DEF 14A 1 a2230941zdef14a.htm DEF 14A

Use these links to rapidly review the document
Proxy Statement Table of Contents
Reference Guide

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 ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

U.S. Bancorp

(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):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

o

 

Fee paid previously with preliminary materials.

o

 

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)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

Table of Contents

GRAPHIC


Table of Contents

LOGO

PHOTO

March 7, 2017

Fellow Shareholders:

In my final full year as Chief Executive Officer of U.S. Bancorp, I am proud of our outstanding performance with record net income, earnings per common share, and revenue.

In a challenging calendar year where the environment was often unpredictable, we (once again) delivered industry-leading return on average assets (ROA), return on average equity (ROE), and efficiency ratio — number one in each metric compared to our peers. In addition, we returned 79 percent of our earnings for the year to shareholders through share buybacks and dividends, increasing our dividend nearly 10 percent.

It is the kind of consistent, predictable, and repeatable financial performance our shareholders have learned to expect from this company and this management team — and the kind of performance I expect under Andy Cecere's leadership when he succeeds me as CEO on the day of our annual meeting. Andy and I have partnered together for the past 10 years to lead this company, and he is one of the strongest and most capable leaders in the banking industry. The future is bright for our shareholders, customers, communities, and employees.

While we were generating industry-leading returns, we also made important investments in our long-term growth strategy, especially initiatives designed to improve our customers' banking experiences. As the economic environment improves, it is important that we stand ready to help our customers navigate their financial futures, and the investment choices we made throughout the year supported that focus.

U.S. Bank's outstanding performance in 2016 was not limited to its financial results. We have been recognized for leading the industry in a variety of measures that make us proud to come to work every day.

For the third year, in 2017 the Ethisphere Institute named U.S. Bank to its World's Most Ethical Companies® list. For the tenth year, the Ponemon Institute named U.S. Bank the Most Trusted Bank. For the ninth year, U.S. Bank received a perfect score in the Corporate Equality Index and was named a Best Place to Work by the Human Rights Campaign Foundation. For the sixth year, FORTUNE magazine named U.S. Bank the number one super regional bank. And for the first time, MONEY® magazine named U.S. Bank the Best Big Bank in the country.

We are proud of these achievements because they are a reflection of our committed employees and our culture. Our success in 2016 was a result of the superlative effort of our 70,000 employees working hard as "one U.S. Bank" to help our customers build financially secure futures — and we did it with ethics and integrity.

On a personal note, as I close the CEO chapter of my U.S. Bank career, let me assure you, the U.S. Bank story is just getting started. It's a story built on trust. I am also honored to remain as the Executive Chairman to ensure a smooth and seamless transition.

Trust was the most important word in the banking industry when I opened my teller window for the first time as an 18-year-old banker in 1976. Now, as I wind down my 41-year career as a banker, preserving, protecting, and nurturing trust is more important than ever for U.S. Bank and the entire banking industry. Every day, we will work hard to become the most trusted choice for our shareholders, customers, and communities.

Thank you for your continued trust in the U.S. Bank story.

Sincerely,

SIGNATURE

Richard K. Davis
Chairman and Chief Executive Officer


Table of Contents

LOGO

PHOTO

March 7, 2017

Fellow Shareholders:

I am honored to have been elected by my fellow independent directors to serve as our Board's Lead Director, beginning in January 2017. As Lead Director, I am focused on the obligation of our Board to you, our shareholders, as well as to our regulators and the public. Our role is to bring an independent perspective in seeking to attain a high standard of governance and oversight.

This is a particularly exciting time to serve on our Board. After 10 years of exceptional service as Chief Executive Officer, Richard Davis will be passing the torch to Andy Cecere, our current President and Chief Operating Officer, on the date of our annual meeting. We welcomed Andy to the Board in January and are eager to see him assume his new executive responsibilities in April. Fortunately for us, we will continue to benefit from Richard's extensive experience, inspiration, and knowledge of our company and industry as he remains on the Board as Executive Chairman.

Andy has spent 31 years with U.S. Bancorp, including as the Vice Chairman of Wealth Management and Securities Services and then as Chief Financial Officer before taking on the COO role two years ago. During that time, he has distinguished himself by demonstrating tremendous intellect and business insight. All of us on the Board are confident that he is ready for the challenge, and I hope you will join us in congratulating him on this exciting opportunity.

Richard's time at U.S. Bancorp has spanned 24 years. We are grateful for the many contributions he has made to the company and the entire financial services industry during his career. His continued service on the Board after stepping down as CEO will ensure a seamless transition of leadership. We fully expect that this company will continue to deliver excellent financial results and to return capital to our investors, always making sure that this work is done responsibly and with the utmost integrity.

The attached proxy statement details the duties and responsibilities of the Lead Director and how they will intersect with the role of the Executive Chairman and management. These duties include approving the agenda for Board meetings, approving information sent from management to the Board, and meeting independently with representatives of various regulatory bodies that oversee our company and its operations, as well as other constituents as appropriate. I also chair executive sessions of the Board, have regular contact with our company's senior executives, and advise the chairs of our Board committees regarding the in-depth policy work those committees undertake.

It is a privilege to work with my fellow directors on behalf of our shareholders, and I look forward to continuing to serve you during 2017.

Sincerely,

SIGNATURE

David B. O'Maley
Lead Director


Table of Contents

LOGO

800 Nicollet Mall
Minneapolis, Minnesota 55402
651.466.3000

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF U.S. BANCORP

Date and Time:   Tuesday, April 18, 2017, at 11:00 a.m., local time

Place:

 

Hilton Nashville Downtown
Ballroom
121 Fourth Avenue South
Nashville, TN 37201

Items of Business:

 

1.

 

The election of the 15 directors named in the proxy statement

 

 

2.

 

The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2017 fiscal year

 

 

3.

 

An advisory vote to approve the compensation of our executives disclosed in the proxy statement

 

 

4.

 

An advisory vote on the frequency of future advisory votes on executive compensation

 

 

5.

 

A shareholder proposal seeking the adoption of a policy requiring that the Chairman of the Board be an independent director

 

 

6.

 

Any other business that may properly be considered at the meeting or any adjournment of the meeting

Record Date:

 

You may vote at the meeting if you were a shareholder of record at the close of business on February 21, 2017.

Voting by Proxy:

 

It is important that your shares be represented and voted at the meeting. You may vote your shares by Internet or telephone by no later than 11:59 p.m., Eastern time, on April 17, 2017 (or April 13, 2017, for shares held in the U.S. Bank 401(k) Savings Plan), as directed in the proxy materials. If you received a printed copy of the proxy materials, you may also complete, sign and return the enclosed proxy card or voting instruction form by mail. Voting in any of these ways will not prevent you from attending or voting your shares at the meeting. We encourage you to vote by Internet or telephone to reduce mailing and handling expenses.

Internet Availability of Proxy Materials:

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 18, 2017: Our proxy statement and 2016 Annual Report are available at www.proxyvote.com.

By Order of the Board of Directors

SIGNATURE

Laura F. Bednarski
Corporate Secretary

March 7, 2017


Table of Contents

GRAPHIC
Proxy Statement Table of Contents

Proxy Statement Table of Contents

Proxy Statement Highlights

    1  

Proposal 1 — Election of Directors

    6  

▶ Director Selection and Qualifications

    6  

▶ 2017 Nominees for Director

    7  

Corporate Governance

    15  

▶ Director Independence

    15  

▶ Board Meetings and Committees

    16  

▶ Board Performance Evaluations

    17  

▶ Director Education

    18  

▶ Shareholder Engagement

    18  

▶ Committee Member Qualifications

    18  

▶ Committee Responsibilities

    19  

▶ Risk Oversight by the Board of Directors

    21  

▶ Board Leadership Structure

    23  

▶ Majority Vote Standard for Election of Directors

    25  

▶ Director Policies

    25  

▶ Succession Planning and Management Development

    25  

Certain Relationships and Related Transactions

    26  

▶ Review of Related Person Transactions

    26  

▶ Related Person Transactions

    27  

Compensation Discussion and Analysis

    28  

▶ Executive Compensation Highlights

    29  

▶ Philosophy and Objectives of Our Executive Compensation Program

    33  

▶ Base Salary

    34  

▶ Annual Cash Incentive Awards

    34  

▶ Long-Term Incentive Awards

    38  

▶ Decision Making and Policies

    41  

Compensation Committee Report

    46  

Executive Compensation

    47  

▶ Summary Compensation Table

    47  

▶ Grants of Plan-Based Awards

    48  

▶ Outstanding Equity Awards

    51  

▶ Option Exercises and Stock Vested

    53  

▶ Pension Benefits

    53  

▶ Nonqualified Deferred Compensation

    56  

▶ Potential Payments Upon Termination or Change-in-Control

    57  

Director Compensation

    61  

Audit Committee Report and Payment of Fees to Auditor

    63  

Proposal 2 — Ratification of Selection of Independent Auditor

    65  

Proposal 3 — Advisory Vote on Executive Compensation

    66  

Proposal 4 — Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation

    67  

Proposal 5 — Shareholder Proposal Regarding Independent Chairman

    67  

Security Ownership of Certain Beneficial Owners and Management

    70  

Questions and Answers About the Annual Meeting and Voting

    72  

Other Matters

    77  

▶ Annual Report to Shareholders and Form 10-K

    77  

▶ Section 16(a) Beneficial Ownership Reporting Compliance

    77  

▶ Contacting U.S. Bancorp's Board of Directors

    77  

▶ Deadlines for Submitting Proposals and Nominating Directors for the 2018 Annual Meeting

    77  

▶ Other Matters for Consideration

    78  

Non-GAAP Financial Measures

    79  

U.S. Bancorp 2017 Proxy Statement

 


Table of Contents

Proxy Statement Highlights
GRAPHIC

 

Proxy Statement Highlights

This summary highlights information described in more detail elsewhere in the proxy statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2017 Annual Meeting of Shareholders

Date and Time:   Tuesday, April 18, 2017, at 11:00 a.m. local time

Place:

 

Hilton Nashville Downtown
Ballroom
121 Fourth Avenue South
Nashville, TN 37201

Record Date:

 

February 21, 2017

Voting Matters and Board Recommendations

Proposal
    Board
Recommendation


For More
Information
             
Proposal 1 —   The election of the 15 directors named in the proxy statement   "FOR" all
nominees
  Page 6
Proposal 2 —   The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2017 fiscal year   "FOR"   Page 65
Proposal 3 —   An advisory vote to approve the compensation of our executives disclosed in the proxy statement   "FOR"   Page 66
Proposal 4 —   An advisory vote on the frequency of future advisory votes on executive compensation   "ONE YEAR"
option
  Page 67
Proposal 5 —   A shareholder proposal seeking the adoption of a policy requiring that the Chairman of the Board be an independent director   "AGAINST"   Page 67

How to Cast Your Vote

The Board of Directors of U.S. Bancorp is soliciting proxies for use at the annual meeting of shareholders to be held on April 18, 2017, and at any adjournment or postponement of the meeting. The proxy materials were first made available to shareholders on or about March 7, 2017.

Your vote is important! Please cast your vote and play a part in the future of U.S. Bancorp.

Even if you plan to attend our annual meeting in person, please cast your vote as soon as possible by:

GRAPHIC Internet
www.proxyvote.com
GRAPHIC Telephone GRAPHIC Mail     

The voting deadline is 11:59 p.m., Eastern time, on April 17, 2017 (or April 13, 2017, for shares held in the U.S. Bank 401(k) Savings Plan). For details on how to cast your vote, see "Questions and Answers about the Annual Meeting and Voting."

1

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proxy Statement Highlights

Director Nominee Highlights

Name

Age


Director
Since


Primary
Occupation


Committee
Memberships


Independent
Douglas M. Baker, Jr.     58     2008   Chairman and Chief Executive Officer, Ecolab Inc.   G (Chair),
RM, E
  GRAPHIC
Warner L. Baxter     55     2015   Chairman, President and Chief Executive Officer, Ameren Corporation   CP (Chair),
A, E
  GRAPHIC
Marc N. Casper     48     2016   President and Chief Executive Officer, Thermo Fisher Scientific Inc.   CP, CR   GRAPHIC
Andrew Cecere     56     2017   President and Chief Operating Officer, U.S. Bancorp   CP, RM   Incoming CEO
Arthur D. Collins, Jr.     69     1996   Retired Chairman and Chief Executive Officer, Medtronic, Inc.   C (Chair),
G, E
  GRAPHIC
Richard K. Davis     59     2006   Chairman and Chief Executive Officer, U.S. Bancorp   E (Chair),
CP, RM
  Current CEO
Kimberly J. Harris     52     2014   President and Chief Executive Officer, Puget Energy, Inc. and Puget Sound Energy, Inc.   CR (Chair),
G, E
  GRAPHIC
Roland A. Hernandez     59     2012   Founding Principal and Chief Executive Officer, Hernandez Media Ventures   A (Chair),
CR, E
  GRAPHIC
Doreen Woo Ho     69     2012   Commissioner, San Francisco Port Commission   CP, RM   GRAPHIC
Olivia F. Kirtley     66     2006   Business Consultant   RM (Chair),
C, E
  GRAPHIC
Karen S. Lynch     54     2015   President, Aetna Inc.   A, CR   GRAPHIC
David B. O'Maley
Lead Director
    70     1995   Retired Chairman, President and Chief Executive Officer, Ohio National Mutual Holdings, Inc. and Ohio National Financial Services, Inc.   C, G, E   GRAPHIC
O'dell M. Owens, M.D., M.P.H.     69     1991   President and Chief Executive Officer, Interact for Health   CP, C   GRAPHIC
Craig D. Schnuck     68     2002   Former Chairman and Chief Executive Officer, Schnuck Markets, Inc.   G, RM   GRAPHIC
Scott W. Wine     49     2014   Chairman and Chief Executive Officer, Polaris Industries Inc.   A, C   GRAPHIC
A   Audit Committee   G   Governance Committee
CP   Capital Planning Committee   RM   Risk Management Committee
CR   Community Reinvestment and Public Policy Committee   E   Executive Committee
C   Compensation and Human Resources Committee        

U.S. Bancorp 2017 Proxy Statement

2


Table of Contents

Proxy Statement Highlights
GRAPHIC


GRAPHIC

Compensation Highlights

Our Executive Compensation Program Aligns Executives' and Shareholders' Interests

GRAPHIC

Our Compensation Program Also Contains Prudent Risk-Management Features

    ​We use a formal process to assess executive officers' sensitivity to risk, which may result in downward adjustments to annual cash incentive payouts.

    ​We include provisions in our equity award agreements that allow for cancellation of all or a portion of the vesting of the awards if an executive demonstrates insensitivity to risk.

    ​We have a "clawback" policy that allows us to recoup annual cash incentive payments attributable to incorrectly reported earnings.

3

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proxy Statement Highlights

Corporate Performance Highlights

We Have Consistently Outpaced Our Peers in Return on Tangible Common Equity1

GRAPHIC

1.
Source: Company reports. The peer companies included in this chart are listed under the heading "Peer Group Composition" on page 43. See Non-GAAP Financial Measures on page 79.

We Built on Our Solid Foundation for a Strong Performance in 2016

GRAPHIC

We Are Well Positioned for Continued Success

    ​Our revenue growth for 2016 (compared to 2015) was in the top half of our peer group, and in the top third when adjusted for large acquisitions.

    ​We have maintained the highest debt ratings of any bank among our peers and among the highest of any bank in the world, reflecting the rating agencies' recognition of our strong, consistent financial performance, the quality of our balance sheet, our future earnings capacity and strong management team.

    ​We continued to make investments to position our businesses for long-term growth, to protect our strong market positions and to accelerate innovation for the benefit of our customers and shareholders.

Please see the Compensation Discussion and Analysis section of this Proxy Statement and our 2016 Annual Report on Form 10-K for more information about our corporate performance in 2016.

U.S. Bancorp 2017 Proxy Statement

4


Table of Contents

Proxy Statement Highlights
GRAPHIC

Governance Highlights

Board Independence

Strong Lead Director Position:  Our independent directors elect from among their ranks a Lead Director, who has broad authority and responsibility over Board governance and operation.

Key Committees Independent:  Independent directors comprise 100% of each of the Audit, Compensation and Human Resources, and Governance Committees.

Regular Executive Sessions:  The full Board and its standing committees each meet in executive session on a regular basis without members of management present.

Board Accountability

Majority Voting:  Our directors are elected annually by a majority of votes cast in uncontested elections. All nominees submit a contingent resignation in writing, which would become effective if the director failed to receive a majority of votes cast and the Board accepted the resignation.

Board Not Classified:  All of our directors are elected annually.

Shareholder Rights and Engagement

Proxy Access:  A shareholder or group of up to 20 shareholders that has held at least 3% of our company's stock for at least three years is able to nominate directors to fill up to 20% of the Board seats (but at least two directors).

Special Meeting:  Holders of at least 25% of our stock are able to call a special meeting of shareholders.

No Poison Pill:  Our company does not maintain a shareholder rights plan.

Shareholder Outreach:  Each year we reach out to many of our largest institutional investors and invite them to provide us feedback on corporate governance and executive compensation issues.

Board Effectiveness

Board, Committee and Individual Evaluations:  The Governance Committee annually conducts rigorous Board assessments, including evaluations of committees and individual directors.

Overboarding Restrictions:  A director may not serve on more than three other boards of public companies in addition to ours, unless the Board determines that the director's service to our Board would not be impaired.

Retirement Policy:  Our Board does not have a rigid retirement policy but instead evaluates for appropriateness the continued service of a director when he or she reaches the age of 72.

Meeting Attendance:  Directors are expected to attend all meetings of the Board and the committees on which they serve and all annual meetings of shareholders. The average Board and committee meeting attendance rate of all directors in 2016 was 99%, and all directors attended the 2016 annual meeting.

Director/Shareholder Alignment

Stock Ownership:  Each non-employee director is expected to hold stock equal to five times the annual cash retainer.

No Hedging or Pledging:  Like our executive officers, our directors are prohibited from holding our company's securities in a margin account or otherwise pledging those securities as collateral for a loan and from engaging in any hedging transactions involving the company's securities.

5

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proposal 1 — Election of Directors

Proposal 1 — Election of Directors

Our Board of Directors currently has 15 members, and directors are elected annually to one-year terms. All of our current directors have been nominated for election by the Board to hold office until the 2018 annual meeting and the election of their successors.

All of the nominees currently serve on our Board, and each of them has previously been elected by the shareholders except for Andrew Cecere. Mr. Cecere was elected to the Board in January 2017, in connection with his appointment to begin serving as Chief Executive Officer on April 18, 2017. The Board has determined that, except for Richard K. Davis and Andrew Cecere, each nominee for election as a director at the annual meeting is independent from U.S. Bancorp as discussed later in this proxy statement under "Corporate Governance — Director Independence."

Director Selection and Qualifications

Director Nominee Selection Process

The selection process for first-time director candidates includes the following steps:

    ​identification of candidates by the Governance Committee based upon information provided by a director search firm, suggestions from current directors and executive officers, or recommendations received from shareholders;

    ​interviews of candidates by the Lead Director and other directors;

    ​reports to the Board by the Governance Committee on the selection process;

    ​recommendations by the Governance Committee; and

    ​election by the Board or formal nomination by the Board for inclusion in the slate of directors at the annual meeting.

Director candidates recommended by shareholders are given the same consideration as candidates suggested by a search firm, directors or executive officers. A shareholder seeking to recommend a prospective candidate for the Governance Committee's consideration should submit the candidate's name and sufficient written information about the candidate to permit a determination by the Governance Committee whether the candidate meets the director selection criteria set forth below and in our Corporate Governance Guidelines. Recommendations should be sent to the Chair of the Governance Committee in care of the Corporate Secretary of U.S. Bancorp at the address listed on page 77 of this proxy statement.

Director Qualification Standards

We will only consider individuals as candidates for director who possess the highest personal and professional ethics, integrity and values, and who are committed to representing the long-term interests of our shareholders. In evaluating candidates for nomination as a director of U.S. Bancorp, the Governance Committee will also consider other criteria, including:

    ​current or recent experience as a chief executive officer of a public company or as a leader of another major complex organization;

    ​business and financial expertise;

    ​experience as a director of a public company;

    ​diversity of gender, ethnicity, viewpoints, background, experience and other demographic factors;

    ​independence;

    ​ability to work in a collegial manner with persons of different education, business and cultural backgrounds;

    ​possession of skills and expertise that complement the attributes of the existing directors; and

    ​freedom from conflicts of interest.

U.S. Bancorp 2017 Proxy Statement

6

Table of Contents

Proposal 1 — Election of Directors
GRAPHIC

For incumbent directors, the Governance Committee also considers the director's attendance, participation in the work of the Board and overall contribution to the Board. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively. Additionally, one or more of our directors serving on the Audit Committee must possess the education or experience required to qualify as an audit committee financial expert, as defined under the rules of the Securities and Exchange Commission ("SEC"), and one or more of our directors serving on the Risk Management Committee must have experience identifying, assessing and managing the risk exposures of large, complex financial firms, in accordance with rules promulgated by the Federal Reserve Board.

2017 Nominees for Director

Our Governance Committee continuously assesses the evolving opportunities and challenges facing our company in order to align the Board's composition with the company's leadership needs. When nominating incumbent and new directors, our Governance Committee considers, among other things:

    Business Experience:  Our Governance Committee considers the balance of business experience represented on the Board. Many of our directors have had experience as a chief executive officer of a large publicly held or private corporation. This background provides experience in risk assessment, corporate governance matters and interaction between management and the board of directors. It also provides experience in general management of large organizations, and oversight of finance, marketing, and execution of corporate strategy. Many of our directors have current or recent experience as a director of another large publicly held or private company, which also provides valuable experience in addressing complex governance and business issues relevant to our company.

    Diversity:  Our Governance Committee regularly reviews the composition of the Board in light of the backgrounds, industries, skills, professional experience, geographic communities, gender, race, ethnicity and other personal qualities and attributes represented by our current members. The Governance Committee also reviews Board self-evaluations and information with respect to the business and professional expertise represented by current members in order to identify any specific skills and backgrounds desirable in future Board members. The Governance Committee incorporates this broad view of diversity into its director nomination process by taking into account all of the above factors when evaluating and recommending director nominees to serve on the Board to ensure that the Board's composition as a whole appropriately reflects the current and anticipated needs of the Board and the company. In implementing this practice, the Governance Committee may place more emphasis on attracting or retaining directors with certain specific skills or experience, such as industry, regulatory, risk management, public policy, accounting or financial expertise, depending on the business strategy and environment and the composition of the Board at the time.

    Tenure:  Our Governance Committee also believes that it is important to maintain a balance of tenure on the Board, in order to benefit from the business, industry and governance experience of longer-serving directors; the fresh perspectives contributed by new directors; and the value of continuity as Board composition changes. Our Governance Committee approaches its task of recommending candidates for election or re-election with the goal of having a mix of directors with long, medium and short tenures on the Board. Our Board has experienced a measured rate of refreshment in recent years, which the Governance Committee believes is appropriate for our Board and company at this time.

Each of our director nominees meets the qualification standards described above and in our Corporate Governance Guidelines and has agreed to serve as a director if elected. Proxies may not be voted for more than 15 directors. If, for any reason, any nominee becomes unable to serve before the election, the persons named as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board of Directors, at its option, may reduce the number of directors that are nominated for election. In addition, as described below under "Corporate Governance — Majority Vote Standard for Election of Directors," each of the nominees has tendered his or her contingent resignation as a director in accordance with our Corporate Governance Guidelines to be effective if he or she fails to receive the required vote for election to the Board and the Board accepts the tendered resignation.

7

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proposal 1 — Election of Directors

Included below is certain information that the director nominees have provided as well as additional information that the Board considered in nominating them. Board service dates listed include service as directors of U.S. Bancorp's predecessor companies.

PHOTO
Douglas M. Baker, Jr.
Director since 2008

Committees

Chair, Governance

Risk Management

Executive

  Business Experience: Mr. Baker, 58, is the Chairman and Chief Executive Officer of Ecolab Inc., a provider of water and hygiene services and technologies for the food, hospitality, industrial and energy markets. He has served as Chairman since May 2006 and Chief Executive Officer since July 2004. He served as President of Ecolab from 2002 until 2011. He joined Ecolab in 1989 and held various leadership positions within the company before being named President and Chief Operating Officer in 2002.

Other Directorships:

Ecolab Inc. since 2004 (Chairman; Safety, Health and Environment Committee)

Target Corporation since 2013 (Lead Director; Nominating and Governance Committee Chair; Risk and Compliance Committee)

Skills and Qualifications:

Chief Executive Experience: Mr. Baker provides the valuable perspective gained from leading a company through the current economic and corporate governance environment as the CEO of an S&P 500 industrial company with global operations.

Corporate Governance: Mr. Baker's experience leading public company boards, including as Chairman of Ecolab and Lead Director of Target, provides valuable corporate governance expertise to our Board.

        
        

PHOTO
Warner L. Baxter
Director since 2015

Committees

Chair, Capital Planning

Audit

Executive

  Business Experience: Mr. Baxter, 55, is the Chairman, President and Chief Executive Officer of Ameren Corporation, a regulated electric and gas utility company serving customers in Missouri and Illinois. He has served in these positions since 2014. Mr. Baxter served as Chairman, President and Chief Executive Officer of Ameren Missouri from 2009 to 2014 and as Executive Vice President and Chief Financial Officer of Ameren Corporation from 2003 to 2009. In addition, he also served as President and Chief Executive Officer of Ameren Services from 2007 to 2009.

Other Directorships:

Ameren Corporation since 2014 (Chairman)

UMB Financial Corporation from 2013 to 2015

Skills and Qualifications:

Chief Executive Experience: Mr. Baxter's experience as a current CEO of a Fortune 500 company provides valuable leadership insight to the Board.

Financial Reporting and Accounting: Through his past experience as the Chief Financial Officer and Controller of a large publicly-traded company, Mr. Baxter brings extensive financial reporting and accounting expertise to our Board.

Regulated Industry Expertise: As the current President and CEO of a company in a highly regulated industry, Mr. Baxter provides valuable perspective on regulatory and business challenges facing our company.

Risk Management: As the current President and CEO of a company in a critical infrastructure industry, Mr. Baxter brings valuable risk management expertise to our Board of Directors.

U.S. Bancorp 2017 Proxy Statement

8


Table of Contents

Proposal 1 — Election of Directors
GRAPHIC

PHOTO
Marc N. Casper
Director since 2016

Committees

Capital Planning

Community Reinvestment and Public Policy

  Business Experience: Mr. Casper, 48, is the President and Chief Executive Officer of Thermo Fisher Scientific Inc., a leader in life sciences and healthcare technologies. He has served as President and Chief Executive Officer since 2009. He served as Executive Vice President and Chief Operating Officer from 2008 to 2009 and Executive Vice President of Thermo Fisher and President of its Analytical Technologies business from 2006 to 2008. He joined Thermo Electron Corporation, a predecessor to Thermo Fisher Scientific, in 2001 and held various leadership positions within that company before being named Executive Vice President of Thermo Fisher in 2006.

Other Directorships:

Thermo Fisher Scientific Inc. since 2009

Zimmer Holdings, Inc. from 2009 to 2013

Skills and Qualifications:

Chief Executive Experience: Mr. Casper's experience as the CEO of a large life sciences and healthcare technologies company gives him broad and valuable leadership experience.

Regulated Industry Expertise: Mr. Casper's experience as the leader of a company in a heavily regulated industry gives him valuable insight on regulatory challenges.

        
        

PHOTO
Andrew Cecere
Director since 2017

Committees

Capital Planning

Risk Management

  Business Experience: Mr. Cecere, 56, is the President and Chief Operating Officer of U.S. Bancorp. He has served in this position since January 2016 and as Vice Chairman and Chief Operating Officer from January 2015 until January 2016. From February 2007 until January 2015, Mr. Cecere served as U.S. Bancorp's Vice Chairman and Chief Financial Officer. Until that time, he served as Vice Chairman, Wealth Management and Securities Services of U.S. Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February 2001. Previously, he had served as an executive officer of the former U.S. Bancorp, including as Chief Financial Officer from May 2000 through February 2001. Mr. Cecere has been elected by the Board to serve as Chief Executive Officer of U.S. Bancorp, effective April 18, 2017.

Other Directorships:

Donaldson Company, Inc. since 2013 (Audit Committee)

Skills and Qualifications:

Financial Reporting and Accounting: Through his service on the audit committee of a public company, as well as his past experience as Chief Financial Officer of U.S. Bancorp, Mr. Cecere brings valuable financial reporting and accounting expertise to our Board.

Financial Services Industry Expertise: Mr. Cecere has deep expertise in the financial services industry, gained through a career of more than 30 years at U.S. Bancorp.

Risk Management: Mr. Cecere brings to our Board valuable risk management expertise gained through his work as Chief Financial Officer and then Chief Operating Officer of U.S. Bancorp during the challenging regulatory and market environment of recent years.

9

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proposal 1 — Election of Directors

PHOTO
Arthur D. Collins, Jr.
Director since 1996

Committees

Chair, Compensation and Human Resources

Governance

Executive

  Business Experience: Mr. Collins, 69, is the retired Chairman and Chief Executive Officer of Medtronic, Inc., a leading medical device and technology company. Mr. Collins served as Chairman of Medtronic from 2002 until August 2008 and Chief Executive Officer from 2002 until August 2007. Mr. Collins served as President of Medtronic from 1996 to 2002 and also as Chief Operating Officer from 1994 to 2002. Since April 2009, Mr. Collins has acted as a senior advisor for Oak Hill Capital Partners, which manages a private equity portfolio of over $8 billion of private equity capital and over $20 billion of investment capital. He is also a managing partner of Acorn Advisors, LLC, which provides consulting services to nonprofit organizations.

Other Directorships:

Cargill, Incorporated since 2000 (Human Resources Committee Chair; Governance, Audit and Executive Committees)

The Boeing Company since 2007 (Compensation Committee Chair; Governance, Organization and Nominating Committee)

Arconic Inc. (formerly Alcoa Inc.) since 2010 (Compensation and Benefits Committee Chair)

Skills and Qualifications:

Chief Executive Experience: Mr. Collins's experience as CEO of Medtronic gives him a broad perspective on a variety of complex business and financial issues that is valuable in his service on our Board.

Corporate Governance: Mr. Collins's experience on the boards of several large public companies has given him significant corporate governance expertise.

Regulated Industry Expertise: Mr. Collins gained extensive regulated industry expertise through his service as Chairman and CEO of a medical device and technology company.

        
        

PHOTO
Richard K. Davis
Director since 2006 Chairman

Committees

Chair, Executive

Capital Planning

Risk Management

  Business Experience: Mr. Davis, 59, is Chairman and Chief Executive Officer of U.S. Bancorp. He has served as Chairman since December 2007 and as Chief Executive Officer since December 2006. He also served as President from October 2004 until January 2016 and was the Chief Operating Officer of U.S. Bancorp from October 2004 until December 2006. Mr. Davis has held management positions with our company since joining Star Banc Corporation, one of our predecessors, as Executive Vice President in 1993. Mr. Davis will step down as Chief Executive Officer of U.S. Bancorp, effective April 18, 2017, but will continue serving as Chairman of the Board.

Other Directorships:

Xcel Energy Inc. since 2006 (Governance Committee Chair; Finance Committee)

The Dow Chemical Company since 2015 (Audit Committee)

Skills and Qualifications:

Chief Executive Experience: As Chairman and CEO of U.S. Bancorp, Mr. Davis brings to all Board discussions and deliberations deep knowledge of the company and its business.

Financial Services Industry Expertise: Mr. Davis brings to the Board extensive leadership experience and industry knowledge gained as Chairman of the Financial Services Roundtable, as Chairman of The Clearing House, and as representative for the Ninth District of the Federal Reserve, where he served on its Financial Advisory Committee.

Regulated Industry Expertise: Mr. Davis's prior service as Lead Director of the Xcel Energy board of directors broadens his experience in overseeing management in an industry subject to extensive regulation.

Risk Management: Mr. Davis brings valuable risk management expertise to our Board through his experience leading a large financial services company through the current risk environment, as well as through his past leadership of the Board of Directors of Xcel Energy, a company in a critical infrastructure industry.

U.S. Bancorp 2017 Proxy Statement

10


Table of Contents

Proposal 1 — Election of Directors
GRAPHIC

PHOTO
Kimberly J. Harris
Director since 2014

Committees

Chair, Community Reinvestment and Public Policy

Governance

Executive

  Business Experience: Ms. Harris, 52, is the President and Chief Executive Officer of Puget Energy, Inc., an energy services holding company, and its subsidiary Puget Sound Energy, Inc., a utility company providing electric and natural gas service in the northwest United States. She has served in these positions since March 2011. Ms. Harris served as President of Puget Energy and Puget Sound Energy from July 2010 through February 2011 and as Executive Vice President and Chief Resource Officer from May 2007 until July 2010. Ms. Harris served as Senior Vice President Regulatory Policy and Energy Efficiency of these companies from 2005 until May 2007.

Other Directorships:

Puget Energy,  Inc. and Puget Sound Energy, Inc. since 2011

Skills and Qualifications:

Chief Executive Experience: Ms. Harris's experience as a current CEO provides valuable leadership perspective to our Board of Directors gained by leading a large company through the current economic and regulatory environment.

Regulated Industry Expertise: Ms. Harris's experience as the leader of a company in a heavily regulated industry gives her valuable expertise in managing a complex business in the context of an extensive regulatory regime.

Risk Management: As the current President and CEO of a company in a critical infrastructure industry, Ms. Harris brings valuable risk management experience to our Board of Directors.

        
        

PHOTO
Roland A. Hernandez
Director since 2012

Committees

Chair, Audit

Community Reinvestment and Public Policy

Executive

  Business Experience: Mr. Hernandez, 59, is the Founding Principal and Chief Executive Officer of Hernandez Media Ventures, a privately held company engaged in the acquisition and management of media assets. He has served in this capacity since January 2001. Mr. Hernandez served as Chairman of Telemundo Group, Inc., a Spanish-language television and entertainment company, from 1998 to 2000 and as President and Chief Executive Officer from 1995 to 2000.

Other Directorships:

MGM Resorts International since 2002 (Lead Director; Audit and Corporate and Social Responsibility Committees)

Vail Resorts,  Inc. since 2002 (Lead Director; Nominating and Governance Committee Chair; Executive and Audit Committees)

Belmond Ltd. (formerly Orient Express Hotels Ltd.) since 2013 (Chairman)

Sony Corporation from 2008 to 2013

The Ryland Group, Inc. from 2001 to 2012

Lehman Brothers Holdings, Inc. from 2005 to 2012

Skills and Qualifications:

Chief Executive Experience: As the Founding Principal and CEO of Hernandez Media Ventures and the former Chairman, President and CEO of a television and entertainment company, Mr. Hernandez has gained business expertise that is particularly relevant to a major consumer bank such as U.S. Bank.

Corporate Governance: As the Chairman or Lead Director of three public companies, Mr. Hernandez brings to our Board significant expertise in current corporate governance issues and practices.

Financial Reporting and Accounting: With his extensive past and current experience on the audit committees of the boards of four public companies, Mr. Hernandez brings broad financial reporting and accounting expertise to our Board.

11

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proposal 1 — Election of Directors

PHOTO
Doreen Woo Ho
Director since 2012

Committees

Capital Planning

Risk Management

  Business Experience: Ms. Woo Ho, 69, is a Commissioner of the San Francisco Port Commission, the governing board responsible for the San Francisco, California, waterfront adjacent to San Francisco Bay. She has served on the Port Commission since May 2011 and served as President from 2012 to 2014. Ms. Woo Ho served as President and Chief Executive Officer of United Commercial Bank, a California commercial bank, from September 2009 to November 2009. She served as President of Community Banking at United Commercial from January 2009 to September 2009. Ms. Woo Ho served as Executive Vice President responsible for Enterprise Marketing, Student Loans and Corporate Trust, at Wells Fargo & Company, a diversified financial services company, in 2008. She served as President of the Consumer Credit Group of Wells Fargo from 1998 to 2007. Ms. Woo Ho was also a member of the Wells Fargo Management Committee from 1999 to 2008.

Other Directorships:

Hercules Capital, Inc. since 2016 (Compensation Committee)

Skills and Qualifications:

Financial Services Industry Expertise: Ms. Woo Ho's over 35 years of commercial and consumer banking experience brings valuable industry experience and knowledge to our Board.

Risk Management: Through her experience as a senior leader in the banking industry, Ms. Woo Ho brings experience identifying, assessing and managing risk exposures of large, complex financial firms.

        
        

PHOTO
Olivia F. Kirtley
Director since 2006

Committees

Chair, Risk Management

Compensation and Human Resources

Executive

  Business Experience: Ms. Kirtley, 66, a Certified Public Accountant and Chartered Global Management Accountant, has served as a business consultant on strategic, risk and corporate governance issues since 2000. She also served as the President of the International Federation of Accountants (IFAC), the global organization for the accountancy profession which facilitates the establishment of international auditing, ethics and education standards, from 2014 to 2016, and as Deputy President of IFAC from 2012 to 2014. Prior to 2000, she served as a senior manager at a predecessor to auditing firm Ernst & Young LLP, and as Treasurer, Vice President and Chief Financial Officer at Vermont American Corporation.

Other Directorships:

Res-Care, Inc. since 1998 (Audit Committee Chair; Governance & Nominating Committee)

Papa Johns International, Inc. since 2003 (Lead Director; Compensation Committee)

Randgold Resources Ltd. since 2017 (Remuneration Committee)

Skills and Qualifications:

Corporate Governance: Ms. Kirtley brings to our Board a deep understanding of a wide range of current governance issues gained by her work as a corporate governance consultant and a faculty member of The Conference Board Directors' Institute.

Financial Reporting and Accounting: Ms. Kirtley's expertise in her field has been recognized in her past service as President of IFAC, as well as her past service as Chair of the American Institute of Certified Public Accountants (AICPA) and Chair of the AICPA Board of Examiners.

Risk Management: Ms. Kirtley gained extensive audit, financial reporting, and risk management experience as the Chief Financial Officer of an international company and as a CPA at a large international accounting firm.

U.S. Bancorp 2017 Proxy Statement

12


Table of Contents

Proposal 1 — Election of Directors
GRAPHIC

PHOTO
Karen S. Lynch
Director since 2015

Committees

Audit

Community Reinvestment and Public Policy

  Business Experience: Ms. Lynch, 54, is the President of Aetna Inc., a diversified health care benefits company. She has served as President since 2014. She served as Executive Vice President of Aetna's Local and Regional business from 2013 to 2014 and Executive Vice President of Aetna's Specialty Products business from 2012 to 2013. Ms. Lynch served as President of Magellan Health Services Inc., a health care management company, from 2009 to 2012. Prior to joining Magellan Health, she served in various leadership roles at Cigna Corporation, a global health insurance service company, from 1999 to 2009. Ms. Lynch began her career as a Certified Public Accountant at auditing firm Ernst & Young LLP.

Skills and Qualifications:

Financial Reporting and Accounting: Ms. Lynch's past experience as a CPA and public company auditor provides valuable financial reporting and accounting expertise to our Board.

Financial Services Industry Expertise: Ms. Lynch's over 24 years of insurance industry experience provides her with valuable financial services industry expertise.

Risk Management: Ms. Lynch contributes valuable risk management expertise in the financial services industry through her experience leading a large health care benefits company.

        
        

PHOTO
David B. O'Maley
Director since 1995
Lead Director

Committees

Compensation and Human Resources

Governance

Executive

  Business Experience: Mr. O'Maley, 70, is the retired Chairman, President and Chief Executive Officer of Ohio National Mutual Holdings, Inc. and its subsidiary Ohio National Financial Services, Inc., an intermediate insurance holding company that markets insurance and financial products through its affiliates, including The Ohio National Life Insurance Company. Mr. O'Maley served as Executive Chairman of these companies from November 2010 to May 2012 after serving as Chairman, President and Chief Executive Officer of Ohio National Mutual Holdings and Ohio National Financial Services from 1994 until November 2010. He joined Ohio National in 1992.

Skills and Qualifications:

Chief Executive Experience: Mr. O'Maley's experience as the CEO of a large, complex company provides leadership and management expertise to our Board.

Financial Services Industry Expertise: As the retired Chairman, President and CEO of a large financial services company, Mr. O'Maley brings to our Board discussions expertise in managing regulatory and business challenges facing financial services companies.

Risk Management: Mr. O'Maley brings valuable risk management expertise to our Board through his experience leading a large financial services company.

13

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Proposal 1 — Election of Directors

PHOTO
O'dell M. Owens, M.D., M.P.H.
Director since 1991

Committees

Capital Planning

Compensation and Human Resources

  Business Experience: Dr. Owens, 69, is the President and Chief Executive Officer of Interact for Health, a regional health and wellness company, and has served in this role since October 2016. He previously served as the Interim Health Commissioner and Medical Director for the Cincinnati Health Department from November 2015 to October 2016 and as the President of Cincinnati State Technical and Community College, an institution of higher education, from September 2010 until September 2015. Dr. Owens has been a member of the Federal Reserve Bank of Cleveland's Cincinnati Business Advisory Council since 2012. He has also been providing services as an independent consultant in medicine, business, education and work-site employee benefits since 2001 and served as the President and Chairman of the Board for Project GRAD (Graduation Really Achieves Dreams), a national non-profit organization formed to improve inner-city education, from 2001 until 2015. From 2004 to 2010, Dr. Owens also served as Coroner of Hamilton County, Ohio.

Skills and Qualifications:

Community Leadership: Through his experience in public service leadership roles and as the President and Chairman of Project GRAD, Dr. Owens brings a unique perspective to our Board by combining business expertise and leadership with a strong focus on community service and public policy.

        
        

PHOTO
Craig D. Schnuck
Director since 2002

Committees

Governance

Risk Management

  Business Experience: Mr. Schnuck, 68, is the former Chairman and Chief Executive Officer of Schnuck Markets, Inc., a regional supermarket chain. He was elected President of Schnuck Markets in 1984 and served as Chief Executive Officer from 1989 until January 2006. He also served as Chairman from January 1991 until December 2006. Mr. Schnuck continued to be active in the Schnuck Markets business as Chair of its Executive Committee from 2007 until 2014 and was named Chairman Emeritus in 2014.

Skills and Qualifications:

Chief Executive Experience: Mr. Schnuck brings to our company substantial leadership experience gained as the long-serving Chairman, CEO and Chair of the Executive Committee of a large, regional food retailer.

Consumer Business Expertise: In addition to leading a large consumer goods business, Mr. Schnuck also served for nine years on the board of governors of the Uniform Code Council, the agency that oversees his industry's most fundamental technologies, serving as Chairman for two terms. This work has given him additional insight into technological innovation in retail business, which is an important focus in various U.S. Bancorp business lines.

U.S. Bancorp 2017 Proxy Statement

14


Table of Contents

Proposal 1 — Election of Directors
GRAPHIC

PHOTO
Scott W. Wine
Director since 2014

Committees

Audit

Compensation and Human Resources

  Business Experience: Mr. Wine, 49, is the Chairman and Chief Executive Officer of Polaris Industries Inc., a worldwide manufacturer and marketer of innovative high-performance motorized products. He has served as Chairman since 2013, and Chief Executive Officer since 2008. Mr. Wine served as President of Fire Safety Americas, a division of United Technologies Corporation, from 2007 to 2008. Prior to that time, Mr. Wine held various senior leadership positions at Danaher Corporation and Honeywell International, Inc. from 1996 to 2007.

Other Directorships:

Polaris Industries Inc. since 2008 (Technology Committee)

Terex Corporation since 2011 (Compensation and Governance and Nominating Committees)

Skills and Qualifications:

Chief Executive Experience: Mr. Wine's experience as the Chairman and CEO of a large international manufacturing company gives him broad and valuable experience in a business focused on growing operations within domestic and overseas markets.

Consumer Business Expertise: Mr. Wine contributes to the Board a current perspective on retail business gained from his leadership of a consumer-focused company.

GRAPHIC

  FOR

    The Board of Directors recommends a vote "FOR" election of the 15 director nominees to serve until the next annual meeting and the election of their successors.

Corporate Governance

Our Board of Directors and management are dedicated to exemplary corporate governance. Good corporate governance is vital to our continued success. Our Board of Directors has adopted Corporate Governance Guidelines to provide a corporate governance framework for our directors and management to effectively pursue our objectives for the benefit of our shareholders. The Board reviews and updates these guidelines and the charters of the Board committees at least annually in response to evolving best practices and the results of annual Board and committee evaluations. Our Corporate Governance Guidelines, as well as our Code of Ethics and Business Conduct, can be found at www.usbank.com by clicking on "About U.S. Bank" and then "Corporate Governance" and then, as applicable, "Corporate Governance Guidelines" or "Code of Ethics."

Director Independence

Our Board of Directors has determined that each of the following directors, comprising all of our non-employee directors, has no material relationship with U.S. Bancorp and is independent: Douglas M. Baker, Jr., Warner L. Baxter, Marc N. Casper, Arthur D. Collins, Jr., Kimberly J. Harris, Roland A. Hernandez, Doreen Woo Ho, Olivia F. Kirtley, Karen S. Lynch, David B. O'Maley, O'dell M. Owens, M.D., M.P.H., Craig D. Schnuck and Scott W. Wine. Richard K. Davis and Andrew Cecere are not independent because both are currently executive officers of U.S. Bancorp.

15

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Corporate Governance

Our Board has adopted a set of standards in our Corporate Governance Guidelines to assist it in assessing the independence of each of our non-employee directors. A director of U.S. Bancorp who meets the independence qualifications of the New York Stock Exchange (the "NYSE") listing standards may be deemed "independent" by the Board of Directors after consideration of the relationships between U.S. Bancorp or any of our affiliates and the director or any of his or her immediate family members or other related parties. Our Board deems the following relationships to be categorically immaterial such that they will not, by themselves, affect an independence determination:

    ​a relationship between our company and an organization of which the director or a member of his or her immediate family is an executive officer if that role does not constitute that person's principal occupation;

    ​an ordinary banking relationship for services readily available from other large financial institutions;

    ​employment by our company of a member of the director's immediate family if that person's annual compensation does not exceed $120,000; and

    ​a relationship between our company and an organization with which the director or a member of his or her immediate family is affiliated if (a) the relationship arises in the ordinary course of both parties' operations and (b) the aggregate annual amount involved does not exceed $120,000.

The only relationship between U.S. Bancorp and our directors or the directors' related interests that was considered by the Board when assessing the independence of our non-employee directors is the relationship between U.S. Bancorp and Schnuck Markets, Inc., a corporation with which our director Craig D. Schnuck is affiliated. The Board determined that this relationship, which is described later in this proxy statement under the heading "Certain Relationships and Related Transactions — Related Person Transactions," did not impair Mr. Schnuck's independence because the amounts involved are immaterial to Schnuck Markets' gross revenues and the relationship had no unique characteristics that could influence Mr. Schnuck's impartial judgment as a director of U.S. Bancorp.

Board Meetings and Committees

The Board of Directors conducts its business through meetings of the Board and the following standing committees: Audit, Capital Planning, Community Reinvestment and Public Policy, Compensation and Human Resources, Governance, Risk Management, and Executive. The standing committees report on their deliberations and actions at each full Board meeting. Each of the standing committees has the authority to engage outside experts, advisers and counsel to the extent it considers appropriate to assist the committee in its work. Each of the standing committees has adopted and operates under a written charter. These charters can be found on our website at www.usbank.com by clicking on "About U.S. Bank" and then "Corporate Governance" and then "Board Committees."

The independent directors meet in executive session (without the CEO or any other member of management present) at the end of each regularly scheduled Board meeting and may also meet in executive session at any other time. The Lead Director presides over these executive sessions. See "Board Leadership Structure." During each committee meeting, the committees have the opportunity to hold executive sessions without members of management present.

The Board of Directors held eight meetings during 2016. Each director attended at least 75% of the total meetings of the Board and Board committees on which he or she served during the year. The average attendance rate of all directors in 2016 was 99%.

U.S. Bancorp 2017 Proxy Statement

16


Table of Contents

Corporate Governance
GRAPHIC

Board Performance Evaluations

Our Governance Committee conducts an annual assessment of the Board's performance to determine whether it, its committees and its members are functioning effectively and to identify areas for growth and improvement. The annual process is as follows:

GRAPHIC

17

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Corporate Governance

Director Education

We believe that it is of utmost importance that our directors receive additional information and training about issues that are critical to exercising prudent oversight of the management of our company. We have implemented a robust director education program that begins with in-depth training covering our industry, financial reporting, and each of our lines of business, and that continues with special education sessions throughout the year that highlight current business, industry, regulatory and governance topics presented by internal and external experts.

Shareholder Engagement

We maintain an annual shareholder engagement program to help us better understand the views of our investors. We reach out to many of our largest institutional investors each fall to invite them to speak with us and provide feedback on corporate governance and executive compensation issues. The investors have the opportunity during these meetings to discuss their views on governance or compensation issues of particular importance to them. Management shares the feedback received during these meetings with the Governance Committee and the Compensation and Human Resources Committee. The Lead Director (or, in the Lead Director's discretion, the chair of the relevant Board committee) may also be available to meet with shareholders as appropriate. Requests for such a meeting are considered on a case-by-case basis.

Committee Member Qualifications

All of the Audit Committee members meet the independence and experience requirements of the NYSE and the SEC. As part of those requirements, our Board of Directors has determined that each member of the Audit Committee is independent and financially literate, and each of our audit committee financial experts has accounting or other financial management expertise. Our Board of Directors has identified Roland A. Hernandez, our Audit Committee Chair, and Warner L. Baxter, Karen S. Lynch and Scott W. Wine as audit committee financial experts as defined under the rules of the SEC. The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this restriction.

All of the Governance Committee members and Compensation and Human Resources Committee members also meet the independence requirements of the NYSE, including, with respect to the Compensation and Human Resources Committee members, the NYSE's independence requirements specific to members of compensation committees.

U.S. Bancorp 2017 Proxy Statement

18


Table of Contents

Corporate Governance
GRAPHIC

Committee Responsibilities

The charter of each of our standing committees fully describes that committee's responsibilities. The following summary highlights the committees' key areas of oversight.

Committee
Primary Responsibilities and Membership

 

 

 
Audit

Held 14 meetings during 2016

 

Assisting the Board of Directors in overseeing the quality and integrity of our financial statements, including matters related to internal controls; our compliance with legal and regulatory requirements; the qualifications, performance and independence of our independent auditor; and the integrity of the financial reporting processes, both internal and external;

appointing, compensating, retaining and overseeing the work of the independent auditor; and

overseeing the internal audit function and approving the appointment and compensation of the Chief Audit Executive.

 

Current Members: Roland A. Hernandez (Chair), Warner L. Baxter, Karen S. Lynch and Scott W. Wine

        
        

Capital Planning

This committee was formed in January 2017

 

Overseeing the capital planning and capital management processes and actions, including stress testing processes, scenarios and results;

reviewing and approving the Comprehensive Capital Analysis and Review and recommending approval to the Board of Directors;

monitoring our company's capital adequacy;

reviewing and approving our resolution and recovery plans and recommending approval to the Board of Directors; and

reviewing and approving the issuance or repurchase of equity securities and other significant financial transactions and equity investments.

 

Current Members: Warner L. Baxter (Chair), Marc N. Casper, Andrew Cecere, Richard K. Davis, Doreen Woo Ho and O'dell M. Owens, M.D., M.P.H.

        
        

Community Reinvestment and Public Policy

Held 4 meetings during 2016

 

Reviewing and considering our position and practices on matters of public interest and public responsibility and similar issues involving our relationship with the community at large;

reviewing our activities related to corporate culture, including those focused on ethical business culture and diversity and inclusion initiatives;

reviewing our activities, performance and compliance with the Community Reinvestment Act and fair lending regulations;

reviewing our reputation-building and brand management activities, including overseeing management of reputational risk; and

reviewing our activities and programs with respect to corporate social responsibility, including sustainability and corporate political contributions.

 

Current Members: Kimberly J. Harris (Chair), Marc N. Casper, Roland A. Hernandez and Karen S. Lynch

19

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Corporate Governance
Committee
Primary Responsibilities and Membership

 

 

 
Compensation and Human Resources (the "Compensation Committee")

Held 7 meetings during 2016

 

Discharging the Board's responsibilities relating to the compensation of our executive officers;

recommending to the Board for approval executive officer incentive compensation plans and all equity-based incentive plans;

approving other compensation plans, practices and programs applicable to the company's executive officers, including performance goals and objectives;

recommending to the independent directors for approval the compensation program for our non-employee directors;

evaluating and discussing with the appropriate officers of our company the incentives for risk taking contained in our incentive compensation plans and programs; and

evaluating the CEO's performance and overseeing succession planning for executive officers other than our CEO.

 

Current Members: Arthur D. Collins, Jr. (Chair), Olivia F. Kirtley, David B. O'Maley, O'dell M. Owens, M.D., M.P.H., and Scott W. Wine

        
        

Governance

Held 6 meetings during 2016

 

Discharging the Board's responsibilities relating to corporate governance matters, including developing and recommending to the Board a set of corporate governance principles;

overseeing succession planning for our CEO;

identifying and recommending to the Board individuals qualified to become directors;

ensuring our company's sales practices are aligned with our stated values, strategy and risk appetite;

conducting an annual performance evaluation of the Board, its committees, and its members;

overseeing the evaluation of management; and

making recommendations to the Board regarding any shareholder proposals.

 

Current Members: Douglas M. Baker, Jr. (Chair), Arthur D. Collins, Jr., Kimberly J. Harris, David B. O'Maley and Craig D. Schnuck

        
        

Risk Management

Held 6 meetings during 2016

 

Overseeing our overall risk management function, which governs the management of credit, interest rate, liquidity, market, capital, operational, compliance and strategic risk;

reviewing and approving our company's risk management framework and risk appetite statement;

monitoring our company's risk profile relative to its risk appetite; and

reviewing and evaluating significant capital expenditures and potential mergers and acquisitions.

 

Current Members: Olivia F. Kirtley (Chair), Douglas M. Baker, Jr., Andrew Cecere, Richard K. Davis, Doreen Woo Ho and Craig D. Schnuck

        
        

Executive

Held 0 meetings during 2016

 

The Executive Committee has authority to exercise all powers of the Board of Directors, as permitted by law and our bylaws, between regularly scheduled Board meetings.
  
Current Members: Richard K. Davis (Chair), Douglas M. Baker, Jr., Warner L. Baxter, Arthur D. Collins, Jr., Kimberly J. Harris, Roland A. Hernandez, Olivia F. Kirtley and David B. O'Maley

U.S. Bancorp 2017 Proxy Statement

20


Table of Contents

Corporate Governance
GRAPHIC

Risk Oversight by the Board of Directors

As part of its responsibility to oversee the management, business and strategy of our company, the Board of Directors has approved a risk management framework that establishes governance and risk management requirements for all risk-taking activities. This framework includes company- and business-level risk appetite statements that set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives.

The Board of Directors oversees management's performance relative to the risk management framework, risk appetite statements, and other policy requirements. While management is responsible for defining the various risks facing our company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis, our Board's responsibility is to oversee our company's risk management processes by informing itself concerning our material risks and evaluating whether management has reasonable risk management and control processes in place to address the material risks.

To fulfill its risk oversight responsibility, the Board:

    ​reviews our company's strategic objectives and financial performance in light of its risk appetite;

    ​oversees the amounts and types of risk taken by management in executing the corporate strategy;

    ​oversees management's performance relative to risk management and control of the company's risk-taking activities;

    ​evaluates the role of incentive compensation in managing our company's risk appetite; and

    ​oversees talent management and succession planning.

The Board's risk oversight function is primarily carried out through its committees. As described in the preceding discussion of committee responsibilities:

    ​the Audit Committee is focused on financial statement and accounting risk and internal controls;

    ​the Capital Planning Committee oversees capital planning and capital management and reviews and approves significant financial transactions and equity investments;

    ​the Community Reinvestment and Public Policy Committee reviews activities related to corporate culture and oversees our company's activities with respect to reputational risk;

    ​the Compensation Committee oversees our company's compensation policies and arrangements to ensure that they do not encourage inappropriate levels of risk-taking by management with respect to our company's strategic goals, and to determine whether any of them give rise to risks that are reasonably likely to have a material adverse effect on our company. More information on the evaluation performed by the Compensation Committee is included below in "Compensation Discussion and Analysis — Decision Making and Policies — Risk Considerations in Setting Compensation Plans and Programs";

    ​the Governance Committee reviews the responsibilities of each Board committee to ensure that all significant risk categories are overseen by at least one committee and ensures our company's sales practices are aligned with our stated values, strategy and risk appetite; and

    ​the Risk Management Committee is primarily responsible for oversight of overall enterprise risk, including credit, interest rate, liquidity, market, operational, compliance, Bank Secrecy Act/Anti-Money Laundering, strategic, reputation and other key risks faced by the company. The Risk Management Committee is also responsible for reviewing and evaluating significant capital expenditures and potential mergers and acquisitions.

In addition, the Risk Management and Audit Committees meet annually in joint session to give each committee the opportunity to review the risk areas primarily overseen by the other; starting in 2017, the Capital Planning Committee will be included in this joint session. Finally, at each meeting of the full Board of Directors, each committee gives a detailed review of the matters it discussed and conclusions it reached during its recent meetings.

Each Board committee carries out its responsibilities using reports from management containing information relevant to the risk areas under that committee's oversight. The committees must therefore be confident that an appropriate risk

21

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Corporate Governance

monitoring structure is in place at the management level in order to be provided accurate and useful informational reports. The management-level risk oversight structure is robust. Our company relies on comprehensive risk management processes to identify, aggregate and measure, manage, and monitor risks. This system enables the Board of Directors to establish a mutual understanding with management of the effectiveness of our company's risk management practices and capabilities, to review our company's risk exposure and to elevate certain key risks for discussion at the Board level. A framework exists to account for the introduction of emerging risks or any increase in risks routinely taken, which would either be largely controlled by the risk limits in place or identified through the frequent risk reporting that occurs throughout our company.

The Executive Risk Committee, which is chaired by the Chief Risk Officer and which includes the CEO and other members of the executive management team, oversees execution against the risk management framework and risk appetite statement. The Executive Risk Committee meets monthly, and more frequently when circumstances merit, to provide executive management oversight of our risk management framework, assess appropriate levels of risk exposure and actions that may be required for identified risks to be adequately mitigated, promote effective management of all risk categories, and foster the establishment and maintenance of an effective risk culture. The Executive Risk Committee members manage large, sophisticated groups within our company that are dedicated to controlling and monitoring risk to the levels deemed appropriate by the Board of Directors and executive management. These individuals, together with our company's controller, treasurer and others, also provide the Board's committees with the information the committees need and request in order to carry out their oversight responsibilities.

The Executive Risk Committee focuses on current and emerging risks, including strategic and reputational risks, directing timely and comprehensive actions. The following senior operating committees have also been established, each responsible for overseeing a specified category of risk:

    ​the Asset and Liability Management Committee ensures that the policies, guidelines and practices established to manage our financial risks, including interest rate risk, market risk, liquidity risk, operations risk and capital adequacy, are followed;

    ​the Capital Management Operating Committee provides oversight of the company's programs related to stress testing, capital planning and capital adequacy, and resolution and recovery, as well as oversight of the company's compliance with capital regulation;

    ​the Compliance Risk Management Committee provides direction regarding the management of compliance risk to the company's business lines and risk management programs and shares institutional knowledge regarding compliance risk management and mitigation across the company;

    ​the Disclosure Committee assists the CEO and the CFO in fulfilling their responsibilities for oversight of the accuracy and timeliness of the disclosures made by the company;

    ​the Enterprise Financial Crimes Compliance Operating Committee is responsible for the management and implementation of the company's program on enterprise financial crimes across business lines to ensure a consistent control infrastructure and culture of compliance throughout the company;

    ​the Enterprise IT Governance Committee ensures that delivery of the company's information technology services, including information security and business continuity, are aligned with the company's priorities and risk appetite;

    ​the Executive Credit Management Groupensures that products that have credit risk are supported by sound credit practices; reviews asset quality, trends, portfolio performance statistics and loss forecasts; and reviews and adjusts credit policies accordingly;

    ​the Incentive Review Committee reviews and evaluates all of our company's incentive compensation programs and policies for risk sensitivity and mitigation;

    ​the International Risk Oversight Committee is responsible for overseeing the company's foreign operations and cross-border activity;

    ​the Operational Risk Committee provides direction and oversight of the company's operational risk management framework and corporate control programs, including significant operational risk events;

U.S. Bancorp 2017 Proxy Statement

22


Table of Contents

Corporate Governance
GRAPHIC
    ​the Reputation Risk Operating Committee is dedicated to the oversight of risk associated with activities and issues that may negatively impact the reputation of the company;

    ​the Sales Culture Oversight Committee oversees and provides direction regarding a coordinated and unified approach to risks associated with sales practices and services at the company; and

    ​the Trust Management Committee oversees the fiduciary activities of the Wealth Management and Securities Services business line.

The company's Board and management-level committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, the business lines, manages risks in conformity with established limits and policy requirements. In turn, business leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, which includes the Chief Risk Officer's organization as well as policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors the first line of defense's compliance with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee and senior management with independent assessment and assurance regarding the effectiveness of the company's governance, risk management, and control processes.

Board Leadership Structure

Board Leadership Policies and Practices

Our Board believes that a strong, independent Board of Directors is critical to effective oversight of management. The Board regularly and carefully considers the critical issue of the best independent leadership structure for the Board, and maintains a flexible policy regarding the issue of whether the position of Chairman should be held by an independent director. At least annually, the Board reviews the Board's and company's needs and the leadership attributes of its directors and executives to determine whether our company is best served at that particular time by having the CEO or another director hold the position of Chairman.

In order to ensure strong independent Board leadership when the position of Chairman is not held by an independent director, the independent directors elect a Lead Director with the substantial leadership responsibilities detailed below. The Lead Director is elected annually upon the recommendation of the Governance Committee, with the expectation that he or she will generally serve three, and may serve up to five, consecutive terms.

In addition to strong independent leadership of the full Board, each of the Audit Committee, Governance Committee, and Compensation Committee is composed solely of independent directors. This means that independent directors oversee critical, risk-sensitive matters such as the quality and integrity of our financial statements; the compensation of our executive officers, including the CEO; the nomination of directors; and the evaluation of the Board, its committees, and its members. Each of the full Board and these key committees meet in executive session on a regular basis.

Leadership Decisions in 2017

Richard K. Davis has served as our CEO since December 2006 and as Chairman since December 2007. On the date of the annual meeting, Andrew Cecere, our current President and Chief Operating Officer, who has 31 years of experience with the company, will become CEO and Mr. Davis will continue serving as Chairman of the Board. Mr. Cecere has been serving as a director, and David B. O'Maley has been serving as the Board's independent Lead Director, since January 2017.

The independent directors believe that Mr. Davis's continued leadership of the Board will constitute a valuable resource to the Board and Mr. Cecere, and will help facilitate a smooth transition of the CEO role. In addition, having the former CEO serve as Executive Chairman and having the incoming CEO serve as a director will create a strong bridge between the Board and management during the transition. The Board will also continue to benefit from the independent leadership provided by a strong Lead Director. More information about the Executive Chairman and Lead Director roles and the leaders in those positions follows.

23

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Corporate Governance

Executive Chairman

Mr. Davis, who has 24 years of experience at U.S. Bancorp, including 12 years as President and 10 years as CEO, has the knowledge, expertise and experience to understand and clearly articulate to the Board the opportunities and risks facing U.S. Bancorp and to lead discussions on important matters affecting our business.

The primary responsibilities of the Executive Chairman will be as follows:

    ​set Board meeting agendas in collaboration with the CEO and Lead Director, who has final approval authority;

    ​preside at Board meetings;

    ​provide support and advice on Board matters to the incoming CEO;

    ​help ensure that the Board is provided with full information on the company and its industry;

    ​set shareholder meeting agendas in collaboration with the CEO, and preside at meetings of the shareholders; and

    ​chair the Board's Executive Committee.

Lead Director

Mr. O'Maley brings a wealth of experience in the financial services industry and on our Board to his new role as Lead Director. As the former Chairman and CEO of a large financial services company, Mr. O'Maley contributes substantial financial industry and risk management expertise to the Board. He is one of our longer-tenured directors, has served as Chair of the Compensation Committee, and is currently a member of the Compensation and Governance Committees, as well as the Executive Committee. He was elected Lead Director by the independent directors after the completion of the expected three-year tenure of Mr. Collins as the company's previous Lead Director.

Role of Lead Director

The Board recognizes the importance of strong independent leadership. Accordingly, it entrusts the Lead Director with the following responsibilities and authority:

lead executive sessions of the Board's independent or non-management directors, and preside at any session of the Board where the Chairman is not present;

act as a regular communication channel between our independent directors and the CEO;

approve the Board meeting agendas;

approve Board meeting schedules to ensure there is sufficient time for discussion of all agenda items;

approve information sent from management to the Board;

as appropriate, be the representative of the independent directors in discussions with our major shareholders regarding their concerns and expectations;

as appropriate, call special Board meetings or special meetings of the independent directors;

approve, on behalf of the Board, the retention of consultants who report directly to the Board;

assist the Board and company officers in assuring compliance with and implementation of our Corporate Governance Guidelines;

advise the independent Board committee chairs in fulfilling their designated roles and responsibilities to the Board;

review shareholder communications addressed to the full Board or to the Lead Director;

interview all Board candidates and make recommendations to the Governance Committee and the Board; and

communicate, as appropriate, with the company's regulators.

U.S. Bancorp 2017 Proxy Statement

24


Table of Contents

Corporate Governance
GRAPHIC

Majority Vote Standard for Election of Directors

Our bylaws provide that in uncontested elections a nominee for director will be elected to the Board if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast "AGAINST" that nominee's election. The voting standard for directors in a contested election is a plurality of the votes cast at the meeting.

Our Corporate Governance Guidelines provide that director nominees must submit a contingent resignation in writing to the Governance Committee, which becomes effective if the director fails to receive a sufficient number of votes for re-election at the annual meeting of shareholders and the Board accepts the resignation. The Board will nominate for election or re-election as director only candidates who have tendered such a contingent resignation.

Our Corporate Governance Guidelines further provide that if an incumbent director fails to receive the required vote for re-election, our Governance Committee will act within 90 days after certification of the shareholder vote to determine whether to accept the director's resignation, and will submit a recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding his or her resignation. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.

If each member of the Governance Committee fails to receive the required vote in favor of his or her election in the same election, then those independent directors who did receive the required vote will appoint a committee amongst themselves to consider the resignations and recommend to the Board whether to accept them. However, if the only directors who received the required vote in the same election constitute three or fewer directors, all directors may participate in the decision regarding whether to accept the resignations.

Each director nominee named in this proxy statement has tendered an irrevocable, contingent resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.

Director Policies

Policy Regarding Service on Other Boards

Our Board of Directors has established a policy that restricts our directors from serving on the boards of directors of more than three public companies in addition to their service on our Board of Directors unless the Board determines that such service will not impair their service on our Board. Currently, no director exceeds this restriction.

Policy Regarding Attendance at Annual Meetings

Board members are expected to attend all annual meetings of shareholders in person. All of our directors attended last year's annual meeting of shareholders.

Director Transition Policy

Our Governance Committee annually reviews each director's contributions to the Board and considers each director's effectiveness and the composition of the Board during the annual review process. The Board believes that any director's continued service on the Board should also be evaluated for continued appropriateness in each of the following circumstances: the director has a change in employment or other major responsibilities, an employee director ceases to be a company employee, and the director reaches the age of 72.

Succession Planning and Management Development

A primary responsibility of the Board is planning for succession with respect to our company's CEO, as well as overseeing succession planning for other senior management positions. The Board's process targets the building of enhanced management depth, considers continuity and stability within our company, and responds to our company's evolving needs and changing circumstances. Toward that goal, the executive talent development and succession planning process is integrated into the Board's annual activities.

The Board works with the Governance Committee to evaluate a number of potential internal and external candidates as successors to the CEO, and considers emergency, temporary scenarios as well as long-term succession. The Compensation Committee is responsible for reviewing succession planning for executive officer positions other than the CEO. The CEO makes available to the Board his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for those individuals.

25

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Certain Relationships and Related Transactions

Certain Relationships and Related Transactions

Review of Related Person Transactions

The Board has adopted a written Related Person Transactions Policy for the review, evaluation and approval or ratification of transactions between our company and its related persons. "Related persons" under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. Their "immediate family members" include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any person (other than a tenant or employee) sharing the person's household.

Except as described below, the policy requires the Governance Committee of the Board to review and evaluate and either approve or disapprove all transactions or series of transactions in which:

    ​the amount involved will, or may be expected to, exceed $120,000 in any fiscal year;

    ​our company is or will be a participant; and

    ​a related person has a direct or indirect interest.

The Board has determined that the Governance Committee does not need to review or approve certain transactions even if the amount involved will exceed $120,000, including the following transactions:

    ​lending and other financial services transactions or relationships that are in the ordinary course of business and non-preferential, and comply with applicable laws;

    ​transactions in which the related person's interest derives solely from his or her services as a director of, and/or his or her ownership of less than ten percent of the equity interest (other than a general partner interest) in, another corporation or organization that is a party to the transaction;

    ​transactions in which the related person's interest derives solely from his or her ownership of a class of equity securities of our company and all holders of that class of equity securities received the same benefit on a pro rata basis;

    ​transactions where the rates or charges involved are determined by competitive bids, or that involve the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; and

    ​employment and compensation arrangements for any executive officer and compensation arrangements for any director, provided that such arrangements have been approved by the Compensation Committee.

When considering whether to approve or ratify a transaction, the Governance Committee will consider facts and circumstances that it deems relevant to its determination, including:

    ​the nature and extent of the related person's interest in the transaction;

    ​whether the transaction is on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with our company;

    ​the materiality of the transaction to each party;

    ​whether our company's Code of Ethics could be implicated, including whether the transaction would create a conflict of interest or appearance of a conflict of interest;

    ​whether the transaction is in the best interest of our company; and

    ​in the case of a non-employee director, whether the transaction would impair his or her independence.

No director is allowed to participate in the deliberations or vote on the approval or ratification of a transaction if that director is a related person with respect to the transaction under review. On an annual basis the Governance Committee assesses all ongoing relationships with related persons to confirm that the transactions are still appropriate.

U.S. Bancorp 2017 Proxy Statement

26


Table of Contents

Certain Relationships and Related Transactions
GRAPHIC

Related Person Transactions

Lending Transactions

During 2016, U.S. Bancorp and our banking and investment subsidiaries engaged in transactions in the ordinary course of business with some of our directors, executive officers and the persons that we know beneficially owned more than 5% of our common stock on December 31, 2016, and the entities with which they are associated. All loans and loan commitments and any transactions involving other financial products and services in connection with these transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to our banking and investment subsidiaries and did not involve more than the normal risk of collectibility or present other unfavorable features.

Transactions with Entities Affiliated with Directors or Executive Officers

During 2016, U.S. Bank operated 33 branches and 69 ATMs in grocery stores owned by Schnuck Markets, Inc., of which Craig D. Schnuck, one of our directors, beneficially owns approximately 13% of the outstanding capital stock. Mr. Schnuck's sister, Nancy A. Diemer, and his four brothers, Scott C. Schnuck, Todd R. Schnuck, Mark J. Schnuck and Terry E. Schnuck, each beneficially own approximately 13% of the outstanding capital stock of Schnuck Markets as well. In addition, each of Mr. Schnuck's brothers is a director of, and holds the following officer positions with, Schnuck Markets: Scott C. Schnuck, Chairman of the Executive Committee; Todd R. Schnuck, Chairman and Chief Executive Officer; Mark J. Schnuck, Vice President; and Terry E. Schnuck, Assistant Secretary. Rent and fee payments by U.S. Bank to Schnuck Markets were approximately $2.8 million in 2016. The consolidated gross revenues of Schnuck Markets in 2016 were approximately $2.7 billion. These transactions were conducted at arm's length in the ordinary course of business of each party to the transaction. As discussed above under the heading "Corporate Governance — Director Independence," the Board of Directors has determined that this relationship is immaterial to Mr. Schnuck, and that Mr. Schnuck is an independent director.

During 2016, we paid Little & Co., a design and branding agency, approximately $1.7 million in professional fees for brand strategy and design work. The President of Little & Co. is the brother of Andrew Cecere, who is currently our President and Chief Operating Officer and a director and who will begin serving as our CEO on April 18, 2017. The selection of Little & Co. was made based on our regular sourcing and competitive bidding process, without the involvement of Mr. Cecere. The fees we paid to Little & Co. were negotiated on an arm's length basis and were not material to our 2016 marketing and advertising expense. The branding work concluded in 2016, and we do not intend to continue the engagement or to have Little & Co. bid for future work, in order to avoid the appearance of any conflict of interest with Mr. Cecere.

27

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

Compensation Discussion and Analysis

This section explains how we compensated the individuals who served as our CEO or CFO for all or a part of 2016 and each of our three other most highly compensated executive officers for 2016 (our named executive officers, or "NEOs"):

    Richard K. Davis, who serves as Chairman and Chief Executive Officer;

    Terrance R. Dolan, who has served as Vice Chairman and Chief Financial Officer since August 1, 2016; Mr. Dolan previously served as Vice Chairman, Wealth Management and Securities Services;

    Kathleen A. Rogers, who served as our Vice Chairman and Chief Financial Officer until August 1, 2016; Ms. Rogers has remained an employee of our company after stepping down from her executive role;

    Andrew Cecere, who serves as President and Chief Operating Officer;

    P.W. (Bill) Parker, who serves as a Vice Chairman and is our Chief Risk Officer; and

    Jeffry H. von Gillern, who serves as Vice Chairman, Technology and Operations Services.

Reference Guide

Executive Compensation Highlights

  29

Philosophy and Objectives of Our Executive Compensation Program

  33

Base Salary

  34

Annual Cash Incentive Awards

  34

▶ How We Determine Our NEOs' Annual Cash Incentive Awards

  34

▶ Setting the Target Award Amounts

  35

▶ Calculating the Bonus Funding Percentage

  35

▶ Factoring in Individual Performance and Risk Sensitivity

  37

▶ Recoupment of Annual Cash Incentive Payouts

  38

Long-Term Incentive Awards

  38

▶ Establishing the Structure and Value of the Equity Awards

  38

▶ Selecting the Performance Metrics and Performance Period for the PRSU Awards

  39

▶ Determining the Percentage of Target PRSUs Earned

  40

Decision Making and Policies

  41

▶ Who Is Involved in Making Compensation Decisions

  41

▶ What Information Is Considered When Determining Compensation

  41

▶ Peer Group Composition

  43

▶ Risk Considerations in Setting Compensation Plans and Programs

  43

▶ Stock Ownership Requirements

  45

▶ Deductibility of Performance-Based Compensation

  46

U.S. Bancorp 2017 Proxy Statement

28


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

Executive Compensation Highlights

    The following table sets forth the components of our NEOs' total direct compensation and results for 2016:

    Component   How It Works   2016 Actions and Results

GRAPHIC

 

Base Salary

 

Salary levels are intended to reward experience and demonstrated skills and competencies relative to the market value of the position

 

Several of the NEOs received raises, which were largely designed to better align their base salaries with those of similarly situated executives in our peer group.

 

Annual Cash Incentive Compensation

 

Target award amounts are set as a percentage of each NEO's base salary

Earnings per share ("EPS") is the performance metric for the corporate component (weighted 35%)

 

The cash incentive awards for 2016 performance that were paid to the NEOs who served as executive officers for the whole year ranged from 96.3% to 96.7% of their individual target award amounts.

     

Pretax income is the performance metric for the business line component (weighted 65%)

Individual performance and sensitivity to risk during the year can modify payout amounts

 

These payout levels were primarily based on corporate EPS results of 96.7% of target performance and business line pretax income results that ranged from 62.7% to 116.9% of target performance.

GRAPHIC

 

Long-Term Incentive Compensation

    
Performance-Based Restricted Stock Units (75% of total annual grant value)

Return on average common equity ("ROE"), measured on both an absolute and relative basis, is the performance metric

One-year performance period provides the executives with a clear line of sight, while a four-year ratable vesting period fosters a long-term perspective

Depending on performance, 0% to 125% of the target number of units may be earned

 

All of our NEOs received a more valuable long-term incentive award in 2016 as part of our company's one-time Appreciation Award program for all employees. Under this program, the Compensation Committee enhanced the value of our NEOs' long-term incentive awards by 10%. In addition, several NEOs received equity awards of increased value to better align their long-term incentive awards with those of similarly situated executives in our peer group.

        
Stock Options (25% of total annual grant value)

Non-qualified stock options with four-year ratable vesting and a ten-year term

Exercise price equal to the fair market value of a share of our common stock on the date of grant

 

Based on absolute and relative ROE results in 2016, the NEOs earned 106.1% of the target number of performance-based restricted stock units ("PRSUs") granted to them in early 2016.

                

29

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

 

High Percentage of At-Risk Compensation

A high percentage of our NEOs' total direct compensation is dependent on our company's financial performance, both in the year in which the compensation is granted and in the long term. This structure provides our NEOs with incentives that are in line with the interests of our other shareholders.

The charts below show the percentage of our NEOs' 2016 total direct compensation, at target levels, that was dependent on our company's financial performance when awarded. (The chart for non-CEO NEOs is based on target compensation for the incumbent NEOs at the time the decisions were made in January 2016. Numbers in that chart do not add up to 100% because of rounding.)

CEO Target Pay Mix   Other NEO Target Pay Mix (average)

GRAPHIC

 

GRAPHIC

Rigorous Performance Goals

The Board establishes financial targets at the beginning of the fiscal year for our company's EPS and ROE performance and our business lines' pretax income performance. The Compensation Committee applies these targets to the executive officers' annual cash incentive awards and PRSUs, with the intent that they be challenging yet reasonably achievable goals.

Strong Corporate and Financial Performance

The Compensation Committee believes that the company's compensation structure has been effective at encouraging the achievement of superior financial and operating results relative to our peers in an uncertain economic environment, while maintaining reasonable risk tolerances.

U.S. Bancorp 2017 Proxy Statement

30


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

In 2016, our company again led its peer group in the most commonly used performance metrics for the banking industry, despite lackluster economic growth and an unfavorable interest rate backdrop.

#1 in Return on Average Assets1   #1 in Return on Average Common Equity1

GRAPHIC

 

GRAPHIC

#1 in Efficiency Ratio1, 2

GRAPHIC

1.
Source: Company reports. The peer companies included in these bar graphs are listed under the heading "Peer Group Composition" on page 43 of this proxy statement.
2.
Efficiency ratio computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses). See Non-GAAP Financial Measures on page 79.

Our consistent superior financial performance over time has increased long-term value for our shareholders.

Total Shareholder Return3

    1-Year   3-Year   5-Year   10-Year  

 

 

 

 

 

 

 

 

 

 

 

 

 

 
U.S. Bancorp     23.4%     10.9%     16.4%     6.3%  
KBW Bank Index (BKX)     28.5%     12.2%     20.9%     –0.1%  
S&P 500 Index     11.9%     8.9%     14.6%     6.9%  

  
  
  
  
    

3.
Source: FactSet and Bloomberg as of December 31, 2016. Reflects annualized returns.

31

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

Sound Compensation Practices

Our executive compensation program incorporates many strong governance features, including the following:

  What We Do    

 

GRAPHIC

 

We pay for performance:

 

 
    Our annual cash incentive awards use a formula based on achievement of corporate and business line financial targets    

 


 

PRSU awards (which make up 75% of the value of equity awards granted to our executive officers) are earned based on absolute and relative corporate performance

 

 

 

GRAPHIC

 

We place primary emphasis on long-term equity incentive compensation

 

 

 

GRAPHIC

 

We discourage excessive risk taking and adjust incentive compensation for any member of senior management who demonstrates inadequate sensitivity to risk

 

 

 

GRAPHIC

 

We have a "clawback" policy that allows us to recoup annual cash incentive payouts attributable to incorrectly reported earnings

 

 

 

GRAPHIC

 

We have meaningful stock ownership requirements, and executive officers must hold 100% of the after-tax value of equity awards until their applicable ownership level is met

 

 

 

GRAPHIC

 

We review tally sheets when making executive compensation decisions

 

 

 

GRAPHIC

 

The Compensation Committee retains an independent compensation consultant that provides no other services to our company

 

 


 


    


 


 


 


 
What We Don't Do

GRAPHIC

 

We do not allow executives to hedge or pledge their company stock

GRAPHIC

 

We do not have single-trigger accelerated vesting of equity awards, and no cash benefits are payable in the event of either a change-in-control or termination of employment that does not involve death or disability

GRAPHIC

 

We do not allow repricing of stock options

GRAPHIC

 

We do not provide tax gross-ups on our limited perquisites

GRAPHIC

 

We do not grant stock options with exercise prices below 100% of market value

GRAPHIC

 

We do not pay dividends on unearned PRSUs

GRAPHIC

 

We do not include the value of equity awards in pension or severance plan calculations

GRAPHIC

 

We have terminated legacy severance agreements held by several of our executive officers that had provided for excise tax gross-up payments, and we have adopted a policy stating that we will enter into no new agreements with executives that provide for such payments upon termination of employment


    


 


 

U.S. Bancorp 2017 Proxy Statement

32


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

Philosophy and Objectives of Our Executive Compensation Program

Compensation Program Goals

The Compensation Committee has designed the executive compensation program to attract, motivate, reward and retain the management talent required to achieve our corporate objectives and increase shareholder value, while at the same time making the most efficient use of our resources and strongly emphasizing pay for performance.

The Compensation Committee achieves these objectives through a compensation package that:

    ​links a significant portion of total compensation to corporate, business line and individual performance, which we believe will create long-term shareholder value;

    ​provides total compensation that is market competitive, permitting us to hire and retain high-caliber individuals at all levels of management;

    ​emphasizes stock-based compensation, encouraging our executive officers to think and act as long-term shareholders;

    ​subjects equity awards to multi-year vesting in order to enhance executive retention and encourage a long-term view of corporate achievement; and

    ​encourages an appropriate sensitivity to risk on the part of senior management, which protects long-term shareholder interests.

Pay for Performance

U.S. Bancorp operates in a highly complex business environment, where it competes with many well-established financial institutions. Our long-term business objective is to maximize shareholder value by consistently delivering superior returns on common equity that exceed the cost of equity. If we are successful in achieving this objective, the Compensation Committee believes the results will benefit our shareholders.

Accordingly, our executive compensation program is designed to reward our executives for achieving annual and long-term financial results that further our long-term business objective. The annual cash incentive plan rewards performance relative to corporate and business line financial plans established at the beginning of the fiscal year, and the PRSUs are earned based on achievement of ROE targets that are also established at the beginning of the fiscal year and that directly measure the return generated by the company on its shareholders' investment. At the same time, the Compensation Committee carefully weighs the risks inherent in these programs against the goals of the programs and the company's risk appetite. Additional discussion of the risk oversight undertaken by the Compensation Committee can be found below under "Decision Making and Policies — Risk Considerations in Setting Compensation Plans and Programs."

Compensation Elements

Our executive officers' total direct compensation consists of three elements: base salary, annual cash incentive compensation, and long-term incentive compensation (75% of which is payable in PRSUs and 25% of which is payable in stock options). Each of these elements of total direct compensation is described in detail below. Our Compensation Committee emphasizes long-term incentive compensation for the reasons discussed above but does not have a firm policy regarding allocation of compensation amounts among the elements. When evaluating an executive officer's compensation compared to market levels and those of other members of our company's executive officer group, the Compensation Committee considers both the value of each element and of the total direct compensation package.

Executive officers are also eligible to receive health benefits under the same plans available to our other employees, matching contributions to their U.S. Bank 401(k) Savings Plan accounts on the same basis as our other employees, and retirement benefits that are earned over their career with the company. Perquisites for executive officers are limited, consisting primarily of financial planning expenses, home security, parking and executive physicals. Executive officers do not receive gross-up payments for tax liabilities resulting from perquisites.

In 2016 we terminated legacy severance agreements that several of our executive officers had held. Those agreements had provided cash benefits in the event of a termination of employment in connection with a change-in-control of the company and included excise tax gross-up payments. Equity awards can be accelerated on a double-trigger basis, as

33

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

described in "Potential Payments Upon Termination or Change-in-Control," but the executive officers are no longer entitled to receive any cash benefits upon any employment termination scenario that does not involve death or disability.

Base Salary

The Compensation Committee considers the salary of executive officers relative to those executives' peers in our industry and will make market-based adjustments as it deems appropriate. Salaries can also be adjusted to reflect experience and tenure in a position, internal pay equity within the executive officer group, increased scope of responsibilities and individual performance.

2016 Actions and Results: In January 2016, the Compensation Committee increased the base salaries of several of the incumbent NEOs from their 2015 amounts as follows:

NEO


2016 Base Salary
2015 Base Salary
% Increase

 



 




 




 


Richard K. Davis

$ 1,400,000 $ 1,300,000 7.7 %

Kathleen A. Rogers

$ 575,000 $ 475,000 21.1 %

Andrew Cecere

$ 800,000 $ 750,000 6.7 %

P.W. (Bill) Parker

$ 625,000 $ 625,000 0 %

Jeffry H. von Gillern

$ 575,000 $ 550,000 4.5 %

These raises were largely motivated by market alignment considerations. In particular, Ms. Rogers's salary was increased by a relatively high percentage to bring her compensation into alignment with compensation paid to other CFOs in our industry. Ms. Rogers had been serving in the CFO role for only one year at the time of this increase, which was put in place as part of a multi-year plan to achieve market alignment incrementally. Her base salary was subsequently decreased when she stepped down from her executive role in August 2016.

When Mr. Dolan was promoted from Vice Chairman, Wealth Management and Securities Services, to Vice Chairman and Chief Financial Officer in August 2016, his annual base salary was increased from $525,000 to $575,000 to reflect his increased responsibilities.

Annual Cash Incentive Awards

How We Determine Our NEOs' Annual Cash Incentive Awards

All management-level employees, including the NEOs and our other executive officers, have the opportunity to earn annual cash incentive awards that reflect their responsibility levels and reward achievement of corporate and business line goals. The awards made to our NEOs are granted under our 2006 Executive Incentive Plan (the "EIP").

The formula for calculating each NEO's Annual Cash Incentive Payout consists of the following elements:

    ​Each NEO's Target Award Amount, which is set by the Compensation Committee as a percentage of his or her base salary (Target Award Percentage × Base Salary)

    ​The Bonus Funding Percentage applicable to each NEO, which includes a combination of corporate and business line performance metrics

    ​The Compensation Committee's assessment of each NEO's Individual Performance and Risk Sensitivity, which can increase or decrease the value of the Bonus Funding Percentage applied to each NEO's Target Award Amount

GRAPHIC

U.S. Bancorp 2017 Proxy Statement

34


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

Setting the Target Award Amounts

The Target Award Amount for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations.

2016 Actions and Results: In January 2016, the Compensation Committee set the following Target Award Percentages for the NEOs, which in each case would be applied to the NEO's base salary to determine his or her Target Award Amount:

NEO


Target Award Percentage  

 

 

 

 

 

Richard K. Davis

    225 %

Andrew Cecere

    150 %

Terrance R. Dolan
Kathleen A. Rogers
P.W. (Bill) Parker
Jeffry H. von Gillern

    125 %

These levels were not changed from the NEOs' 2015 Target Award Percentages. The percentage of Ms. Rogers's base salary used to calculate her annual cash incentive award was subsequently decreased when she stepped down from her executive role in August 2016.

Mr. Dolan's Target Award Percentage did not change when he was promoted to CFO. His Target Award Amount for 2016 was calculated using his increased base salary, however (125% × $575,000).

Calculating the Bonus Funding Percentage

Each year, the Compensation Committee targets an aggregate amount of annual cash incentive awards to be granted to all management-level employees in each business line. The actual size of the pool that funds payouts can range from 0% to 200% of the target amount (the Bonus Funding Percentage) based on the company's and the business line's performance against EPS and pretax income targets included in the annual financial plan. The Board establishes these financial targets at the beginning of the fiscal year with the intent that they be challenging yet reasonably achievable goals.

The Bonus Funding Percentage for each of our revenue-producing business lines is based on the company's EPS performance compared to the target amount in the annual financial plan (weighted 35%) and that business line's pretax income performance compared to the target amount in the annual financial plan (weighted 65%); for each of the business lines in a support function, the 65% of the Bonus Funding Percentage assigned to pretax income performance is calculated based on the weighted average results of all of the revenue-producing business lines in their group. The calculation is described in detail below. Adjustments may be made to EPS or pretax income results to mitigate anomalies so that the results more realistically reflect the company's or business line's performance.

The Compensation Committee believes that EPS and business line pretax income are appropriate performance metrics for the executive officers' annual cash incentive awards for the following reasons:

    ​EPS is an important indicator of profitability that aligns the interests of the executive officers with those of shareholders;

    ​EPS captures elements of corporate performance that are beyond those of the individual operating business lines, such as corporate funding policies and the management and use of capital;

    ​the business line pretax income targets are the fundamental drivers of the company's revenues and income before taxes;

    ​the EPS and pretax income targets are aligned with annual financial plan targets, which the Board and management have assessed for achievability; accordingly, the targets provide incentives to take appropriate amounts of risk to achieve those goals; and

    ​the Compensation Committee values the clear alignment of incentives for executive officers and other management-level employees resulting from shared performance metrics.

35

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

The Bonus Funding Percentage for each business line is calculated as follows:

    ​The percentages by which actual corporate EPS differs from the EPS target and actual business line pretax income differs from target pretax income are each multiplied by a leverage factor of four to magnify the positive or negative variation of actual results. For example, if the actual corporate EPS were 5% greater than the EPS target, the formula would multiply 5% by four to arrive at 20%. The 20% would then be added to 100% to get the EPS Bonus Funding Result of 120%. If the actual business line pretax income were 3% below target, the formula would multiply 3% by four to arrive at 12%. The 12% would then be subtracted from 100%, resulting in a Pretax Income Bonus Funding Result of 88%. Neither the EPS Bonus Funding Result nor the Pretax Income Bonus Funding Result may be less than 0% or greater than 200%.

    ​The EPS Bonus Funding Result is multiplied by 35% to yield the Corporate Component, and the Pretax Income Bonus Funding Result is multiplied by 65% to yield the Business Line Component.

    ​The Corporate Component is then added to the Business Line Component to arrive at the Bonus Funding Percentage for that business line. For example, a 120% EPS Bonus Funding Result weighted 35% and an 88% Pretax Income Bonus Funding Result weighted 65% results in a Bonus Funding Percentage of 99.2%.

GRAPHIC

The Bonus Funding Percentage used for most annual cash incentive plan participants in corporate-wide support functions that do not produce revenue — the Overall Bonus Funding Percentage — is calculated slightly differently, with 35% based on the EPS Bonus Funding Result and 65% based on the weighted average Pretax Income Bonus Funding Results of all of the company's business lines.

2016 Actions and Results: Actual EPS was $3.24, compared to the target level of $3.35. After applying the leverage factor to the difference between target and actual EPS, the EPS Bonus Funding Result was 88.3%.

Pretax income results ranged from 62.7% to 116.9% of target performance across our company's 29 revenue-producing business lines, which generated Pretax Income Bonus Funding Results of 0% to 167.7% following application of the leverage factor. The weighted average Pretax Income Bonus Funding Results of all of the company's business lines, which was used to calculate the Overall Bonus Funding Percentage following application of the leverage factor, was 101.2%.

After applying the 35% weighting to the EPS Bonus Funding Result of 88.3% and the 65% weighting to the applicable Pretax Income Bonus Funding Result and adding them together, the Bonus Funding Percentages for the 29 revenue-producing business lines in 2016 ranged from 30.9% to 139.9%. The Overall Bonus Funding Percentage in 2016 was 96.7%.

The Bonus Funding Percentage used in January 2017 to calculate the annual cash incentive awards for executive officers with leadership responsibilities for the entire company or for a corporate-wide support function in 2016 was the Overall Bonus Funding Percentage. Accordingly, the awards granted to Messrs. Davis, Cecere and Parker were calculated by using the Overall Bonus Funding Percentage. The Overall Bonus Funding Percentage was also used to calculate Mr. Dolan's award because he had assumed leadership responsibilities for the entire company during the course of the year. When Ms. Rogers stepped down from her executive role in August 2016, she took a position within a

U.S. Bancorp 2017 Proxy Statement

36


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

business line that has a corporate-wide support function; accordingly, her award calculation was also made by using the Overall Bonus Funding Percentage.

The Bonus Funding Percentage for the Technology and Operations Services business line, led by Mr. von Gillern, is calculated differently from all others in that 35% is based on the EPS Bonus Funding Result, 50% is based on the weighted average Pretax Income Bonus Funding Results of all of the company's revenue-producing business lines, and 15% is based on that business line's expense management performance compared to plan. The Compensation Committee considers expense management to be particularly important to Technology and Operations Services because this business line has responsibility for a significant portion of the company's overall expenditures.

The resulting Bonus Funding Percentages were as follows for the NEOs:

NEO
  Bonus Funding Percentage

 

 

 
Richard K. Davis
Terrance R. Dolan
Kathleen A. Rogers
Andrew Cecere
P.W. (Bill) Parker
  96.7% (the Overall Bonus Funding Percentage)
Jeffry H. von Gillern   96.3% (the Bonus Funding Percentage for the Technology and Operations Services business line, for which Mr. von Gillern has responsibility)

Factoring in Individual Performance and Risk Sensitivity

The Compensation Committee considers the performance of the business lines managed by each executive officer and that executive officer's individual performance during the year. The Bonus Funding Percentage to be applied to an executive's Target Award Amount can be adjusted downward as well as upward based on these performance reviews. The Compensation Committee also uses a formal "risk scorecard" analysis, which can result in downward or upward adjustments to the Bonus Funding Percentage to reflect the executives' demonstrated sensitivity to risk. The Compensation Committee believes that it is important to retain the ability to recognize outstanding individual performance and risk mitigation in determining Annual Cash Incentive Payouts, as well as to acknowledge circumstances where individual performance improvements are suggested or where inappropriate risk-taking behaviors have occurred.

Individual performance criteria for all executive officers include performance relative to risk management, leadership, employee engagement, community involvement, involvement in special projects and new initiatives, and talent management, as well as factors including credit quality and audit, regulatory and compliance results. Finally, the Compensation Committee reviews the level of our corporate performance relative to our peer group in the principal profitability measures used by the Board in assessing corporate performance, as well as in relative levels of total shareholder return, as a check on the appropriateness of the award levels in the context of these operational performance measures.

Individual Performance and Risk Sensitivity Modifications Have Been Used Sparingly

Modifications to our NEOs' Bonus Funding Percentage based on their individual performance and risk sensitivity have historically been modest in scope and have resulted in decreased award payouts more often than increased payouts.

NEOs during 2013–2015, for example, collectively received increases three times, resulting in modifications of +4%, +5%, and +10%, and received decreases six times, resulting in modifications of –3%, –5% (three awards), and –7% (two awards). As described below, no such modifications were made in 2016.

2016 Actions and Results: The Compensation Committee determined that each NEO's applicable Bonus Funding Percentage appropriately reflected that executive's performance and contribution to the company in 2016. Accordingly, no performance-based modifications were made to the NEOs' Bonus Funding Percentages. An analysis of the NEOs' risk scorecard results also yielded no modifications.

37

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

The resulting Annual Cash Incentive Payouts for 2016 were as follows for the NEOs serving in their executive roles at the time of the payout calculation in January 2017:

NEO


Percentage of Target
Award Amount Paid Out


Dollar Value
of Payout

 



 




 


Richard K. Davis

96.7 % $ 3,046,050

Terrance R. Dolan

96.7 % $ 695,031

Andrew Cecere

96.7 % $ 1,160,400

P.W. (Bill) Parker

96.7 % $ 755,469

Jeffry H. von Gillern

96.3 % $ 692,156

As described above, the calculation of Mr. Dolan's Annual Cash Incentive Payout was based on the base salary and Bonus Funding Percentage applicable to him when he was serving as CFO; his Target Award Percentage did not shift during the year.

Ms. Rogers's Annual Cash Incentive Payout of $466,000 was determined by using a prorated Target Award Amount to reflect the differing base salaries and Target Award Percentages applicable to the time she spent in her executive and non-executive roles in 2016.

Recoupment of Annual Cash Incentive Payouts

The Compensation Committee will evaluate the facts and circumstances surrounding a restatement of earnings, if any, and, in its sole discretion, may adjust and recoup cash incentive amounts paid to our CEO, any executive officers or any other employees as it deems appropriate, if attributable to incorrectly reported earnings.

Long-Term Incentive Awards

Establishing the Structure and Value of the Equity Awards

The Compensation Committee grants the executive officers equity awards to align their interests with those of long-term shareholders. As in each of the last several years, 75% of the value of each NEO's long-term incentive award in 2016 was granted in the form of PRSUs, and 25% was granted in the form of stock options. These awards were granted under the U.S. Bancorp 2015 Stock Incentive Plan.

The Compensation Committee believes that this award structure provides appropriately balanced incentives. The PRSUs receive more weight to emphasize the critical importance of corporate financial performance. On the other hand, the stock options add an extra incentive for long-term success because of their ten-year term and also provide more direct alignment with shareholder returns.

PRSUs are earned according to a formula tied to our one-year ROE performance, as described in detail below. Both earned PRSUs and stock options vest ratably over four years from the grant date, and PRSU awards are settled in shares of our common stock. Cash dividends on unvested PRSUs are accrued during the performance period, but accrued dividends are only paid after the end of the performance period on shares actually earned by the executives.

Each year in January, the Compensation Committee determines the dollar value of that year's long-term incentive awards to be granted to the executive officers, and the grants are made in February. In setting each year's award amounts, the Compensation Committee considers the relative market position of the awards and the total compensation for each executive, the proportion of each executive's total direct compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention concerns, and corporate performance.

2016 Actions and Results: In January 2016, the Compensation Committee approved a one-time Appreciation Award for all employees. The purpose of the award was to recognize our employees for their loyalty and commitment in a difficult environment and to align their interests with those of shareholders. Employees whose compensation packages generally do not include equity awards received a grant of a set number of restricted stock units. Employees in higher pay grades, including the executive officers, received a 10% enhancement in the value of their long-term incentive award.

U.S. Bancorp 2017 Proxy Statement

38


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

In addition, the Compensation Committee increased the "base" value of the annual equity award to be received by several of the incumbent NEOs from their 2015 amounts as shown below (values reflect the fair market value of the award on the date of grant):

NEO


"Base" Value of 2016
Equity Award
(excluding value of
one-time
Appreciation Award)





Value of 2015
Equity Award


% Increase
Total Value of 2016
Equity Award
(including value of
one-time
Appreciation Award)

 



 




 




 




 


Richard K. Davis

$ 7,750,000 $ 7,750,000 0 % $ 8,525,000

Kathleen A. Rogers

$ 1,500,000 $ 1,000,000 50 % $ 1,650,000

Andrew Cecere

$ 5,250,000 $ 5,000,000 5 % $ 5,775,000

P.W. (Bill) Parker

$ 2,200,000 $ 2,000,000 10 % $ 2,420,000

Jeffry H. von Gillern

$ 1,600,000 $ 1,500,000 6.7 % $ 1,760,000

As with the base salary increases described above, the increases in "base" value of the annual equity awards were largely driven by market alignment considerations, particularly with respect to Ms. Rogers as she began her second year as Vice Chairman and Chief Financial Officer.

In addition to the equity award with a total value of $1,540,000 (including the Appreciation Award) that Mr. Dolan received in February 2016 as Vice Chairman, Wealth Management and Securities Services, he received an equity award with a value of $100,000 upon his promotion to Vice Chairman and Chief Financial Officer.

Selecting the Performance Metrics and Performance Period for the PRSU Awards

The number of PRSUs earned each year is determined according to a formula that uses a comparison of our actual ROE to target results established in our company's annual financial plan, as well as our ROE performance relative to that of our peer group companies. ROE is used as the performance metric because:

    ​it directly reflects the return generated by the company on our shareholders' investment;

    ​it encompasses profitability, efficiency, balance sheet management and financial leverage, and is among the most widely used indicators of financial performance in our industry;

    ​achieving a high ROE requires prudent management of the tradeoffs between risk and return, requiring an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels; and

    ​using ROE as a performance metric aligns the interests of the executives with those of long-term shareholders, because sustaining a high ROE is a primary driver of strong earnings growth.

The Compensation Committee believes that using a one-year performance period for the PRSUs provides important clarity for the NEOs and a strong pay and performance link. The one-year performance period creates a clear sense that strong leadership and effort will directly affect the number of shares ultimately received. The Compensation Committee has carefully considered using a longer cycle for its performance-based equity awards, but believes that the continued uncertainty in the economy and the financial industry, as well as the regulatory environment affecting our business, could have a significant effect on the company's ROE over a longer time horizon that could mute the effects of management performance.

The link between performance and pay would be weakened and the incentive effect of the award reduced if members of executive management perceived that the relationship between their performance and the ultimate value of their award may be largely diluted by factors outside of their control. In addition, the PRSUs vest over a four-year period, which encourages executives to improve corporate performance during this longer period so that the company's stock price, and consequently the value of the award, increase while the award vests.

39

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

Determining the Percentage of Target PRSUs Earned

At the time of each PRSU grant, the Compensation Committee establishes a one-year target level for U.S. Bancorp's absolute level of ROE, as well as a sliding scale of ROE achievement and corresponding incremental increases or decreases in award earn-out amounts. The absolute ROE target aligns with the company's annual financial plan, which is approved by the company's Board of Directors after consideration of, among other things, the degree of achievability. Target ROE is therefore designed to be a goal that is challenging yet reasonably achievable.

The ROE levels used in the PRSU performance matrix established by the Compensation Committee have been lowered over the last several years. These shifts in minimum, target and maximum ROE levels are directly linked to year-over-year changes in the company's annual financial plans that reflect external pressures on this performance metric. Industry-wide returns on common equity have been pressured by the impact of persistently low interest rates, sluggish economic growth, higher structural expenses driven by increased regulatory requirements, and higher capital and liquidity constraints imposed by regulations.

The Compensation Committee also establishes a sliding scale of ROE achieved relative to the ROE of our financial peer companies (which are listed below under "Peer Group Composition"), with median performance as the target level and corresponding increases or decreases in award earn-out amounts. The Compensation Committee uses a performance matrix reflecting both the absolute and relative ROE scales to determine the final PRSU award amounts earned by interpolation using the actual ROE level achieved during the year.

The Compensation Committee established the following performance matrix at the time the 2016 PRSU awards were granted, providing for the actual award amounts to range from 0% to 125% of the target number of units in each award:

    2016 ROE PERFORMANCE MATRIX
                    Percentage of Target PRSUs Earned
    Company       Company ROE of 17.5% or more       75%   112.5%   125%    
 
    ROE       Company ROE Target (14.0%)       50%   100%   112.5%    
 
    Result       Company ROE of 10.5% or less (but >0%)       25%   50%   75%    
 
    (Vertical Axis)       Company ROE of 0% or less       0%   0%   0%    
                    Peer Group
ROE Ranking
at 25th %ile
or below
  Peer Group
ROE Ranking
at Median
  Peer Group
ROE Ranking
at 75th %ile
or above
   
                    Peer Group ROE Ranking (Horizontal Axis)    

The Compensation Committee believes that the PRSU earn-out structure provides an important balance between rewarding the achievement of absolute performance goals and strong relative performance. For example, if our absolute ROE is less than the specified ROE minimum for U.S. Bancorp, the target award number will not be earned, even if our relative ROE is at or above the 75th percentile in the peer group ROE ranking. Conversely, if our relative ROE is significantly below the median in the peer group, the executive will earn a below-target number of units, even if U.S. Bancorp's absolute ROE substantially exceeds the target ROE.

Thus, executives are not rewarded for poor performance simply because peer group members have even worse performance, nor are they rewarded for exceeding expectations (set at the beginning of the performance year) if performance relative to peers is substandard. In addition, by using a sliding scale for each ROE performance metric, the matrix takes into account the amount of variance from the ROE target and peer group ROE results, rewarding performance while mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.

2016 Actions and Results: Our ROE in 2016 was 13.4%, compared to the target absolute level (on the vertical axis) of 14.0%. In relation to its financial peer group, U.S. Bancorp's 2016 ROE ranked first, which was above the 75th percentile (on the horizontal axis). The final calculation resulted in the number of PRSUs earned being equal to 106.1% of the target number of units granted.

U.S. Bancorp 2017 Proxy Statement

40


Table of Contents

Compensation Discussion and Analysis
GRAPHIC

The number of units earned by each NEO for 2016 performance, as well as the number of stock options granted to each NEO in 2016, are reported in the Outstanding Equity Awards at 2016 Fiscal Year-End table later in this proxy statement.

Decision Making and Policies

Who Is Involved in Making Compensation Decisions

Executive compensation policy, practices and amounts are determined by the Compensation Committee, which is composed entirely of independent outside directors. The Compensation Committee has responsibility for setting each component of compensation for our CEO with the assistance and guidance of Frederic W. Cook & Co., Inc. ("FW Cook"), its independent compensation consultant. Our CEO and our executive vice president of human resources, also with the help of FW Cook, develop initial recommendations for all components of compensation for the executive officers other than the CEO and present their recommendations to the Compensation Committee for review and approval. The Compensation Committee also annually reviews the total amount and types of compensation paid to non-management members of the Board of Directors and recommends any changes to the independent directors for approval.

The Compensation Committee retains FW Cook to:

    ​provide advice regarding compensation program design, competitive practices, market trends and peer group composition;

    ​make recommendations to the Compensation Committee in setting the pay of our CEO;

    ​provide the same advisory services to the Compensation Committee and our CEO and executive vice president of human resources regarding the compensation of the other executive officers; and

    ​advise the Compensation Committee on director compensation.

FW Cook does not provide any other services to our company. Following a review of the relationship between the company and FW Cook in 2016, the Compensation Committee concluded that FW Cook's work for the Compensation Committee does not raise any conflicts of interest.

What Information Is Considered When Determining Compensation

In January of each year, the Compensation Committee takes the following actions with respect to compensation of our executive officers for the previous and upcoming year:

    ​calculates the percentage of target PRSUs earned based on the previous year's absolute and relative ROE results;

    ​determines the Annual Cash Incentive Payout for each executive officer based on the previous year's corporate and business line performance and after considering whether any modification to the executive's Bonus Funding Percentage is warranted based on his or her individual performance and sensitivity to risk during the previous year;

    ​sets the upcoming year's base salary, Target Award Percentage for the annual cash incentive plan, and value and structure of the long-term incentive award for each executive officer;

    ​establishes performance and aggregate payout targets for the upcoming year's annual cash incentive plan; and

    ​establishes the performance matrix for the upcoming year's PRSU awards.

41

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

These decisions are informed by a year's worth of information gathering and analysis on performance, risk, market practices and shareholder views, as summarized below:

GRAPHIC

As indicated above, the Compensation Committee performs several market checks per year in which it assesses the alignment of relative compensation levels within our peer group with relative performance levels to ensure that our pay levels are competitive with those of the companies with which we compete for executive talent, while remaining reasonable and appropriate. The Committee believes that the relative compensation of our NEOs within our peer group is appropriate, given U.S. Bancorp's asset size relative to the group and that it has consistently led its peers in the common industry measures of ROE, ROA and efficiency ratio over many years.

In making executive compensation determinations, our Compensation Committee has also considered the results of the non-binding, advisory shareholder votes on our executive compensation program in each year since 2009. Our shareholders approved our executive compensation program in each of those years, most recently approving it by 96.2% of shares present and entitled to vote at our 2016 annual meeting of shareholders. The Compensation Committee will continue to consider the results from this year's and future advisory shareholder votes regarding our executive compensation program.

In addition, in 2016 the company continued its annual shareholder engagement program, described on page 18 of this proxy statement, which includes discussion of executive compensation matters with some of our largest shareholders. The Compensation Committee was mindful of our shareholders' endorsement of the Compensation Committee's decisions and policies to date and decided to retain its general approach to executive compensation during 2016, with an emphasis on short- and long-term incentive compensation that rewards our most senior executives when they deliver value for our shareholders.

U.S. Bancorp 2017 Proxy Statement

42

Table of Contents

Compensation Discussion and Analysis
GRAPHIC

Peer Group Composition

When performing market checks on the level of compensation of our CEO and the other executive officers, the Compensation Committee has been using the same peer group of financial services companies that management and the Board use for annual financial performance comparisons. This single peer group has been in place since 2009 and is composed of the following companies, ranked in order of asset size as of December 31, 2016:


2016 U.S. Bancorp Peer Group

JPMorgan Chase & Co.

Bank of America Corporation

Wells Fargo & Company

U.S. Bancorp

The PNC Financial Services Group, Inc.

 

BB&T Corporation

SunTrust Banks, Inc.

Fifth Third Bancorp

KeyCorp

Regions Financial Corporation

This group was recommended by management and chosen by the Board for financial comparison purposes because these financial institutions, along with U.S. Bancorp, are the ten largest financial services companies based in the United States that provide broadly comparable retail and commercial banking services, and they are the companies with which we compete for market share across our major business lines.

Some of the companies in the peer group are significantly larger than we are, and some are significantly smaller. Within this group, U.S. Bancorp is the fourth largest by asset size, total revenue, and total deposits. All of these peer companies are included in the KBW Bank Index, which we believe is the most appropriate stock market index to use for financial comparison purposes, and which is used in the Stock Performance Chart presented on page 145 of our 2016 Annual Report.

Our Compensation Committee has altered the peer group it is using for performing market checks on executive and director compensation for 2017 and going forward by removing Regions Financial Corporation and KeyCorp and adding Citigroup and Capital One Financial. The Board does not use Citigroup and Capital One Financial for financial comparison purposes because both companies' business mix is very different from our company's, but the Compensation Committee has decided to adopt the altered peer group for compensation purposes because it believes that these two institutions are more meaningful competitors in the marketplace for executive talent than are the two smallest institutions in our financial peer group.

The Compensation Committee also reviews and uses compensation data from a large group of diversified financial services companies as an additional point of comparison.

Risk Considerations in Setting Compensation Plans and Programs

Overview: Taking carefully considered risks is an integral part of any business strategy, and our compensation program is not intended to encourage management decisions that eliminate risk. Rather, the combination of various elements in our program is designed to encourage appropriate sensitivity to risk and mitigate the potential to reward risk taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and negatively affect shareholder value. Our compensation practices are also designed to reward performance while maintaining our core commitment to customer service and ethical principles. Together with the company's processes for strategic planning, its internal control over financial reporting and other financial and compliance policies and practices, the design of our compensation program helps to discourage management actions that demonstrate insensitivity to risk. We also structure our compensation program to comply with all relevant regulatory requirements, including, where applicable, foreign regulations that may be different from those in the United States.

Role of the Incentive Review Committee: As a large financial services company, we have been subject to a continuing review of incentive compensation policies and practices undertaken by the Federal Reserve Board since 2009. While participating in that review, we have undertaken a thorough analysis of every incentive compensation plan of the company, the individuals covered by each plan and the risks inherent in each plan's design and implementation. We also conduct validation and back-testing activities to ensure that compensation plans are correctly risk rated, the plans are

43

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

designed to adequately mitigate risk inherent therein, and the plans are administered effectively. The Incentive Review Committee was created to oversee that review and to provide more comprehensive oversight of the relationship between the various kinds of risk we manage and our company's incentive compensation plans and programs. The Incentive Review Committee meets throughout the year and is responsible for the ultimate review and recommendation of all company incentive plans.

This committee reviews plan elements such as plan participants, performance measures, performance and payout curves or formulas, how target level performance is determined (including whether any thresholds and caps exist), how frequently payouts occur, and the mix of fixed and variable compensation that the plan delivers. The plans and programs are also reviewed from the standpoint of reasonableness (for example, how target pay levels compare to similar plans for similar employee groups at other companies, and how payout amounts relate to the results that generate the payments), how well the plans and programs are aligned with U.S. Bancorp's goals and objectives and with the company's risk appetite, and from an overall standpoint, whether these plans and programs represent an appropriate mix of short-term and long-term compensation.

As part of this review by our Incentive Review Committee, our management team, including senior risk officers and individuals from the compensation department, have identified the risks inherent in these programs and have modified plans and procedures where appropriate to mitigate certain potential risks. For example, most business line incentive compensation plans with a credit component track early defaults, or defaults that occur within the first 12 months, and must include a provision that allows the company to offset future payments by the amount of the previously paid incentives related to the early default.

In addition, a "risk scorecard" analysis measuring adequacy of risk management is undertaken for all senior management-level employees, including the executive officers; all employees who have credit responsibility and who participate in annual corporate cash incentive plans; and all employees who have been identified by the company as persons able, individually or as part of a group, to engage in risk-taking behavior that could be material to the company and who participate in annual corporate cash incentive plans. This analysis serves as the basis for annual cash incentive plan adjustments for these employees. Annually, the Incentive Review Committee also addresses risk events that pose a material adverse impact to the company or business line to determine whether an event should trigger cancellation of equity awards. The Incentive Review Committee has reviewed its process with the Compensation Committee and discussed the areas where compensation-related risks were being addressed by plan modifications, or were mitigated by internal controls or otherwise.

Role of the Compensation Committee: The Compensation Committee also conducts an annual risk assessment of the compensation packages and components for the executive officers. The Compensation Committee assesses the incentives for risk taking contained in the compensation program and balances them with the other goals of the compensation program. The Compensation Committee meets at that time with members of senior management for a discussion of the material risks our company faces, in order to assess those risks and the overall risk tolerance of the company approved by the Board of Directors in relation to the levels of risk inherent in the compensation plans and programs and the performance targets set each year.

U.S. Bancorp 2017 Proxy Statement

44

Table of Contents

Compensation Discussion and Analysis
GRAPHIC

In evaluating the incentives for risk taking in compensation plans and policies for executive officers, the Compensation Committee considered the following risk-mitigating aspects of those plans and policies:


  

 

Overall Compensation Program Risk Mitigation Factors

 

 

 


Long-Term Incentive Focus: The majority of the total compensation received by executive officers is in the form of equity awards with four-year vesting schedules, which helps to ensure that executives have significant value tied to long-term stock price performance and mitigates incentives to manage the company with an excessive focus on short-term gain.

 

 


 

 

Annual Cash Incentive Risk Mitigation Factors

 

 

 


Broad Corporate Focus: The award payouts for all participants in the annual cash incentive plan, including our executive officers, are dependent to a large degree on our corporate EPS performance. This structure provides a common, consistent focus on the achievement of annual goals important to our overall success, while mitigating the incentives to take excessive risks in order to achieve goals that are more closely linked to individual performance.

 

 

 


Specific Risk Sensitivity Analysis: A "risk scorecard" analysis is performed for all senior management-level employees, including executive officers, and is reviewed by our Incentive Review Committee. The results of this analysis may result in decreases in Annual Cash Incentive Payouts when inadequate risk management is demonstrated.

 

 

 


Clawback Policy: The company's incentive compensation "clawback" policy discourages risk taking that would lead to improper financial reporting.

 

 


 

 

Long-Term Incentive Risk Mitigation Factors

 

 

 


Specific Equity Cancellation Provisions: The equity award agreements for executive officers contain a provision that cancels the vesting of equity awards if it is determined that the executive exhibited an inadequate sensitivity to risk that caused a material adverse impact on the company or the executive's line of business.

 

 

 


Choice of Performance Metric: The PRSUs use ROE as the measure of corporate performance for determining the final number of units earned under the award. Achieving a high ROE requires an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels.

 

 

 


Maximum PRSU Amount Limited to 125% of Target: The number of units that may be earned under the performance formula is capped at a modest level, which limits the potential incentive to take excessive risk in order to receive a greater number of shares.

 

 

 


Sliding Scale Earn-Out Calculation: The PRSU performance matrix takes into account the amount of variance from the ROE target and peer group ROE results, mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.

 

 

 


Meaningful Stock Ownership Requirements: As described below, executives are required to hold significant amounts of company stock, which fosters the alignment of executives' interests with those of our long-term shareholders.

 

 

 


Policy Prohibiting Hedging of Shares: Executives are prohibited from taking actions designed to hedge or offset any decrease in the market value of our common stock.

 

 

Based on a consideration of the foregoing reviews and factors, the Compensation Committee has determined that risks arising from the company's compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.

Stock Ownership Requirements

The Compensation Committee believes that significant ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and also helps balance the incentives for risk taking

45

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Compensation Discussion and Analysis

inherent in equity-based awards. We have had a requirement for many years that our executives hold significant amounts of company stock. The current required ownership levels are:


Executive Officer

 

Ownership Level

CEO

 

6x base salary

Other executive officers

 

3x base salary

Unvested equity awards are not included in determining whether an executive officer satisfies these ownership levels. Until the applicable ownership level is met, the executive officers must hold 100% of the after-tax value of any vested stock award or exercised option.

As of December 31, 2016, all of our executive officers were in compliance with the stock ownership requirements. Most executive officers complied by holding stock valued in excess of their applicable salary multiple, and those who have not yet reached those levels (the most recently appointed executive officers) complied by holding 100% of the after-tax value of any vested stock award or exercised option.

Deductibility of Performance-Based Compensation

Annual cash incentive awards for the NEOs are granted under the EIP, which is designed to allow the company to issue awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)"). Accordingly, the annual cash incentive plan sets the maximum award level that can be given to any NEO under the plan for any year at 0.2% of the company's net income for the year. The Compensation Committee then uses negative discretion to reduce the payout amount of an executive's cash incentive award to an amount that is determined based on the formula described above: Target Award Amount × (Bonus Funding Percentage +/- Individual Performance and Risk Sensitivity). The maximum award amount under the EIP was established principally to position these awards to comply with regulations under Section 162(m), and is not indicative of the expected payout amounts.

Annual equity awards are granted to our NEOs under the U.S. Bancorp 2015 Stock Incentive Plan. Based on the design of that plan, the PRSUs and stock options granted to NEOs are intended to qualify as performance-based compensation under Section 162(m).

We review all compensation programs and payments to determine the tax impact on the company as well as on the executive officers. In addition, we review the impact of our programs against other considerations, such as accounting impact, shareholder alignment, market competitiveness, effectiveness and perceived value to executives. Because many different factors influence a well-rounded, comprehensive executive compensation program, the Compensation Committee may award compensation that is not deductible under Section 162(m). In addition, there can be no assurance that compensation awards intended to qualify for tax deductibility under Section 162(m) will ultimately be determined by the Internal Revenue Service to so qualify.

Compensation Committee Report

The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our 2016 Annual Report on Form 10-K.

Compensation and Human Resources Committee of the Board of Directors of U.S. Bancorp

Arthur D. Collins, Jr., Chair   O'dell M. Owens, M.D., M.P.H.
Olivia F. Kirtley   Scott W. Wine
David B. O'Maley    

U.S. Bancorp 2017 Proxy Statement

46


Table of Contents

Executive Compensation
GRAPHIC

Executive Compensation

Summary Compensation Table

The following table shows the cash and non-cash compensation awarded to or earned by our NEOs for 2016.

Name and
Principal Position




Year


Salary
($)





Stock
Awards
($)1






Option
Awards
($)2







Non-Equity
Incentive Plan
Compensation
($)3












Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings
($)4











All Other
Compensation
($)5




Total
($)
 

Richard K. Davis

   
2016
   
1,400,000
   
6,393,750
   
2,131,250
   
3,046,050
   
2,359,264
   
15,680
   
15,345,994
 

Chairman and

    2015     1,300,000     5,812,500     1,937,500     2,304,900     202,478     27,632     11,585,010  

Chief Executive Officer

    2014     1,200,000     5,625,000     1,875,000     2,465,100     8,192,618     15,358     19,373,076  

Terrance R. Dolan6, 7

    2016     545,833     1,230,000     410,000     695,031     357,515     15,672     3,254,051  

Vice Chairman and
Chief Financial Officer

                                                 

Kathleen A. Rogers7, 8

    2016     460,417     1,237,500     412,500     466,000     390,191     39,961     3,006,569  

Former Vice Chairman and
Chief Financial Officer

    2015     475,000     750,000     250,000     485,688     298,453     14,705     2,273,846  

Andrew Cecere

    2016     800,000     4,331,250     1,443,750     1,160,400     884,538     31,478     8,651,416  

President and

    2015     750,000     3,750,000     1,250,000     920,250     43,399     28,053     6,741,702  

Chief Operating Officer

    2014     725,000     3,187,500     1,062,500     1,047,263     1,400,038     27,883     7,450,184  

P.W. (Bill) Parker

    2016     625,000     1,815,000     605,000     755,469     163,105     24,868     3,988,442  

Vice Chairman and

    2015     625,000     1,500,000     500,000     678,125     241,507     24,545     3,569,177  

Chief Risk Officer

    2014     550,000     1,312,500     437,500     627,688     471,963     24,170     3,423,821  

Jeffry H. von Gillern7

    2016     575,000     1,320,000     440,000     692,156     133,795     18,595     3,179,546  

Vice Chairman, Technology
and Operations Services

    2015     550,000     1,125,000     375,000     587,125     57,651     21,589     2,716,365  
1.
Stock Awards

    The amounts in this column are calculated based on the number of performance-based restricted stock units, or PRSUs, awarded and the fair market value of U.S. Bancorp common stock on the date the award was made in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718.

    The 2016 values in this table reflect the fair market value of each officer's target payout for the 2016 PRSUs on the grant date. The number of units subject to each of these awards that were earned based on our actual 2016 performance is equal to 106.1% of the awards' respective target amounts. The fair market value of the maximum potential payout amounts for these awards on the grant date was as follows: (i) Mr. Davis, $7,992,188; (ii) Mr. Dolan, $1,537,500; (iii) Ms. Rogers, $1,546,875; (iv) Mr. Cecere, $5,414,063; (v) Mr. Parker, $2,268,750; and (vi) Mr. von Gillern, $1,650,000.

2.
Option Awards

    The amounts in this column are based on the fair value of the stock option awards as estimated using the Black-Scholes option-pricing model in accordance with FASB ASC Topic 718. The assumptions used to arrive at the Black-Scholes value are disclosed in Note 17 to our consolidated financial statements included in our 2016 Annual Report on Form 10-K.

3.
Non-Equity Incentive Plan Compensation

    The amounts in this column relate to awards granted under our EIP in January 2016, determined in January 2017 based on 2016 performance, and paid out in February 2017. The EIP and these awards are discussed above in the "Compensation Discussion and Analysis" section of this proxy statement.

    Ms. Rogers's award was paid out under our Annual Incentive Plan, the corporate incentive plan for management-level employees, because she was no longer an executive officer at the time the annual cash incentive payout determinations were made.

47

U.S. Bancorp 2017 Proxy Statement


Table of Contents

GRAPHIC
Executive Compensation
4.
Change in Pension Value and Non-Qualified Deferred Compensation Earnings

    The amounts in this column represent the increase in the actuarial net present value of all future retirement benefits under the U.S. Bank Pension Plan and the U.S. Bancorp Non-Qualified Retirement Plan. A number of factors can cause the amounts reflected in this column to vary significantly, including volatility in the discount rate applied to determine the value of future payment streams and changes to mortality assumptions.

    The change in present value amounts reported for 2016 are generally larger than those reported for 2015 for the respective NEOs. These larger "change" values are primarily due to the lower discount rates for year-end 2016, which are approximately 15 basis points lower than for year-end 2015, as well as higher annual cash incentive plan payout amounts in 2016 as compared to 2015.

    The net present values of the pension benefits as of December 31, 2016, used to calculate the net change in pension benefits were determined using the same assumptions used to determine our pension obligations and expense for financial statement purposes. See Note 16 to our consolidated financial statements included in our 2016 Annual Report on Form 10-K for these specific assumptions. Additional information about our Pension Plan and Non-Qualified Retirement Plan is included below under the heading "Pension Benefits." We have not provided above-market or preferential earnings on any nonqualified deferred compensation and, accordingly, no such amounts are reflected in this column.

5.
All Other Compensation

    The following table describes each component of the All Other Compensation column for 2016:

Name





Parking
Reimbursement
($)







Matching
Contribution into
401(k) Savings Plan
($)








Reimbursement
of Financial
Planning Expenses
($)







Executive
Physical
($)







Home Security
System
Expenses
($)






Other
($)a



Total
($)
 

Mr. Davis

   
4,485
   
10,600
   
   
   
345
   
250
   
15,680