DEF 14A 1 d263526ddef14a.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  

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))
   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):

 

  No fee required.
 

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

 

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Title of each class of securities to which transaction applies:

   

 

  (2)  

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  (3)  

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  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


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 7

Resolution

  Page 8

Nominees

  Page 9

Corporate Governance and Board Information

  Page 18

Director Compensation

  Page 31
     

ITEM  2 –  ADVISORY VOTE ON COMPENSATION

  Page 33

Resolution

  Page 34

Compensation Discussion and Analysis

  Page 35

Executive Compensation Tables

  Page 60
     

ITEM  3 –  ADVISORY VOTE ON SAY-ON-PAY VOTE FREQUENCY

  Page 72

Resolution

  Page 72
     

ITEM  4 –  RATIFICATION OF KPMG LLP

  Page 73

Resolution

  Page 73

Report of the Audit Committee

  Page 74

Services Provided by KPMG LLP

  Page 75
     

ITEM 5 –  STOCKHOLDER PROPOSAL REGARDING PROXY

VOTING REVIEW REPORT

  Page 76

Stockholder Proposal

  Page 76

Board of Directors’ Response

  Page 77
     

 

 


Table of Contents

 

ADDITIONAL INFORMATION

  Page 78

Equity Compensation Plans

  Page 79

Information on Stock Ownership

  Page 80

Annual Meeting Q&A

  Page 82

Other Information

  Page 85

Helpful Resources

  Page 88
     

ANNEX A: NON-GAAP RECONCILIATION

  Page 89

 

 


Table of Contents
 
  LETTER FROM THE CEO  

 

LOGO

March 10, 2017

Dear Fellow Stockholder:

On behalf of the Board of Directors, we cordially invite you to our 2017 Annual Meeting of Stockholders to be held on Tuesday, April 11, 2017 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 2016 executive compensation program (the “say-on-pay vote”), the frequency with which we should conduct a say-on-pay vote and a stockholder proposal, if properly presented. Detailed information about the director nominees, including their specific experience and qualifications, begins on page 7. 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 2016 incentive compensation decisions, begins on page 35. A summary of why we are seeking stockholder input on say-on-pay vote frequency is on page 72. We appreciate the opportunity to provide you with these details of your Board’s actions in 2016 and recommendations for 2017. 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 as promptly as possible through any of the acceptable means described in this proxy statement. Instructions on how to vote begin on page 82. 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   2017 Proxy Statement       1


Table of Contents
 
  NOTICE OF ANNUAL MEETING  

 

TUESDAY, APRIL 11, 2017

9:00 a.m., Eastern time

101 Barclay Street, New York, New York 10286

Record Date: February 10, 2017

 

     AGENDA     BOARD  RECOMMENDATION  
     
    1.    To elect the 13 nominees named in this proxy statement to serve on our Board of Directors until the 2018 annual meeting   FOR each director nominee
     
    2.    To provide an advisory vote for approval of the 2016 compensation of our named executives, as disclosed in this proxy statement   FOR
     
    3.    To provide an advisory vote recommending the frequency with which we conduct a say-on-pay vote   FOR a vote EVERY year
     
    4.    To ratify the appointment of KPMG LLP as our independent auditor for 2017   FOR
     
    5.    To consider a stockholder proposal regarding a proxy voting review report, if properly presented   AGAINST

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

March 10, 2017

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 82 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 11, 2017: Our 2017 proxy statement and 2016 Annual Report to stockholders are available
at www.envisionreports.com/bk.

 

 

 

 

2       BNY Mellon   LOGO   2017 Proxy Statement


Table of Contents
 
  INTRODUCTION  
 

The following information is presented to provide context for the operation of our pay program which is discussed in more detail on page 6 of this introduction and throughout our Compensation Discussion and Analysis beginning on page 35 of this proxy statement.

 

2016 Performance Highlights

 

Operating EPS*    Adjusted Pre-Tax Operating Margin*

 

 

LOGO

  

 

 

LOGO

Adjusted Noninterest

Expense*

  

Adjusted Return on Tangible

Common Equity*

LOGO   

 

 

LOGO

Progressing Towards Achieving Our Three-Year Financial Goals

 

 

p 15%**

 

2-year operating EPS*

 

   

 

p 2%**

 

2-year adjusted revenue*

 

                      

 

 

p  21%**

 

2-year adjusted return on tangible

common equity*

 

   

Adjusted pre-tax operating margin up 449 basis points to 33%*

 

Awards and Recognition

 

                 

Investment Services

 

Tri-Party Agent of the Year

Global Investor/ISF, 2016

 

Custodian of the Year and Most Innovative Project of the Year

Risk.net, 2016

 

Best Global Corporate Trust Service Provider

Global Finance, 2016

 

 

Treasury Services

 

Best Treasury and Cash Management Providers

Global Finance, 2016

 

 

Markets

 

Best Foreign Exchange Providers

Global Finance, 2016

   

Investment Management

 

Top U.S. Private Bank

Family Wealth Report, 2016

 

Equity Manager of the Year — Newton Investment Management

UK Pensions, 2016

 

LDI Manager of the Year — Insight Investment

Financial News, 2016

 

Fixed Income Manager of the Year — Insight Investment

Financial News, 2016

 

 

Corporate Social Responsibility

 

Dow Jones Sustainability World Index

2016

     

Technology

 

Digital Edge 25 Award

2016

 

Top Companies for Women Technologists Leadership Index

Anita Borg Institute, 2016

 

 

Workplace

 

Best Places to Interview

Glassdoor, 2016

 

Financial Services Gender-Equality Index

Bloomberg, 2016

 

100% Corporate Equality Index

Human Rights Campaign, 2017

                 

 

* Operating EPS, adjusted pre-tax operating margin, adjusted noninterest expense, adjusted return on tangible common equity and adjusted revenue are non-GAAP measures. For a reconciliation and explanation of these non-GAAP measures, see Annex A. On a comparable GAAP basis, for 2015 and 2016 respectively, EPS was $2.71 and $3.15, pre-tax operating margin was 28% and 31%, noninterest expense (in millions) was $10,799 and $10,523, return on equity was 8.6% and 9.6% and revenue (in millions) was $15,194 and $15,237.
** Values reflect cumulative 2015-2016 performance. On a comparable GAAP basis, EPS increased 21%, revenue decreased 1%, return on equity increased 280 basis points and pre-tax operating margin increased 830 basis points.

 

 

BNY Mellon   LOGO   2017 Proxy Statement       3


Table of Contents
 
  INTRODUCTION  

 

DIRECTOR NOMINEES

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

 

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

Technology

  Other Current
Public Company
Board Service

Linda Z. Cook

Age 58, Director since 2016

  Managing Director of EIG Global Energy Partners and CEO of Harbour Energy, Ltd.  

 

  

     

 

  

             

 

  

     

 

0

Nicholas M. Donofrio

Age 71, Director since 1999

  Retired EVP, Innovation & Technology of IBM Corporation  

 

  

     

 

  

 

 

  

         

 

  

 

 

C  

 

 

2

Joseph J. Echevarria

Age 60, Director since 2015

  Retired CEO of Deloitte LLP  

 

(2)

 

 

C  

     

 

  

 

 

  

             

 

3

Edward P. Garden

Age 55, Director since 2014

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

 

  

     

 

  

     

 

  

 

 

C  

 

 

  

     

 

1

Jeffrey A. Goldstein

Age 61, Director since 2014

  Senior Advisor, Hellman & Friedman LLC  

 

  

             

 

C  

 

 

  

 

 

  

     

 

1

Gerald L. Hassell

Age 65, Director since 1998

  Chairman & CEO of The Bank of New York Mellon Corporation                                  

 

1

John M. Hinshaw

Age 46, Director since 2014

  Former EVP and Chief Customer Officer of Hewlett Packard Enterprise Company  

 

  

                     

 

  

 

 

  

 

 

0

Edmund F. “Ted” Kelly

Age 71, Director since 2004

  Retired Chairman of Liberty Mutual Group  

 

  

                 

 

  

 

 

C  

     

 

1

John A. Luke, Jr.

Age 68, Director since 1996

  Non-Executive Chairman of WestRock Company  

 

  

 

 

  

 

 

  

                     

 

3

Jennifer B. Morgan

Age 45, Director since 2016

  President of SAP North America  

 

  

 

 

  

                     

 

  

 

 

0

Mark A. Nordenberg

Age 68, Director since 1998

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

 

  

 

 

  

 

 

C  

 

 

  

             

 

  

 

 

0

Elizabeth E. Robinson

Age 48, Director since 2016

  Retired Global Treasurer of The Goldman Sachs Group, Inc.  

 

  

             

 

  

     

 

  

     

 

0

Samuel C. Scott III

Age 72, Director since 2003

  Retired Chairman, President & CEO of Ingredion Incorporated  

 

  

 

 

  

     

 

C  

     

 

  

         

 

2

 

(1) Catherine A. Rein, a member of our Audit and Corporate Governance and Nominating Committees, is retiring as a director of our company immediately after our Annual Meeting.
(2) Lead Director.

 

 

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Table of Contents
 
  INTRODUCTION  

 

COMMITTEES

 

Audit

 

 

   

Finance

 

Chair: Joseph J. Echevarria

 

Members: John A. Luke, Jr., Jennifer B. Morgan, Mark A. Nordenberg, Catherine A. Rein, Samuel C. Scott III

 

2016 Meetings: 13

 

Key Responsibilities: Overseeing our registered independent public accountants, internal audit function, and internal controls over financial statements and reports.

   

Chair: Jeffrey A. Goldstein

 

Members: Joseph J. Echevarria, Edward P. Garden, Elizabeth E. Robinson

 

2016 Meetings: 6

 

Key Responsibilities: Monitoring and overseeing our financial resources and strategies; and reviewing forecasts and budgets, net interest revenue plans, investment portfolio activities, capital structure, capital raising and capital distribution initiatives that exceed our Corporate Governance Guidelines thresholds.

Corporate Governance and Nominating

 

   

Human Resources and Compensation

 

Chair: Mark A. Nordenberg

 

Members: Linda Z. Cook, Nicholas M. Donofrio, Edward P. Garden, John A. Luke, Jr., Catherine A. Rein

 

2016 Meetings: 9

 

Key Responsibilities: Identifying and reviewing potential directors, and reviewing non-employee director compensation; maintaining our Corporate Governance Guidelines; overseeing annual Board and committee evaluations; and reviewing structure, responsibilities and membership of committees.

   

Chair: Edward P. Garden

 

Members: Jeffrey A. Goldstein, Edmund F. “Ted” Kelly, Samuel C. Scott III

 

2016 Meetings: 6

 

Key Responsibilities: Overseeing employee compensation and benefits, management development and succession and diversity and inclusion programs; and administering our incentive compensation plans, including equity incentive compensation plans.

Corporate Social Responsibility

 

   

Risk

 

Chair: Samuel C. Scott III

 

Members: Nicholas M. Donofrio, Joseph J. Echevarria, Mark A. Nordenberg

 

2016 Meetings: 3

 

Key Responsibilities: Promoting culture of exemplary corporate citizenship; overseeing our philanthropy, community involvement, and advocacy; assessing the impact of our businesses, operations and programs from a social responsibility perspective reflecting varied stakeholders’ interests; and overseeing Community Reinvestment Act and Fair Lending compliance.

   

Chair: Edmund F. “Ted” Kelly

 

Members: Linda Z. Cook, Nicholas M. Donofrio, Edward P. Garden, Jeffrey A Goldstein, John M. Hinshaw, Elizabeth E. Robinson

 

2016 Meetings: 5

 

Key Responsibilities: Approving enterprise-wide risk management practices, our risk appetite statement and our global risk management framework; evaluating risk exposure and tolerance; and reviewing policies and practices regarding risk assessment and risk management.

   

Technology

 

   

Chair: Nicholas M. Donofrio

 

Members: John M. Hinshaw, Jennifer B. Morgan, Mark A. Nordenberg

 

2016 Meetings: 8

 

Key Responsibilities: Approving our technology planning and strategy; reviewing significant technology investments; and monitoring technology trends relative to our business strategy.

 

 

BNY Mellon   LOGO   2017 Proxy Statement       5


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

 

•    Board succession and refreshment: our Board, led by the Corporate Governance and Nominating Committee recruiting efforts, added three new independent directors in 2016

 

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

 

•    High rate of attendance: average 2016 attendance at Board and committee meetings was 93%

 

•    A substantial portion of director compensation is paid in equity that is retained until retirement

 

•    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 2016 Total Direct Compensation(1)

 

Named Executives(2)
(NEOs)
  Salary   Incentive Compensation   Total
  Incentive  
as % of
Target
 

 

Awarded Total
Direct

  Compensation(1)  

    Cash   RSUs(3)   PSUs(3)    

Gerald L. Hassell

Chairman & CEO

 

 

$1,000,000

 

 

$4,326,000

 

 

$4,326,000

 

 

$8,652,000

 

 

124%

 

 

$18,304,000

Thomas P. (“Todd”) Gibbons

Vice Chairman & CFO

 

 

   $650,000

 

 

$2,354,580

 

 

$1,962,150

 

 

$3,531,870

 

 

124%

 

 

  $8,498,600

Brian T. Shea

Vice Chairman & CEO of Investment Services

 

 

   $650,000

 

 

$2,388,870

 

 

$1,990,725

 

 

$3,583,305

 

 

125%

 

 

  $8,612,900

Karen B. Peetz

President

 

 

   $650,000

 

 

$1,353,938

 

 

$3,159,187

 

 

               $0(4)

 

 

104%

 

 

  $5,163,125

Mitchell E. Harris

CEO of Investment Management

 

 

   $650,000

 

 

$1,736,438

 

 

$1,447,031

 

 

$2,604,656

 

 

  79%

 

 

  $6,438,125

 

1 The amounts reported as Awarded Total Direct Compensation differ substantially from the amounts determined under SEC rules as reported for 2016 in the “Total” column of the Summary Compensation Table set forth on page 60. The above table is not a substitute for the Summary Compensation Table.
2 Our NEOs for 2016 also include Curtis Y. Arledge, former Vice Chairman and CEO of Investment Management. Mr. Arledge’s employment with the company terminated effective March 23, 2016.
3 Restricted stock units (“RSUs”) vest in equal installments over three years. Performance-based restricted stock units (“PSUs”) are earned between 0 – 150% based on the achievement of performance metrics over the 2017 – 2019 performance period.
4 Ms. Peetz’s incentive award was paid in cash and RSUs in light of her retirement on December 31, 2016.

 

 

6       BNY Mellon   LOGO   2017 Proxy Statement


Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS  

 

Item 1. Election of Directors

 

RESOLUTION

  Page 8
     

NOMINEES

  Page 9

Director Qualifications

  Page 16

Majority Voting Standard

  Page 17
     

CORPORATE GOVERNANCE AND BOARD INFORMATION

  Page 18

Our Corporate Governance Practices

  Page 18

Board Leadership Structure

  Page 21

Director Independence

  Page 22

Oversight of Risk

  Page 24

Board Meetings and Committee Information

  Page 25

Compensation Consultants to the HRC Committee

  Page 29

Succession Planning

  Page 30

Contacting the Board

  Page 30
     

DIRECTOR COMPENSATION

  Page 31

 

 

BNY Mellon   LOGO   2017 Proxy Statement       7


Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS    > Resolution

 

Proposal

We are asking stockholders to elect the 13 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 2018 Annual Meeting of stockholders or until their successors have been duly elected and qualified.

Background

 

•    Each nominee currently serves on our Board of Directors.

 

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

 

•    Catherine A. Rein, currently a director of our company, will not be standing for reelection at 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 16 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, global management, insurance, risk management and legal matters.

 

•    The nominees are able to devote the necessary time and effort to BNY Mellon 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 17. 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 17 below.

 

 

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Table of Contents
 
  ITEM 1. ELECTION OF DIRECTORS    > Nominees

 

LOGO

 

 

Linda Z. Cook

 

Age 58

 

Independent Director since 2016

 

Managing Director of EIG Global Energy Partners and CEO of Harbour Energy, Ltd.

 

Retired Executive Committee Member and Director of Royal Dutch Shell plc

 

Committees: Corporate Governance and Nominating, Risk

 

Other Current Public Company Board Service: None

LOGO

 

 

Nicholas M. Donofrio

 

Age 71

 

Independent Director of BNY Mellon and predecessor companies since 1999

 

Retired Executive Vice President, Innovation and Technology of IBM Corporation

 

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

 

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

 

 

Ms. Cook is a Managing Director and member of the Executive Committee of EIG Global Energy Partners, an investment firm focused on the global energy industry, and CEO of Harbour Energy, Ltd., an energy investment vehicle. Ms. Cook joined EIG in 2014, after spending over 29 years with Royal Dutch Shell at various companies in the U.S., the Netherlands, the United Kingdom and Canada. At her retirement from Royal Dutch Shell, Ms. Cook was a member of the Executive Committee in the Netherlands headquarters and a member of the Board of Directors. Her primary executive responsibility was Shell’s global upstream Natural Gas business in addition to oversight for Shell’s global trading business, Shell Renewable Energy, and Shell’s Downstream R&D and Major Projects organizations. Ms. Cook previously was CEO of Shell Canada Limited, CEO of Shell Gas & Power and Executive VP of Finance, Strategy and HR for Shell’s global Exploration and Production businesses.

Ms. Cook has previously served on the Boards of Directors of KBR, Inc., The Boeing Company, Marathon Oil Corporation, Cargill Inc., Royal Dutch Shell plc, Royal Dutch Shell Petroleum Co. NV and Shell Canada Limited. Ms. Cook is also a member of the National Petroleum Council, an advisory committee to the U.S. Secretary of Energy, and the Society of Petroleum Engineers and is a Trustee of the University of Kansas Endowment Association. Ms. Cook earned a Bachelor of Science degree in Petroleum Engineering from the University of Kansas.

 

Skills and Expertise:   

 

   LOGO    LOGO    LOGO    LOGO

 

 

International business operations experience at a senior policy-making level of a large, complex company

 

 

Expertise in financing, operating and investing in companies

 

 

Extensive service on the boards of several large public companies in regulated industries

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 a Trustee Emeritus 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 Ultra Capital, LLC 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

 

 

 

LOGO  Leadership        

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

 

 

BNY Mellon   LOGO   2017 Proxy Statement       9


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

LOGO

 

 

Joseph J. Echevarria

 

Age 60

 

Independent Director since 2015; Lead Director since 2016

 

Retired CEO of Deloitte LLP

 

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

 

Other Current Public Company Board Service: Pfizer Inc.; Unum Group; Xerox Corporation

LOGO

 

 

Edward P. Garden

 

Age 55

 

Independent Director since 2014

 

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

 

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

 

Other Current Public Company Board Service: Pentair plc

 

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 the Chair Emeritus of former 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

 

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. 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

 

 

 

LOGO  Leadership        

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

 

 

10       BNY Mellon   LOGO   2017 Proxy Statement


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

LOGO

 

 

Jeffrey A. Goldstein

 

Age 61

 

Independent Director since 2014

 

Senior Advisor, 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: Westfield Corporation

LOGO

 

 

Gerald L. Hassell

 

Age 65

 

Management Director of BNY Mellon and predecessor companies since 1998

 

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

 

Committees: None

 

Other Current Public Company Board Service: Comcast Corporation

 

Mr. Goldstein is a Senior Advisor at Hellman & Friedman LLC, a private equity firm. He was a Managing Director at Hellman & Friedman from 2011 to 2016 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. In addition to the public company board service noted above, Mr. Goldstein is a member of the Board of Directors of Edelman Financial Services, LLC and on the Advisory Board of Promontory Financial Group, LLC. He also serves on the Board of Trustees of Vassar College. 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

 

 

Expertise in the operations of large financial institutions

 

 

Experience in financial regulation and banking

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 Lincoln Center for the Performing Arts, Vice Chair of Big Brothers/Big Sisters of New York and a member of the Board of Visitors of Columbia University Medical Center. 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

 

 

 

LOGO  Leadership        

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

 

 

BNY Mellon   LOGO   2017 Proxy Statement       11


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

John M. Hinshaw

 

Age 46

 

Independent Director since 2014

 

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

 

Committees: Risk, Technology

 

Other Current Public Company Board Service: None

LOGO

 

 

Edmund F. “Ted” Kelly

 

Age 71

 

Independent Director of BNY Mellon and predecessor companies since 2004

 

Retired Chairman of Liberty Mutual Group

 

Committees: Human Resources and Compensation, Risk (Chairman)

 

Other Current Public Company Board Service: None

 

Mr. Hinshaw served as Executive Vice President of Hewlett Packard and Hewlett Packard Enterprise from 2011 to 2016, running Technology and Operations and serving as Chief Customer Officer. 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 NAF, 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

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. Mr. Kelly is also a member of the Board of Trustees of the Boston Symphony Orchestra; a member of the Senior Advisory Council of the New England College of Business and Finance; a member of the Bretton Woods Committee; 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

 

 

 

 

LOGO  Leadership        

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

 

 

12       BNY Mellon   LOGO   2017 Proxy Statement


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

 

LOGO

 

 

John A. Luke, Jr.

 

Age 68

 

Independent Director of BNY Mellon and predecessor companies since 1996

 

Non-Executive Chairman of WestRock Company

 

Committees: Audit, Corporate Governance and Nominating

 

Other Current Public Company Board Service: The Timken Company; WestRock Company; Dominion Midstream Partners, LP

LOGO

 

 

Jennifer B. Morgan

 

Age 45

 

Independent Director since 2016

 

President of SAP North America

 

Committees: Audit, Technology

 

Other Current Public Company Board Service: None

 

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 and the Virginia Museum of Fine Arts, and is Rector and a 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

 

Ms. Morgan has served as President of SAP North America since 2014, where she is responsible for the company’s strategy, revenue and customer success in the U.S. and Canada. Since being named President, she has led SAP’s rapid shift to the cloud in North America while helping customers achieve growth in the digital economy. Ms. Morgan served in a number of leadership roles for SAP since joining the company in 2004, including as head of SAP North America’s public sector organization and president of its Regulated Industries business unit. In these roles, Ms. Morgan was a recognized thought-leader on government and public sector technology innovation, represented SAP to the U.S. Government and testified before Congress on technology and acquisition issues. Earlier in her career, Ms. Morgan served in various management roles at Siebel Systems and Accenture.

Ms. Morgan is an executive advisory board member of James Madison University College of Business and a board member of NAF, an educational non-profit organization bringing education, business and community leaders together to transform the high school experience, and GENYOUth, an organization dedicated to improving the health and wellness of the next generation of young leaders. Ms. Morgan earned a Bachelor of Business Administration degree from James Madison University.

 

Skills and Expertise:   

 

   LOGO    LOGO    LOGO    LOGO

 

 

Leadership and client experience with technology as a business driver

 

 

Experience in the operations at large, complex global companies

 

 

 

LOGO  Leadership        

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

 

 

BNY Mellon   LOGO   2017 Proxy Statement       13


Table of Contents
ITEM 1. ELECTION OF DIRECTORS > Nominees

 

LOGO

 

 

Mark A. Nordenberg

 

Age 68

 

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 (Chairman), Corporate Social Responsibility, Technology

 

Other Current Public Company Board Service: None

LOGO

 

 

Elizabeth E. Robinson

 

Age 48

 

Independent Director since 2016

 

Retired Global Treasurer of The Goldman Sachs Group, Inc.

 

Committees: Finance, Risk

 

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. Robinson served as Global Treasurer, Partner and Managing Director of The Goldman Sachs Group, Inc., the global financial services company, from 2005 to 2015. Prior to that, Ms. Robinson served in the Financial Institutions Group within the Investment Banking Division of Goldman Sachs.

Ms. Robinson is a trustee of Williams College and MASS MoCA and was, until August 2016, a director of Goldman Sachs Bank USA. Ms. Robinson received a Bachelor of Arts degree from Williams College and an M.B.A. from Columbia University.

 

Skills and Expertise:   

 

LOGO    LOGO    LOGO    LOGO

 

 

Experience in finance and risk management

 

 

Experience in financial regulation and banking

 

 

Leadership in the operations of a large global financial institution

 

 

 

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

 

 

Samuel C. Scott III

 

Age 72

 

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 (Chairman), Human Resources and Compensation

 

Other Current Public Company Board Service: Abbott Laboratories; Motorola Solutions, Inc. (lead director)

 

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 CPC International’s Corn Refining division 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, The Chicago Council on Global Affairs and Get IN Chicago. 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   2017 Proxy Statement       15


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 88), 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 the following with respect to Board composition:

 

 

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 viewpoints, professional experience, education, skills and other individual qualities such as race, gender and ethnicity, and the variety of attributes that contribute to the Board’s collective strength.

 

 

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 30.

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.

Each of the nominees for election as director, other than Mses. Cook, Morgan and Robinson, was elected as a director at our 2016 Annual Meeting. Ms. Robinson was appointed a director effective October 3, 2016 and was recommended to the CG&N Committee for consideration as a candidate after members of management who had become acquainted with her through her work with The Goldman Sachs Group, Inc. learned of her impending retirement. Each of Mses. Cook and Morgan was appointed a director effective December 1, 2016; they were recommended to the CG&N Committee for consideration as a candidate by a third-party search firm and a director, respectively. Our Board believes that each of the nominees meet the criteria described above with diversity and depth and breadth of experience that enable them to oversee management of the company as an effective and engaged Board. No director has a family relationship to any other director, nominee for director or executive officer.

Catherine A. Rein, who was elected as a director at our 2016 Annual Meeting, will not be standing for reelection. The Board is grateful to Ms. Rein for her invaluable contributions as a director during her more than 35 years of service to the company and The Bank of New York. The Board will miss the camaraderie, commitment, insight and perspective of Ms. Rein.

 

 

 

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Table of Contents
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.

 

 

 

BNY Mellon   LOGO   2017 Proxy Statement       17


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. Our key governance practices are described below.

 

 

Independence

 

 

 

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

 

•   Reflecting our Board’s focus on refreshment, in 2016 our Board added three new diverse directors.

 

•   Our independent Lead Director is selected annually by our independent directors and has broad powers, including approval of Board meeting agendas, materials and schedules, leading executive sessions and consulting with the Chairman of the Human Resources and Compensation Committee (“HRC Committee”) on CEO performance, compensation and succession.

 

•   Our standing committees are composed entirely of independent directors.

 

 

Active

Engagement

 

 

 

•   We had a high rate of director attendance at Board and committee meetings in 2016, averaging 93%.

 

•   We have continued to actively engage with our stakeholders through multiple initiatives, inviting feedback from investors representing about 45% of our outstanding shares and reaching investors representing almost 30% of our outstanding shares, as well as with proxy advisory firms and other stakeholders.

 

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

 

•   Stockholders and other interested parties can directly contact our Board (see “Helpful Resources” on page 88).

 

 

Ongoing Improvements

 

 

 

•   Our Corporate Governance Guidelines require that the Corporate Governance and Nominating Committee rotate the Lead Director and committee Chairmen at five-year intervals and consider enhanced director qualifications in connection with director nominations.

 

•   Following engagement with stockholders, in 2015 we adopted proxy access and further refined our proxy disclosures regarding executive compensation and the annual Board self-evaluation process and resulting enhancements.

 

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

 

•   Our Board and each of our standing committees conduct annual self-evaluations that have resulted in enhancements to the Board (see “Evaluation of Board and Committee Effectiveness” on page 19).

 

•   Our Board participates in information sessions during regularly scheduled and special meetings, during which they receive business, regulatory and other 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.

 

•  We amended our Corporate Governance Guidelines to refine the Lead Director duties and responsibilities and limit any director who also serves as an executive officer of a publicly traded company to service on the board of one other public company in addition to our Board.

 

 

 

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

 

 

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.

 

•  We have enhanced our thorough and robust director orientation program in which new directors participate in their first six months as a director.

 

 

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

Based on stockholder engagement, over the last few years our Board has been focused on Board refreshment and has redoubled its succession efforts accordingly. In 2016, our Board added three new diverse directors. Since August 2014, six of our directors have retired or announced their retirement and our Board has added seven new directors over that same period. Each of these new directors has added experience and unparalleled expertise to our Board, complementing and supplementing the experience and talents of our Board as a whole. Although the CG&N Committee is principally involved in Board succession and recruitment, our entire Board plays a role in recruiting, interviewing and assessing candidates. Our Board’s succession planning is ongoing and will continue to be robust as it seeks to further enhance the diversity of our Board while balancing necessary continuity.

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

 

 

to ensure our directors have sufficient time to devote to BNY Mellon matters, amended our Corporate Governance Guidelines such that any director who also serves as an executive officer of a publicly traded company can only serve on the board of one other publicly traded company in addition to our Board,

 

 

amended our Corporate Governance Guidelines to clarify the role of the Lead Director, in connection with our chief executive officer’s compensation, succession planning and the Board’s annual performance evaluation,

 

 

amended our Corporate Governance Guidelines to require rotation of the Lead Director at a five-year interval,

 

amended our Corporate Governance Guidelines to reflect areas of consideration in the annual Board self-evaluation, and

 

 

eliminated the Executive Committee, in recognition of the ability to convene the Board in exigent circumstances.

As previously disclosed, during 2016 our Board elected Mr. Echevarria as our new Lead Director, consistent with our Board’s succession planning. In addition, our Board elected new chairs to the CG&N, Corporate Social Responsibility and Human Resources and Compensation Committees in 2016. We anticipate the election of a new chair to the Technology Committee in 2017.

Evaluation of Board and Committee Effectiveness

Annually, the Board and each of our standing committees conducts a self-evaluation to continually enhance performance. The Board and management then work together to enhance Board and committee effectiveness in light of the results of the self-evaluations.

The CG&N Committee, in consultation with the Lead Director, will determine the process, scope and contents of the Board’s annual performance evaluation. 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.

Based on the CG&N Committee’s determination of the evaluation process and scope, each standing committee self-evaluation is conducted in an executive session led by the chairman of the committee. The results of the self-evaluation of each standing committee are reported to the full Board.

 

 

 

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As a result of the most recent round of Board and committee self-evaluations, the Board determined to refine committee reporting to the Board to convey matters discussed and actions taken. The Board also decided that all directors should have access to materials for all committees as a good governance practice. Finally, the directors suggested enhancements to the new director orientation program which have been implemented, including additional one-on-one sessions with our executive officers.

Active Stockholder Engagement Program

We conduct extensive governance reviews and investor outreach throughout the year, and our Board has formally endorsed the SDX Protocol which offers guidance to public company boards and stockholders on when

engagement is appropriate, and how to make these engagements valuable and effective. Our independent directors engage in outreach discussions along with management to ensure that both 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 implementation of proxy access was informed by the discussions among directors, management and stockholders with respect to certain provisions. Additionally, following feedback from stockholders regarding our annual Board and committee self-evaluation process, we have refined our proxy statement to include discussion regarding this important process and subsequent actions to continuously enhance Board and committee function.

 

 

 

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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 and promotes Board effectiveness.

 

 

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:

 

•  Reviews and approves, in coordination with the Chairman and Chief Executive Officer, agendas for Board meetings, materials, information 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,

 

• Consults with the HRC Committee regarding its consideration of Chief Executive Officer compensation,

 

•  In conjunction with the chairman of the HRC Committee, discusses with the Chairman/Chief Executive Officer the Board’s annual evaluation of his performance as Chief Executive Officer,

 

•  Consults with the HRC Committee on Chief Executive Officer succession planning, and

 

•  Consults with the Chairman of the CG&N Committee on the Board’s annual performance evaluation.

 

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 12 of our 13 director nominees are independent. Our independent director nominees are Linda Z. Cook; Nicholas M. Donofrio; Joseph J. Echevarria; Edward P. Garden; Jeffrey A. Goldstein; John M. Hinshaw; Edmund F. “Ted” Kelly; John A. Luke, Jr.; Jennifer B. Morgan; Mark A. Nordenberg; Elizabeth E. Robinson and Samuel C. Scott III. As our Chairman and Chief Executive Officer, Gerald L. Hassell is not independent. The Board has also determined that each of Mr. Kogan and Dr. Richardson, who did not stand for reelection as a director last year, Mr. von Schack, who resigned effective following our 2016 Annual Meeting, and Ms. Rein, who is not standing for reelection as a director this year, was independent during the period in 2016 in which he or she served as a director.

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 85, 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 2016 when one of our current independent directors served as an executive officer of, or was otherwise employed by, such organization: Hewlett Packard Enterprise Company (Mr. Hinshaw), SAP SE (Ms. Morgan) 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 0.06% of the seller’s annual revenue for its last reported fiscal year or 0.17% of our annual revenue for 2016.

 

 

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 2016 when one of our current independent directors served as an executive officer of, or was otherwise employed by, such organization: EIG Global Energy Partners (Ms. Cook); Trian Fund Management, L.P. (Mr. Garden); Hellman & Friedman LLC (Mr. Goldstein); Hewlett Packard Enterprise Company (Mr. Hinshaw) and the University of Pittsburgh (Mr. Nordenberg). All of the

 

 

 

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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 0.2% of the purchaser’s annual revenue for its last reported fiscal year and less than 0.01% of our annual revenue for 2016.

 

 

Customer relationships. We and our subsidiaries provide ordinary course services, including asset management services, banking services, broker services and credit services, to Messrs. 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 current or former independent directors served as a director, executive officer or trustee during 2016, namely Messrs. Donofrio, Echevarria, Goldstein, Nordenberg, Scott and von Schack. In 2016, charitable contributions to these organizations totaled approximately $700,000 in the aggregate, and none of these organizations received a contribution greater than $170,000.

 

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 2016, namely Hewlett Packard Enterprise Company (Mr. Hinshaw) and SAP SE (Ms. Morgan). As of December 31, 2016, we, our subsidiaries or funds advised by our subsidiaries, in the aggregate, owned or had the power to vote less than 1.01% of the outstanding shares of Hewlett Packard Enterprise Company and depositary receipts representing less than 0.03% of the outstanding shares of SAP SE.

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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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 65 through 70 in our 2016 Annual Report. See “How We Address Risk and Control” on page 59 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 2016 Annual Meeting of stockholders.

Our Board held 14 meetings in 2016. 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 93%.

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 88).

 

 

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Audit

Committee

 

Independent 13 Meetings in 2016

     

Joseph J. Echevarria (Chair), John A. Luke, Jr., Jennifer B. Morgan,
Mark A. Nordenberg, Catherine A. Rein, 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 registered independent 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, have accounting or related financial management expertise within the meaning of the NYSE listing standards as interpreted by our Board and are outside directors, independent of management, under the FDIC’s rules and regulations. Our Board has determined that each of Mr. Echevarria and Mr. Scott 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 and has “banking and financial management expertise” as set out in the FDIC’s rules and regulations.

 

 

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Corporate Governance and Nominating Committee

 

Independent

9 Meetings in 2016

 

    

Mark A. Nordenberg (Chair), Linda Z. Cook, Nicholas M. Donofrio,
Edward P. Garden, John A. Luke, Jr., Catherine A. Rein,

 

Corporate Governance Matters. As further described on page 16, 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 2016

    

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

 

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 88.

    

Finance
Committee

 

Independent

6 Meetings in 2016

 

    

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

 

The Finance Committee assists 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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Human Resources and Compensation Committee

 

Independent
6 Meetings in 2016

     

Edward P. Garden (Chair), Jeffrey A. Goldstein, Edmund F. “Ted” Kelly,
Samuel C. Scott III

 

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 the CEO and 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 35 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 29.

 

 

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Risk Committee

 

Independent 5 Meetings in 2016

     

Edmund F. “Ted” Kelly (Chair), Linda Z. Cook, Nicholas M. Donofrio,
Edward P. Garden, Jeffrey A. Goldstein, John M. Hinshaw, Elizabeth E. Robinson

 

See “Oversight of Risk” on page 24 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. Our Board has determined that Mr. Kelly satisfies the independence requirements to serve as Chairman of the Risk Committee set out in the Board of Governors of the Federal Reserve System rules and has experience in identifying, assessing, and managing risk exposures of large, complex financial firms based upon his senior leadership experience of a multi-line insurance company.

     

Technology Committee

 

Independent
8 Meetings in 2016

     

Nicholas M. Donofrio (Chair), John M. Hinshaw, Jennifer B. Morgan,
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 35 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 2016, 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 and 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 88).

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 2016, this award of deferred stock units was granted shortly after the 2016 Annual Meeting for directors elected or re-elected at such meeting and, similarly, for 2017, this award will be granted shortly after the 2017 Annual Meeting for directors elected or re-elected at such meeting.

For 2016, 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.

Our directors are not permitted to hedge, pledge or transfer any of their deferred stock units and are subject a robust anti-hedging policy as described in further detail under “Compensation Discussion and Analysis — Anti-Hedging Policy” on page 55 below. With the exception of those securities deemed to be beneficially owned by Mr. Garden by virtue of his relationship with Trian, this policy prohibits our directors from engaging in certain transactions involving our securities and requires directors to pre-clear any transaction in company stock or derivative securities with our legal department (including gifts, pledges and other similar transactions).

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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Table of Contents
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 2016. 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 ($)(4)
 

Change in
Pension Value
 and Nonqualified 

Deferred
Compensation
Earnings(5)

  All Other
 Compensation($)(6) 
  Total ($)

Linda Z. Cook(1)

    $10,321            $—            $—        $—   $10,321

Nicholas M. Donofrio(2)

  $149,000    $129,996             $—   $1,014    $280,010 

Joseph J. Echevarria(2)

  $196,500   $129,996            $—        $—   $326,496

Edward P. Garden

  $138,750   $129,996            $—        $—   $268,746

Jeffrey A. Goldstein(2)

  $140,000   $129,996            $—        $—   $269,996

John M. Hinshaw(2)

  $134,000   $129,996            $—        $—   $263,996

Edmund F. “Ted” Kelly

  $155,400   $129,996            $—        $—   $285,396

Richard J. Kogan(3)

    $37,500            $—            $—        $—   $37,500

John A. Luke, Jr.

  $120,000   $129,996            $—        $—   $249,996

Jennifer B. Morgan

    $10,321            $—            $—        $—   $10,321

Mark A. Nordenberg

  $143,600   $129,996       $4,483   $3,785   $281,864

Catherine A. Rein

  $120,000   $129,996            $—   $2,184   $252,180

Elizabeth E. Robinson

    $30,019            $—            $—        $—   $30,019

William C. Richardson(3)

    $44,150            $—            $—      $477   $44,627

Samuel C. Scott III

  $141,250   $129,996            $—      $554   $271,800

Wesley W. von Schack(2)(3)

    $64,000            $—     $51,744   $5,673   $121,417

 

(1) Each of Mses. Cook and Morgan was appointed as a director effective December 1, 2016. Ms. Robinson was appointed as a director effective October 3, 2016.

 

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

 

(3) Mr. Kogan and Dr. Richardson did not stand for re-election as a director at our 2016 Annual Meeting. Mr. von Schack resigned effective following our 2016 Annual Meeting.

 

(4) 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 3,166 deferred stock units granted to each independent director in April 2016, using the valuation methodology for equity awards set forth in note 15 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. As of December 31, 2016, each of Messrs. Donofrio, Echevarria, Garden, Goldstein, Hinshaw, Kelly, Luke, Nordenberg and Scott and Ms. Rein owned 3,208 unvested deferred stock units.

 

(5) The amounts disclosed in this column for Messrs. Nordenberg and Mr. 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 2016 was 4.31%. The present value of Ms. Rein’s accumulated pension benefit under The Bank of New York Retirement Plan for Non-Employee Directors decreased by $5,640. 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.

 

(6) The amounts disclosed for Messrs. Donofrio, Richards 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.

 

 

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  ITEM 2. ADVISORY VOTE ON COMPENSATION  

 

Quick Reference Guide

 

RESOLUTION

  Page  34
     

COMPENSATION DISCUSSION AND ANALYSIS

  Page  35

Introduction

  Page 35

Performance

  Page 38

Compensation of Named Executives

  Page 40

Pay Practices

  Page 52

How We Address Risk and Control

  Page 59

Report of the HRC Committee

  Page 59
     

EXECUTIVE COMPENSATION TABLES

  Page  60

Summary Compensation Table

  Page 60

Grants of Plan-Based Awards

  Page 62

Outstanding Equity Awards at Fiscal Year-End

  Page 63

Option Exercises and Stock Vested

  Page 65

Pension Benefits

  Page 65

Nonqualified Deferred Compensation

  Page 67

Potential Payments upon Termination or Change in Control

  Page 68

 

 

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  ITEM 2. ADVISORY VOTE ON COMPENSATION    > Resolution

 

Proposal

We highly value dialogue and engagement with our stakeholders, including stockholders, 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 2016 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. We have consistently received strong support for our executive compensation program, with over 97% stockholder approval of our 2015 executive compensation at last year’s Annual Meeting, and over 95% approval of our 2014 executive compensation and over 93% approval of our 2013 executive compensation at prior Annual Meetings.

 

•   In order to ensure that we have investor feedback, we have continued our annual investor outreach process in 2016, resulting in our having conversations with investors representing almost 30% of our outstanding shares as well as with proxy advisory firms and other stakeholders.

 

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•   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.

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 2017 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 have held an advisory vote each year on our executive compensation program. At our 2017 Annual Meeting, in addition to this advisory vote on 2016 compensation, we will hold an advisory vote on say-on-pay vote frequency. For information regarding the advisory vote on say-on-pay vote frequency, see Item 3, on page 72 below.

 

 

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

 

Introduction

Organization and Key Considerations

 

Performance  

(see pages  

38 to 39)  

 

•   Our 2016 performance builds on our 2015 results with strong expense controls and stockholder-friendly capital allocation leading to double-digit EPS growth, and in addition, we have shown continued progress towards the three-year performance goals we set at our Investor Day in October 2014

 

   11% year-over-year growth in operating EPS with 2016 OEPS at $3.17, 2% above our operating plan of $3.10

 

   Adjusted Return on Tangible Common Equity remained strong at 21%*

 

   Adjusted Revenue increased 1% year-over-year (to $15.2 billion, below our operating plan*)

 

   Adjusted noninterest expense $282 million better than our operating plan and lower than 2015*

 

•   274 basis points of adjusted operating leverage in 2016, exceeding the target by 174 basis points

 

   Adjusted pre-tax operating margin increased to 33% (vs. 31% in 2015)*

 

   Relative stock returns were strong, with both 3- and 5-year TSR outperforming the median of our peer group and the S&P 500 Financials Index

 

   Returned $3.2 billion to stockholders, with $2.4 billion in common stock repurchases and $778 million in dividends

 

Compensation  

of Named   Executives  

(see pages  

40 to 51)  

 

•   Introduced a “one decision” model for 2016 incentive compensation determinations, rather than having two separate decisions for annual and long-term components, in order to: (1) better align compensation with current year performance, (2) increase upside and downside program leverage and (3) simplify the program to enhance employee understanding of performance objectives

 

•   Shifted the mix of deferred incentive compensation components to increase PSUs, emphasizing performance-based equity over time-vesting equity and promoting long-term alignment with our stockholders

 

•   In calculating the incentive for our CEO and other NEOs, the HRC Committee recognized our strong overall 2016 operating performance, but exercised its discretion to take into account that a key metric, revenue growth, was below operating plan

 

Pay  

Practices  

(see pages  

52 to 58)  

 

•   Directly link pay to performance

 

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

 

•   Reflect good corporate governance and practices (e.g., no tax gross-ups 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 59)  

 

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

 

   Comprehensive recoupment policy that subjects all equity incentives to 100% forfeiture during, and clawback following, the vesting period; all cash incentives are subject to 100% clawback within three years following the award date

 

   Achievement of 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 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

 

Progress Towards Our Investor Day Goals

 

    

Investor Day Goals

Operating Basis:

2015 – 20171

  2-Year Progress Towards
Our 3-Year Goals
    

 “Flat” Rate

Scenario2 

 

“Normalizing” 

Rate Scenario3

  2015 – 2016  Performance4

Adjusted Revenue Growth

  3.5 – 4.5%   6 – 8%   2%

Operating EPS Growth

  7 – 9%   12 – 15%   15%

Adjusted Return on Tangible Common Equity

  17 – 19%   20 – 22%   21%

 

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

 

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. For 2015, adjusted revenue growth was 2%, operating EPS growth was 19% and adjusted return on tangible common equity was 21%. For 2016, adjusted revenue growth was 1%, operating EPS growth was 11% and adjusted return on tangible common equity was 21%.

2016 Program Outcomes

 

Corporate Component Determination   CEO Incentive Award Payout

 

•  Operating EPS and adjusted operating leverage above plan

 

•  Strong multi-year TSR performance relative to peers and the S&P Financials Index

 

•  Strong relative EPS growth compared to peers

 

•  Disciplined expense management

 

•  Revenue above prior year but below plan

 

 

 

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*   See pages 44 through 45 for further information regarding the CEO’s 2016 incentive award determination.

2016 Program Enhancements

 

Objectives   Enhancement

 

Strengthen  

tie between  

pay and  

performance  

 

 

•   Implemented a “one decision” model for incentive compensation determinations, basing 100% of incentive compensation on our “balanced scorecard” — a comprehensive analysis of corporate and individual performance

 

•   “One decision” model (1) better aligns compensation with current year performance, (2) increases upside and downside program leverage and (3) simplifies the program to enhance employee understanding of performance objectives

 

•   Shifted the mix of deferred incentive compensation components to increase PSUs, emphasizing performance-based equity over time-vesting equity

 

 

 

Limit  

executive  

severance  

benefits  

 

 

 

•   Amended Executive Severance Plan to reduce maximum severance eligibility from 2 times to 1 times base salary

 

 

 

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

 

CEO Total Direct Compensation1

 

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1 Total Direct Compensation reflects salary and incentive compensation for the applicable year. Totals may not foot due to rounding.

 

2 Target and award determinations reflect salary rate for the year and incentive compensation which is awarded after year-end for performance during the year.

 

3 SEC Reporting reflects salary, stock awards and non-equity incentive plan compensation reported in the Summary Compensation Table set forth on page 60 (and for 2013, reported in the Summary Compensation Table set forth in last year’s proxy statement). SEC Reporting does not reflect how our HRC Committee sets targets and determines awards, largely due to the timing requirements for reporting equity-based pay and our previously disclosed 2013 pay-for-performance enhancements.

 

4 Percentages represent incentive awarded as a percentage of target.

2016 Executive Pay Practice Highlights

 

What we do:    What we don’t do:    

LOGO   Directly link pay to performance

 

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

 

LOGO   Promote long-term stock ownership through deferred equity compensation

 

LOGO   Balance risk and reward in compensation

 

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

 

LOGO   Balance incentives for short- and long-term performance with a mix of fixed and variable, cash and equity compensation

 

LOGO   Conduct a robust stockholder outreach program

 

  

LOGO    Do not use employment agreements

 

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

 

LOGO    No excessive perquisites or benefits

 

LOGO    No tax gross-ups

 

LOGO    No hedging or short sales of our stock

 

LOGO    No dividend equivalents paid on unearned PSUs or RSUs

 

 

 

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

 

Performance

Our operating earnings per share (“OEPS”) was $3.17, representing a year-over-year increase of 11% and a 2% increase above our operating plan of $3.10. Combined with our strong OEPS growth last year, compounded OEPS growth for the two-year period from 2015 through 2016 was 15%, which is on track to meet our three-year Investor Day Goals. OEPS reflects GAAP EPS (earnings per diluted common share) as adjusted for significant items, including M&I, litigation and restructuring charges (recovery) in excess of plan. Our GAAP EPS increased year-over-year by 16% from $2.71 to $3.15, which is 5% above our GAAP plan of $2.99, representing a GAAP EPS growth rate at the 93rd percentile relative to our peers.

Our Return on Tangible Common Equity remained strong at 21%*, up 70 basis points year-over-year. Accordingly, our Return on Tangible Common Equity for the two-year period from 2015 through 2016 was also 21%*, which is on track to meet our three-year Investor Day Goals. Our continued focus on implementing expense controls resulted in a year-over-year decrease in expenses of 2%* on an adjusted basis, and our compensation to revenue ratio decreased to 37.6% as compared to 38.4% in 2015.

Although 2016 adjusted revenue of $15.2 billion* was below our operating plan of $15.5 billion, it represented a year-over-year increase of 1% and, when coupled with our strong operating expense controls, resulted in net operating income of $3.45 billion* (7% higher than 2015 net operating income and 3% above our operating plan). Our adjusted revenue growth for the two-year period from 2015 through 2016 was 2%.

In 2016, we achieved industry leading operating margins, and our adjusted pre-tax operating margin increased to 33%* (from 31% in 2015). Additionally, we attained positive adjusted operating leverage of 274 basis points.

 

Operating EPS

   Adjusted Pre-Tax Operating Margin*

 

 

LOGO

  

 

 

LOGO

Adjusted Noninterest Expense

($ in millions)*

  

Adjusted Return on Tangible

Common Equity*

 

LOGO

  

 

 

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* 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.

 

 

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

 

In 2016, we executed on our capital plan and returned nearly $3.2 billion to our stockholders in the form of common dividends and share repurchases. We distributed $778 million of common stock dividends to our stockholders in 2016 and also repurchased 5.4% of outstanding common shares for approximately $2.4 billion in 2016. We have repurchased 20% of common shares over the last five years and our 2016 dividend distributions and share repurchases resulted in a combined payout ratio of about 93%, one of the highest payout ratios in our peer group.

Although our total shareholder return (TSR) was below the median relative to our peer group and the S&P Financials Index as a whole for 2016 (25th and 48th percentiles, respectively), our TSR has outperformed the median of our peer group and the S&P Financials Index over both a three-year period (61st and 59th percentiles, respectively) and a five-year period (72nd and 69th percentiles, respectively).

We 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 common equity Tier 1 ratio, calculated under the the Advanced Approach on a fully-phased in basis, was 9.7%* at December 31, 2016, exceeding the fully phased-in requirements plus applicable buffers of 8.5%.

Our strategic priorities for 2017 are designed to leverage our scale and expertise while delivering innovative strategic solutions with strong upside potential. The 2017 strategic priorities include: enhancing the client experience; driving profitable revenue growth; executing our business improvement processes to increase productivity and effectiveness while controlling expenses; being a strong, trusted counterparty by maintaining our safety and soundness, low-risk profile and strong liquidity and capital positions; generating and effectively deploying excess capital; and attracting, developing and retaining top talent. We believe that by executing on these priorities, we will ensure that we are making appropriate investments in our business to sustain long-term growth and value creation for our clients and stockholders.

We are also focused on improving the performance of our investment management business in 2017. In 2016, our investment management business achieved below-plan returns. To improve our performance and drive profitable revenue growth for 2017, we are focused on improving our investment performance, optimizing our distribution and infrastructure, repositioning certain products and developing new ones that are better aligned with evolving market conditions and curtailing initiatives that are not core to our strategic priorities. Our disciplined execution against these areas of focus is helping drive near-term performance, positioning us to attract new asset flows and drive improved margins.

 

 

Strong Multi-Year TSR Relative to Peers    Returned Significant Value to Stockholders

 

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

 

 

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

 

Compensation of Named Executives

2016 Target Total Direct Compensation Structure*

 

 

LOGO

2016 Target Incentive Compensation Elements*

 

LOGO

 

* Excludes Curtis Y. Arledge, former Vice Chairman and CEO of Investment Management, whose employment with the company terminated effective March 23, 2016. Because compensation determinations for Mr. Arledge were made in connection with his departure, he is not included in this discussion. Mr. Arledge’s compensation is described below in “Separation Benefits for Mr. Arledge” on page 57.

 

 

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

 

 

2016 Incentive Compensation Determinations

The following table shows the HRC Committee’s determinations of the form and amount of 2016 compensation awarded to our named executive officers, as well as corresponding 2014 and 2015 information. The amounts reported in the table differ substantially as reported for 2016 in the Summary Compensation Table set forth on page 60.

Pursuant to SEC rules, the Summary Compensation Table is required to include for a particular year only those equity-based awards granted during that year, rather than awards granted after year-end, even if awarded for services in that year.

We consider the PSU and RSU awards granted during February of a given year to be part of the prior year’s compensation. For example, we consider PSU and RSU awards granted in February 2016 to be part of 2015 compensation. The following table depicts the manner in which the HRC Committee has considered named executive officer compensation determinations:

NEO Compensation Determinations(1)(2)

 

Executive   Year   Direct Compensation   Total Direct
Compensation
  Incentive  Awarded  
as a Percentage of  
Target
    Salary   Cash
Incentive
  Deferred Equity    
        RSU
Incentive
 

PSU

Incentive

   

Gerald L. Hassell

Chairman & CEO

  2016   $1.0   $4.3   $4.3   $8.7   $18.3   124%
  2015   $1.0   $2.4   $9.7   $4.1   $17.2   135%
  2014   $1.0   $1.2   $5.0   $4.5   $11.7     89%

Thomas P. (“Todd”) Gibbons

Vice Chairman & CFO

  2016   $0.7   $2.4   $2.0   $3.5     $8.5   124%
  2015   $0.7   $2.4   $3.0   $1.8     $7.9   135%
  2014   $0.7   $1.8   $1.4   $2.0     $5.8     97%

Brian T. Shea

Vice Chairman & CEO of

Investment Services

  2016   $0.7   $2.4   $2.0   $3.6     $8.6   125%
  2015

 

  $0.6

 

  $2.5

 

  $3.0

 

  $1.9

 

    $7.9

 

  136%

 

Karen B. Peetz(3)

President

  2016   $0.7   $1.4   $3.2     $0     $5.2   104%
  2015   $0.7   $1.6   $2.0   $1.3     $5.6   114%
  2014   $0.7   $1.7   $1.3   $2.0     $5.7     94%

Mitchell E. Harris

CEO of Investment Management

  2016   $0.7   $1.7   $1.4   $2.6     $6.4     79%
     

 

1      Dollar amounts shown in millions. Totals may not foot due to rounding.

 

2      Our named executives also include Curtis Y. Arledge, former Vice Chairman and CEO of Investment Management. Mr. Arledge’s employment with the company terminated effective March 23, 2016. Because his compensation was determined in connection with his departure, he is not included in this table; his compensation is described below in “Separation Benefits for Mr. Arledge” on page 57.

  

 

Blue shading represents incentive determined by balanced scorecard results, reflecting the change to a “one decision” model in 2016 to (1) better align compensation with current year performance, (2) increase upside and downside program leverage and (3) simplify the program to enhance employee understanding of performance objectives

 

    
     

3      As previously disclosed, Ms. Peetz retired effective December 31, 2016. In recognition of the fact that Ms. Peetz is no longer able to influence our go-forward performance, the HRC Committee determined to award the deferred equity portion of her 2016 incentive award solely in the form of RSUs (rather than a combination of RSUs and PSUs).

 

 

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

 

2016 Target Compensation

 

Name           Salary                   Target Incentive          

Total Target

    Direct Compensation    

Hassell

  $1,000,000   $14,000,000   $15,000,000

Gibbons

  $650,000   $6,350,000   $7,000,000

Shea

  $650,000   $6,350,000   $7,000,000

Peetz

  $650,000   $4,350,000   $5,000,000

Harris

  $650,000   $7,350,000   $8,000,000

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 annual target total direct compensation for each executive. Targets are reviewed annually but only adjusted if determined appropriate by the HRC Committee.

As disclosed last year, after having remained unchanged since 2012, 2016 target incentive compensation was increased for Mr. Hassell by $2 million to position his total target direct compensation in line with that of our peers. Additionally, for 2016, compared to the prior year, total target direct compensation was increased for each of Messrs. Gibbons and Shea by $1 million (including, for Mr. Shea, a salary increase from $600,000 to $650,000), in each case, to better align with their current responsibilities. Total target direct compensation was increased for Mr. Harris by $900,000 (including a salary increase from $600,000 to $650,000) in connection with his promotion to CEO of Investment Management.

2016 Incentive Awards

Starting with our 2016 compensation program, our HRC Committee determined to move to a “one decision” incentive structure to (1) better align compensation with current year performance, (2) increase upside and downside program leverage and (3) simplify the program to enhance employee understanding of performance objectives. Under the “one decision” structure, total incentive compensation is based on a single incentive award decision based on the balanced scorecard results and then delivered in the form of cash, PSUs and RSUs, rather than two separate incentive award 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. One hundred percent of the total incentive award is conditional upon meeting a minimum funding requirement and subject to reduction or elimination based on a risk assessment.

Minimum Funding Requirement

A 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 incentive compensation, with such percentage equal to the regulatory threshold ratio for a well-capitalized bank to which we expect to be held on a fully phased-in basis, including estimated buffers.

Payment of incentive compensation is conditioned upon our meeting this goal. This threshold funding goal was met, with an estimated common equity Tier 1 ratio of 9.7%* at December 31, 2016, calculated under the Advanced Approach on a fully phased-in basis.

Balanced Scorecard

We have used a “balanced scorecard” approach for our incentive compensation determinations since 2009 and have adapted it for our “one decision” 2016 incentive compensation determinations. 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 is based on a single set of objective company-wide performance metrics that are designed to drive achievement of near-term business strategies. The HRC Committee establishes the applicable metrics at the start of the performance period and has discretion to consider other factors to obtain a holistic picture of our performance.

 

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

 

 

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

 

 

 

Individual Component. The individual component of the balanced scorecard focuses on individual performance and consists of (1) a business unit goal (as applicable) based on pre-tax income of the specific business unit for which the individual is responsible and (2) an individual modifier to recognize and differentiate individual actions and contributions in final pay decisions.

The HRC Committee determines the corporate component payout and the business unit payout, then applies the individual modifier to increase or decrease the total incentive award by up to ±25%. Finally, the HRC Committee has the discretion to reduce an individual’s corporate component, individual component and/or total incentive award based on an assessment of the individual’s risk profile. Incentive awards, including the effect of the individual modifier, can range from 0% up to 150% of the individual’s target award.

As illustrated below, incentive awards are paid out in a combination of cash, PSUs earned between 0 – 150% based on the achievement of performance metrics over a three-year performance period and RSUs deferred over three years. In calculating the number of PSUs and RSUs to grant, the HRC Committee divided the value of PSUs and RSUs awarded by $45.19, the average closing price of our common stock on the NYSE for the 15 trading days from January 13, 2017 through February 3, 2017, to mitigate the impact of short-term volatility in our stock price.

 

 

 

LOGO

 

* Percentages reflect incentive award payment to our CEO. For our other named executives, incentive awards are generally paid 30% in cash, 45% in PSUs and 25% in RSUs. As described below, Ms. Peetz’s incentive award was paid 30% in cash and 70% in RSUs in light of her retirement on December 31, 2016.

For Messrs. Hassell and Gibbons, the corporate component weighting was 100% due to their roles 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. Shea and Harris, the corporate component and business unit were weighted equally (50% each) due to their roles as the head of our investment services and investment management businesses, respectively.

 

 

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

 

Corporate Component Payout

The corporate component metrics are reviewed annually to select measures that align with our strategy and are appropriate for measuring annual performance. The same corporate component metrics and goals apply to each named executive officer. In February 2016, the HRC Committee determined to focus management on OEPS and adjusted operating leverage, weighted 75% and 25% respectively. The HRC Committee retains the discretion to consider other factors (including our performance relative to our peers, market conditions and interest rate environment) in assessing the strength of the Company’s OEPS and adjusted operating leverage achievements and also retains the discretion to determine the overall corporate component payout.

 

 

OEPS (weighted 75%). 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. Our 2016 OEPS budget was set at $3.10 and, in February 2016, 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 earnout portion of the corporate component.

 

OEPS   Percent of Budget  ($3.10)   Earnout Range as  a
Percent of Target
  Intended Leverage

>$ 3.72

  >120%   150%    

$3.10 – $3.72

  100% – 120%   100% – 150%   3:1

$2.64 – $3.10

  85% – 100%   40% – 110%   4:1

<$2.64

  <85%   0%    

 

 

Adjusted Operating Leverage (weighted 25%). 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). In February 2016, 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. There is no upside leverage associated with this metric, as the adjusted operating leverage portion cannot be earned above 100%.

 

Adjusted Operating Leverage   Earnout as a Percent of Target

³100 bps

  100%

<100 bps

  0%

HRC Committee Determinations. Our actual 2016 OEPS was $3.17 and 2.3% above our operating budget, resulting in an earnout range of 100% to 150% for the OEPS portion of the corporate component per the guidelines shown above. The HRC Committee determined that an earnout of 106.9% in respect of the OEPS portion of the corporate component was appropriate, which reflected an earnout of 3 percentage points above target for each percentage point by which actual 2016 OEPS exceeded our operating budget (consistent with our intended leverage shown above).

For 2016, our adjusted operating leverage was 274 basis points, which exceeded the 100 basis point target described above. The adjusted operating leverage portion of the corporate component was therefore earned at 100%.

The OEPS earnout of 106.9%, weighted 75% of the total corporate component payout, and the adjusted operating leverage earnout of 100%, weighted 25% of the total corporate component payout, yielded a corporate component payout of 105.2%, based solely on the objective performance metrics. The HRC Committee then exercised its discretion to review the following factors with respect to our 2016 performance:

 

 

TSR results relative to peers over a 1, 3 and 5-year period were at the 25th, 61st and 72nd percentiles, respectively. When compared to the S&P Financials Index, our relative TSR results were directionally similar, ranking at the 48th, 59th and 69th percentiles over a 1, 3 and 5-year period, respectively.

 

 

EPS growth results relative to peers were at the 92nd percentile (at the time the HRC Committee made its determination, which excluded Prudential Financial, Inc.).

 

 

Expenses were under control, decreasing by 3% compared to 2015.

 

 

Adjusted revenue grew 1% over the prior year, below plan by 1.8 percentage points.

 

 

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

 

Notwithstanding our strong multi-year TSR and EPS growth performance relative to peers and our disciplined expense management, management recommended and the HRC Committee agreed to limit the corporate component payout to 103% to reflect our below-plan revenue and the Company’s emphasis on quality growth based on earnings and revenue.

 

LOGO

Individual Component (Business Unit Payout and Individual Modifier)

In February 2016, the HRC Committee approved the pre-tax income goal for each business unit and determined to apply similar payout range guidelines and 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 modifier 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; the objectives are intended to be used, together with other information the HRC Committee determines relevant, to develop a holistic evaluation of individual performance.

In the first quarter of 2017, the HRC Committee evaluated 2016 business unit performance and determined each named executive officer’s individual modifier. 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.

 

 

BNY Mellon   LOGO   2017 Proxy Statement       45

Payout Based on Objective Performance Metrics: 105.2% Discretionary Factors Strong multi-year TSR performance relative to peers and the S&P Financials index Strong relative EPS growth compared to peers Disciplined expense management Revenue above prior year but below plan Actual Corporate Component Payout: 103%


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

 

In determining the individual component for Mr. Hassell, the HRC Committee considered the following key results:

 

 

Strategic: met or exceeded key financial metric targets; developed and executed corporate strategies to achieve our Investor Day Goals; evaluated and developed strategic vision for investment services and investment management businesses and successfully led risk management initiatives

 

Leadership: continued to enhance our performance- based culture; continued to build a robust and diverse leadership team and succession pipeline and assisted in building a robust and diverse Board; made a number of strategic and diverse hires and demonstrated commitment to providing superior client experience as a driver of new business

 

 

Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 120% for Mr. Hassell.

 

 

LOGO

The HRC Committee then granted Mr. Hassell 25% of his total incentive award in the form of cash, 50% in the form of PSUs and 25% in the form of RSUs.

In determining the individual component for Mr. Gibbons, the HRC Committee considered the following key results:

 

 

Strategic: achieved targets for key components of our operating plan; implemented process to assist business partners deliver run-rate improvements; assisted in the strategic review and restructuring of several businesses and executed use cases to explore benefits of potential fintech innovations

 

 

Leadership: drove initiatives to increase employee engagement in support of company-wide performance initiatives; advanced our diversity and inclusion agenda and continued to evolve business line financial reporting and analysis and risk management initiatives

 

 

Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 120% for Mr. Gibbons.

 

 

LOGO

The HRC Committee then granted Mr. Gibbons 30% of his total incentive award in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs.

 

 

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

 

In determining the individual component for Mr. Shea, the HRC Committee considered the following key results:

 

 

Business Unit Payout: Our 2016 budgeted pre-tax income for the investment services business unit was $3.790 billion and, in February 2016, the HRC Committee established the guidelines below:

 

Percent of Budget

($3.790 billion)

  

Payout Range

as a Percent of Target

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

Our actual achievement was $3.933 billion, representing 104% of budget, resulting in a payout range of 85% to 150%. The HRC Committee determined that a business unit payout percentage of 106% was appropriate.

 

Strategic: exceeded business improvement process target; executed multiple strategic investment initiatives and drove improvements to bolster growth; sustained business line performance; significantly advanced technology platforms and agenda and completed a number of major systems conversions

 

 

Leadership: implemented talent management tools and processes to support company-wide development initiatives; advanced our diversity and inclusion agenda; advanced our risk management agenda and attracted and developed key leaders for several businesses

 

 

Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 120% for Mr. Shea.

 

 

LOGO

The HRC Committee then granted Mr. Shea 30% of his total incentive award in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs.

In determining the individual component for Ms. Peetz, the HRC Committee considered the following key results:

 

 

Business Unit Payout: as described above, the HRC Committee determined that a business unit payout percentage of 106% was appropriate for the investment services business unit

 

 

Strategic: improved competitive positioning relative to peers through development of change initiative and training program and enhanced communications with employees and clients; transformed treasury services team to position group for innovation and successfully oversaw critical regulatory deliverables

 

Leadership: drove initiatives to increase employee engagement in support of company-wide performance initiatives; advanced our diversity and inclusion agenda and outperformed relative to peers with respect to corporate social responsibility

 

 

Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 100% for Ms. Peetz.

 

 

LOGO

The HRC Committee then granted Ms. Peetz 30% of her total incentive award in the form of cash and 70% in the form of RSUs. The HRC Committee determined not to grant Ms. Peetz any PSUs because she retired on December 31, 2016 and consequently will not impact our performance going forward.

 

 

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

 

In determining the individual component for Mr. Harris, the HRC Committee considered the following key results:

 

 

Business Unit Payout: Our 2016 budgeted pre-tax income for the investment management business unit was $1.156 billion and, in February 2016, the HRC Committee established the guidelines below:

 

Percent of Budget

($1.156 billion)

  

Payout Range

as a Percent of Target

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

Our actual achievement was $1.053 billion, representing 91% of budget, resulting in a payout range of 40% to 100%. The HRC Committee determined that a business unit payout percentage of 72% was appropriate.

 

Strategic:

 

   

achieved net margin growth in a margin contraction environment; created investment performance standards for boutique investment capabilities; exceeded target for customer contacts; restructured and/or shut down a number of underperforming businesses and reduced structural costs

 

   

achieved below-plan returns on strategic initiatives and underperformed relative to peers with respect to revenue growth and growth of assets under management

 

 

Leadership: realigned senior leadership team; implemented talent management tools and processes to support company-wide development initiatives and advanced our diversity and inclusion agenda

 

Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 90% for Mr. Harris.

 

 

LOGO

The HRC Committee then granted Mr. Harris 30% of his total incentive award in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs.

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 incentive award if the risk scorecard result is significantly below expectation. No downward adjustments were made for 2016.

 

 

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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 RSUs and PSUs that constitute a portion of our named executives’ 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 RSUs and PSUs will be subject to review and potential forfeiture, as determined by our HRC Committee.

Outstanding PSUs

In 2013, we reintroduced PSUs as part of our incentive compensation program. The PSUs are granted each year based on prior-year performance. We consider PSUs granted during a given year to be part of the prior year’s compensation; for example, we consider the February 2016 PSU grant to be part of 2015 earned compensation. Any earned PSUs cliff vest after the end of three-year performance periods based on continued service with certain exceptions. The PSUs granted in 2014 and 2015 are earned between 0 – 125% and the PSUs granted in 2016 are earned based between 0 – 150%, in each case 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.

February 2016 PSUs

As discussed in last year’s proxy statement, in February 2016, the HRC Committee granted PSUs to each of our then-current named executives based on target values, as adjusted based on prior-year risk scorecard results and strategic milestones. The February 2016 PSUs are earned based on 2018 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 2018 OEPS targets (one set for a “normalizing” scenario, where the daily average Fed target rate is greater than or equal to 100 basis points in 2018, and one set for an alternative “flat” scenario):

 

 
2018 OEPS in a “Flat” Rate Scenario    2018 OEPS in  a “Normalizing”
Rate Scenario
   Payout Range

> $3.57

   > $3.92    150%

$3.47 – $3.57

   $3.78 – $3.92    100% – 150%

$3.47

   $3.78    100%

$3.37 – $3.47

   $3.63 – $3.78    50% – 100%

< $3.37

   < $3.63    0%

 

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

> 11%

   0% – 75%

11% – 9%

   75% – 100%

< 9%

   100%
 

 

For 2016, our OEPS was $3.17 and the one-year growth rate of our RWA was 0.43%.

 

 

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

 

Our outstanding PSU awards are illustrated below:

 

    2014   2015   2016   2017   2018   2019    
             

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%

 

Earned at 99%

based on RRWA

of 1.98% against

a target of 2.0%

 

cliff vested

in 2017

     
                           
             

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

 
                           
             

February  

2017 PSU  

Award  

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

cliff vests

in 2020 based on

continued service

                           

For the February 2014 PSU award, PSUs were earned in separate tranches over each year of the performance period based on return on risk-weighted assets (“RRWA”). RRWA was 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 a fully phased-in 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). For awards beginning in February 2015, RWA is generally 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, for PSUs granted in 2015, the Advanced Approach, for PSUs granted in 2016, the higher of the Advanced or Standardized Approach and for PSUs granted in 2017, the Standardized Approach) based on existing assumptions at the commencement of the performance period and as reported in the company’s SEC filings.

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 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.

 

 

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

 

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 (see footnotes to the Summary Compensation Table below). The following perquisites were provided in 2016 and are substantially unchanged from 2015:

 

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.

 

 

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.

 

 

In addition to the perquisites described above, certain named executive officers are covered by legacy life insurance plans assumed in the merger.

 

 

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

 

Pay Practices

Stakeholder Engagement

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

 

We have consistently received strong support for our executive compensation program, with over 97% stockholder approval of the say-on-pay proposal at our 2016 Annual Meeting, over 95% approval at our 2015 Annual Meeting and over 93% approval at our 2014 Annual Meeting. We continue to actively engage with our stakeholders throughout the year (including webcasting our Annual Meeting to allow broader stockholder participation).

 

In total, in advance of our 2017 Annual Meeting and as a result of our annual outreach process, we invited feedback from investors representing about 45% of our outstanding shares and reached investors representing

  LOGO

almost 30% of our outstanding shares, and we actively engaged with proxy advisory firms and other stakeholders on governance and performance matters. We further engaged stockholders and analysts at industry conferences, in meetings at our offices or at our stockholders’ 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 2017

We are focused on driving quality growth based on earnings and revenue, which we believe is the key to sustainable progress. Having achieved industry leading operating margins, we want to ensure that we are making appropriate investments in our businesses to sustain long-term growth and value creation for our clients and stockholders. Although we are still committed to maintaining our culture of expense control, our HRC Committee eliminated operating leverage from the corporate component of the balanced scorecard to make OEPS the primary performance metric for 2017. In addition to reinforcing our focus on topline growth, this adjustment to the corporate component more closely ties pay to performance by increasing the upside and downside leverage of our compensation program. Under our balanced scorecard for prior years, adjusted operating leverage, weighted 25% of the overall corporate component, was earned at either 100% or 0%, but was not itself subject to upside or downside adjustment. By eliminating the operating leverage component and increasing the weighting of the OEPS component, an incremental 25% of the corporate component is now subject to upward adjustment (in the case of above-target performance) and downward adjustment (in the case of below-target performance). The HRC Committee retains discretion to determine the corporate component payout and to consider other factors (including performance relative to our peers) in assessing the strength of the Company’s OEPS results.

 

 

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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 2016 compensation program for the named executives has the following features:

 

Directly link pay to  

performance  

 

•   Incentive compensation is based on balanced scorecard results and comprises 91% of target total direct compensation

 

•  Incentive compensation deferred in the form of PSUs comprises 50% of target total incentive compensation for our CEO and 45% for other continuing named executives

 

•  Incentive compensation deferred in the form of RSUs comprises 25% of target total incentive compensation for all our continuing named executives

 

Balanced approach   for incentive  

compensation  

 

•  Incentive compensation earned based on a combination of corporate and individual goals

 

•  Corporate component based on OEPS (weighted 75%) and operating leverage (weighted 25%)

 

•  Business unit goals use quantitative financial measures to establish a payout range

 

•  Individual modifier allows the HRC Committee to recognize and differentiate individual contributions

 

Promote long-term  

stock ownership  

 

•  Deferred equity (PSUs and RSUs) as a percentage of total incentive compensation: 75% for our CEO and 70% for our other named executives

 

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

 

•  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, plus an additional amount equal to one times base salary to provide a cushion against stock volatility

 
What we don’t do    

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

 

•  No tax gross-ups

 

•  No hedging or short sales of our stock

 

•  No stock option grants

 

HRC Committee Role and Process

In the first quarter of 2016, for each named executive, the HRC Committee approved base salary levels; established target amounts for the 2016 incentive award to be earned or granted, as applicable, in the first quarter of 2017 based on 2016 performance; and granted PSUs based on targets established in 2015, following consideration and adjustment based on prior-year risk scorecard results and strategic milestones.

In setting 2016 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 2017, the HRC Committee evaluated 2016 corporate performance, using a combination of financial and qualitative measures, as well as each named executive’s individual performance to make 2016 incentive compensation determinations under the “one decision” model as described above.

The HRC Committee also provided each named executive with incentive compensation targets for their 2017 incentive award, with the actual award amount to be determined in the first quarter of 2018 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.

 

 

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

 

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 29.

Benchmarking

 

Peer Group

 

The HRC Committee and our management use a peer group to provide a basis for assessing relative company performance and to provide a competitive reference for pay levels 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, as well as total assets and net income;

 

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

 

•       global presence.

   LOGO

The 2016 peer group selected by the HRC Committee was unchanged from 2015.

Compensation Benchmarking

Compensation information is collected from the peer group proxy statements to provide data for the HRC Committee to assess the competitiveness of targeted and actual compensation. Peer group information is also used to analyze market trends and compensation program practices. 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. Peer group data and other information provided to the HRC Committee by CAP was used by the HRC Committee as a consideration in setting 2016 target compensation levels for our named executives.

Financial Performance Benchmarking

The peer group is also used to provide the HRC Committee with relative financial performance assessments. The metrics reviewed include revenue growth, EPS growth, operating leverage, return on equity, return on tangible common equity as well as TSR on a one- and three-year basis. This analysis provides additional context for the HRC Committee in their review of compensation outcomes as well as compensation program design. When making annual compensation determinations for prior year performance, the HRC Committee reviews additional relative performance metrics as part of their considerations, as discussed above on pages 44 to 45.

Peer group data reviewed by the HRC Committee was considered holistically, and was used as an input, but not the sole input, of their compensation decisions.

 

 

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

 

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.

 

 

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 ongoing named executives are also expected to hold, as an administrative practice, an additional amount of company shares above their guideline amount equal to 1 times base salary to provide a cushion against stock volatility. All of our ongoing named executives meet the stock ownership and administrative 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; for other named executive officers, 50% of the net after-tax shares must be held for one year from the vesting date.

Anti-Hedging Policy

Our executive officers, including each named executive officer, and directors are subject to a robust anti-hedging policy which prohibits them from entering into hedging transactions with their company stock and derivative securities relating to BNY Mellon. Prohibited transactions include 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 (other than options granted pursuant to our compensation program). Prior to engaging in any transaction in company stock or derivative securities (including transactions in employee benefit plans, gifts and pledges), our executive officers and directors are required to pre-clear such transaction with our legal department and obtain that department’s affirmative approval to enter into the transaction.

Our anti-hedging policy applies to all securities which our executive officers and directors beneficially own and, with the exception of Trian, any entity for which an executive officer or director is attributed ownership.

 

 

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

 

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.

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.

 

 

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

 

Executive Severance Plan. In July 2010, we adopted The Bank of New York Mellon Corporation Executive Severance Plan (the “Executive Severance Plan”). In August 2016, the HRC Committee reviewed the Executive Severance Plan in light of competitive market data and determined it was appropriate to amend the plan to bring the severance benefits available thereunder more in line with those offered by peer institutions. Accordingly, participants terminated by the company without “cause” after August 11, 2017, will be eligible to receive severance in the amount of 1 times base salary. In addition, for participants terminated by the company without “cause” after August 7, 2016, eligibility for a pro-rata annual bonus for the year of termination is determined on a case by case basis and if awarded, paid at year end after an evaluation of corporate, business unit and individual performance, among other considerations. The following table sets forth the severance benefits available under the Executive Severance Plan, both before and after the HRC Committee’s August 2016 amendment.

 

Reason for Termination       Severance Payment   Bonus   Benefit
Continuation   
   Outplacement 
Services

By the company without “cause”

   Original     2 times base salary    Pro-rata annual

bonus for the year of
termination

  Two years   One year
  Revised   Reduced to 1 times base salary   Pro-rata annual

bonus paid at year
end at the discretion
of management and
the HRC Committee

  Reduced to
one year
  No change
By the company without “cause” or by the executive for “good reason” within two years following a “change in control”   Original  

2 times base salary

and 2 times target

annual bonus

   Pro-rata target annual 
bonus for the year of
termination
  Two years   One year
  Revised   No change   No change    No change     No change 

Executive Severance 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 Executive Severance 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 terminated effective March 23, 2016. In connection with his termination, the company determined that he was eligible to receive payments under the Executive Severance Plan for a termination by the company without “cause.” In accordance with the plan, Mr. Arledge received a severance payment of $1,300,000 equal to two times his base salary payable over two years; a 2016 incentive award 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.

In determining the 2016 incentive for Mr. Arledge, the HRC Committee awarded him an individual modifier of 100%. Combined with the corporate component payout of 103% (weighted 50%) and the business unit payout for the investment management business of 72% (weighted 50%), the total incentive compensation awarded to Mr. Arledge was 88% of target. Mr. Arledge had a target of $13,350,000 and his award was pro-rated for the portion of the year during which he was employed by us, resulting in an incentive award of $1,456,964. 30% of Mr. Arledge’s incentive compensation was paid in cash and 70% was deferred in the form of RSUs, which vest in equal installments over three years.

 

 

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

 

Additionally, as a result of his departure prior to the completion of the applicable performance periods, Mr. Arledge vested in a pro-rated portion of the 2016 tranche of his February 2014 PSU awards and is eligible to vest in a pro-rated portion of his unvested February 2015 and 2016 PSU awards. Accordingly, Mr. Arledge vested in 9,055 shares under the 2016 tranche of the February 2014 PSU awards and the number of shares under the February 2015 and February 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 periods, and pro-rated to reflect the portion of each such performance period during which he was employed by us.

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 incentive awards are granted under our stockholder-approved Executive Incentive Compensation Plan and intended to be “qualifying performance-based” compensation. In that regard, incentive compensation 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

 

 

LOGO

On a regular basis, our Chief Risk Officer and our HRC Committee review the company’s risk appetite, practices and employee compensation plans, including sales incentives, for alignment with sound risk management. Our Chief Risk Officer also met with the HRC Committee to specifically discuss and review our 2016 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 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 incentive compensation, 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 incentive compensation also takes into account a risk assessment for both the company as a whole and for each individual. In addition, all of our named executive officers’ equity awards are subject to 100% forfeiture during, and clawback following, the vesting period and all of their cash incentives are subject to 100% clawback 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

 

Edward P. Garden, Chairman

  

Edmund F. “Ted” Kelly

  

Samuel C. Scott III

Jeffrey A. Goldstein

     

 

 

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  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 60 and on page 62, 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 incentive compensation 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 

 

Non-Equity

Incentive Plan 

Compensation

 

Change in

Pension

Value and
Nonqualified
Deferred
Compensation
Earnings
(3)

  All Other
Compensation
(4) 
  Total
Compensation 

Gerald L. Hassell

  2016     $1,000,000     $—   $13,656,477     $—      $4,326,000               $—      $183,121    $19,165,598
Chairman & Chief Executive Officer   2015     $1,000,000     $—     $9,889,738     $—      $2,419,200               $—      $173,496    $13,482,434
  2014     $1,000,000     $—     $7,750,031     $—      $1,244,640   $1,509,388      $155,469    $11,659,528
Thomas P. “Todd” Gibbons   2016        $650,000     $—     $4,755,929     $—      $2,354,580      $179,290        $84,360      $8,024,159
Vice Chairman & Chief Financial Officer   2015        $650,000     $—     $3,510,949     $—      $2,426,760               $—        $76,731      $6,664,440
  2014        $650,000     $—     $2,982,659     $—      $1,808,471      $978,123        $78,460      $6,497,713

Brian T. Shea(5)

  2016        $625,000     $—     $4,812,725     $—      $2,388,870               $—      $114,200      $7,940,795
Vice Chairman & CEO of Investment Services   2015        $575,000     $—     $3,033,843     $—      $2,459,646               $—      $115,616      $6,184,105

Karen B. Peetz

  2016        $650,000     $—     $3,280,346     $—      $1,353,938               $—        $48,550      $5,332,834
President   2015        $650,000     $—     $3,439,089     $—      $1,647,726        $39,595        $43,000      $5,819,410
  2014        $650,000     $—     $2,907,106     $—      $1,716,826      $233,014        $26,012      $5,532,958

Mitchell E. Harris(5)

  2016        $625,000     $—     $3,713,373     $—      $1,736,438        $74,252        $18,550      $6,167,613
CEO of Investment Management                                    

Curtis Y. Arledge(6)

  2016        $162,500     $—     $7,230,894     $—        $437,089               $—   $1,398,747      $9,229,230
Former Vice Chairman & CEO of Investment Management   2015        $650,000     $—     $8,082,755     $—      $3,364,200               $—      $121,592   $12,218,547
  2014        $650,000     $—     $7,544,542     $—      $3,647,534               $—        $95,396   $11,937,472
                                   

 

(1) The amounts disclosed in this column include the grant date fair value of RSUs and PSUs granted in 2016, 2015 and 2014. For 2016, the grant date fair values of PSUs were: $4,091,945 for Mr. Hassell; $1,824,324 for Mr. Gibbons; $1,841,370 for Mr. Shea; $1,289,825 for Ms. Peetz; $1,734,624 for Mr. Harris; and $3,166,824 for Mr. Arledge. At the maximum level of performance, the PSU values would be: $6,137,917 for Mr. Hassell; $2,736,486 for Mr. Gibbons; $2,762,055 for Mr. Shea; $1,934,738 for Ms. Peetz; $2,601,936 for Mr. Harris; and $4,750,235 for Mr. Arledge.

 

(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 15 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

(3) The amount disclosed in this column for 2016 represents the amount of increase in the present value of the executive’s accumulated pension benefit and, for Mr. Harris, also includes $21,341 representing the portion of interest accrued on deferred compensation above 120% of the applicable federal long-term rate at the maximum rate payable under the Mellon Elective Deferred Compensation Plan for Senior Officers (see page 68 for additional information about this plan). Present values are determined in accordance with the assumptions used for purposes of measuring our pension obligations under FASB ASC 715 as of December 31, 2016, including a discount rate of 4.35%, with the exception that benefit payments are assumed to commence at the earliest age at which unreduced benefits are payable. The increase in present value of accumulated benefit for Mr. Hassell is negative $212,805 (this negative amount is not reflected in the amount disclosed above for Mr. Hassell). The increase in present value of accumulated benefit for Ms. Peetz is negative $7,717 (this negative amount is not reflected in the amount disclosed above for Ms. Peetz).

 

 

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(4) The items comprising “All Other Compensation” for 2016 are:

 

Name  

    Perquisites    

and Other

Personal

Benefits(a)

 

    Contributions    

to Defined

Contribution

Plans(b)

 

Insurance

    Premiums(c)     

  Severance
    Payments(d)     
    Total      

Gerald L. Hassell

  $149,921         $18,550   $14,650                 $—      $183,121  

Thomas P. ”Todd” Gibbons

  $55,710         $18,550   $10,100                 $—        $84,360  

Brian T. Shea

  $95,650         $18,550             $—                 $—      $114,200  

Karen B. Peetz

  $30,000         $18,550             $—                 $—        $48,550  

Mitchell E. Harris

  $—         $18,550             $—                 $—        $18,550  

Curtis Y. Arledge

  $56,177           $8,125             $—   $1,334,445   $1,398,747  

 

  (a) “Perquisites and Other Personal Benefits” are for Mr. Hassell, use of company car and driver ($53,237), use of company aircraft ($66,684) and enhanced charitable gift match ($30,000); for Mr. Gibbons, use of company car and driver ($42,597), use of company aircraft ($8,061) and enhanced charitable gift match ($5,052); for Mr. Shea, use of company car and driver ($65,650) and enhanced charitable gift match ($30,000); for Ms. Peetz, enhanced charitable gift match ($30,000); and for Mr. Arledge, use of company car and driver ($26,177) 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 net 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 2016 and divided this number by the total number of flight hours logged in 2016.

 

  (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 67 for more details regarding the BNY Mellon 401(k) Benefits Restoration Plan. In addition, for Messrs. Hassell, Gibbons, Shea and Harris and Ms. Peetz, 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.

 

  (d) Represents the following severance payments made by us pursuant to the Executive Severance Plan: two times base salary ($1,300,000) and two years of benefits continuation (valued at $34,445).

 

(5) Because Mr. Shea was only a named executive in 2016 and 2015, no disclosure is included as to Mr. Shea for 2014. Because Mr. Harris was only a named executive in 2016, no disclosure is included as to Mr. Harris for 2015 or 2014.

 

(6) Mr. Arledge’s employment with BNY Mellon terminated on March 23, 2016.

 

 

BNY Mellon   LOGO   2017 Proxy Statement       61


Table of Contents
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                        $14,000,000       $21,000,000                          
     PSUs      2/19/2016       2/19/2016                               117,147       175,721       $4,091,945  
Thomas P. “Todd” Gibbons    EICP                        $6,350,000         $9,525,000                          
     PSUs      2/19/2016       2/19/2016                                 52,228         78,342       $1,824,324  

Brian T. Shea

   EICP                        $6,350,000         $9,525,000                          
     PSUs      2/19/2016       2/19/2016                                 52,716         79,074       $1,841,370  

Karen B. Peetz

   EICP                        $4,350,000         $6,525,000                          
     PSUs      2/19/2016       2/19/2016                                 36,926         55,389       $1,289,825  

Mitchell E. Harris

   EICP                        $7,350,000       $11,025,000                          
     PSUs      2/19/2016       2/19/2016                                 49,660         74,490       $1,734,624  

Curtis Y. Arledge

   EICP                        $13,350,000       $20,025,000                          
     PSUs      2/19/2016       2/19/2016                                 90,662       135,993       $3,166,824  

 

(1) Represents incentive compensation amounts to be paid for performance during 2016 under The Bank of New York Mellon Corporation Executive Incentive Compensation Plan (the “EICP”). Amounts earned under the EICP in 2017 (for 2016 performance) were made 25% in the form of cash, 50% in the form of PSUs and 25% in the form of RSUs for Mr. Hassell; 30% in the form of cash and 70% in the form of RSUs for Ms. Peetz and Mr. Arledge; and 30% in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs for our other named executives. There was no threshold payout under this plan for 2016.

 

     The table above does not reflect the RSUs that were granted on February 19, 2016 with respect to each named executive‘s 2015 annual incentive award, which was 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 executives. The RSUs vest in equal installments over three years. In the event that the named executive’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 2015 annual incentive award was previously reported in the 2015 Grants of Plan-Based Awards Table.

 

(2) Represents the portion of the named executive’s incentive compensation 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 150% 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 – 150% based on our 2018 OEPS and growth in Risk Weighted Assets from 12/31/2015 to 12/31/2018 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’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.

 

 

62       BNY Mellon   LOGO   2017 Proxy Statement


Table of Contents
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 $47.38 per share, the closing price of our common stock on the NYSE on December 30, 2016.

 

        Option Awards   Stock Awards(2)
       

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

  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   434,412             —     $22.0300   2/22/2022                
    2014                     46,732     $2,214,162        
    2015                     87,804     $4,160,154        
    2016                   273,820   $12,973,592        
    2014-2016                     96,635(3)     $4,578,559        
    2015-2017                           123,175(4)    $5,836,028 
    2016-2018                           119,190(4)    $5,647,226 
Thomas P. “Todd” Gibbons   2008   184,380             —     $42.3100   3/10/2018                
    2008     38,152             —     $34.6300   7/21/2018                
    2011   190,124             —     $30.1300   2/23/2021                
    2012   128,432             —     $22.0300   2/22/2022                
    2014                     15,774        $747,372        
    2015                     23,963     $1,135,367        
    2016                     83,928     $3,976,509