meetings in 2015. Each incumbent director attended at least 75% of the aggregate number of meetings of our Board and of the committees on which he or she sat, and the average attendance rate was 90%.

Committees and Committee Charters

Our Board has established several standing committees, and each committee makes recommendations to our Board as appropriate and reports periodically to the entire Board. Our committee charters are available on our website (see “Helpful Resources” on page 87).

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

Audit

Committee

 

Independent 12 Meetings in 2015

 

 

     

Joseph J. Echevarria (Chair), Richard J. Kogan, John A. Luke, Jr.,
Mark A. Nordenberg, Catherine A. Rein, William C. Richardson, Samuel C. Scott III

 

Independent Registered Public Accountant. Our Audit Committee has direct responsibility for the appointment, compensation, annual evaluation, retention and oversight of the work of the independent registered public accountants engaged to prepare an audit report or to perform other audit, review or attestation services for us. The Committee is responsible for the pre-approval of all audit and permitted non-audit services performed by our independent registered public accountants and each year, the Committee recommends that our Board request stockholder ratification of the appointment of the independent registered public accountants.

 

Overseeing Internal Audit Function. The Committee acts on behalf of our Board in monitoring and overseeing the performance of our internal audit function. The Committee reviews the organizational structure, qualifications, independence and performance of Internal Audit and the scope of its planned activities, at least annually. The Committee also approves the appointment of our internal Chief Auditor, who functionally reports directly to the Committee and administratively reports to the CEO, and annually reviews his or her performance and, as appropriate, replaces the Chief Auditor.

 

Internal Controls over Financial Statements and Reports. The Committee oversees the operation of a comprehensive system of internal controls covering the integrity of our financial statements and reports, compliance with laws, regulations and corporate policies. Quarterly, the Committee reviews a report from the company’s Disclosure Committee and reports concerning the status of our annual review of internal control over financial reporting, including (1) information about (a) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect our ability to record, process, summarize and report financial information and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in our internal control over financial reporting, and (2) management’s responses to any such circumstance. The Committee also oversees our management’s work in preparing our financial statements, which will be audited by our independent registered public accountants.

 

Members and Financial Expert. The Committee consists entirely of directors who meet the independence requirements of listing standards of the NYSE, Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the Federal Deposit Insurance Corporation (“FDIC”). All members are financially literate and have accounting or related financial management expertise within the meaning of the NYSE listing standards as interpreted by our Board. Our Board has determined that each of Mr. Echevarria and Ms. Rein satisfies the definition of “audit committee financial expert” as set out in the rules and regulations under the Exchange Act, based upon their experience actively supervising a principal accounting or financial officer or public accountant. All members have “banking and financial management expertise” as set out in the FDIC’s rules and regulations.

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

Corporate Governance and Nominating Committee

 

Independent

4 Meetings in 2015

 

 

    

William C. Richardson (Chair), Richard J. Kogan, John A. Luke, Jr.,
Mark A. Nordenberg, Catherine A. Rein, Wesley W. von Schack

 

Corporate Governance Matters. As further described on page 14, our CG&N Committee assists our Board of Directors in reviewing and identifying individuals qualified to become Board members. The Committee periodically considers the size of our Board and recommends changes to the size as warranted and is responsible for developing and recommending to our Board our Corporate Governance Guidelines and proposing changes to these guidelines from time to time as may be appropriate. In addition, the Committee oversees evaluations of our Board and its committees, reviews the structure and responsibilities of the Board’s committees and annually considers committee assignments, recommending changes to those assignments as necessary.

 

Oversight of Director Compensation and Benefits. The Committee reviews non-employee director compensation and benefits on an annual basis and makes recommendations to our Board on appropriate compensation, and is responsible for approving compensation arrangements for non-employee members of the Boards of our significant subsidiaries.

    

Corporate Social Responsibility Committee

 

Independent

3 Meetings in 2015

 

 

    

Mark A. Nordenberg (Chair), Nicholas M. Donofrio, Joseph J. Echevarria,
Samuel C. Scott III

 

Our Corporate Social Responsibility Committee’s purpose is to promote a culture that emphasizes and sets high standards for corporate citizenship and to review corporate performance against those standards. The Committee is responsible for providing oversight of the company’s programs regarding strategic philanthropy and employee community involvement, public policy and advocacy, including lobbying and political contributions, environmental management, corporate social responsibility of suppliers, corporate social responsibility governance and reporting and human rights. The Committee also provides oversight for the company’s compliance with the Community Reinvestment Act and Fair Lending laws and considers the impact of the company’s businesses, operations and programs from a social responsibility perspective, taking into account the interests of stockholders, clients, suppliers, employees, communities and regulators.

 

For additional information regarding the company’s commitment to corporate social responsibility and the Committee’s recent initiatives, see “Helpful Resources” on page 87.

    

Executive Committee

 

0 Meetings in 2015

 

 

    

Wesley W. von Schack (Chair), Nicholas M. Donofrio, Gerald L. Hassell,
John A. Luke, Jr., Catherine A. Rein, Samuel C. Scott III

 

The Executive Committee, as with each of our other standing committees, is appointed annually by the Board. The Committee generally has, as permitted by law and except as limited by the Board, the powers and may exercise all the authority of the Board during intervals between Board meetings. Unlike our other committees, the Executive Committee is only required to meet as frequently as necessary to fulfill its duties and responsibilities.

    

Finance
Committee

 

Independent

5 Meetings in 2015

 

 

    

Jeffrey A. Goldstein (Chair), Joseph J. Echevarria, Edward P. Garden

 

The Finance Committee was established in February 2015 as a standing committee of the Board to assist the Board in fulfilling its responsibilities with respect to the monitoring and oversight of the company’s financial resources and strategies. The Committee’s responsibilities and duties include reviewing: (1) financial forecasts, operating budgets, capital expenditures and expense management programs and progress relative to targets and relative to competitors; (2) plans with regard to net interest revenue, investment portfolio activities and progress relative to such plans and activities; (3) the company’s capital structure, capital raising and capital distributions; and (4) any initiatives, including investments, mergers, acquisitions, and dispositions, that exceed the thresholds in our Corporate Governance Guidelines and, as necessary, making recommendations to the Board regarding those initiatives.

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

Human Resources and Compensation Committee

 

Independent

8 Meetings in 2015

 

 

     

Samuel C. Scott III (Chair), Edward P. Garden, Jeffrey A. Goldstein, John M. Hinshaw,
Edmund F. Kelly, Richard J. Kogan, Wesley W. von Schack

 

Compensation and Benefits. The HRC Committee is generally responsible for overseeing our employee compensation and benefit policies and programs, our management development and succession programs, the development and oversight of a succession plan for the CEO position and our diversity and inclusion programs. The Committee also administers and makes equity and/or cash awards under plans adopted for the benefit of our employees to the extent required or permitted by the terms of these plans, establishes any related performance goals and determines whether and the extent to which these goals have been attained. The Committee also evaluates and approves the total compensation of all other executive officers and makes recommendations concerning equity-based plans, which recommendations are subject to the approval of our entire Board. The Committee also oversees certain retirement plans that we sponsor to ensure that: (1) they provide an appropriate level of benefits in a cost-effective manner to meet our needs and objectives in sponsoring such plans; (2) they are properly and efficiently administered in accordance with their terms to avoid unnecessary costs and minimize any potential liabilities to us; (3) our responsibilities as plan sponsor are satisfied; and (4) financial and other information with respect to such plans is properly recorded and reported in accordance with applicable legal requirements.

 

CEO Compensation. The Committee reviews and approves corporate goals and objectives relevant to the compensation of our CEO, his performance in light of those goals and objectives, and determines and approves his compensation on the basis of its evaluation. With respect to the performance evaluation and compensation decisions regarding our CEO, the Committee reports its preliminary conclusions to the other independent directors of our full Board in executive session and solicits their input prior to finalizing the Committee’s decisions.

 

Delegated Authority. The Committee has delegated to our CEO the responsibility for determining equity awards to certain employees, other than himself, who are eligible to receive grants under our Long-Term Incentive Plan (“LTIP”). This delegated authority is subject to certain limitations, including: (1) total aggregate shares represented by plan awards in any calendar year (1,100,000), (2) aggregate shares represented by plan awards that may be granted to any one individual in any calendar year (100,000), and (3) a sub-limit of shares represented by full value awards that may be granted in any calendar year (550,000). In addition, the Committee may delegate limited authority to our CEO to grant awards under the LTIP beyond these limits in connection with specific acquisitions or similar transactions.

 

Management Involvement. Our management provides information and recommendations for the Committee’s decision-making process in connection with the amount and form of executive compensation, except that no member of management will participate in the decision-making process with respect to his or her own compensation. The “Compensation Discussion and Analysis” starting on page 32 discusses the role of our CEO in determining or recommending the amount and form of executive compensation. In addition, we address the role of our management and its independent compensation consultants and the role of the Committee’s independent outside compensation advisor in determining and recommending executive compensation on page 26.

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

 

Risk Committee

 

Independent

5 Meetings in 2015

 

 

     

Edmund F. Kelly (Chair), Nicholas M. Donofrio, Edward P. Garden,
Jeffrey A. Goldstein, John M. Hinshaw, Wesley W. von Schack

 

See “Oversight of Risk” on page 21 above for a discussion of the Risk Committee’s duties and responsibilities, which include: (1) review and approval of enterprise-wide risk management practices; (2) review and approval of the company’s risk appetite statement; (3) review of significant financial and other risk exposures; (4) evaluation of risk exposure and tolerance; (5) review and evaluation of the company’s policies and practices with respect to risk assessment and risk management; and (6) review, with respect to risk management and compliance, of certain significant reports.

     

Technology Committee

 

Independent

2 Meetings in 2015

 

 

     

Nicholas M. Donofrio (Chair), John M. Hinshaw, Edmund F. Kelly,
Mark A. Nordenberg

 

Technology Planning and Strategy. The Technology Committee is responsible for reviewing and approving the company’s technology planning and strategy, reviewing significant technology investments and expenditures, and monitoring and evaluating existing and future trends in technology that may affect our strategic plans, including monitoring overall industry trends. The Committee receives reports from management concerning the company’s technology and approves related policies or recommends such policies to the Board for approval, as appropriate. The Committee also oversees risks associated with technology.

Compensation Consultants to the HRC Committee

 

The HRC Committee has the sole authority to retain, terminate and approve the fees and other engagement terms of any compensation consultant directly assisting the committee, and may select or receive advice from any compensation consultant only after taking into consideration all factors relevant to the consultant’s independence from management, including the factors set forth in the NYSE’s rules.

The HRC Committee has engaged Compensation Advisory Partners LLC (“CAP”) to serve as its independent compensation consultant since March 2014. As discussed in greater detail in the “Compensation Discussion and Analysis” beginning on page 32 below, throughout the year, CAP assists the committee in its analysis and evaluation of compensation matters relating to our executive officers. CAP reports directly to the committee, attends the in-person and telephonic meetings of the committee, and meets with the committee in executive session without management present. CAP also reviews and provides input on committee meeting materials and advises on other matters considered by the committee.

 

The HRC Committee annually reviews the independence of its compensation consultant. CAP works with management in executing its services to the committee, but does not provide services to management without pre-approval by the committee Chairman. In addition, CAP maintains, and has provided to the committee, a written policy designed to avoid, and address potential, conflicts of interest.

In 2015, neither CAP nor its affiliates provided any services to the company other than serving as the HRC Committee’s independent compensation consultant. The committee considered the Company’s relationship with CAP, assessed the independence of CAP pursuant to SEC and NYSE rules and concluded that there are no conflicts of interest that would prevent CAP from independently representing the committee.

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information

 

Succession Planning

We have succession plans and processes in place for our Chairman and Chief Executive Officer, each of our Vice Chairmen, President, and for the team of approximately 700 global senior leaders. Our senior management succession planning process is an organization-wide practice designed to proactively identify, develop and retain the leadership talent that is critical for future business success.

The succession plan for our Chairman and Chief Executive Officer is reviewed regularly by the HRC Committee and the other independent directors. The plan identifies a “readiness” level and ranking for each internal candidate and also incorporates the flexibility to define an external hire as a succession option. Formal succession planning for the rest of our senior leaders is also a regular process, which also includes identifying a rank and readiness level for each potential internal candidate and also strategically planning for external hires for positions where, for example, gaps are identified. The HRC Committee and the Board review the succession plans for all management Executive Committee positions.

Contacting the Board

Interested parties may send communications to our Board or our independent directors or any Board committee through our Lead Director in accordance with the procedures set forth on our website (see “Helpful Resources” on page 87).

Our Corporate Secretary is authorized to open and review any mail or other correspondence received that is addressed to the Board or any individual director unless the item is marked “Confidential” or “Personal.” If so marked and addressed to the Board, it will be delivered unopened to the Lead Director. If so marked and addressed to an individual director, it will be delivered to the addressee unopened. If, upon opening an envelope or package not so marked, the Corporate Secretary determines that it contains a magazine, solicitation or advertisement, the contents may be discarded. Any written communication regarding accounting matters to our Board of Directors are processed in accordance with procedures adopted by the Audit Committee with respect to the receipt, review and processing of, and any response to, such matters.

In addition, all directors are expected to attend each Annual Meeting of stockholders. While our by-laws, consistent with Delaware law, permit stockholder meetings to occur by remote communication, we intend this to be used only in exigent circumstances. Our Board believes that an in-person Annual Meeting provides an important opportunity for stockholders to ask questions.

 

 

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  ITEM 1. ELECTION OF DIRECTORS  

 > Director Compensation

 

 

Our Corporate Governance Guidelines provide that compensation for our independent directors’ services may include annual cash retainers; shares of our common stock; deferred stock units or options on such shares; meeting fees; fees for serving as a committee chair; and fees for serving as a director of one of our subsidiaries. We also reimburse directors for their reasonable out-of-pocket expenses in connection with attendance at Board meetings. In the case of airfare, directors are reimbursed for their travel expenses not exceeding the first-class commercial rate. In addition, corporate aircraft and charter aircraft may be used for directors in accordance with the company’s aircraft usage policy. Directors will also be reimbursed for reasonable out-of-pocket expenses (including tuition and registration fees) relating to attendance at seminars and training sessions relevant to their service on the Board and in connection with meetings or conferences which they attend at the company’s request.

Each year, the CG&N Committee is responsible for reviewing and making recommendations to the Board regarding independent director compensation. The CG&N Committee annually reviews independent director compensation to ensure that it is consistent with market practice and aligns our directors’ interests with those of long-term stockholders while not calling into question the directors’ objectivity. In undertaking its review, the CG&N Committee utilizes benchmarking data regarding independent director compensation of the company’s peer group based on public filings with the SEC, as well as survey information analyzing independent director compensation at U.S. public companies.

Based on its review, each year since 2014, the CG&N Committee has recommended, and the Board has approved, an annual equity award with a value of $130,000 for each independent director. The annual equity award is in the form of deferred stock units that vest on the earlier of one year after the date of the award or on the date of the next Annual Meeting of stockholders, and must be held for as long as the director serves on the Board. The units accrue dividends, which are reinvested in additional deferred stock units. For 2015, this award of deferred stock units was granted shortly after the 2015 Annual Meeting for directors elected or re-elected at such meeting and, similarly, for 2016, this award will be granted shortly after the 2016 Annual Meeting for directors elected or re-elected at such meeting.

For 2015, our independent directors received an annual cash retainer of $110,000, payable in quarterly installments in advance. In addition, the chair of the HRC Committee received an annual cash retainer of $25,000, the chairs of the Audit Committee and the Risk Committee each received an annual cash retainer of $30,000, the chairs of all other committees each received an annual cash retainer of $20,000, each member of the Audit Committee and the Risk Committee received an annual membership fee of $10,000, and our Lead Director received an annual cash retainer of $50,000.

In addition, under our Corporate Governance Guidelines, by the fifth anniversary of their service on the Board, directors are required to own a number of shares of our common stock with a market value of at least five times the annual cash retainer of $110,000. We believe that our independent director compensation is consistent with current market practice, recognizes the critical role that our directors play in effectively managing the company and responding to stockholders, regulators and other key stakeholders, and will assist us in attracting and retaining highly qualified candidates. In the case of Mr. Garden, the CG&N Committee determined that holdings of our securities by Trian (other than hedged or pledged securities) shall be deemed to be beneficially owned by Mr. Garden for purposes of this stock ownership requirement, given his relationship with Trian and that he transfers to Trian, or holds for the benefit of Trian, his security holdings.

In the merger we assumed the Deferred Compensation Plan for Non-Employee Directors of The Bank of New York (the “Bank of New York Directors Plan”) and the Mellon Elective Deferred Compensation Plan for Directors (the “Mellon Directors Plan”). Under the Bank of New York Directors Plan, participating legacy The Bank of New York directors continued to defer receipt of all or part of their annual retainer and committee fees earned through 2007. Under the Mellon Directors Plan, participating legacy Mellon directors continued to defer receipt of all or part of their annual retainer and fees earned through 2007. Both plans are nonqualified plans, and neither plan is funded.

Although the Bank of New York Directors Plan and the Mellon Directors Plan continue to exist, all new deferrals of director compensation by any of the independent directors have been made under the Director Deferred Compensation Plan, which was adopted effective as of January 1, 2008. Under this plan, an independent director can direct all or a portion of his or her annual retainer or other fees into either (1) variable funds, credited with gains or losses that mirror market performance of market style funds or (2) the company’s phantom stock.

 

 

 

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ITEM 1. ELECTION OF DIRECTORS > Director Compensation

 

Director Compensation Table

The following table provides information concerning the compensation of each independent director who served in 2015. Mr. Hassell did not receive any compensation for his service as a director. Mr. Garden has advised us that, pursuant to his arrangement with Trian, he transfers to Trian, or holds for the benefit of Trian, all director compensation paid to him.

 

Name    Fees Earned or 
 Paid in Cash($) 
  Stock
Awards($)(5)
  Change in
Pension Value
 and Nonqualified 
Deferred
Compensation
Earnings(6)
  All Other
 Compensation($)(7) 
   Total($)

Nicholas M. Donofrio(1)

  $152,200    $129,997           $—      $940     $283,137 

Joseph J. Echevarria(1)(2)

  $124,700   $129,997          $—        $—    $254,697

Edward P. Garden

  $145,721   $129,997          $—        $—    $275,718

Jeffrey A. Goldstein(1)

  $137,778   $129,997          $—        $—    $267,775

John M. Hinshaw(1)

  $127,200   $129,997          $—        $—    $257,197

Edmund F. Kelly

  $169,400   $129,997          $—        $—    $299,397

Richard J. Kogan(3)

  $130,000   $129,997          $—        $—    $259,997

Michael J. Kowalski(4)

    $53,903            $—          $—      $385      $54,288

John A. Luke, Jr.

  $140,000   $129,997          $—        $—    $269,997

Mark A. Nordenberg

  $155,400   $129,997     $3,780   $3,405    $292,582

Catherine A. Rein

  $152,500   $129,997          $—   $2,025    $284,522

William C. Richardson(3)

  $170,421   $129,997          $—      $941    $301,359

Samuel C. Scott III

  $164,000   $129,997          $—      $514    $294,511

Wesley W. von Schack(1)(3)

  $196,600   $129,997   $46,596   $5,083    $378,276

 

(1) Elected to defer all or part of cash compensation in the Director Deferred Compensation Plan.

 

(2) Mr. Echevarria was appointed as a director effective January 30, 2015.

 

(3) Mr. Kogan and Dr. Richardson are retiring and are not standing for re-election at our Annual Meeting. Mr. von Schack is resigning, effective following our Annual Meeting.

 

(4) Mr. Kowalski did not stand for re-election as a director at our 2015 Annual Meeting.

 

(5) Amount shown represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (or “FASB ASC”) 718 Compensation-Stock Compensation for 3,053 deferred stock units granted to each independent director in April 2015, using the valuation methodology for equity awards set forth in note 17 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015. As of December 31, 2015, each of Messrs. Donofrio, Goldstein, Kelly, Kogan, Luke, Nordenberg, Richardson, Scott, and von Schack and Ms. Rein owned 3,089 unvested deferred stock units.

 

(6) The amounts disclosed in this column for Messrs. Nordenberg and von Schack represent the sum of the portion of interest accrued (but not currently paid or payable) on deferred compensation above 120% of the applicable federal long-term rate at the maximum rate payable under the Mellon Directors Plan. Under the Mellon Directors Plan, deferred amounts receive earnings based on (i) the declared rate, reflecting the return on the 120-month rolling average of the 10-year T-Note rate enhanced based on years of service and compounded annually, (ii) variable funds, which are credited with gains or losses that “mirror” the market performance of market-style funds or (iii) the company’s phantom stock. The fully enhanced declared rate for 2015 was 4.58%. The present value of Ms. Rein’s accumulated pension benefit under The Bank of New York Retirement Plan for Non-Employee Directors decreased by $13,695 due to a change in the FASB ASC 715 discount rate used to calculate the pension value. Ms. Rein is the only current director who participates in this plan. Participation in this plan was frozen as to participants and benefit accruals as of May 11, 1999.

 

(7) The amounts disclosed for Messrs. Donofrio, Richardson and Scott and Ms. Rein reflect the amount of a 5% discount on purchases of phantom stock when dividend equivalents are reinvested under the Bank of New York Directors Plan. The amounts disclosed for Messrs. Nordenberg and von Schack reflect the estimated cost of the legacy Mellon Directors’ Charitable Giving Program, which remains in effect for them and certain other legacy Mellon directors. Upon such legacy Mellon director’s death, the company will make an aggregate donation of $250,000 to one or more charitable or educational organizations of the director’s choice. The donations are paid in 10 annual installments to each organization.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       29


Table of Contents
 
  ITEM 2. ADVISORY VOTE ON COMPENSATION  

 

Quick Reference Guide

 

RESOLUTION

  Page  31
     

COMPENSATION DISCUSSION AND ANALYSIS

  Page 32

Introduction

  Page 32

Our Performance

  Page 35

Compensation of Our Named Executives

  Page 36

Our Pay Practices

  Page 46

How We Address Risk and Control

  Page 53

Report of the HRC Committee

  Page 53
     

EXECUTIVE COMPENSATION TABLES

  Page 54

Summary Compensation Table

  Page 54

Grants of Plan-Based Awards

  Page 56

Outstanding Equity Awards at Fiscal Year-End

  Page 57

Option Exercises and Stock Vested

  Page 59

Pension Benefits

  Page 59

Nonqualified Deferred Compensation

  Page 61

Potential Payments upon Termination or Change in Control

  Page 62

 

 

 

 

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  ITEM 2. ADVISORY VOTE ON COMPENSATION    > Resolution

 

Proposal

We highly value dialogue and engagement with our stakeholders, including shareholders, employees, clients and the communities we serve, with respect to our executive compensation program. Consistent with that, and in accordance with SEC rules, we are asking stockholders to approve the following resolution:

RESOLVED, that the stockholders approve the 2015 compensation of the named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K of the Securities and Exchange Commission (including the Compensation Discussion and Analysis, the compensation tables and other narrative executive compensation disclosures).

Background

 

•   Since our 2009 Annual Meeting, we have provided stockholders with an advisory vote on our executive compensation program each year. At last year’s Annual Meeting, over 95% of the votes cast approved our 2014 executive compensation.

 

•   We have continued our annual investor outreach process in 2015, resulting in our having conversations with investors representing about 54% of our outstanding shares as well as with proxy advisory firms and other stakeholders.

 

•   Our approach to compensation continues to be designed to directly link pay to performance, balance corporate and individual performance, promote long-term stock ownership and balance risk and reward, while taking into consideration market trends and practices as well as stakeholder feedback to refine our program.

  

LOGO

Voting

Your vote on this resolution is an advisory vote. Although the Board is not required to take any action in response to the stockholder vote, the Board values our stockholders’ opinions. As in prior years, the Board intends to evaluate the results of the 2016 vote carefully when making future decisions regarding the compensation of our named executive officers. At our 2011 Annual Meeting, we provided stockholders with an advisory vote with respect to how often the company should hold a say-on-pay vote, and 86% of the votes cast voted in favor of holding such a vote annually. Consistent with the voting results, we intend to hold an advisory vote each year on our executive compensation program until the next stockholder advisory vote on its frequency, which we expect will occur at our 2017 Annual Meeting.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       31


Table of Contents
 
  ITEM 2. ADVISORY VOTE ON COMPENSATION    > Compensation Discussion & Analysis

 

Introduction

Organization and Key Considerations

 

Our  

Performance  

(see page 35)  

 

•   Our 2015 performance is on track to meet the three-year performance goals BNY Mellon set at its Investor Day in October 2014.

 

•   Operating EPS was $2.85, 11% above operating plan of $2.57 and representing 19% year-over-year growth

 

•   Adjusted Return on Tangible Common Equity improved to 21% (vs. 18% in 2014)*

 

•   Adjusted Revenue growth of 2% (to $15.1 billion), slightly below our operating plan*

 

•   Adjusted Pre-Tax Operating Margin improved to 31% (vs. 28% in 2014)*

 

•   Adjusted operating leverage of 420 basis points, exceeding the target by 263 basis points

 

•   Relative stock returns were strong, with both 1- and 3-year TSR outperforming the median of our peer group and the S&P 500 Financials Index

 

•   Continued disciplined expense control, with adjusted noninterest expense $335 million better than operating plan and lower than 2014*

 

•   Returned $3.115 billion to shareholders, with $2.355 billion in stock repurchases and $760 million in dividends

 

 

Compensation  

of Our Named  

Executives  

(see pages  

36 to 45)  

 

•   For 2015, deferred equity (RSUs and PSUs) comprise 86% of our CEO’s target incentive compensation and 69% of target incentive compensation for our other NEOs (up from 60% in 2014), promoting long-term alignment with our stockholders

 

•   The HRC Committee established long-term incentive metrics for our February 2015 PSU Award to focus management on OEPS growth from 2015 to 2017, consistent with our Investor Day performance goals

 

•   In calculating the annual incentive for our CEO and other NEOs, the HRC Committee recognized our strong 2015 operating performance but exercised its discretion to limit the corporate component to reflect the quality of our 2015 performance

 

•   Starting in 2016, total incentive compensation determinations will be made under a “one decision” model, rather than two decisions for annual and long-term components, more closely tying award values to performance by increasing upside and downside program leverage

 

 

Our Pay  

Practices  

(see pages  

46 to 52 )  

 

•   Directly link pay to performance

 

•   Use a balanced approach for annual incentives and promote long-term stock ownership

 

•   Reflect good corporate governance and practices (e.g., no tax gross-ups on severance and no hedging)

 

•   Obtain regular feedback from stockholders on governance and performance matters through annual outreach process

 

 

How We  

Address  

Risk and  

Control  

(see page 53)  

 

•   Review of our risk appetite, practices and employee compensation plans (1) for alignment with sound risk management by our Chief Risk Officer and the HRC Committee and (2) to directly link pay to appropriate risk-taking

 

•   Comprehensive recoupment policy that subjects all equity incentives to 100% forfeiture during the vesting period and all cash incentives to 100% claw back within three years following the award date

 

•   Achievement of Basel III common equity Tier 1 ratio on a fully phased-in basis of at least 8.5% calculated under the Advanced Approach as a condition for funding annual incentives

 

 

* For a reconciliation and explanation of these non-GAAP measures, as well as information on the calculation of operating earnings per share and adjusted operating leverage for compensation purposes, see Annex A.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Our 2015 Performance

On Track to Achieve Our Investor Day Goals

 

    

Investor Day Goals

Operating Basis:

2015 20171

    
    

 “Flat” Rate

Scenario2 

 

“Normalizing” 

Rate Scenario3

 

2015

Performance4

Adjusted Revenue Growth

  3.5 – 4.5%   6 –8%   2%

Operating EPS Growth

  7 – 9%   12 –15%   19%

Adjusted Return on Tangible Common Equity

  17 – 19%   20 –22%   21%

 

1 As announced on October 28, 2014. Compounded annual growth rate for 2015-2017.

 

2 Assumes (A) “flat” rate scenario NIM of 95-100 bps, (B) operating margin of 28-30% and (C) no deterioration in volatility, volume and short-term interest rates.

 

3 Assumes (A) “normalizing” rate scenario NIM of 125-150 bps and (B) operating margin of 30-32%.

 

4 For a reconciliation and explanation of these non-GAAP measures, see Annex A.

 

LOGO

CEO Total Direct Compensation1

(in $ millions)

 

LOGO

 

1 Total Direct Compensation reflects salary, annual incentive and long-term incentive for the applicable year.

 

2 Target and award determinations reflect (1) salary rate for the year, (2) annual incentive, which is based on performance during the year and ultimately awarded after year-end and (3) long-term incentive, which is granted after year-end and after adjusting for performance during the year.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       33


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

 

Our Pay Practice

 

What we do:    What we don’t do:    

LOGO   Directly link pay to performance

 

LOGO   Balance risk and reward in compensation

 

LOGO   Require sustained financial performance to earn full amount of long-term awards

 

LOGO   Use a balanced approach for annual incentives with both corporate and individual goals

 

LOGO   Promote long-term stock ownership through deferred equity compensation

 

LOGO   Require compliance with stock ownership guidelines and post-vest holding requirements

 

LOGO   Subject equity awards and cash incentives to recoupment and forfeiture policies

 

LOGO   Engage an independent compensation consultant

 

LOGO   Conduct a robust stockholder outreach program

 

  

LOGO    No excessive change- in-control or other severance benefits

 

LOGO    No single-trigger change-in-control benefits

 

LOGO    No change-in-control tax gross-ups

 

LOGO    No excessive perquisites or benefits

 

LOGO    No tax gross-ups on perquisites

 

LOGO    No hedging or short sales of our stock

 

LOGO    No stock options granted with an exercise price below market

 

LOGO    No stock options with reload provisions

 

LOGO    No repricing of underwater stock options

 

 

2015 Program Enhancements

 

Objective   Enhancement

 

Strengthen  

tie between  

pay and  

performance  

 

 

•    For the 2015 annual incentive corporate component, focused management on operating earnings per share (OEPS) and adjusted operating leverage, weighted 75% and 25% respectively

 

•    For the 2015 annual incentive, separated individual component into (1) business unit goals, which use quantitative measures to establish a payout range, and (2) an individual modifier, which allows the HRC Committee to modify an award by up to ±25%

 

 

 

Emphasize  

long-term,  

sustainable  

growth  

 

 

•    Revised long-term incentive metrics to focus on OEPS growth from 2015 to 2017, consistent with the goals presented at our 2014 Investor Day, with the potential of a negative risk modifier should risk-weighted assets grow at an unacceptable rate

 

 

 

Promote  

long-term  

alignment  

with  

stockholders  

 

 

•    Increased the portion of 2015 annual incentive that is deferred in the form of RSUs from 57% to 80% for our CEO and from 43% to 55% for our other named executives (also applied retroactively to 2014 CEO compensation)

 

 

 

Limit pension  

benefit  

accruals  

 

 

 

•    U.S. defined benefit pension plans frozen effective June 30, 2015

 

 

How We Address Risk and Control

 

    

Regular Review of

Compensation

Plans and Practices

      

Direct Link Between

Pay and Risk-Taking

      

Comprehensive

Recoupment Policy

       Annual Incentive
Funding Condition
   

 

Our Chief Risk Officer and the HRC Committee review our risk appetite, practices and employee compensation plans for alignment with sound risk management.

  LOGO  

 

We directly link pay to appropriate risk-taking through the use of a risk scorecard in determining our named executives’ earned annual incentive and in considering potential downward adjustments to target long-term incentives.

  LOGO  

 

We have a comprehensive recoupment policy that subjects all equity incentives to 100% forfeiture during the vesting period, and all cash incentives to 100% claw back within three years following the award date, based on risk assessments.

  LOGO  

 

As a condition for funding our annual incentives, we must achieve a Basel III common equity Tier 1 ratio of at least 8.5% on a fully phased-in basis.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Our Performance

Our GAAP EPS (earnings per diluted common share) increased year-over-year by 26% from $2.15 to $2.71, which is 10% above our GAAP plan of $2.46. OEPS, reflecting GAAP EPS as adjusted for significant items, including litigation, restructuring and impairment charges in excess of plan, was $2.85, representing a year-over-year increase of 19% and an 11% increase above our operating plan of $2.57.

Our Return on Tangible Common Equity increased year-over-year from 18% to 21%*, which is on track to meet our three-year Investor Day Goals. Furthermore, although 2015 adjusted revenue increased 2% (to $15.1 billion*), below our operating plan of $15.2 billion, we are still positioned to achieve our three-year Investor Day Goals. Our revenue performance, when coupled with strong operating expense control, resulted in net income of $3.1 billion, or $3.2 billion* as adjusted for the impairment charge related to a recent court decision, litigation and restructuring charges.

In 2015, we achieved positive adjusted operating leverage of 420 basis points, which exceeded our target by 168%, or 263 basis points. Additionally, Adjusted Pre-Tax Operating Margin improved to 31%* from 28% in 2014.

In 2015 and over the past three years, our total shareholder return (TSR) outperformed the median of our peer group and the S&P Financials Index as a whole. Our 2015 TSR was at the 63rd percentile when compared to both our peer group and the S&P Financials Index, and our 3-year TSR was at the 63rd and 75th percentiles when compared to our peer group and to the S&P Financials Index, respectively.

In 2015, we repurchased 55.6 million common shares for approximately $2.4 billion and distributed $760 million in dividends, returning significant value to our stockholders.

We also continue to maintain our strong capital position and further strengthen our balance sheet, remaining a safe and trusted business partner to our clients. Our estimated Basel III common equity Tier 1 ratio calculated under the Advanced Approach on a fully phased-in basis was 9.5%* at December 31, 2015, exceeding the fully phased-in requirements plus applicable buffers of 8.5%.

 

* For a reconciliation and explanation of these non-GAAP measures, as well as information on the calculation of OEPS and adjusted operating leverage for compensation purposes, see Annex A.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       35


Table of Contents
ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Compensation of Our Named Executives

2015 Target Total Direct Compensation Structure

 

 

LOGO

2015 Incentive Compensation Awarded(1)

 

   

ANNUAL

INCENTIVE

 

LONG-TERM

INCENTIVE

 

DEFERRED EQUITY

(RSUs & PSUs) AS

   
Executive   Cash        RSUs        Awards as
% of Target
       PSUs        Award as
% of Target
      

% of Total

Incentive

    

Gerald L. Hassell

Chairman & CEO

  $2,419,200       $9,676,800       144%       $4,140,000       115%       85%    

Thomas P. (Todd) Gibbons

Vice Chairman & CFO

  $2,426,760       $2,966,040       144%       $1,845,750       115%       67%    

Curtis Y. Arledge(2)

Vice Chairman & CEO of

Investment Management

  $3,364,200       $4,111,800       80%       $3,204,000       80%       69%    

Karen B. Peetz

President

  $1,647,726       $2,013,887       120%       $1,305,000       100%       67%    

Brian T. Shea

Vice Chairman & CEO of

Investment Services

  $2,459,646       $3,006,234       145%       $1,863,000       115%       66%    

 

1 The amounts reported above differ substantially from the amounts determined under SEC rules as reported for 2015 in the Summary Compensation Table set forth on page 54. The above table is not a substitute for the Summary Compensation Table set forth on page 54.
2 Mr. Arledge is no longer serving as Vice Chairman and CEO of Investment Management, and his employment with BNY Mellon is scheduled to terminate on March 23, 2016. As a result, Mr. Arledge is eligible to vest only in a pro-rated amount of his 2015 long-term incentive award, as further discussed on page 51.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

2015 Target Compensation

In the first quarter of each year, the HRC Committee considers competitive data, executive position and level of responsibility and, for executives other than our CEO, our CEO’s recommendation, and establishes target total direct compensation for each executive. Targets are reviewed annually but only adjusted if determined appropriate by the HRC Committee.

 

Name            Salary                Annual Incentive           Long-Term Incentive      

Total Target

    Direct Compensation1    

Hassell

  $1,000,000   $8,400,000   $3,600,000   $13,000,000

Gibbons

  $650,000   $3,745,000   $1,605,000   $6,000,000

Arledge

  $650,000   $9,345,000   $4,005,000   $14,000,000

Peetz

  $650,000   $3,045,000   $1,305,000   $5,000,000

Shea

  $600,000   $3,780,000   $1,620,000   $6,000,000

 

1 For 2015, compared to the prior year, total target direct compensation was increased for Mr. Shea by $1 million (including a salary increase from $550,000 to $600,000 effective July 1, 2015) and decreased for Ms. Peetz by $1 million to align with their current responsibilities.

2015 Annual Incentive

Minimum Funding Requirement

A Basel III common equity Tier 1 ratio of at least 8.5% on a fully phased-in basis was established as a minimum funding requirement for our annual incentive, with such percentage equal to the regulatory threshold ratio to which we expect to be held on a fully phased-in basis, including estimated buffers.

Payment of annual incentives is conditioned upon our meeting this goal. This threshold funding goal was met, with an estimated Basel III common equity Tier 1 ratio of 9.5%* at December 31, 2015, calculated under the Advanced Approach on a fully phased-in basis.

Balanced Scorecard Highlights

We have used a “balanced scorecard” approach for our annual incentive since 2009. Our approach is designed to be a comprehensive analysis of corporate and individual performance determined in the discretion of the HRC Committee. Our balanced scorecard provides for the following:

 

 

Corporate Component. The corporate component of the balanced scorecard focuses management on OEPS and adjusted operating leverage, weighted 75% and 25% respectively. The HRC Committee has discretion within the corporate component payout range to consider the impact of market conditions, relative performance, risk-based results and other important factors.

 

 

Individual Component. The individual component of the balanced scorecard is separated into (1) a business unit goal (as applicable) based on pre-tax income to establish a payout range, and (2) an individual modifier, which allows the HRC Committee to modify an award by up to ±25% to recognize and differentiate individual actions and contributions in final pay decisions. The HRC Committee has the discretion to reduce the individual component based on an assessment of the individual’s risk profile.

Earned awards cannot exceed 150% of the individual’s target award. Earned awards are paid out in a combination of cash and RSUs deferred over three years. For 2015, 80% of our CEO’s annual incentive was deferred in the form of RSUs and 55% was deferred for our other named executives (up from 43% in 2014).

 

* For a reconciliation and explanation of this non-GAAP measure, see Annex A.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       37


Table of Contents
ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

 

LOGO

For Messrs. Hassell and Gibbons, the corporate component weighting was 100% due to their role as the Company’s CEO and CFO, respectively. For Ms. Peetz, the corporate component and business unit were weighted 75% and 25%, respectively, due to her role as the Company’s President as well as the sizable impact her role has on the investment services business. For Messrs. Arledge and Shea, the corporate component and business unit were weighted equally (50% each) due to their roles as the head of our investment management and investment services businesses, respectively.

Corporate Component Payout

The same corporate component goals apply to each named executive officer. In February 2015, the HRC Committee determined to focus management on OEPS and adjusted operating leverage, weighted 75% and 25% respectively. The HRC Committee and management view these metrics as aligned with our strategy and appropriate for measuring annual performance. The HRC Committee retains the discretion to determine the corporate component payout within the incentive payout ranges set forth below and also retains the discretion to consider other factors (including significant, unusual items, market conditions and interest rate environment) in assessing the strength of the Company’s OEPS and adjusted operating leverage achievements.

OEPS is defined as reported earnings per share excluding merger and integration, restructuring, litigation expense and other significant, unusual items added or subtracted at the HRC Committee’s discretion. Adjusted operating leverage is defined as the percentage change in operating revenue growth less operating expense growth for the same period (with revenue and expense items calculated on the same basis as the calculations for OEPS).

 

 

OEPS (weighted 75%). Our 2015 OEPS budget was set at $2.57 and, in February 2015, the HRC Committee established the guidelines below for a range of incentive payouts. These guidelines include the intended upside and downside leverage, which is the amount by which each percentage point difference between our budgeted and actual OEPS is magnified to determine the OEPS payout portion of the corporate component.

 

OEPS   Percent of Budget ($2.57)   Payout Range as  a
Percent of Target
  Intended Leverage

<$2.18

  <85%   0%    

$2.18 – $ 2.57

  85% – 100%   40% –100%   4:1

$ 2.57 – $3.08

  100% – 120%   85% – 150%   3:1

>$ 3.08

  >120%   150%    

 

     Our actual 2015 OEPS was $2.85 and 11% above our operating budget, resulting in a payout range of 85% to 150% for the OEPS payout portion of the corporate component. The HRC Committee determined that a payout of approximately 133% in respect of the OEPS payout portion of the corporate component was appropriate, which reflects a payment of 3 percentage points above target for each percentage point by which actual 2015 OEPS exceeded our operating budget (consistent with our intended leverage shown above).

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

 

 

Adjusted Operating Leverage (weighted 25%). In February 2015, the HRC Committee determined that the adjusted operating leverage portion of the corporate component would be earned at 100% if adjusted operating leverage is equal to, or more than, 100 basis points and at 0% if it is less than 100 basis points. For 2015, our adjusted operating leverage was 420 basis points, resulting in full payment with respect to the adjusted operating leverage portion.

The OEPS payout of 133%, weighted 75% of the total corporate component payout, and the adjusted operating leverage payout of 100%, weighted 25% of the total corporate component payout, yielded a corporate component payout of 125%. The HRC Committee then exercised its discretion to limit the corporate component payout to 120% to reflect the quality of our 2015 performance.

Individual Component (Business Unit Payout and Individual Modifier)

In February 2015, the HRC Committee approved the pre-tax income goal for each business unit and determined to apply the same intended leverage ratios as those applicable to the OEPS portion of the corporate component, as set forth above. At that time, the HRC Committee also approved individual strategic and leadership objectives for our CEO, after discussion with the other independent directors, and for our other named executive officers, which were set by our CEO after discussion with the HRC Committee. None of the individual strategic and leadership objectives had any specific weighting and are intended to be used, together with other information the HRC Committee determines relevant, to develop a holistic evaluation of individual performance. The HRC Committee may modify the annual incentive award that is determined by applying the corporate component payout and, if applicable, the business unit payout by up to ±25% based on individual performance, except that the final modified award may not exceed 150% of the individual’s target award.

In the first quarter of 2016, the HRC Committee evaluated 2015 performance for each named executive against the business unit pre-tax income goal, if applicable, and applied an individual modifier based on, among other factors, the approved individual strategic and leadership objectives. For Mr. Hassell, the HRC Committee reviewed his performance self-assessment, obtained feedback from each independent director, and finalized its decision after reporting its preliminary evaluation to the other independent directors and soliciting their input. For each of the other named executive officers, the HRC Committee reviewed his or her performance self-assessment, considered Mr. Hassell’s recommendation and summary of performance, and finalized its decision after soliciting input from the other independent directors.

In determining the annual incentive modifier for Mr. Hassell, the HRC Committee considered the following key items:

 

 

Strategic Achievements: met or exceeded key financial metric targets, developed and executed corporate strategies to achieve our Investor Day Goals, executed strategic priorities and adjusted business model to realign markets group and accelerate profitable growth for Investment Services, led initiatives to transform targeted business lines and drove improvements to numerous risk management initiatives

 

 

Leadership Achievement: continued to enhance our performance-based culture, demonstrated considerable progress in building a robust leadership pipeline for the future, further streamlined our executive team and the company, made a number of strategic and diverse hires and led development of improved talent, succession and development planning

 

 

Based on the above, the HRC Committee approved a modifier of 120% for Mr. Hassell.

 

LOGO

 

 

BNY Mellon   LOGO   2016 Proxy Statement       39


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

In determining the annual incentive modifier for Mr. Gibbons, the HRC Committee considered the following key items:

 

 

Strategic Achievements: achieved targets for key components of our operating plan, executed finance reengineering target cost reduction program, led analysis of corporate discretionary spending to reduce non-essential costs and enhanced internal controls over regulatory reporting

 

Leadership Achievement: implemented talent management tools and processes to support company-wide performance and development initiatives, advanced our diversity and inclusion agenda and continued to evolve business line risk management initiatives

 

 

Based on the above, the HRC Committee approved a modifier of 120% for Mr. Gibbons.

 

LOGO

In determining the annual incentive for Mr. Arledge, the HRC Committee considered the following key items:

 

 

Business Unit Payout: Our 2015 budgeted pretax income for the investment management business unit was $1.218 billion and, in February 2015, the HRC Committee established the guidelines below:

 

Percent of Budget

($1.223 billion)

  

Payout Range

as a Percent of Target

<85%    0%
85% – 100%    40% – 100%
100% – 120%    85% – 150%
>120%    150%

Our actual achievement was $1.145 billion, representing 94% of budget (or 96% of budget on a constant currency basis), resulting in a payout range of 40% to 100%. The HRC Committee determined that a business unit payout percentage of 80% was appropriate.

 

Strategic Achievements: continued to refine the Investment Management business model and distribution strategy, achieved lower-than-expected returns on strategic initiatives, underperformed relative to peers; and responsible for the Markets Group (which had above-plan performance)

 

 

Leadership Achievement: oversaw development and implementation of business unit risk plans, actively supported various employee resource initiatives, implemented talent management tools and processes to support company-wide performance and development initiatives and advanced our diversity and inclusion agenda

 

 

Based on the above strategic and leadership achievements, the HRC Committee approved a modifier of 80% for Mr. Arledge.

 

LOGO

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

In determining the annual incentive for Ms. Peetz, the HRC Committee considered the following key items:

 

 

Business Unit Payout: Our 2015 budgeted pretax income for the investment services business unit was $3.160 billion and, in February 2015, the HRC Committee established the guidelines below:

 

Percent of Budget

($3.152 billion)

  

Payout Range

as a Percent of Target

<85%    0%
85% – 100%    40% – 100%
100% – 120%    85% – 150%
>120%    150%

Our actual achievement was $3.390 billion, representing 107% of budget (or 108% of budget on a constant currency basis), resulting in a payout range of 85% to 150%. The HRC Committee determined that a business unit payout percentage of 121% was appropriate.

 

Strategic Achievements: drove improvements to our competitive positioning, collaborated to develop and implement Investment Services’ client coverage improvements and led company-wide revenue-generating and key cross-company regulatory initiatives

 

 

Leadership Achievement: implemented talent management tools and processes to enhance development and retention of top talent and improve performance levels across the company and led risk management initiatives including developing risk plans for the treasury services and credit services businesses and identifying and globally implementing best practices

 

Based on the above strategic and leadership achievements, the HRC Committee approved a modifier of 100% for Ms. Peetz.

LOGO

In determining the annual incentive for Mr. Shea, the HRC Committee considered the following key items:

 

 

Business Unit Payout: As described above, the HRC Committee determined that a business unit payout percentage of 121% was appropriate for the investment services business unit.

 

 

Strategic Achievements: achieved or surpassed various financial targets for the investment services business unit, led business unit transformation process, successfully executed strategic platform investments to improve financial performance, drove multiple strategic growth initiatives for Investment Services and analyzed and executed business portfolio reviews

 

Leadership Achievement: implemented talent management tools and processes while maintaining our performance-based culture and advanced our risk management agenda

 

 

Based on the above strategic and leadership achievements, the HRC Committee approved a modifier of 120% for Mr. Shea.

 

LOGO

 

 

BNY Mellon   LOGO   2016 Proxy Statement       41


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Risk Assessment

We adopted the use of a risk scorecard in 2011 to formally connect compensation and risk-taking. The risk scorecard takes into account liquidity, operational, reputational, market, credit and technology risk categories by measuring:

 

 

maintenance of an adequate compliance program, including adhering to our compliance rules and programs;

 

 

protection of the company’s reputation, including reviewing our business practices to ensure that they comply with laws, regulations and policies, and that business decisions are free from actual or perceived conflicts;

 

 

management of operational risk, including managing operational losses and maintaining proper controls;

 

 

compliance with all applicable credit, market and liquidity risk limits, including understanding and monitoring risks associated with relevant businesses and new client acceptance, as well as appropriately resolving or escalating risk issues to minimize losses; and

 

 

meeting Internal Audit expectations, including establishing an appropriate governance culture, achieving acceptable audit results and remediating control issues in a timely manner.

The HRC Committee’s review of the risk scorecard results for each named executive was taken into account by the HRC Committee in determining each of the corporate and individual components of the balanced scorecard. The HRC Committee has the ability to reduce or fully eliminate the annual incentive award if the risk scorecard result is significantly below expectation. No downward adjustments were made for 2015.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

2015 Long-Term Incentive

We consider the PSU award made in February 2016 to be part of 2015 compensation. In February 2016, in determining the 2015 long-term incentive grants, our HRC Committee applied the following adjustment process to the target amounts previously set and communicated to our named executives in February 2015. The process can result in a PSU grant adjustment of up to ±25% based on annual performance and strategic objectives and a downward adjustment of up to 100% based on risk results.

 

 

Performance Results. Target long-term incentive award amounts were first subject to adjustment based on the HRC Committee’s review of 2015 annual performance against the corporate, business unit (if applicable) and individual goals of each executive’s 2015 annual incentive balanced scorecard.

      Performance Results    Adjustment

Less than 90% of target

   0% to - 25%

Between 90% and 110% of target

   0%

More than 110% of target

   0% to + 25%
 

 

 

Strategic Objectives. The amount also may be modified, upward or downward, by up to an additional 25% in the HRC Committee’s discretion after considering strategic assessments of each named executive and priorities for the company. The total reduction or increase cannot be greater than 25%.

 

 

Risk Scorecard Results. Target long-term incentive award amounts are also subject to downward adjustment of up to 100% based on the risk scorecard results, which measure compliance with risk metrics. Negative adjustments under the guidelines are cumulative, and no positive adjustment may be applied if the risk scorecard result is lower than acceptable risk tolerance.

The initial target award for Mr. Arledge was adjusted downward by 20% and the initial target award for each of Messrs. Hassell, Gibbons and Shea was adjusted upward by 15%, reflecting 2015 operating performance and individual performance results described on pages 39-41. As a result, the calculated long-term incentive awards were as follows:

 

       Name    Award as % of Target    PSUs Granted

Hassell

  

115%

  

117,147

Gibbons

  

115%

  

52,228

Arledge

  

80%

  

90,662

Peetz

  

100%

  

36,926

Shea

  

115%

  

52,716

In calculating the number of PSUs to grant, the HRC Committee divided the value of PSUs awarded by $35.34, the average closing price of our common stock on the NYSE for the 15 trading days from January 14, 2016 through February 4, 2016, to mitigate the impact of short-term volatility in our stock price.

Outstanding Long-Term Equity Incentives

In 2013, we reintroduced PSUs as our long-term performance vehicle. The PSUs are granted each year and any earned PSUs cliff vest after the end of three-year performance periods based on continued service with certain exceptions. The PSUs granted in 2013, 2014 and 2015 are earned between 0 – 125% based on the achievement of performance metrics. Granting awards annually with overlapping, multi-year performance periods allows the HRC Committee to annually review and update, as appropriate, the structure and performance metrics that we use in our PSU program.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       43


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

February 2015 PSU Award

As discussed in last year’s proxy statement, in February 2015, the HRC Committee granted PSUs to each of our named executives based on target values, as adjusted based on prior-year risk scorecard results and strategic milestones and after shifting 2014 pay mix to long-term incentives to emphasize long-term, sustainable growth. We consider the February 2015 PSU award to be part of 2014 compensation. The February 2015 PSUs are earned based on 2017 OEPS, with the potential of a negative risk modifier should risk-weighted assets (“RWA”) grow at an unacceptable rate.

In particular, to emphasize our focus on pay for performance, the HRC Committee pre-established two sets of 2017 OEPS targets (one set for a “normalizing” scenario, where interest rates move a minimum of 100 basis points during the three-year performance period, and one set for an alternative “flat” scenario) both scenarios of which are consistent with the goals presented at our 2014 Investor Day:

 

2017 OEPS in a “Normalizing”
Rate Scenario

  

2017 OEPS in a “Flat” Rate Scenario

   Earnout Payout Range

>$3.63

   >$3.10    125%

$ 3.36 – $3.63

   $2.93 – $3.10    75% – 125%

<$3.36

   <$2.93    0 – 75%

 

The actual percentage of PSUs that are earned will be determined in the HRC Committee’s discretion within the payout range set forth above. In addition, the percentage may be adjusted downward by a risk-based modifier should risk-weighted assets grow at an unacceptable rate during the three-year performance period as set forth below:

 

Compound Annual Growth

Rate of RWA

   Risk-Based Modifier

>9%

   0 – 75%

9% – 7%

   75% – 100%

<7%

   100%
 

 

For 2015, our OEPS was $2.85 and the one-year growth rate of our RWA was 3.97%.

Our long-term incentive PSU awards are illustrated below:

 

    2013   2014   2015   2016   2017   2018    
             

February  

2013 PSU  

Award  

 

Earned at 87%

based on RRWA

of 1.42% against

a target of 1.6%

 

Earned at 98%

based on RRWA

of 1.57% against

a target of 1.6%

 

Earned at 117%

based on RRWA

of 1.83% against

a target of 1.6%

 

cliff vested

in 2016

     
                           
             

February  

2014 PSU  

Award  

   

Earned at 67%

based on RRWA

of 1.57% against

a target of 2.0%

 

Earned at 87%

based on RRWA

of 1.83% against

a target of 2.0%

 

To be earned

based on RRWA target

of 2.0%

 

cliff vests

in 2017 based on

continued service

   
                           
             

February  

2015 PSU  

Award  

     

OEPS, with the potential of a negative risk modifier

should risk-weighted assets grow at an unacceptable  rate

 

cliff vests

in 2018 based on

continued service

 
                           
             

February  

2016 PSU  

Award  

        OEPS, with the potential of a negative risk modifier should risk-weighted assets grow at an unacceptable rate  

cliff vests

in 2019 based on

continued service

                           

Prior to the February 2015 grant, PSUs were earned in separate tranches over each year of the performance period based on return on risk-weighted assets (“RRWA”). RWA is defined as, for each fiscal year, the simple average of the preceding four quarter-end risk-weighted assets (estimated on a fully phased-in basis in Basel III using the Advanced Approach) based on existing assumptions at the commencement of the performance period and as reported in the company’s SEC filings. RRWA is generally defined as net income available to common stockholders, adjusted for capital charges on acquisitions as incurred, divided by the simple average of quarter-end risk-weighted assets (estimated per Basel III, based on assumptions and approaches existing at the commencement of the performance period as reported in our reports on Forms 10-Q and 10-K).

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Reduction or Forfeiture in Certain Circumstances

The company may cancel all or any portion of the PSUs (as well as the RSUs that constitute a portion of our named executives’ annual incentive award), if, directly or indirectly, the named executive (1) engages, or is discovered to have engaged, in conduct that is materially adverse to the company’s interests during his or her employment, (2) violates certain non-solicitation or non-competition restrictions during his or her employment and for a certain period thereafter, (3) violates any post-termination obligation or duties owed to the company or (4) has received, or may receive, compensation that is required to be forfeited and/or repaid to the company pursuant to applicable regulatory requirements. In addition, in the event that the named executive’s risk scorecard rating is lower than acceptable risk tolerance, any unvested PSUs (as well as unvested RSUs) will be subject to review and potential forfeiture, as determined by our HRC Committee.

Other Compensation and Benefits Elements

Retirement and Deferred Compensation Plans

After the merger in 2007, we assumed certain existing arrangements affecting the provision of retirement benefits to our named executives, maintaining qualified and non-qualified defined benefit and defined contribution plans in which eligible employees, including our named executives, may participate. Our named executives are eligible to participate in deferred compensation plans, which enable eligible employees to defer the payment of taxes on a portion of their compensation until a later date. To limit pension accruals, we previously froze all accruals under the Legacy BNY SERP as of December 31, 2014 and under our other U.S. defined benefit pension plans (including the BNY Mellon Tax-Qualified Retirement Plan and the Legacy BNY Excess Plan) as of June 30, 2015. For a description of these plans and our named executive officers’ participation therein, see “Pension Benefits” and “Nonqualified Deferred Compensation” below.

Perquisites

Our named executives are eligible to participate in company-wide benefit plans. In addition, we provide certain benefits, consistent with market practices, that are reportable under SEC rules as perquisites. The following perquisites were provided in 2015 and are substantially unchanged from 2014:

 

Car and Driver    

Each named executive has access to a pool of company cars and drivers for security purposes and to allow for more effective use of travel time. The pool is also available for use by our other executives.

 

 

Executive Life  

Insurance  

 

The named executives are covered by certain life insurance plans. (See footnotes to the Summary Compensation Table below.)

 

 

Personal Use of  

Corporate Aircraft  

 

Company aircraft are intended to be used by employees, directors and authorized guests primarily for business purposes. Our policy provides that the CEO should make prudent use of the company aircraft for security purposes and to make the most efficient use of his time. The HRC Committee receives an aircraft usage report on a semi-annual basis.

 

 

Charitable Gifts  

Match  

 

We maintain a matching gift program for gifts to eligible charities. All of our employees are eligible to participate in the matching gift program, and our named executives are eligible for an additional match of up to $30,000.

 

 

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Our Pay Practices

Stakeholder Engagement

In determining our governance practices, we believe it is important to consider feedback and input from our stakeholders, including shareholders, employees, clients and the communities we serve.

 

We continued to receive strong support for our executive compensation
program with 96% shareholder approval of the say-on-pay proposal at
our 2015 annual meeting and continued to actively engage with our
stakeholders throughout the remainder of the year (including webcasting
our annual meeting to allow broader shareholder participation).

 

In total, in advance of our 2016 annual meeting, our annual outreach process resulted in conversations with investors representing about 54% of our outstanding shares, as well as with proxy advisory firms and other

  LOGO

stakeholders on governance and performance matters. We further engaged shareholders and analysts at industry conferences, in meetings at our offices or at our shareholders’ offices, through conference calls and at our Investor Day conference held on October 28, 2014. We also regularly engage in direct meetings with local leaders and advocacy groups in our communities as well as with our employees.

Changes for 2016

As illustrated on page 33, our CEO’s target total direct compensation is below peer group median total compensation. Our HRC Committee determined that an increase in target incentive pay would position the CEO’s target pay in line with that of our peers and established Mr. Hassell’s 2016 target total direct compensation at $15 million. Mr. Hassell’s salary remains unchanged for 2016.

In addition, to simplify our program and more closely tie pay to performance by increasing upside and downside program leverage as illustrated below, our HRC Committee determined to move to a “one decision” incentive structure starting with our 2016 compensation program. Under the “one decision” structure, total incentive compensation will be based on a single compensation award decision based on the balanced scorecard results and then will be delivered in the form of cash, RSUs and PSUs, rather than two separate compensation decisions—one for annual incentive, delivered in the form of cash and RSUs, and one for long-term incentive, delivered in the form of PSUs. The total incentive payment will continue to be subject to reduction or elimination based on a risk assessment. The example below illustrates, for a hypothetical NEO (excluding the CEO), the difference between our current 2015 incentive structure and the 2016 “one decision” incentive structure, each at target performance.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

 

LOGO

 

* Payout potential as a percentage of target.

For our CEO, under our current incentive structure, 70% of total incentive compensation comes from the annual incentive award (of which 20% is paid in cash and 80% in RSUs) and 30% comes from the long-term incentive award (of which 100% is paid in PSUs). Under the 2016 “one decision” structure, his total incentive compensation will be paid 25% in cash, 25% in RSUs and 50% in PSUs.

 

 

BNY Mellon   LOGO   2016 Proxy Statement       47


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Key Compensation Practices

To further our commitment to good corporate governance practices and mitigation of inappropriate risk-taking, our 2015 compensation program for the named executives has the following features:

 

Directly link pay to  

performance  

 

•   Annual incentives based on balanced scorecard results comprise 70% of target total incentive compensation and 64% of target total direct compensation

 

•   Annual incentives deferred in the form of RSUs comprise 80% of annual incentive award for the CEO and 55% for other named executives and vest over three years

 

•   Long-term incentives delivered as PSUs comprise 30% of target total incentive compensation and 28% of target total direct compensation

 

 

Balanced approach  

for annual incentives  

 

•   Annual incentives earned based on (1) OEPS and operating leverage, weighted 75% and 25% respectively, for the corporate component and (2) each named executive’s business unit goals, which use quantitative financial measures to establish a payout range, and an individual modifier to allow the HRC Committee to recognize and differentiate individual contributions

 

 

Promote long-term  

stock ownership  

 

•   Deferred equity (RSUs and PSUs) as a percentage of target incentives: 86% for our CEO and 69% for our other named executives (up from 60% in 2014)

 

•   Deferred equity as a percentage of earned incentives: 85% for our CEO and 67% for our other named executives

 

•   RSUs vest in equal installments over three years, and earned PSUs cliff vest after the end of a three-year performance period

 

•   Our CEO must acquire and retain company stock equal to six times base salary and other named executives must acquire and retain stock equal to four times base salary

 

 
What we don’t do    

•   No excessive or single-trigger change-in-control or other severance benefits

 

•   No tax gross-ups on change-in-control payments

 

•   No tax gross-ups on perquisites

 

•   No hedging or short sales of our stock

 

•   No stock options grants

 

 

HRC Committee Role and Process

In the first quarter of 2015, for each named executive, the HRC Committee approved base salary levels; established target amounts for the 2015 annual incentive and long-term incentive awards to be earned or granted, as applicable, in the first quarter of 2016 based on 2015 performance; and granted a long-term incentive award in the form of PSUs based on targets established in 2014, following consideration and adjustment based on prior-year risk scorecard results and strategic milestones. As described in our 2015 proxy statement, we shifted 2014 pay mix to the long-term incentive award granted in the first quarter of 2015 to emphasize long-term, sustainable growth.

In setting 2015 compensation targets, the HRC Committee, assisted by its independent compensation consultant, considered a variety of factors over multiple meetings, including our financial performance and data concerning peer companies’ executive compensation programs. Factors were considered holistically, and no one factor had an assigned or specific quantifiable impact on the target compensation levels established by the HRC Committee.

During the year, the HRC Committee received regular updates on performance forecasts versus performance goals, regulatory and legislative developments and other relevant matters. In the first quarter of 2016, the HRC Committee evaluated 2015 corporate performance, using a combination of financial and qualitative measures as well as each named executive’s individual performance. This was used in determining final amounts for the 2015 annual incentive awards and

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

upfront adjustments to the 2015 long-term incentive awards granted in the form of PSUs (see pages 38-41 and 43, respectively). The HRC Committee also provided each named executive with incentive compensation targets for both their 2016 annual incentive and long-term incentive awards, with the actual award amounts to be determined in the first quarter of 2017 based on prior-year performance.

With respect to our CEO, the HRC Committee reports its preliminary conclusions and compensation decisions, and information on the process used by the HRC Committee, to the other independent members of our Board in executive session and solicits their input prior to finalizing determinations. With respect to our other named executive officers, the HRC Committee also advises and discusses with the other independent directors compensation decisions and the process used by the HRC Committee.

Role of Compensation Consultants

Since February 2014, the HRC Committee has retained Compensation Advisory Partners LLC, which we refer to as “CAP,” as its independent compensation consultant. CAP regularly attends HRC Committee meetings and assists the committee in its analysis and evaluation of compensation matters related to our executive officers. For more information on CAP, see page 26.

 

Peer Group

 

The HRC Committee and our management use compensation data from our peer group to provide a basis for assessing relative company performance, to provide data for the HRC Committee to assess competitiveness in determining targeted and actual compensation and to analyze market trends and practices. In evaluating and selecting companies for inclusion in the peer group, the HRC Committee targets complex financial companies with which we typically compete for executive talent and business. In particular, the HRC Committee selected these companies based on:

 

•       mix of businesses (e.g., asset management, asset servicing and clearing services) and other financial services companies with similar business models that operate in a similar regulatory environment;

 

•       relative size in terms of revenue, market capitalization and assets under management (AUM), as well as total assets and net income;

 

•       position as competitors for customers and clients, executive talent and investment capital; and

 

•       global presence.

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The 2015 peer group selected by the HRC Committee was unchanged from 2014. For certain named executive officers, data relating to the peer group is supplemented with industry data from surveys conducted by national compensation consulting firms and other data to assess the compensation levels and practices in the businesses and markets in which we compete for executive talent. All peer group data and other information provided to the HRC Committee by CAP was used by the HRC Committee in setting 2015 target compensation levels for our named executives.

Stock Ownership Guidelines

Under our stock ownership guidelines, each named executive is required to own a number of shares of our common stock with a value equal to a multiple of base salary within five years of becoming a member of our Executive Committee. The officer cannot sell or transfer to a third party any shares until he or she achieves the ownership guideline.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

 

                 
 

Stock Ownership

Requirement

 

Stock Retention

Requirement*

   
 
  CEO         Must retain shares of our common stock equal to six times base salary   50% of net after tax shares must be held until age 60
       
   
 
  Other NEOs         Must retain shares of our common stock equal to four times base salary   50% of net after tax shares must be held for one year after vesting date
       

 

* Applies to shares received from the vesting of RSUs, PSUs, restricted stock and other long-term equity awards granted after appointment to the Executive Committee and that were unvested as of August 2012.

Our CEO is subject to a 6-times base salary and our other named executives are subject to a 4-times base salary ownership guideline. All of our named executives meet the stock ownership guidelines. To determine their ownership stake we include shares owned directly, shares held in our employee stock purchase and retirement plans and shares held in certain trusts. We include 50% of unvested restricted stock and RSUs that do not have performance conditions or for which the applicable performance conditions have been met. Unearned performance shares, awards that remain subject to performance conditions and stock options are not counted toward compliance with the stock ownership guidelines.

In addition, named executives are subject to a retention requirement relating to shares received from the vesting of RSUs, PSUs, restricted stock and other long-term equity awards that were granted after their respective appointment to the Executive Committee and that were unvested as of August 2012. For the CEO, 50% of the net after-tax shares from these awards must be held until age 60 to allow for orderly diversification; for other named executive officers, 50% of the net after-tax shares must be held for one year from the vesting date.

Anti-Hedging Policies

Our named executive officers are prohibited from entering into hedging transactions with their company stock, including engaging in short sales of our stock, purchasing our stock on margin, and buying or selling any puts, calls or other options involving our securities.

Clawback and Recoupment Policy

In addition to forfeiture provisions based on risk outcomes during the vesting period, we have a comprehensive recoupment policy administered by the HRC Committee that applies to equity awards granted to our executives, including the named executive officers. Under the policy, the company may cancel all or any portion of unvested equity awards made after the policy was adopted and require repayment of any shares of common stock (or values thereof) or amounts that were acquired from the award if:

 

 

the executive directly or indirectly engages in conduct, or it is discovered that the executive engaged in conduct, that is materially adverse to the interests of the company, including failure to comply with the company’s rules or regulations, fraud or conduct contributing to any financial restatements or irregularities;

 

 

during the course of employment, the executive engages in solicitation and/or diversion of customers or employees and/or competition with the company;

 

 

following termination of employment with the company for any reason, the executive violates any post-termination obligations or duties owed to the company or any agreement with the company; or

 

 

any compensation otherwise payable or paid to the executive is required to be forfeited and/or repaid to the company pursuant to applicable regulatory requirements.

In addition, we have a cash recoupment policy, which provides that the company may claw back some or all of a cash incentive award within three years of the award date if, during the award performance period, the employee (including each of the named executives) is found to have engaged in fraud or to have directly or indirectly contributed to a financial restatement or other irregularity. The company continues to monitor regulatory requirements as may be applicable to its recoupment policies.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Severance Benefits

Stockholder Approval of Future Senior Officer Severance Arrangements. In July 2010, the Board adopted a policy regarding stockholder approval of future senior officer severance arrangements. The policy provides that the company will not enter into a future severance arrangement with a senior executive that provides for severance benefits (as defined in the policy) in an amount exceeding 2.99 times the sum of annual base salary and target bonus for the year of termination (or, if greater, for the year before the year of termination), unless such arrangement receives stockholder approval.

Executive Severance Plan. In July 2010, we adopted The Bank of New York Mellon Corporation Executive Severance Plan, which provides the following severance benefits:

 

Reason for termination   Severance payment   Bonus    Benefit
continuation
   Outplacement
services

By the company without “cause”

  2 times base salary   Pro-rata annual

bonus for the year of
termination

   Two years    One year

By the company without

“cause” or by the executive for

“good reason” within two years

following a “change in control”

 

2 times base salary

and 2 times target

annual bonus

  Pro-rata target annual
bonus for the year of
termination
   Two years    One year

Plan participants are selected by the HRC Committee and include each of our named executives. To receive benefits under the plan, the participant must sign a release and waiver of claims in favor of the company and agree not to solicit our customers and employees for one year.

We do not provide any severance-related tax gross-ups. If any payment under the plan would cause a participant to become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986 (“IRC”), then payments and benefits will be reduced to the amount that would not cause the participant to be subject to the excise tax if such a reduction would put the participant in a better after-tax position than if the participant were to pay the tax. In addition, the amount of payments and benefits payable under the plan will be reduced to the extent necessary to comply with our policy regarding stockholder approval of future senior officer severance arrangements as described above.

Separation Benefits for Mr. Arledge

Mr. Arledge’s employment with the company will terminate effective March 23, 2016. In connection with his departure, the company determined that he will be eligible to receive payments under the Bank of New York Mellon Corporation Executive Severance Plan for a termination by the company without “cause.” In accordance with the plan, Mr. Arledge will receive a severance payment of $1,300,000 equal to two times his base salary payable over two years; a 2016 annual incentive pro-rated for the portion of the year during which he was employed by us, with such benefit determined by the company’s actual performance during such period; benefits continuation for two years; and outplacement services for one year.

Additionally, Mr. Arledge will be eligible to vest in a pro-rated portion of his unvested February 2014, 2015 and 2016 PSU awards as a result of his departure prior to the completion of the applicable performance period. Accordingly, the number of the unvested February 2014, 2015 and 2016 PSU awards in which Mr. Arledge will vest will be based on the company’s actual performance as determined by the HRC Committee at the end of the applicable performance period, and pro-rated to reflect the portion of each such performance period during which he was employed by us.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

Tax Considerations

The HRC Committee considers certain tax implications when designing our executive compensation programs and certain specific awards. The HRC Committee considered that Section 162(m) of the IRC generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to its CEO and the three other most highly compensated officers each year. This limitation does not apply to “qualifying performance-based” compensation as defined in the IRC. We generally design our compensation programs so that compensation paid to the named executives can qualify for available income tax deductions. Our annual incentive awards are granted under our shareholder-approved Executive Incentive Compensation Plan and intended to be “qualifying performance-based” compensation. In that regard, annual incentives paid to any individual for the calendar year cannot exceed the sum of $3 million plus 0.5% of our positive pre-tax income from continuing operations, before the impact of the cumulative effect of accounting changes and extraordinary items, as disclosed on our consolidated statement of income for such year included in our Annual Report on Form 10-K.

However, the HRC Committee believes that stockholders’ interests may best be served by offering compensation that is not fully deductible, where appropriate, to attract, retain and motivate talented executives. Accordingly, the HRC Committee has discretion to authorize compensation that does not qualify for income tax deductibility.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis

 

How We Address Risk and Control

On a regular basis, our Chief Risk Officer and our HRC Committee review the company’s risk appetite, practices and employee compensation plans for alignment with sound risk management. Our Chief Risk Officer also met with the HRC Committee to specifically discuss and review our 2015 compensation plans, including the plans in which members of the Executive Committee participate. With respect to employees broadly, we also monitor the company’s compensation plans through a management-level compensation oversight committee that includes our Chief Risk Officer, Chief Human Resources Officer, Chief Financial Officer and the Risk Management and Compliance Chief Administrative Officer. The committee receives regular reports, meets at least on a quarterly basis and reports to the HRC Committee on risk-related compensation issues.

We identify employees who, individually or as a group, are responsible for activities that may expose us to material amounts of risk, using a risk-related performance evaluation program with adjustments determined by a senior management committee responsible for control functions, with such adjustments later reviewed by the HRC Committee. The incentive compensation of identified employees is directly linked to risk-taking either through a “risk scorecard” or through the inclusion of a standard risk goal as part of our performance management process.

With respect to our named executive officers, a Basel III common equity Tier 1 ratio of at least 8.5% on a fully phased-in basis calculated under the Advanced Approach was established as a minimum funding requirement for our annual incentive, with such percentage being equal to the regulatory threshold ratio to which we expect to be held on a fully phased-in basis, including estimated buffers. Our annual incentives also take into account a risk assessment for both the company as a whole and for each individual. Our named executives’ target long-term incentives are set after considering potential downward adjustments for prior-year risk scorecard results. In addition, all of their equity awards are subject to 100% forfeiture during the vesting period and all of their cash incentives are subject to 100% claw back within three years following the award date, in each case based on ongoing risk assessments under our comprehensive recoupment policy.

We are also subject to regulation by various U.S. and international governmental and regulatory agencies with respect to executive compensation matters and the consideration of risk in the context of compensation. Our programs have been designed to comply with these regulations, and the HRC Committee regularly monitors new and proposed regulations as they develop to determine if additional action is required.

Based on the above, we believe that our compensation plans and practices are well-balanced and do not encourage imprudent risk-taking that threatens our company’s value or create risks that are reasonably likely to have a material adverse effect on the company.

Report of the HRC Committee

The HRC Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. On the basis of such review and discussions, the HRC Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s Annual Report on Form 10-K and this proxy statement.

By: The Human Resources and Compensation Committee

 

Samuel C. Scott III, Chairman

  

John M. Hinshaw

  

Richard J. Kogan

Edward P. Garden

  

Edmund F. “Ted” Kelly

  

Wesley W. von Schack

Jeffrey A. Goldstein

     

 

 

BNY Mellon   LOGO   2016 Proxy Statement       53


Table of Contents
 
  ITEM 2. ADVISORY VOTE ON COMPENSATION    > Executive Compensation Tables

 

Summary Compensation Table

The Summary Compensation Table and Grants of Plan-Based Awards Table, on this page 54 and on page 56, are in accordance with SEC rules and do not reflect the manner in which our HRC Committee thinks about and determines compensation. In particular, the SEC rules require that we report equity-based awards for the year that they are granted, even though the equity-based portion of our annual incentives is awarded for services performed the prior year and our long-term equity incentives are awarded after adjustment for performance during the prior year.

 

Name and

Principal

Position

  Year     Salary   Bonus     Stock
Awards
(1)(2) 
  Option
Awards
(2) 
  Non-Equity
Incentive  Plan 
Compensation 
  Change in
Pension
Value and
Nonqualified
Deferred
Compensation 
Earnings
(3)
  All Other
Compensation
(4) 
  Total
Compensation 

Gerald L. Hassell

  2015     $1,000,000     $0   $9,889,738   $0   $2,419,200                 $0   $173,496   $13,482,434

Chairman & Chief

Executive Officer

  2014     $1,000,000     $0   $7,750,031   $0   $1,244,640   $1,509,388   $155,469   $11,659,528
  2013     $1,000,000     $0   $4,682,101   $0   $3,486,483                 $0   $282,191     $9,450,775
Thomas P. “Todd” Gibbons   2015        $650,000     $0   $3,510,949   $0   $2,426,760                 $0     $76,731     $6,664,440
Vice Chairman & Chief Financial Officer   2014        $650,000     $0   $2,982,659   $0   $1,808,471      $978,123     $78,460     $6,497,713
  2013        $650,000     $0   $2,293,760   $0   $2,084,936                 $0   $113,010     $5,141,706

Curtis Y. Arledge(5)

  2015        $650,000     $0   $8,082,755   $0   $3,364,200                 $0   $121,592   $12,218,547
Vice Chairman & CEO of Investment Management   2014        $650,000     $0   $7,544,542   $0   $3,647,534                 $0     $95,396   $11,937,472
  2013        $625,000     $0   $6,160,496   $0   $5,346,668                 $0   $129,321   $12,261,485

Karen B. Peetz

  2015        $650,000     $0   $3,439,089   $0   $1,647,726        $39,595     $43,000     $5,819,410

President

  2014        $650,000     $0   $2,907,106   $0   $1,716,826      $233,014     $26,012     $5,532,958
  2013        $625,000     $0   $2,150,002   $0   $1,978,016        $38,682     $43,886     $4,853,586

Brian T. Shea(6)

  2015        $575,000     $0   $3,033,843   $0   $2,459,646                 $0   $115,616     $6,184,105
Vice Chairman & CEO of Investment Services                                    

 

(1) The amounts disclosed in this column include the grant date fair value of RSUs and PSUs granted in 2015, 2014 and 2013. For 2015, the grant date fair values of PSUs were: $4,695,214 for Mr. Hassell; $2,093,278 for Mr. Gibbons; $5,223,434 for Mr. Arledge; $2,093,278 for Ms. Peetz; and $1,741,118 for Mr. Shea. At the maximum level of performance, the PSU values would be: $5,869,027 for Mr. Hassell; $2,616,607 for Mr. Gibbons; $6,529,292 for Mr. Arledge; $2,616,607 for Ms. Peetz; and $2,176,418 for Mr. Shea.

 

(2) The amounts disclosed in these columns are computed in accordance with FASB ASC Topic 718 (“ASC 718”) using the valuation methodology for equity awards set forth in note 17 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

(3) The amount disclosed in this column represents the increase in the present value of the executive’s accumulated pension benefit. The total amount disclosed for 2015 for Messrs. Hassell and Gibbons and Ms. Peetz consists solely of the increase in the present value of the accumulated benefit, as there are no above-market nonqualified deferred compensation earnings. Present values are determined in accordance with the assumptions used for purposes of measuring our pension obligations under FASB ASC 715 (formerly SFAS No. 87) as of December 31, 2015, including a discount rate of 4.48%, with the exception that benefit payments are assumed to commence at the earliest age at which unreduced benefits are payable.

 

 

54       BNY Mellon   LOGO   2016 Proxy Statement


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Executive Compensation Tables

 

 

(4) The items comprising “All Other Compensation” for 2015 are:

 

Name       Perquisites    
and Other
Personal
Benefits(a)
      Contributions    
to Defined
Contribution
Plans(b)
  Insurance
    Premiums(c)     
      Total      

Gerald L. Hassell

  $135,596   $23,250   $14,650   $173,496  

Thomas P. “Todd” Gibbons

    $46,881   $19,750   $10,100     $76,731  

Curtis Y. Arledge

    $95,342   $26,250          $—   $121,592  

Karen B. Peetz

    $23,250   $19,750          $—     $43,000  

Brian T. Shea

    $90,866   $24,750          $—   $115,616  

 

  (a) “Perquisites and Other Personal Benefits” are for Mr. Hassell, use of company car and driver ($47,806), use of company aircraft ($57,790) and enhanced charitable gift match ($30,000); for Mr. Gibbons, use of company car and driver ($34,433) and enhanced charitable gift match ($12,448); for Mr. Arledge, use of company car and driver ($65,342) and enhanced charitable gift match ($30,000); for Ms. Peetz, enhanced charitable gift match ($23,250); and for Mr. Shea, use of company car and driver ($60,866) and enhanced charitable gift match ($30,000).

 

       The amounts disclosed represent aggregate incremental costs as follows: use of the company car and driver determined by the company’s cost associated with the individual’s personal use of the pool of vehicles and drivers; personal use of corporate aircraft determined by the direct hourly operating cost for use of the aircraft multiplied by the number of hours of personal use; and the enhanced charitable gift match determined by matching contributions to eligible charities made by the company in excess of those provided for other employees under the company’s gift matching programs. We calculated the direct hourly operating cost for use of the aircraft by adding the total amount spent by us for fuel, maintenance, landing fees, travel and catering associated with the use of corporate aircraft in 2015 and divided this number by the total number of flight hours logged in 2015.

 

  (b) “Contributions to Defined Contribution Plans” consist of matching contributions under our 401(k) plans and non-discretionary company contributions under The Bank of New York Mellon Corporation Defined Contribution IRC Section 401(a)(17) Plan (the “BNY Mellon 401(k) Benefits Restoration Plan”). See “Nonqualified Deferred Compensation” below on page 61 for more details regarding the BNY Mellon 401(k) Benefits Restoration Plan. In addition, for Messrs. Arledge and Shea, the amount includes non-discretionary company contributions totaling 2% of base salary under our 401(k) plan.

 

  (c) Represent taxable payments made by us for universal life insurance policies.

 

(5) Mr. Arledge is no longer serving as Vice Chairman and CEO of Investment Management, and his employment with BNY Mellon is scheduled to terminate on March 23, 2016.

 

(6) Because Mr. Shea was only a named executive officer in 2015, no disclosure is included as to Mr. Shea for 2013 or 2014.

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Executive Compensation Tables

 

Grants of Plan-Based Awards

 

                        Estimated Possible Payouts
Under Non-Equity Incentive  Plan
Awards
(1)
   

Estimated Possible Payouts Under

Equity Incentive Plan Awards(2)

 
Name   Award
  Type 
  Grant
Date
    Date HRC
Committee
took
Action to
Grant
Award
    Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
    Grant
Date Fair
Value of
Stock
Awards
($)
(3)
 

Gerald L. Hassell

   EICP                           $8,400,000        $12,600,000                      —            
     PSUs      2/20/2015        2/20/2015                                    119,047        148,809        $4,695,214   
Thomas P. “Todd” Gibbons    EICP                           $3,745,000          $5,617,500                      —            
     PSUs      2/20/2015        2/20/2015                                      53,075          66,344        $2,093,278   

Curtis Y. Arledge

   EICP                           $9,345,000        $14,017,500                      —            
     PSUs      2/20/2015        2/20/2015                                    132,440        165,550        $5,223,434   

Karen B. Peetz

   EICP                           $3,045,000          $4,567,500                      —            
     PSUs      2/20/2015        2/20/2015                                      53,075          66,344        $2,093,278   

Brian T. Shea

   EICP                           $3,780,000          $5,670,000                      —            
     PSUs      2/20/2015        2/20/2015                                      44,146          55,183        $1,741,118   

 

(1) Represents annual incentive amounts to be paid for performance during 2015 under The Bank of New York Mellon Corporation Executive Incentive Compensation Plan (the “EICP”). Amounts earned under the Plan in 2016 (for 2015 performance) were made 20% in the form of cash and 80% in the form of RSUs for Mr. Hassell and 45% in the form of cash and 55% in the form of RSUs for our other named executive officers. There was no threshold payout under this plan for 2015.

 

     The table above does not reflect the RSUs that were granted on February 20, 2015 with respect to each named executive officer’s 2014 annual incentive award, which was made 20% in the form of cash and 80% in the form of RSUs for Mr. Hassell and 57% in the form of cash and 43% in the form of RSUs for our other named executive officers. The RSUs vest in equal installments over three years. In the event that the named executive officer’s risk scorecard rating is lower than acceptable risk tolerance, any unvested RSUs will be subject to review and potential forfeiture, as determined by our HRC Committee. The 2014 annual incentive award was previously reported in the 2014 Grants of Plan-Based Awards Table.

 

(2) Represents the named executive officer’s long-term incentive award granted in the form of PSUs under The Bank of New York Mellon Corporation Long-Term Incentive Plan. The amounts shown under the Maximum column represent the maximum payout level of 125% of target; there is no threshold payout level. Upon vesting, the PSUs will be paid out in shares of BNY Mellon common stock. PSUs cannot be sold during the period of restriction. During this period, dividend equivalents on the PSUs will be reinvested and paid to the executives at the same time as the underlying shares. These units will be earned between 0-125% based on our 2017 OEPS with a negative risk modifier should risk-weighted assets grow at an unacceptable rate. The earned units generally will cliff vest after the end of the performance period if the executive remains employed by us. In the event that the named executive officer’s risk scorecard rating is lower than acceptable risk tolerance, any unvested PSUs will be subject to review and potential forfeiture, as determined by our HRC Committee.

 

(3) The aggregate grant date fair value of awards presented in this column is calculated in accordance with ASC 718.

 

 

56       BNY Mellon   LOGO   2016 Proxy Statement


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ITEM 2. ADVISORY VOTE ON COMPENSATION > Executive Compensation Tables

 

Outstanding Equity Awards at Fiscal Year-End

The market value of unvested or unearned awards is calculated based on $41.22 per share, the closing price of our common stock on the NYSE on December 31, 2015.

 

       

Option Awards(2)

  Stock Awards(3)
       

Number of Securities
Underlying Unexercised
Options (#)

 

 

Option
Exercise
Price ($)

 

Option
  Expiration  
Date

 

  Number of  

Shares or
Units of
Stock That
Have Not
Vested (#)

  Market
Value of
Shares or
Units of
  Stock That  
Have Not
Vested ($)
  Equity
Incentive Plan
Awards:
Number of
Unearned
  Shares, Units  
or Other
Rights That
Have Not
Vested (#)
  Equity
Incentive
  Plan Awards:  
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)
Name  

Year of
Grant/

Performance

Period(1)

    Exercisable       Unexercisable              

Gerald L. Hassell

  2007   191,042             —     $40.4000     3/13/2017                
    2007     86,180             —   $42.8300     4/2/2017                
    2007   471,700             —   $43.9300   6/29/2017                
    2007     35,896             —   $44.5900   7/23/2017                
    2008   380,916             —   $42.3100   3/10/2018                
    2010   319,803             —   $30.2500   3/15/2020                
    2011   295,119             —   $30.1300   2/23/2021                
    2012   325,809   108,603   $22.0300   2/22/2022                
    2013                      12,567      $518,012        
    2014                      93,464   $3,852,586        
    2015                    131,707   $5,428,963        
    2013-2015                       142,077(4)   $5,856,434        
    2014-2016                         57,814(4)   $2,383,084     37,540(5)   $1,547,419
    2015-2017                           121,064(5)   $4,990,239
Thomas P. “Todd” Gibbons   2007     79,022             —   $40.4000   3/13/2017                
    2007     43,161             —   $42.8300     4/2/2017                
    2007     16,320             —   $44.5900   7/23/2017                
    2008   184,380             —   $42.3100   3/10/2018                
    2008     38,152             —   $34.6300   7/21/2018                
    2009   182,328             —   $18.0200     3/9/2019                
    2010   193,726             —   $30.2500   3/15/2020                
    2011   190,124             —   $30.1300   2/23/2021                
    2012     96,324     32,108   $22.0300   2/22/2022                
    2013                        8,119      $334,665        
    2014                      31,549   $1,300,450        
    2015                      35,945   $1,481,653        
    2013-2015                         63,342(4)   $2,610,959        
    2014-2016                         25,775(4)   $1,062,444     16,737(5)      $689,900
    2015-2017                             53,974(5)   $2,224,810

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Executive Compensation Tables

 

       

Option Awards(2)

  Stock Awards(3)
       

Number of Securities
Underlying Unexercised
Options (#)

 

 

Option  
Exercise  

Price ($)  

 

Option
Expiration  
Date

  Number of 
Shares or 
Units of 
Stock That 
Have Not 
Vested (#) 
  Market 
Value of 
Shares or 
Units of 
Stock That 
Have Not 
Vested ($) 
  Equity 
Incentive 
Plan 
Awards: 
Number of 
Unearned 
Shares,  Units 
or Other 
Rights That 
Have Not 
Vested (#) 
  Equity 
Incentive 
Plan Awards: 
Market or 
Payout Value 
of Unearned 
Shares, Units 
or Other 
Rights That 
Have Not 
Vested ($) 
Name  

Year of
Grant/

 Performance 

Period(1)

  Exercisable     Unexercisable              
Curtis Y. Arledge   2011   607,263             —     $30.1300     2/23/2021                  
    2012   192,612     64,202     $22.0300     2/22/2022                  
    2013                     25,592        $1,054,902         
    2014                     80,906        $3,334,945         
    2015                     72,498        $2,988,368         
    2013-2015                   158,062(4)    $6,515,320         
    2014-2016                     64,317(4)    $2,651,139      41,764(5)    $1,721,526 
    2015-2017                           134,683(5)    $5,551,650 
Karen B. Peetz   2007     52,102             —     $40.4000     3/13/2017                  
    2007     24,198             —     $42.8300       4/2/2017                  
    2007       8,964             —     $44.5900     7/23/2017                  
    2008   109,412             —     $42.3100     3/10/2018                  
    2008     17,609             —     $34.6300     7/21/2018                  
    2012             —     32,580     $22.0300     2/22/2022                  
    2013                       6,365           $262,365         
    2014                     29,931        $1,233,756         
    2015                     34,123        $1,406,550         
    2013-2015                     63,342(4)    $2,610,959         
    2014-2016                     25,775(4)    $1,062,444    16,737(5)       $689,900 
    2015-2017                           53,974(5)    $2,224,810 
Brian T. Shea   2011   119,182             —     $30.1300         2/23/21                  
    2012     60,372     20,122     $22.0300         2/22/22                  
    2013                       6,125           $252,473         
    2014                     26,214        $1,080,541         
    2015                     32,777        $1,351,068         
    2013-2015                     52,687(4)    $2,171,758         
    2014-2016                     23,584(4)        $972,126    15,312(5)       $631,167 
    2015-2017                           44,894(5)    $1,850,522 

 

(1) Refers to the year of grant for stock options and RSUs, and to the performance period for PSUs.

 

(2) Stock options granted in 2012 vest and become exercisable 1/4 per year over a four-year period; the remaining unexercisable options vested on 2/23/2016.

 

(3) RSUs vest in accordance with the following schedule:

 

   Year of Grant     

2013    

   1/3 vest per year over a three-year period; the remaining unvested RSUs vested on 2/21/2016

2014    

   1/3 vest per year over a three-year period; the remaining unvested RSUs vested 1/2 on 2/19/2016 and vest 1/2 on 2/19/2017

2015    

   1/3 vest per year over a three-year period; the remaining unvested RSUs vested 1/3 on 2/20/2016 and vest 1/3 on 2/20/2017 and 1/3 on 2/20/2018

 

 

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ITEM 2. ADVISORY VOTE ON COMPENSATION > Executive Compensation Tables

 

 

     PSUs are earned and vest in accordance with the following schedule:

 

   Year of Grant     

2013

   1/3 earned per year over the three-year performance period, between 0-125% of target based on our return on risk-weighted assets during each year; earned PSUs cliff vested at the end of the performance period (on 2/21/2016)

2014

   1/3 earned per year over the three-year performance period, between 0-125% of target based on our return on risk-weighted assets during each year; earned PSUs cliff vest at the end of the performance period (on 2/19/2017)

2015

   Earned, between 0-125% of target, based on our OEPS growth over the three-year performance period with a negative risk modifier should risk-weighted assets grow at an unacceptable rate; earned PSUs cliff vest at the end of the performance period (on 2/20/2018)

 

(4) Includes accrued dividends on the first and second tranches for the PSUs granted in 2014 and all tranches for the PSUs granted in 2013, in each case, which were earned based on performance as of December 31, 2015 but remained subject to ongoing time-vesting conditions.

 

(5) Includes accrued dividends on the unearned portion of the PSUs granted in 2014 and 2015, assuming target performance.

Option Exercises and Stock Vested

 

    Option Awards   Stock Awards
Name   Number of   
Shares Acquired   
on Exercise (#)   
 

Value Realized   
on Exercise   

($)   

  Number  of   
Shares Acquired   
on Vesting (#)   
  Value  Realized   
on Vesting ($)   

Gerald L. Hassell

  485,254      $7,849,489     153,877      $6,028,419   

Thomas P. “Todd” Gibbons

  127,359  &nb