DEF 14A 1 d624844ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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   Definitive Proxy Statement
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Marsh & McLennan Companies, Inc.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO

Notice of Annual Meeting and Proxy Statement 2019


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LOGO

We are the world’s leading professional services firm in the areas of risk, strategy and people. We are four global businesses united by a common purpose and a uniquely collaborative culture. We are over 65,000 colleagues committed to each other, to our clients and to the greater good. We help clients change what’s possible, enabling enterprise around the world. WE ARE MARSH & McLENNAN. OUR BUSINESSES: Risk & Insurance Services Consulting MARSH Insurance broking and risk management solutions GUY CARPENTER Reinsurance and capital strategies MERCER Health, wealth and career consulting and solutions OLIVER WYMAN Strategy, economic and brand consulting


Table of Contents

Notice of Annual Meeting

of Stockholders and Proxy Statement

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of Marsh & McLennan Companies, Inc. at:

 

    

DATE:

   

    

TIME:

   

    

LOCATION:

Thursday,     10:00 a.m.     1166 Avenue of the Americas,

May 16, 2019

    

       

New York, NY 10036

    

If you plan to attend the meeting in person, you will need to register in advance and provide proof that you own the Company’s common stock. Please see page 72 for more information about attending the meeting in person.

Items of Business

 

1.

To elect twelve (12) persons named in the accompanying proxy statement to serve as directors for a one-year term;

 

2.

To approve, by nonbinding vote, the compensation of our named executive officers;

 

3.

To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm; and

 

4.

To conduct any other business that may properly come before the meeting.

Your Vote is Very Important

Only stockholders of record as of close of business on March 18, 2019 may vote, in person or by proxy, at the annual meeting. Whether or not you plan to attend the annual meeting, your vote is very important. We urge you to participate in the election of our directors and deciding the other items on the agenda for the annual meeting.

You may vote over the Internet or by telephone.

 

 

If you accessed this proxy statement through the Internet, instructions appear in the Notice of Internet Availability of Proxy Materials.

 

 

If you received this proxy statement by mail, you may also vote by mail and instructions appear on the enclosed proxy card.

 

LOGO

KATHERINE J. BRENNAN

Deputy General Counsel, Corporate Secretary & Chief Compliance Officer

March 29, 2019

Important Notice Regarding the Availability of Proxy Materials for the Marsh & McLennan Companies Annual Meeting of Stockholders to be held on May 16, 2019: This proxy statement and the Company’s 2018 Annual Report, which includes financial statements as of and for the fiscal year ended December 31, 2018, are available at http://proxy.mmc.com

This notice and proxy statement is being mailed or made available on the Internet to stockholders on or about March 29, 2019.

In these materials, we refer to Marsh & McLennan Companies, Inc. as the “Company”, “we” and “our”.

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement            


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Proxy Summary

 

 

This summary highlights information contained elsewhere in this proxy statement. You should read the entire proxy statement carefully before voting.

 

      

 

Voting Matters

 

             
             

 

Page number for

more information

 

   

 

Board’s 

   recommendation 

 

       
 

 

 

 

Election of Directors (Item 1)

 

    15       FOR    
 

 

To elect twelve (12) persons named in the accompanying proxy

statement to serve as directors for a one-year term

 

 

 
 

 

 

 

Advisory (Nonbinding) Vote to Approve Named Executive Officer Compensation (Item 2)

 

 

    23       FOR    
 

 

To approve, by nonbinding vote, the compensation of our named executive officers

 

 

 
 

 

 

 

Ratification of Independent Auditor (Item 3)

 

    60       FOR    
 

 

To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm

 

 

 
       

 

 

   Highlights of Our Business and Strategy

 

 

 

 

 

    BUSINESS

   

We are a global professional services firm offering clients advice and solutions in risk, strategy and people. Our businesses include:

 

 
   

    

MARSH

 

Insurance broker,
intermediary and risk
advisor

   

    

GUY CARPENTER

 

Risk and reinsurance
specialist

   

    

MERCER

 

HR and investment
related financial
advice and services

   

    

OLIVER WYMAN

GROUP

 

Management,
economic and brand
consultancy

 

     
       

 

With over 65,000 COLLEAGUES worldwide and ANNUAL REVENUE OF $15 BILLION, we provide analysis, advice and transactional capabilities to clients in more than 130 COUNTRIES.

 

   

 

 

 

    STRATEGY

   

We are the leading professional services firm in the areas of risk, strategy and people. Our purpose is to make a meaningful difference in the moments that matter, and by doing so, create significant value for our clients, colleagues, stockholders and the broader community. We are focused on four imperatives —

 

 
   

    

Creating

breakthrough impact
for our clients

 

   

    

Embracing

innovation and the
digital future

 

   

Being a
great place to work

 

   

Driving growth and
creating value

 

 
       

This strategy is designed to create exceptional value and superior returns for our stockholders over time.

 

Every year, the Board reviews the Company’s long-term strategic plan and the strategic plans of the Company’s operating subsidiaries.

 

   

 

 

 

i          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


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Proxy Summary (Continued)

 

 

 

 

   Key Governance Policies and Practices

 

 

 

BOARD OF DIRECTORS

 

 

 

 

 

 

Our chairman of the Board is an independent director

 

 
 

 

 

Two directors have joined since 2016, enhancing the Board’s breadth and depth of experience and diversity

 

 
 

 

 

All of our directors are elected annually

 

 
 

 

 

Our directors’ areas of expertise are presented in a matrix on page 9

 

 
 

 

 

Our Governance Guidelines articulate the Board’s responsibility, alongside management, for setting the “tone at the top” and overseeing management’s strategy to promote a culture of integrity throughout the Company

 

 
     

LOGO

 

   

 

STOCKHOLDER ENGAGEMENT

 

 

 

 

 

 

In 2011, we expanded the breadth and consistency of our stockholder engagement. In each of the past five years, we have engaged with institutional stockholders holding approximately 25% to 45% of the Company’s common stock

 

   

 

STOCKHOLDER RIGHTS

 

 

 

 

 

Our bylaws provide for proxy access (3% ownership / 3 years / group of up to 20 / greater of 20% of Board seats or 2 directors)

 

 
 

 

 

Our bylaws allow holders of at least 20% of the voting power of the Company’s outstanding common stock to call a special meeting

 

 
   

 

 

Directors must receive a majority of the votes cast to be elected in uncontested elections

 

   

 

COMPENSATION AND EQUITY

 

 

 

 

 

We have stock ownership guidelines for directors and senior executives

 

 
 

 

 

We prohibit hedging transactions by directors and colleagues, including senior executives

 

 
   

 

 

Directors and senior executives are prohibited from pledging Company securities as collateral for a loan or otherwise

 

   

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          ii


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Proxy Summary (Continued)

 

 

 

 

   Key Executive Compensation Policies and Practices

 

 

 

STOCKHOLDER ALIGNED EXECUTIVE COMPENSATION

PROGRAM

 

 

 

 

Our senior executives have a high percentage of variable (‘‘at risk’’) pay

 

 
 

 

 

Long-term incentive compensation for our senior executives is delivered predominantly in stock options and performance stock unit awards, the value of which is contingent on stock price appreciation or achievement of specific Company financial objectives

 

 
 

 

 

We mitigate the potential dilutive effect of equity-based awards through our share repurchase program

 

 
   

 

 

Our Compensation Committee has an independent compensation consultant

 

   

 

COMPENSATION RECOVERY POLICIES

 

 

 

 

 

We have clawback policies for senior executive annual bonus awards and for equity-based compensation

 

   

 

SEVERANCE AND CHANGE IN CONTROL

 

 

 

 

 

Severance protections for our senior executives, including our CEO, are at a 1x multiple of base salary and bonus

 

 
 

 

 

We provide “double-trigger” vesting of equity-based awards and payment of severance benefits following a change in control of the Company

 

 
   

 

 

We do not provide golden parachute excise tax gross-ups in connection with a change in control of the Company

 

   

 

SAY ON PAY

 

 

 

 

 

 

We hold an annual advisory vote on named executive officer compensation and stockholder support of the executive compensation program has been strong (95% in 2018 and 96% in 2017)

 

   

 

 

 

iii          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


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Proxy Summary (Continued)

 

 

 

 

   Highlights of Our 2018 Performance and Compensation

 

 

 

FINANCIAL OBJECTIVES

 

LOGO

 

 

 

 

In 2018, Marsh & McLennan Companies DELIVERED STRONG PERFORMANCE as we successfully executed on our long-term financial and strategic objectives.

 

 
 

 

 

GAAP EPS INCREASED 13%, and we delivered 11%* GROWTH IN ADJUSTED EPS. This marks ANOTHER YEAR OF DOUBLE-DIGIT GROWTH following 15% adjusted EPS growth in 2017.

 

 
 

 

 

We generated $15 BILLION OF REVENUE, an increase of 7% compared with 2017. We achieved 4.2% GROWTH in underlying revenue—significantly higher than the 3.5% growth we generated in 2017.

 

 
   

 

 

We INCREASED ADJUSTED OPERATING INCOME* for both the Risk & Insurance Services and Consulting segments for the NINTH CONSECUTIVE YEAR, with our overall margin increasing for the eleventh consecutive year.

 

   

 

ANNUAL COMMITMENTS

 

LOGO

 

 

 

We increased our quarterly dividend from $0.375 to $0.415 per share beginning in the third quarter of 2018, resulting in an ANNUAL DIVIDEND INCREASE OF 10.5%, from $1.43 to $1.58. Our dividend has increased every year since 2010.

 

 
 

 

 

We used approximately $675 million in cash to REPURCHASE APPROXIMATELY 8.2 MILLION SHARES, reducing our outstanding common stock by approximately 4.9 million shares on a net basis.

 

   

 

POSITIONING

FOR THE FUTURE

 

LOGO

 

 

 

 

 

We DEPLOYED $1.1 BILLION OF CAPITAL ACROSS 23 TRANSACTIONS that were completed in 2018, representing another year of significant reinvestment in building our business through acquisitions.

 

 
 

 

 

Our agreement to acquire JARDINE LLOYD THOMPSON GROUP PLC was the capstone of 2018 for us. This acquisition is the LARGEST ACQUISITION IN OUR 148-YEAR HISTORY and represents a meaningful step forward in our efforts to expand in higher-growth and higher-margin segments.

 

   

 

STOCK PERFORMANCE

 

LOGO

 

 

 

 

 

Our total stockholder return OUTPERFORMED THE S&P 500® INDEX
BY 4.3 PERCENTAGE POINTS
for 2018.

 

 
 

 

 

Our FIVE-YEAR ANNUALIZED TOTAL STOCKHOLDER RETURN OF 12.8% also outperformed the S&P 500® index total stockholder return of 8.5% by 4.3 percentage points.

 

   

 

EXECUTIVE COMPENSATION

 

LOGO

 

 

 

 

The Compensation Committee assessed our achievement against 2018 financial and strategic objectives and determined ABOVE-TARGET BONUSES for most of our named executive officers.

 
 

 

We achieved THREE-YEAR ADJUSTED EPS GROWTH OF 12.3% for our 2016 performance stock unit awards.

 

 
   

 

Our EQUITY RUN RATE** IN 2018 WAS 0.8%. Shares repurchased during the year more than offset the increase in shares attributable to the exercise of stock options and the distribution of shares for stock units from previously granted equity-based awards.

 

   

 

  *

Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

 

  **

“Equity run rate” means the number of shares of our common stock underlying equity-based awards granted plus the number of shares of our common stock underlying equity-based awards assumed upon an acquisition (if any), divided by the weighted average number of shares of our common stock outstanding for the year.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          iv


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Table of Contents

 

 

 

Corporate Governance

 

  

 

 

 

 

1

 

 

 

 

 

Overview

 

  

 

 

 

 

1

 

 

 

 

 

Corporate Governance Practices

 

  

 

 

 

 

1

 

 

 

 

 

Guidelines for Corporate Governance

 

  

 

 

 

 

2

 

 

 

 

 

Stockholder Engagement

 

  

 

 

 

 

3

 

 

 

 

 

Risk Oversight

 

  

 

 

 

 

3

 

 

 

 

 

Environmental, Social and Governance (ESG) Oversight and Activities

 

  

 

 

 

 

3

 

 

 

 

 

Codes of Conduct

 

  

 

 

 

 

4

 

 

 

 

 

CEO Succession Planning and Succession Planning for Senior Executives

 

  

 

 

 

 

4

 

 

 

 

 

Director Recruitment, Nomination and Succession Planning

 

  

 

 

 

 

4

 

 

 

 

 

Director Orientation and Continuing Education

 

  

 

 

 

 

5

 

 

 

 

 

Director Independence

 

  

 

 

 

 

5

 

 

 

 

 

Review of Related Person Transactions

 

  

 

 

 

 

6

 

 

 

 

 

Stockholder Nominations for Director Candidates

 

  

 

 

 

 

6

 

 

 

 

 

Director Election Voting Standard

 

  

 

 

 

 

6

 

 

 

 

 

Communicating with Directors

 

  

 

 

 

 

7

 

 

 

 

 

Communicating Concerns Regarding Accounting Matters

 

  

 

 

 

 

7

 

 

 

 

          

 

Board of Directors and Committees

 

  

 

 

 

 

8

 

 

 

 

 

Board Composition, Leadership and Size

 

  

 

 

 

 

8

 

 

 

 

 

Director Qualifications

 

  

 

 

 

 

8

 

 

 

 

 

Director Skills and Experience

 

  

 

 

 

 

9

 

 

 

 

 

Board Diversity

 

  

 

 

 

 

10

 

 

 

 

 

Board Refreshment

 

  

 

 

 

 

10

 

 

 

 

 

Retirement

 

  

 

 

 

 

10

 

 

 

 

 

Attendance

 

  

 

 

 

 

10

 

 

 

 

 

Executive Sessions

 

  

 

 

 

 

10

 

 

 

 

 

Board and Committee Evaluations

 

  

 

 

 

 

10

 

 

 

 

 

Committees

 

  

 

 

 

 

11

 

 

 

 

          

 

Election of Directors

 

  

 

 

 

 

15

 

 

 

 

 

Item 1: Election of Directors

 

  

 

 

 

 

15

 

 

 

 

 

Executive Compensation

 

  

 

 

 

 

23

 

 

 

 

 

Item 2: Advisory (Nonbinding) Vote to Approve Named Executive Officer Compensation

 

  

 

 

 

 

23

 

 

 

 

 

Compensation Discussion and Analysis

 

  

 

 

 

 

24

 

 

 

 

 

Compensation Committee Report

 

  

 

 

 

 

44

 

 

 

 

 

Compensation of Executive Officers

 

  

 

 

 

 

45

 

 

 

 

          

 

Audit

 

  

 

 

 

 

60

 

 

 

 

 

Item 3: Ratification of Selection of Independent Registered Public Accounting Firm

 

  

 

 

 

 

60

 

 

 

 

 

Fees of Independent Registered Public Accounting Firm

 

  

 

 

 

 

60

 

 

 

 

 

Audit Committee Report

 

  

 

 

 

 

61

 

 

 

 

          

 

Additional Information

 

  

 

 

 

 

62

 

 

 

 

 

Stock Ownership of Directors, Management and Certain Beneficial Owners

 

  

 

 

 

 

62

 

 

 

 

 

Director Compensation

 

  

 

 

 

 

64

 

 

 

 

 

Equity Compensation Plan Information

 

  

 

 

 

 

67

 

 

 

 

 

CEO Pay Ratio

 

  

 

 

 

 

69

 

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

  

 

 

 

 

69

 

 

 

 

 

Transactions with Management and Others

 

  

 

 

 

 

70

 

 

 

 

 

Information about Our Annual Meeting and Solicitation of Proxies

 

  

 

 

 

 

71

 

 

 

 

 

Submission of Stockholder Proposals and Other Items of Business for 2020 Annual Meeting

 

  

 

 

 

 

75

 

 

 

 

 

Exhibit A

 

  

 

 

 

 

76

 

 

 

 

 

Exhibit B

 

  

 

 

 

 

80

 

 

 

 

 

 

v          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

  Corporate Governance

 

 

We describe key features of the Company’s corporate governance environment below and in the next section of this proxy statement, captioned “Board of Directors and Committees.” Our key corporate governance materials are available online at http://www.mmc.com/about/governance.php.

Overview

Our Board of Directors currently has twelve (12) members, including H. Edward Hanway, our independent chairman, and Daniel S. Glaser, our President and Chief Executive Officer. Mr. Glaser is the only member of management who serves as a director. As described in more detail under “Board of Directors and Committees,” our Board maintains an Audit Committee, a Compensation Committee, a Directors and Governance Committee, a Finance Committee, a Corporate Responsibility Committee and an Executive Committee.

Corporate Governance Practices

The Company is committed to best practices in corporate governance. Highlights of our corporate governance practices are described below.

BOARD STRUCTURE

 

    Board Independence.   All of the Company’s directors are independent, with the exception of our CEO, who is the only member of management serving on the Board.

 

    Independent Chairman.   The Company maintains separate roles of chief executive officer and chairman of the Board as a matter of policy. An independent director acts as chairman of the Board.

 

    Offer to Resign upon Change in Circumstances.   Pursuant to our Governance Guidelines, any director undergoing a significant change in professional circumstances must offer to resign from the Board.

ELECTION OF DIRECTORS

 

    Annual Election of Directors.   The Company’s charter provides for the annual election of directors.

 

    Majority Voting in Director Elections.   The Company’s bylaws provide that, in uncontested elections, director candidates must be elected by a majority of the votes cast. Each director candidate has previously tendered an irrevocable resignation that will be effective upon his or her failure to receive the requisite votes and the Board’s acceptance of such resignation.

PROXY ACCESS

 

    Proxy Access.   The Company’s bylaws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials directors constituting up to the greater of two or 20% of board seats, if the stockholder(s) and the nominee(s) meet the requirements in our bylaws.

RIGHT OF STOCKHOLDERS TO CALL SPECIAL MEETINGS

 

    Stockholder Right to Call Special Meetings.   The Company’s bylaws allow holders of record of at least 20% of the voting power of the Company’s outstanding common stock to call a special meeting.

STOCKHOLDER RIGHTS PLAN

 

    No Poison Pill.   The Company does not have a Rights Agreement.

COMPENSATION PRACTICES

 

    Compensation Structure for Independent Directors.   The Company’s director compensation structure is transparent to investors and does not provide for meeting fees or retainers for non-chair committee membership.

 

    Cap on Executive Severance Payments.   The Company is required as a matter of policy to obtain stockholder approval for severance agreements with certain senior executives if they provide for cash severance that exceeds 2.99 times the executive’s base salary and three-year average annual bonus award.

 

    “Double-Trigger” Condition for Vesting of Equity-Based Awards following a Change in Control.   Our outstanding and unvested equity-based awards contain a “double-trigger” vesting provision, which requires both a change in control of the Company and a specified termination of employment in order for vesting to be accelerated.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          1


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 Corporate Governance (Continued)

 

 

 

    “Clawback” Policies.   The Company may as a matter of policy recoup (or “claw back”) certain executive bonuses in the event of misconduct leading to a financial restatement. Also, our 2011 Incentive and Stock Award Plan allows the Company to “claw back” outstanding or already settled equity-based awards.

EQUITY OWNERSHIP AND HOLDING REQUIREMENTS

 

    Senior Executive Equity Ownership and Holding Requirements.   The Company requires senior executives to hold shares or stock units of our common stock with a value equal to a multiple of base salary. The multiple for our Chief Executive Officer is six, and the multiple for our other senior executives is three. Senior executives are required to hold shares of the Company’s common stock acquired in connection with equity-based awards until they reach their ownership multiple and may not sell any shares of the Company’s common stock unless they maintain their ownership multiple.

 

    Director Equity Ownership and Holding Requirements.   Directors are required to acquire over time, and thereafter hold (directly or indirectly), shares or stock units of our common stock with a value equal to at least five times the Board’s basic annual retainer. Directors may not sell shares of the Company’s common stock until this ownership threshold is attained.

Guidelines for Corporate Governance

The Company and the Board of Directors formally express many of our governance policies through our Guidelines

for Corporate Governance (our “Governance Guidelines”). The Governance Guidelines are posted on our website at http://www.mmc.com/about/governance.php.

The Governance Guidelines summarize certain policies and practices designed to assist the Board in fulfilling its fiduciary obligations to the Company’s stockholders, including the following (parenthetical references are to the relevant section of the Governance Guidelines):

 

  The Board’s responsibility, alongside management, for setting the “tone at the top” and overseeing management’s strategy to promote a culture of integrity throughout the Company. (Section A)

 

  Specific Board functions (Section B), such as:

 

    selecting, regularly evaluating the performance of, and approving the compensation paid to, the CEO;

 

    providing oversight and guidance regarding the selection, evaluation, development and compensation of other senior executives;

 

    planning for CEO and other senior management succession;

 

    reviewing, monitoring and, where appropriate, approving the Company’s strategic and operating plans, fundamental financial objectives and major corporate actions;

 

    assessing major risks facing the Company and reviewing enterprise risk management programs and processes;

 

    overseeing the integrity of the Company’s financial statements and financial reporting processes;

 

    reviewing processes to maintain the Company’s compliance with legal and ethical standards; and

 

    reviewing and monitoring the effectiveness of the Company’s corporate governance practices.

 

  Succession planning and management development. (Section C)

 

  Director qualification standards and director independence. (Sections D.2 and D.3)

 

  Limits on serving on more than four public company boards. (Section D.5)

 

  Majority voting in director elections. (Section E.3)

 

  Resignation and retirement requirements for independent directors. (Section E.5)

 

  Separation of chairman and CEO roles. (Section F.2)

 

  Executive sessions of independent directors at every in-person meeting of the Board. (Section H.3)

 

  Annual Board review of the Company’s long-term strategic plan and the strategic plans of the Company’s operating subsidiaries. (H.4)

 

 

 

2          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Corporate Governance (Continued)

 

 

 

  Board access to management and professional advisors. (Section I)

 

  Director stock ownership requirements. (Section K.2)

 

  Prohibition on directors’ hedging and pledging Company securities. (Section K.3)

 

  Annual Board and committee evaluations. (Section L)

 

  Policy on interested stockholder transactions. (Section O)

Stockholder Engagement

In 2011, we expanded the breadth and consistency of our stockholder engagement. In each of the past five years, we have engaged with institutional stockholders holding approximately 25% to 45% of the Company’s common stock. Discussions with stockholders cover corporate governance, executive compensation and environmental and social topics. Feedback received during the stockholder engagement process is shared with senior executives, the Board and its committees. We are committed to ongoing engagement with our stockholders and intend to continue these outreach efforts.

Risk Oversight

It is the responsibility of the Company’s senior management to assess and manage our exposure to risk and to bring to the Board’s attention the most material risks facing the Company. The Board oversees risk management directly and through its committees.

Annually, the Board reviews management’s assessment of the Company’s key enterprise risks. Senior management then briefs the Board on its strategy with respect to each risk and provides a mid-year status update and a report at year-end. The Board receives updates from management on specific risks throughout the year, including on human capital management and cybersecurity.

The Audit Committee regularly reviews the Company’s policies and practices with respect to risk assessment and risk management, including cybersecurity risk. The Directors and Governance Committee considers risks relating to CEO succession planning, and the Compensation Committee considers risks relating to the design of executive compensation programs and arrangements. See the discussion under “Committees” on page 11 for additional information about the Board’s committees.

Environmental, Social and Governance (ESG) Oversight and Activities

With the creation of the Corporate Responsibility Committee in 2008, the Board has formally focused on key aspects of the Company’s environmental, social and governance (ESG) initiatives for more than a decade. In 2018, the Company formed a cross-functional management committee to coordinate and communicate on the Company’s ESG initiatives. Our Corporate Citizenship Report and related information is available on our website at http://www.mmc.com/esg.

The Board oversees the Company’s ESG initiatives and strategies primarily through its committees.

Corporate Responsibility Committee.  The Corporate Responsibility Committee has responsibility for sustainability, diversity and inclusion and social responsibility, as well as corporate communications and government relations. It includes members from each of the Board’s other committees. The Corporate Responsibility Committee receives reports at least annually on environmental matters from the Company’s Chief Sustainability Officer and on diversity and inclusion and social responsibility matters from the Company’s Chief Human Resources Officer.

Compensation Committee.  The Compensation Committee has responsibility to review certain key human resource strategic activities, including those relating to diversity, training and recruitment. The Compensation Committee coordinates with the Corporate Responsibility Committee on diversity initiatives and receives annual reports on diversity and inclusion from the Company’s Chief Human Resources Officer.

Directors and Governance Committee.  The Directors and Governance Committee takes a leadership role in shaping the Company’s corporate governance principles and practices. It receives regular updates on governance practices and developments from the Company’s General Counsel.

Audit Committee.  The Audit Committee has responsibility for the Company’s policies, systems and controls designed to promote ethical behavior and compliance with applicable legal and regulatory requirements. It receives regular updates from the Company’s Chief Compliance Officer.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          3


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 Corporate Governance (Continued)

 

 

Following each committee meeting, the respective committee chair reports on the meeting to the full Board. See the discussion under “Committees” on page 11 for additional information about the Board’s committees.

Management ESG Committee.  In 2018, a committee was formed with members drawn from across the Company to coordinate and communicate on the Company’s ESG initiatives. The committee is comprised of colleagues from Legal, Compliance, Human Resources, Corporate Social Responsibility, Investor Relations, Communications and Government Relations. Members of the committee include the Company’s Deputy General Counsel, Corporate Secretary & Chief Compliance Officer, the secretaries to the Board’s committees, the Company’s Chief Sustainability Officer, the Company’s Head of Corporate Responsibility, as well as other colleagues who support the Company’s ESG initiatives.

Codes of Conduct

Our reputation is fundamental to our business. The Company’s directors and officers and other colleagues are expected to act ethically at all times. To provide guidance in this regard, the Company has adopted a Code of Conduct, The Greater Good, which applies to all of our directors, officers and other colleagues. Additionally, The Greater Good requires the Company’s agents, subcontractors and suppliers to comply with relevant aspects of our compliance policies. The dissemination of The Greater Good to the Company’s colleagues includes comprehensive training and communication. In 2016, there was a campaign requiring colleagues to recertify their commitment to The Greater Good. Each year, the Company’s directors and senior executives certify their commitment to The Greater Good. The Company has also adopted an additional Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which applies to our chief executive officer, chief financial officer and controller. Both of these codes are posted on the Company’s website at http://www.mmc.com and print copies are available to any stockholder upon request. We will disclose any amendments to, or waivers of, the Code of Ethics for the Chief Executive Officer and Senior Financial Officers on our website within four business days.

CEO Succession Planning and Succession Planning for Senior Executives

The Board believes that planning for CEO succession is one of its most important responsibilities. CEO succession planning is regularly discussed at Board meetings and in executive sessions. The Board, taking into account the recommendations of the Directors and Governance Committee, approves and maintains a succession plan for the CEO. At least annually, independent directors meet with the CEO to discuss potential successors. In addition, a confidential procedure is maintained for the timely and efficient transfer of the CEO’s responsibilities in the event of an emergency or his sudden incapacitation or departure.

The Board also believes that planning for succession below the CEO level is a key responsibility. The CEO periodically reviews with the independent directors the performance of senior executives and any succession issues related to those individuals. The Compensation Committee has responsibility for reviewing the Company’s executive talent review process for senior executives. Every year, the Compensation Committee reviews succession plans for direct reports to the CEO and other key executive positions.

Directors engage with senior executives and others at Board and committee meetings and in less formal settings to allow directors to personally assess potential candidates for CEO and senior executive roles.

Director Recruitment, Nomination and Succession Planning

The Board, taking into account the recommendation of the Directors and Governance Committee, is responsible for nominating a slate of director candidates for election at the Company’s annual meeting of stockholders.

DIRECTOR RECRUITMENT

The Board has delegated to the Directors and Governance Committee the authority to identify, consider and recommend to the Board potential new director candidates and to engage one or more search firms to assist the Committee in that regard. The Directors and Governance Committee reviews with the Board periodically the skills and characteristics to be sought in any new director candidates. In evaluating the skills and characteristics to be sought in new director candidates, the Directors and Governance Committee considers, among other factors, the criteria described under “Director Qualifications” on page 8 and the skills and experiences shown in the “Director Skills and Experience” matrix on page 9. In its recruitment process, the Directors and Governance Committee and the Board seek to reflect gender, racial and ethnic diversity in the pool of director candidates.

 

 

 

4          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


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 Corporate Governance (Continued)

 

 

DIRECTOR NOMINATION PROCESS

As part of the process for nominating director candidates, the Board evaluates each individual director in the context of the Board as a whole, with the objective of recommending a group that can best support the success of our business and represent stockholder interests. The Directors and Governance Committee may consider recommendations for director candidates from search firms, other directors and stockholders. In deciding whether to nominate an incumbent director for re-election, the Board considers many factors, including the criteria described under “Director Qualifications” on page 8, such as gender, racial and ethnic diversity, as well as his or her length of service and performance on the Board.

DIRECTOR SUCCESSION PLANNING

The Board is committed to effective succession planning. The Directors and Governance Committee has responsibility to review the composition and structure of the Board as a whole, taking into account such factors as the Board’s current mix and diversity of skills, backgrounds and experiences, and to make recommendations to the Board as appropriate. In its review of Board composition, the Directors and Governance Committee considers succession planning in light of factors such as skills needed and upcoming retirements and other potential departures.

Director Orientation and Continuing Education

All new directors participate in an orientation program throughout their first year on the Board to familiarize them with the Company’s business, strategy, finances, policies, corporate governance practices and culture. The orientation program includes in-person meetings with the Company’s senior executives and comprehensive background materials. Directors are provided training on our code of conduct, The Greater Good. Thereafter, each director certifies annually that he or she has read it and agrees to abide by its policies and practices. Additional orientation sessions with key advisors are provided for Audit and Compensation Committee members. Orientation sessions are tailored upon request to meet directors’ needs and interests.

Directors are also encouraged to participate in continuing education programs. Continuing education programs may be part of regular Board or committee meetings or third-party presentations. Additionally, the Company pays for directors to have access to third-party resources that provide updates on issues and programs relevant to public companies and their directors.

Director Independence

The Board has determined that all directors other than Mr. Glaser are independent under the New York Stock Exchange (“NYSE”) listed company rules and the standards set forth in the Governance Guidelines. Therefore, the Board has satisfied the objective, set forth in the Governance Guidelines, that a substantial majority of the Company’s directors be independent of management.

For a director to be considered independent, the Board must affirmatively determine that the director has no direct or indirect material relationship with the Company. The Board has established standards to assist it in making determinations of director independence. These standards conform to, or are more exacting than, the independence requirements provided in the NYSE listed company rules. The Company’s director independence standards are set forth as Annex A to our Governance Guidelines.

All members of the Audit, Compensation and Directors and Governance Committees must be independent directors under the NYSE listed company rules and the standards set forth in the Company’s Governance Guidelines. Members of the Audit Committee must also satisfy a separate Securities and Exchange Commission (“SEC”) and NYSE independence requirement, which provides that they may not be affiliates and may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than their directors’ compensation. The Board evaluated each member of the Compensation Committee under the additional NYSE compensation committee member independence standards and also determined that these members qualify as “non-employee directors” (as defined under Rule 16b-3 under the Securities Exchange Act of 1934) and as “outside directors” (as defined in Section 162(m) of the Internal Revenue Code).

Under our Governance Guidelines, if a director whom the Board has deemed independent has a change in circumstances or relationships that might cause the Board to reconsider that determination, he or she must immediately notify the chairman of the Board and the chair of the Directors and Governance Committee.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          5


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 Corporate Governance (Continued)

 

 

Review of Related Person Transactions

The Company maintains a written Policy Regarding Related Person Transactions, which sets forth standards and procedures for the review and approval or ratification of transactions between the Company and related persons. The policy is administered by the Directors and Governance Committee with assistance from the Company’s Corporate Secretary.

In determining whether to approve or ratify a related person transaction, the Directors and Governance Committee will review the facts and circumstances including: the commercial reasonableness of the transaction; the benefits of the transaction to the Company; the availability of other sources for the products or services involved in the transaction; the materiality and nature of the related person’s direct or indirect interest in the transaction and the potential public perception of the transaction. The Directors and Governance Committee will approve or ratify a related person transaction only if the Committee determines that the related person transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders.

If the Directors and Governance Committee determines not to approve or ratify a related person transaction, the transaction will not be entered into or continued. No member of the Directors and Governance Committee will participate in any review or determination if the Committee member or any of his or her immediate family members is the related person.

See the discussion under “Transactions with Management and Others” on page 70.

Stockholder Nominations for Director Candidates

Stockholders may recommend or nominate director candidates in writing to the Company’s Corporate Secretary. All stockholder recommendations for director candidates are considered and they are evaluated in the same manner as other director candidates. Nominating stockholders must meet the requirements described in Article III of our bylaws. The notice of nomination must meet bylaw requirements, including as to timeliness and form, and be delivered to the Company’s Corporate Secretary at our principal executive offices: Marsh & McLennan Companies, Inc., Attn: Directors and Governance Committee, c/o Katherine J. Brennan—Corporate Secretary, 1166 Avenue of the Americas, New York, New York 10036-2774. See the discussion under “Submission of Stockholder Proposals and Other Items of Business for 2020 Annual Meeting” on page 75.

Director Election Voting Standard

The Company’s bylaws provide that, in an uncontested election of directors (i.e., where the number of nominees does not exceed the number of directors to be elected), a director nominee must receive more votes cast “for” than “against” his or her election in order to be elected to the Board.

In connection with the Company’s majority voting standard for director elections, the Board has adopted the following procedures, which are set forth more fully in Section E.3 of our Governance Guidelines:

 

  The Board shall nominate for election only director candidates who agree to tender to the Board an irrevocable resignation that will be effective upon (i) a director’s failure to receive the required number of votes for re-election at the next meeting of stockholders at which he or she faces re-election and (ii) the Board’s acceptance of such resignation.

 

  Following a meeting of stockholders at which an incumbent director who was a nominee for re-election does not receive the required number of votes for election, the Directors and Governance Committee shall make a recommendation to the Board as to whether to accept or reject such director’s resignation. Within 90 days following the certification of the election results, the Board shall decide whether to accept or reject the director’s resignation and shall publicly disclose that decision and its rationale.

 

  If the Board accepts a director’s resignation, the Directors and Governance Committee will recommend to the Board whether to fill the resultant vacant Board seat or reduce the size of the Board.

 

 

 

6          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


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 Corporate Governance (Continued)

 

 

Communicating with Directors

Holders of the Company’s common stock and other interested parties may send communications to the Board of Directors, the independent chairman, any of the directors or the independent directors as a group by mail (addressed to Katherine J. Brennan—Corporate Secretary, at the address shown below), online at http://www.ethicscomplianceline.com or by telephone (local dialing instructions can be found at http://www.ethicscomplianceline.com). Items unrelated to the directors’ duties and responsibilities as Board members may be excluded by the Corporate Secretary, including solicitations and advertisements, junk mail, product-related communications, surveys and job referral materials such as resumes.

Communicating Concerns Regarding Accounting Matters

The Audit Committee of the Board of Directors has established procedures to enable anyone who has a concern about the Company’s accounting, internal accounting controls or auditing practices to communicate that concern directly to the Audit Committee. These communications, which may be made on a confidential or anonymous basis, may be submitted in writing, by telephone or online as follows:

By mail to:

Marsh & McLennan Companies, Inc.

Audit Committee of the Board of Directors

c/o Katherine J. Brennan—Corporate Secretary

1166 Avenue of the Americas, Legal Department

New York, New York 10036-2774

By telephone or online:

Go to this website for dialing instructions or to raise a concern online:

http://www.ethicscomplianceline.com

Further details of the Company’s procedures for handling complaints and concerns of colleagues and other interested parties regarding accounting matters are posted on our website at http://www.mmc.com/about/governance.php.

Company policy prohibits retaliation against anyone who raises a concern in good faith.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          7


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 Board of Directors and Committees

 

 

Board Composition, Leadership and Size

At the 2019 annual meeting, stockholders will vote on the election of twelve (12) directors. H. Edward Hanway currently serves as the Board’s independent chairman.

The only member of management who serves on the Board is Daniel S. Glaser, the Company’s President and Chief Executive Officer. The position of chairman of the Board has been held by an independent director since 2005. The Board believes that this currently is the best leadership structure for the Company.

 

LOGO

Director Qualifications

As provided in our Governance Guidelines, all directors must demonstrate the highest standards of ethics and integrity, must be independent thinkers with strong analytical ability and must be committed to representing all of the Company’s stockholders rather than any particular interest group. In addition to these characteristics, our Governance Guidelines provide that each director candidate be evaluated by the Board against the following criteria: (1) the candidate’s personal and professional reputation and background; (2) the candidate’s industry knowledge; (3) the candidate’s experience with businesses or other organizations comparable to the Company in terms of size or complexity; (4) the interplay of the candidate’s skills and experience with those of the incumbent directors; (5) the extent to which the candidate would provide substantive expertise that is currently sought by the Board or any committees of the Board; (6) the candidate’s ability to commit the time necessary to fulfill a director’s responsibilities; (7) relevant legal and regulatory requirements and evolving best practices in corporate governance; (8) the gender, racial, ethnic and cultural diversity of each potential candidate and (9) any other criteria the Board deems appropriate.

 

 

 

8          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


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 Board of Directors and Committees (Continued)

 

 

Director Skills and Experience

As a global professional services firm offering clients advice and solutions in risk, strategy and people, the eight areas of expertise described in the chart below support our business and strategy. The chart identifies the five principal skills that the Directors and Governance Committee considered for each director when evaluating that director’s experience and qualifications to serve as a director. Additional information about each director’s background, business experience and other matters, as well a description of how each individual’s experience qualifies him or her to serve as a director of the Company, is provided under the heading “Item 1—Election of Directors” beginning on page 15.

 

    

Skills and Experience

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

   

Leadership

Business and strategic management experience from service in a significant leadership position, such as a chief executive officer, chief financial officer or other senior leadership role.

  🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑
   

Financial

Background and experience in finance, accounting, banking, capital markets, financial reporting or economics.

  🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑   🌑
   

Industry

Experience in the Company’s businesses and industries, including insurance, insurance and reinsurance brokerage, consulting and healthcare.

  🌑       🌑   🌑           🌑       🌑           🌑
   

International

International background or global experience, including in growth markets.

      🌑   🌑   🌑   🌑   🌑   🌑           🌑        
   

Technology

Experience in technology, innovation or cybersecurity, particularly as a senior executive.

                  🌑       🌑               🌑    
   

Corporate Governance & Responsibility

Experience with governance principles or corporate responsibility initiatives, including sustainability and diversity and inclusion.

  🌑   🌑                       🌑       🌑       🌑
   

Government Relations & Regulatory

Experience with government relations, regulatory matters or regulated industries and political affairs.

      🌑       🌑       🌑       🌑   🌑       🌑    
   

Risk Management

Experience in risk management, strategic planning or compliance.

  🌑       🌑       🌑   🌑       🌑   🌑   🌑   🌑   🌑
   

 

Diversity

Gender, racial or ethnic diversity.

 

 

🌑

 

 

🌑

         

 

🌑

 

 

🌑

                 

 

🌑

   

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          9


Table of Contents

 

 Board of Directors and Committees (Continued)

 

 

Board Diversity

We are committed to maintaining a diverse and inclusive Board. Of our twelve directors, five (42%) are diverse, including two women.

Our Governance Guidelines specify that the gender, racial, ethnic and cultural diversity of each potential director candidate be considered by the Board. In its recruitment process, the Directors and Governance Committee and the Board seek to reflect gender, race and ethnic diversity in the pool of director candidates. The Directors and Governance Committee and the Board also consider gender, race and ethnic diversity in the director nomination process.

Board Refreshment

The Board is committed to effective succession planning and refreshment. Two directors have joined since 2016, enhancing the Board’s breadth and depth of experience and diversity. The average tenure of our directors is nine years. In deciding whether to nominate an incumbent director for re-election, the Board considers many factors, including tenure. The Board believes that a variety of director tenures provides fresh perspectives and valuable insight developed over time into the Company’s operations.

Retirement

Our Governance Guidelines require our independent directors to resign no later than at the annual meeting of stockholders following their 75th birthday. Any director who is an employee of the Company will resign from the Board when his or her employment ends.

Attendance

The Board held eleven meetings, including telephonic meetings, during 2018. All directors attended at least 75% of the meetings of the Board and committees on which they served. The Board’s policy is to have all directors attend the annual meetings of stockholders. All of our directors were present at the 2018 annual meeting of stockholders.

Executive Sessions

Our independent directors meet in executive session without management at regularly scheduled in-person Board meetings. In 2018, they held six executive sessions, which were presided over by the independent chairman of the Board. In addition, the members of the Audit, Compensation and Directors and Governance Committees meet in executive session without management at regularly scheduled in-person committee meetings.

Board and Committee Evaluations

The Directors and Governance Committee oversees an annual evaluation of the Board’s performance and effectiveness. The evaluation focuses on the Board’s contribution to the Company over the preceding year, including areas in which the Board or management believes the Board could enhance its future contributions. Each year, the Directors and Governance Committee reviews and considers the self-evaluation for the upcoming year.

As part of the Board’s self-evaluation process, each director completes a questionnaire soliciting quantitative ratings and qualitative commentary. Recent changes to the self-evaluation include beginning the questionnaire with open-ended questions and expanding qualitative feedback. The questionnaire solicits directors’ views on topics such as:

 

  the Board’s key priorities,

 

  fulfillment of the Board’s responsibilities under our Governance Guidelines,

 

  the Board’s relationship with management and

 

  the Board’s structure, composition and committees.

The responses to the questionnaire are compiled on an unattributed basis and are discussed by the Board in executive session. Based on the evaluation results, changes in practices or procedures are considered and, as appropriate, implemented. More generally, directors are encouraged to make suggestions at any time for improving the Board’s practices.

In addition, each of the Audit, Compensation and Directors and Governance Committees evaluates its own performance annually pursuant to their respective charters. Each Committee’s self-evaluation is conducted in an executive session and includes an assessment of its fulfillment of its responsibilities under its charter and our Governance Guidelines.

 

 

 

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 Board of Directors and Committees (Continued)

 

 

Committees

Our Board maintains an Audit Committee, a Compensation Committee, a Directors and Governance Committee, a Finance Committee, a Corporate Responsibility Committee and an Executive Committee to assist the Board in discharging its responsibilities. Following each committee meeting, the respective committee chair reports the highlights of the meeting to the full Board.

Membership on each of the Audit, Compensation and Directors and Governance Committees is limited to independent directors as required by the Company, the listing standards of the NYSE and the SEC’s independence rules. The Corporate Responsibility Committee must consist of a majority of independent directors as required by the Company. Each of these committees is governed by a charter, which can be viewed on our website at http://www.mmc.com/about/governance.php.

The table below indicates committee assignments for 2018 and the number of times each committee met in 2018:

 

 

  Director

 

          

Audit

 

    

Compensation

 

    

 

Directors

and

Governance

 

    

Finance

 

    

Corporate

Responsibility

 

    

Executive

 

 

 

  Anthony K. Anderson

 

           

 

 

 

 

🌑

 

 

 

 

                             

 

 

 

 

🌑

 

 

 

 

        

 

  Oscar Fanjul

 

                    

 

 

 

 

🌑

 

 

 

 

           

 

 

 

 

CHAIR

 

 

 

 

           

 

 

 

 

🌑

 

 

 

 

 

  Daniel S. Glaser

 

                                      

 

 

 

 

🌑

 

 

 

 

           

 

 

 

 

🌑

 

 

 

 

 

  H. Edward Hanway

 

                    

 

 

 

 

🌑

 

 

 

 

  

 

 

 

 

🌑

 

 

 

 

  

 

 

 

 

🌑

 

 

 

 

           

 

 

 

 

CHAIR

 

 

 

 

 

  Deborah C. Hopkins

 

                    

 

 

 

 

🌑

 

 

 

 

  

 

 

 

 

🌑

 

 

 

 

           

 

 

 

 

🌑

 

 

 

 

        

 

  Elaine La Roche

 

           

 

 

 

 

🌑

 

 

 

 

                    

 

 

 

 

🌑

 

 

 

 

  

 

 

 

 

🌑

 

 

 

 

        

 

  Steven A. Mills

 

                    

 

 

 

 

CHAIR

 

 

 

 

  

 

 

 

 

🌑

 

 

 

 

                    

 

 

 

 

🌑

 

 

 

 

 

  Bruce P. Nolop

 

           

 

 

 

 

CHAIR

 

 

 

 

                    

 

 

 

 

🌑

 

 

 

 

           

 

 

 

 

🌑

 

 

 

 

 

  Marc D. Oken

 

           

 

 

 

 

🌑

 

 

 

 

                    

 

 

 

 

🌑

 

 

 

 

                 

 

  Morton O. Schapiro

 

                    

 

 

 

 

🌑

 

 

 

 

  

 

 

 

 

CHAIR

 

 

 

 

                    

 

 

 

 

🌑

 

 

 

 

 

  Lloyd M. Yates

 

           

 

 

 

 

🌑

 

 

 

 

                             

 

 

 

 

🌑

 

 

 

 

        

 

  R. David Yost

 

                    

 

 

 

 

🌑

 

 

 

 

                    

 

 

 

 

CHAIR

 

 

 

 

        

 

  2018 Meetings

 

           

 

 

 

 

10

 

 

 

 

  

 

 

 

 

6

 

 

 

 

  

 

 

 

 

5

 

 

 

 

  

 

 

 

 

7

 

 

 

 

  

 

 

 

 

4

 

 

 

 

  

 

 

 

 

0

 

 

 

 

AUDIT COMMITTEE

The Audit Committee is charged, among other things, with assisting the Board in fulfilling its oversight responsibilities with respect to:

 

  the integrity of the Company’s financial statements;

 

  the qualifications, independence and performance of our independent registered public accounting firm;

 

  the performance of the Company’s internal audit function;

 

  the Company’s policies and implementation of systems and controls designed to promote ethical behavior;

 

  compliance by the Company with legal and regulatory requirements; and

 

  the Company’s enterprise risk management programs and processes.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          11


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 Board of Directors and Committees (Continued)

 

 

The Audit Committee selects, oversees and approves, pursuant to a pre-approval policy, all services to be performed by our independent registered public accounting firm. The Company’s independent registered public accounting firm reports to the Audit Committee.

All members of the Audit Committee are “financially literate,” as required by the NYSE and determined by the Board. The Board has determined that Anthony K. Anderson, Bruce P. Nolop, Marc D. Oken and Lloyd M. Yates have the requisite qualifications to satisfy the SEC definition of “audit committee financial expert.”

COMPENSATION COMMITTEE

The primary responsibilities of the Compensation Committee are to:

 

  evaluate the performance and determine the compensation of our chief executive officer;

 

  review and approve the compensation of our other senior executives;

 

  review certain key human resource strategic activities, including those relating to diversity, training and recruitment; and

 

  oversee and discharge its responsibilities for the Company’s incentive compensation plans for our senior executives and equity-based award plans.

Meeting Schedule.   The Compensation Committee met six times in 2018, including a special meeting in February to complete its annual review of, and make decisions on, executive compensation. Decisions relating to significant matters are usually presented to the Compensation Committee and discussed at more than one meeting to allow for full consideration of the implications and possible alternatives before a final decision is made. The Compensation Committee receives support from its independent compensation consultant and the Company’s management, including the Company’s human resources staff, as described below. At each of its meetings, the Compensation Committee meets in executive session and without management present. The independent compensation consultant attends portions of the executive sessions.

The Compensation Committee may delegate all or a portion of its duties and responsibilities to the chair of the Compensation Committee or a subcommittee of the Compensation Committee. If necessary, the chair is authorized to take action on behalf of the Compensation Committee between its regularly scheduled meetings, within prescribed guidelines. If any such action is taken, the chair reports such action to the Compensation Committee at its next regularly scheduled meeting.

Independent Compensation Consultant.   The Compensation Committee has engaged Pay Governance LLC as its independent compensation consultant to support the Compensation Committee in performing its duties and to provide analysis and make recommendations to the Compensation Committee regarding our executive compensation program. The independent compensation consultant reports directly to the Compensation Committee and provides advice and analysis solely to the Compensation Committee. The independent compensation consultant supports the Compensation Committee by:

 

  participating in meetings and executive sessions of the Compensation Committee to advise the Compensation Committee on specific matters that arise;

 

  offering objective advice regarding the compensation and policy recommendations presented to the Compensation Committee by the Company’s management, including senior members of the Company’s human resources staff; and

 

  supplying data regarding the compensation practices of comparable companies.

The Compensation Committee requested and received advice from the independent compensation consultant with respect to all significant matters addressed by the Compensation Committee during 2018. Except for the services provided to the Board, neither the individual compensation consultant nor Pay Governance LLC nor any of its affiliates provided any services to the Company or its affiliates in 2018.

The Compensation Committee assessed the work of Pay Governance LLC during 2018 pursuant to SEC rules and concluded that Pay Governance’s work did not raise any conflict of interest.

Company Management.   The Company’s management, including the Company’s human resources staff, supports the Compensation Committee by:

 

  developing meeting agendas in consultation with the chair of the Compensation Committee and preparing background materials for Compensation Committee meetings;

 

 

 

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 Board of Directors and Committees (Continued)

 

 

 

  making recommendations to the Compensation Committee on the Company’s compensation philosophy, governance initiatives and short-term and long-term incentive (“LTI”) compensation design, and by providing input regarding the individual performance component of annual bonus awards; and

 

  responding to actions and initiatives proposed by the Compensation Committee.

In addition, our President and Chief Executive Officer provides recommendations with respect to the compensation of our other senior executives.

Our President and Chief Executive Officer, senior members of the Company’s human resources staff and internal legal counsel attended Compensation Committee meetings when invited but were not present for executive sessions or for any discussion of their own compensation.

Timing and Procedures of Equity-Based Compensation Awards.   Annual awards under our LTI compensation program are approved at a prescheduled meeting of the Compensation Committee each February and, consistent with our historical practice, are granted on that same date.

In addition, the Compensation Committee periodically grants restricted stock unit awards to newly hired senior executives and to continuing senior executives for increased responsibilities that accompany changes in position and for retention purposes. These awards are approved at prescheduled meetings of the Compensation Committee. The Compensation Committee has also authorized our President and Chief Executive Officer to make such awards to individuals who are not senior executives, subject to prescribed parameters. These awards are granted on the first calendar day of the month following approval of the award by the Compensation Committee or our President and Chief Executive Officer, as applicable. In the event that an award is approved prior to an individual’s start date with the Company, the award will be granted on the first calendar day of the first month on or following the individual’s start date; however, if an award is approved contingent on the award recipient providing documentation supporting the forfeiture of compensation from a former employer and that documentation has not been provided as of the individual’s start date, the award will be granted on the first calendar day of the month following the provision of such documentation and acceptance by the Company.

Typically, equity-based awards are denominated as a dollar value and then converted into a number of performance stock units, restricted stock units or stock options. The number of performance stock units or restricted stock units is determined based on the grant date fair value of the Company’s common stock, which is defined as the average of the high and low trading prices of the Company’s common stock on the trading day immediately preceding the grant date. The number of stock options is determined based on the grant date fair value of a stock option to purchase a share of the Company’s common stock. The grant date fair value of stock options is determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”). Stock options have an exercise price equal to the average of the high and low trading prices of the Company’s common stock on the trading day immediately preceding the grant date. We believe that our equity-based compensation grant procedures effectively protect against the manipulation of grant timing for employee gain.

The Company’s human resources staff regularly monitors, and updates the Compensation Committee on, the use of shares of the Company’s common stock for equity-based awards and the number of shares available for future awards under our equity-based compensation plans. As part of the process of granting annual LTI compensation, the Compensation Committee considers share use and equity run rate (as defined in “2018 Highlights” on page 24) so that annual LTI awards, and the extent to which shares of the Company’s common stock are used for those awards, are maintained at a reasonable level.

DIRECTORS AND GOVERNANCE COMMITTEE

The Directors and Governance Committee’s duties and responsibilities include, among other things:

 

  assisting the Board by identifying, considering and recommending, consistent with criteria approved by the Board, qualified candidates for election as directors, including the slate of directors to be nominated by the Board for election at the Company’s annual meeting of stockholders;

 

  recommending Board committee assignments;

 

  overseeing the development and implementation of succession planning for the Company’s chief executive officer; and

 

  developing and recommending to the Board the Company’s Governance Guidelines, including taking a leadership role in shaping the Company’s corporate governance.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          13


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 Board of Directors and Committees (Continued)

 

 

FINANCE COMMITTEE

The Finance Committee reviews and makes recommendations to the Board concerning, among other matters, the Company’s capital structure, capital management and methods of corporate finance (including proposed issuances of securities or other financing transactions) and proposed acquisitions, divestitures or other strategic transactions.

CORPORATE RESPONSIBILITY COMMITTEE

The Corporate Responsibility Committee’s purpose is to create value for our stakeholders by enhancing the Company’s reputation, business position and colleague engagement. In particular, the Corporate Responsibility Committee focuses on government relations, corporate communications, social responsibility, diversity and inclusion and sustainability. The Corporate Responsibility Committee receives at least annual updates on sustainability, environmental matters, social responsibility and diversity and inclusion topics and reports to the Board on a regular basis.

EXECUTIVE COMMITTEE

The Executive Committee is empowered to act for the full Board during the intervals between Board meetings, except with respect to matters that, under Delaware law or the Company’s bylaws, may not be delegated to a committee of the Board. The Executive Committee meets as necessary, with all actions taken by the Committee reported at the next Board meeting.

 

 

 

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 Election of Directors

 

 

Item 1 — Election of Directors

At the 2019 annual meeting, stockholders will vote on the election of the twelve (12) nominees listed below for a one-year term—Anthony K. Anderson, Oscar Fanjul, Daniel S. Glaser, H. Edward Hanway, Deborah C. Hopkins, Elaine La Roche, Steven A. Mills, Bruce P. Nolop, Marc D. Oken, Morton O. Schapiro, Lloyd M. Yates and R. David Yost.

The Board has nominated each of these individuals to serve until the 2020 annual meeting. Each nominee has indicated that he or she will serve if elected. We do not anticipate that any of the nominees will be unable or unwilling to stand for election, but if that happens, your proxy may be voted for another person nominated by the Board or the Board may reduce its size. Each director holds office until his or her successor has been duly elected and qualified or his or her earlier resignation, death or removal.

In nominating the following slate of director candidates for election at the Company’s annual meeting of stockholders, the Board has evaluated each nominee by reference to the criteria described above on pages 8 and 9 under the headings “Director Qualifications” and “Director Skills and Experience.” In addition, the Board evaluates each individual director in the context of the Board as a whole, with the objective of recommending a group that can best support the success of our businesses and represent stockholder interests.

The following section contains information provided by the nominees about their principal occupations, business experience and other matters, including their 2019 committee assignments, as well as a description of how each individual’s experience qualifies him or her to serve as a director of the Company.

The Board of Directors recommends that you vote FOR all of the director nominees.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          15


Table of Contents

 

 Election of Directors (Continued)

 

 

     Name/Age

 

 

Director

Since

 

 

Background

 

 

Independent

 

 

 

Other
Public
Company
Boards

 

   

Committees

 

      
   

 

Anthony K. Anderson, 63

 

 

2016

 

 

Former Vice Chair and Midwest Area Managing Partner of Ernst & Young LLP

 

 

 

Yes

 

 

 

 

3

 

 

 

 

Audit

Corporate Responsibility

 

       
   

 

Oscar Fanjul, 69

 

 

2001

 

 

Vice Chairman of Omega Capital, Founding Chairman and Former Chief Executive Officer of Repsol

 

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation

Executive

Finance (Chair)

 

       
   

 

Daniel S. Glaser, 58

 

 

2013

 

 

President and Chief Executive Officer of Marsh & McLennan Companies, Inc.

 

 

 

No

 

 

 

 

0

 

 

 

 

Executive

Finance

 

       
   

 

H. Edward Hanway, 67

 

 

2010

 

 

Former Chairman and Chief Executive Officer of CIGNA Corporation

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation

Directors and Governance Executive (Chair)

Finance

 

       
   

 

Deborah C. Hopkins, 64

 

 

2017

 

 

Former Chief Executive Officer of Citi Ventures, Former Chief Innovation Officer of Citigroup

 

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation Corporate Responsibility

Directors and Governance

       
   

 

Elaine La Roche, 69

 

 

2012

 

 

Chief Executive Officer, China International Capital Corporation US Securities, Inc.

 

 

 

Yes

 

 

 

 

0

 

 

 

 

Audit

Corporate Responsibility

Finance

 

       
   

 

Steven A. Mills, 67

 

 

2011

 

 

Former Executive Vice President of Software & Systems of International Business Machines Corporation (IBM)

 

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation (Chair)

Directors and Governance

Executive

 

       
   

 

Bruce P. Nolop, 68

 

 

2008

 

 

Former Executive Vice President and Chief Financial Officer of E*Trade Financial Corporation

 

 

Yes

 

 

 

 

2

 

 

 

 

Audit (Chair)

Executive

Finance

 

       
   

 

Marc D. Oken, 72

 

 

2006

 

 

Founding Partner of Falfurrias Capital Partners

 

 

 

Yes

 

 

 

 

1

 

 

 

 

Audit

Finance

 

       
 

 

Morton O. Schapiro, 65

 

 

2002

 

 

President and Professor of

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation

 
            Economics, Northwestern University              

Directors and Governance (Chair) Executive

 

       
   

 

Lloyd M. Yates, 58

 

 

2011

 

 

Executive Vice President of Duke Energy and President of Duke Energy’s Carolinas Region

 

 

 

Yes

 

 

 

 

0

 

 

 

 

Audit

Corporate Responsibility

       
 

 

R. David Yost, 71

 

 

2012

 

 

Former President and Chief Executive

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation

 
           

Officer of AmerisourceBergen

 

             

Corporate Responsibility (Chair)

 

       

 

 

LOGO

 

 

 

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 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Anthony K. Anderson

 

    

    

    

 

 

Director since 2016

 

Age 63

 

Other Public Company Boards

AAR Corp.

Avery Dennison Corporation

Exelon Corporation

Past five years: First American Financial

Corporation

  

 

 

Committees

Audit

Corporate Responsibility

 

Key Skills and Experience

Leadership

Financial

Industry

Corporate Governance & Responsibility

Risk Management

 

 

 

Mr. Anderson served as Vice Chair and Midwest Area Managing Partner of Ernst & Young LLP from 2006 until his retirement in April 2012. He joined Ernst & Young in 1977 and held various management positions during his 35-year career there. Mr. Anderson served on the Board of the Federal Reserve Bank of Chicago from 2008 to 2010. He is a member of the American, California and Illinois Institutes of Certified Public Accountants. Mr. Anderson is also a director of AAR Corp., Avery Dennison Corporation and Exelon Corporation. He is a former director of First American Financial Corporation.

 

We believe Mr. Anderson’s qualifications to sit on our Board of Directors include his significant experience as an audit partner serving insurance and insurance brokerage entities and his leadership and management experience with a global professional services organization.

 

                       

     

 

LOGO

    

Oscar Fanjul

 

    

    

    

 

 

Director since 2001

 

Age 69

 

Other Public Company Boards

LafargeHolcim

Ferrovial

Past five years: Acerinox and Deoleo

  

 

 

Committees

Compensation

Executive

Finance (Chair)

 

Key Skills and Experience

Leadership

Financial

International

Corporate Governance & Responsibility

Government Relations & Regulatory

 

 

 

Mr. Fanjul is Vice Chairman of Omega Capital, a private investment firm in Spain. Mr. Fanjul is the Founding Chairman and former Chief Executive Officer of Repsol. Mr. Fanjul is Vice Chairman of the Board of LafargeHolcim and a director of Ferrovial. He is a Trustee of the Museo Nacional Centro de Arte Reina Sofia. Mr. Fanjul is a former director of Unilever, the London Stock Exchange, Areva, Acerinox and Deoleo. He is a dual Spanish and Chilean national.

 

We believe Mr. Fanjul’s qualifications to sit on our Board of Directors and chair our Finance Committee include his extensive experience in various international markets with global companies and his understanding of global business practices.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          17


Table of Contents

 

 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Daniel S. Glaser

 

    

    

    

 

 

Director since 2013

 

Age 58

 

Other Public Company Boards

N/A

  

 

 

Committees

Executive

Finance

 

Key Skills and Experience

Leadership

Financial

Industry

International

Risk Management

 

 

 

Mr. Glaser is President and Chief Executive Officer of Marsh & McLennan Companies. Prior to assuming his current role in 2013, Mr. Glaser served as Group President and Chief Operating Officer of the Company, with operational and strategic oversight of its Risk and Insurance Services and Consulting segments. He rejoined Marsh & McLennan Companies in December 2007 as Chairman and Chief Executive Officer of Marsh, returning to the firm where he had begun his career right out of university in 1982. Mr. Glaser is an insurance industry veteran who has held senior positions in commercial insurance and insurance brokerage, working in the United States, Europe and the Middle East. Mr. Glaser serves as the Chairman of the Federal Advisory Committee on Insurance (FACI). He is a member of the Board of Trustees for The Institutes and Ohio Wesleyan University; the Board of Directors for the Partnership for New York City; and the Advisory Councils for St. George’s Society of New York and BritishAmerican Business.

 

As the only member of the Company’s management team on the Board, Mr. Glaser’s presence on the Board provides directors with direct access to the Company’s chief executive officer and helps facilitate director contact with other members of the Company’s senior management.

 

                       

     

 

LOGO

    

H. Edward Hanway

 

    

    

    

 

 

Director since 2010

 

Age 67

 

Other Public Company Boards

N/A

  

 

 

Committees

Compensation

Directors and Governance

Executive (Chair)

Finance

 

Key Skills and Experience

Leadership

Financial

Industry

International

Government Relations & Regulatory

 

 

 

Mr. Hanway served as Chairman and Chief Executive Officer of CIGNA Corporation from 2000 to the end of 2009. From 1999 to 2000, he served as President and Chief Operating Officer of CIGNA. From 1996 to 1999, he was President of CIGNA HealthCare and from 1989 to 1996 was President of CIGNA International. Mr. Hanway is a former member of the Board of Directors of America’s Health Insurance Plans (AHIP). He is also a past Chairman of the Council on Affordable Quality Healthcare (CAQH) and has been active in a wide range of issues and initiatives associated with children’s health and education. He serves on the Board of Trustees of the Delaware County Community Foundation and is Chairman of the Drexel Neumann Academy and Faith in the Future Foundation, an organization committed to growth of Catholic education in the Archdiocese of Philadelphia.

 

We believe Mr. Hanway’s qualifications to chair our Board of Directors include his years of executive experience in the insurance industry, together with his background in the health and benefits sector, which provide our Board with insight into important areas in which the Company conducts business.

 

 

 

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 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Deborah C. Hopkins

 

    

    

    

 

 

Director since 2017

 

Age 64

 

Other Public Company Boards

Union Pacific Corporation

Virtusa Corporation

Past five years: Qlik Technologies

  

 

 

Committees

Compensation

Corporate Responsibility

Directors and Governance

 

Key Skills and Experience

Leadership

Financial

International

Technology

Risk Management

 

 

 

Ms. Hopkins was the founder and Chief Executive Officer of Citi Ventures and served as Citigroup’s first Chief Innovation Officer, where she and her team introduced a systematic approach to respond to digital disruption. Prior to joining Citigroup in 2003 as Head of Corporate Strategy and M&A, she was Chief Financial Officer of Lucent Technologies and The Boeing Company and held senior-level positions at General Motors in the US and Zurich and at Unisys Corporation, after starting her career at Ford. Ms. Hopkins was twice named to Fortune’s 10 most powerful women in business and was on Institutional Investor’s Top 50 list every year from 2011 until her retirement from Citi at the end of 2016. Ms. Hopkins serves on the Advisory Boards of M3 Biotechnology Inc. and SalesHero and is an Executive Fellow at the University of California Berkeley’s Haas School of Business. She serves on the Board of St. John’s Hospital Foundation and is a Trustee at Silicon Couloir, both located in Jackson, Wyoming. Ms. Hopkins is a director of Union Pacific Corporation, Virtusa Corporation and privately held cybersecurity company, Deep Instinct. She is a former director of Qlik Technologies, E.I. DuPont de Nemours & Company and Dendrite International. Ms. Hopkins holds honorary doctorate degrees from Westminster College and Walsh College and a B.A. in Accounting from Walsh College.

 

We believe Ms. Hopkins’s qualifications to sit on our Board of Directors include her significant leadership positions in finance, technology and innovation at various multinational companies.

 

                       

     

 

LOGO

    

Elaine La Roche

 

    

    

    

 

 

Director since 2012

 

Age 69

 

Other Public Company Boards

N/A

Past five years: Harsco Corporation

  

 

 

Committees

Audit

Corporate Responsibility

Finance

 

Key Skills and Experience

Leadership

Financial

International

Government Relations & Regulatory

Risk Management

 

 

 

Ms. La Roche is Chief Executive Officer, China International Capital Corporation US Securities, Inc. She served as Chief Executive Officer of China International Capital Corporation in Beijing from 1997 to 2000. Over the course of a 20-year career at Morgan Stanley, Ms. La Roche rose from Associate to Managing Director, serving in a variety of roles including Chief of Staff to the Chairman, and President and Head of the Asia Desk. From 2008 to 2010, Ms. La Roche was with JPMorgan Chase & Co. in Beijing, where she served as Vice Chairman, J.P. Morgan China Securities. Ms. La Roche served on the Board of Directors of China Construction Bank from 2006 to 2011 and from 2012 to 2015 and Harsco Corporation, where she served on the Audit Committee and the Nominating and Corporate Governance Committee.

 

We believe Ms. La Roche’s qualifications to sit on our Board of Directors include her executive experience in financial services, particularly internationally, and her corporate governance experience from other board service.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          19


Table of Contents

 

 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Steven A. Mills

 

    

    

    

 

 

Director since 2011

 

Age 67

 

Other Public Company Boards

N/A

  

 

 

Committees

Compensation (Chair)

Directors and Governance

Executive

 

Key Skills and Experience

Leadership

Financial

Industry

International

Technology

 

 

 

Mr. Mills was a senior executive at International Business Machines Corporation (IBM) before his retirement at the

end of December 2015. Mr. Mills joined IBM in 1973 and during the course of his 40-plus-year career held various executive leadership positions. At the time of his retirement, Mr. Mills was the Executive Vice President of Software & Systems, with responsibility for directing IBM’s $40 billion product business, which included over 100,000 employees spanning development, manufacturing, sales, marketing and support professions.

 

We believe Mr. Mills’ qualifications to sit on our Board of Directors and chair our Compensation Committee include his executive leadership and management experience, his technology expertise, his extensive international experience at IBM and his overall knowledge of global markets.

 

                       

     

 

LOGO

    

Bruce P. Nolop

 

    

    

    

 

 

Director since 2008

 

Age 68

 

Other Public Company Boards

TEGNA Inc.

On Deck Capital, Inc.

  

 

 

Committees

Audit (Chair)

Executive

Finance

 

Key Skills and Experience

Leadership

Financial

Corporate Governance & Responsibility

Government Relations & Regulatory

Risk Management

 

 

 

Mr. Nolop retired in 2011 from E*TRADE Financial Corporation, where he served as Executive Vice President and Chief Financial Officer from September 2008 through 2010. Previously he was Executive Vice President and Chief Financial Officer of Pitney Bowes Inc. from 2000 to 2008 and Managing Director of Wasserstein Perella from 1993 to 2000. Prior thereto he held positions with Goldman, Sachs & Co., Kimberly-Clark Corporation and Morgan Stanley & Co. Mr. Nolop also serves on the Board of Directors of TEGNA Inc. (formerly Gannett Co., Inc.), On Deck Capital, Inc. and privately held CLS Group Holdings AG.

 

We believe Mr. Nolop’s qualifications to sit on our Board of Directors and chair our Audit Committee include his experience in financial accounting and corporate finance and his familiarity with internal financial controls and strategic transactions acquired through executive-level finance positions held in public companies and 18 years’ experience as an investment banker.

 

 

 

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 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Marc D. Oken

 

    

    

    

 

 

Director since 2006

 

Age 72

 

Other Public Company Boards

Sonoco Products Company

Past five years: Capital Bank

Financial Corp.

  

 

 

Committees

Audit

Finance

 

Key Skills and Experience

Leadership

Financial

Industry

Government Relations & Regulatory

Risk Management

 

 

 

Mr. Oken is a Founding Partner of Falfurrias Capital Partners, a private equity firm. He was Chief Financial Officer of Bank of America Corporation from 2004 to 2005. Mr. Oken joined Bank of America in 1989 as Executive Vice President-Chief Accounting Officer, a position he held until 1998, when he became Executive Vice President-Principal Finance Executive. Prior to joining Bank of America, he was a partner at Price Waterhouse, serving there for 13 years. Mr. Oken is also a director of Sonoco Products Company and a former Director of Capital Bank Financial Corp. He also served in Vietnam as a Navy pilot.

 

We believe Mr. Oken’s qualifications to sit on our Board of Directors include his extensive experience with public and financial accounting matters for complex global organizations, as well as his executive leadership and management experience.

 

                       

     

 

LOGO

    

Morton O. Schapiro

 

    

    

    

 

 

Director since 2002

 

Age 65

 

Other Public Company Boards

N/A

  

 

 

Committees

Compensation

Directors and Governance (Chair)

Executive

 

Key Skills and Experience

Leadership

Financial

International

Corporate Governance & Responsibility

Risk Management

 

 

 

Mr. Schapiro has been President and Professor of Economics at Northwestern University since 2009. Prior to that, he was President and Professor at Williams College from 2000. Previous positions include Dean of the College of Letters, Arts and Sciences of the University of Southern California from 1994 to 2000, the University’s Vice President for planning from 1999 to 2000 and Chair of its Department of Economics from 1991 to 1994.

 

We believe Mr. Schapiro’s qualifications to sit on our Board of Directors and chair our Directors and Governance Committee include his experience in managing large and complex educational institutions, which provides the Board with a diverse approach to management, as well as his more than 30 years of experience as a professor of economics.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          21


Table of Contents

 

 Election of Directors (Continued)

 

 

 

                       

     

 

LOGO

    

Lloyd M. Yates

 

    

    

    

 

 

Director since 2011

 

Age 58

 

Other Public Company Boards

N/A

  

 

 

Committees

Audit

Corporate Responsibility

 

Key Skills and Experience

Leadership

Financial

Technology

Government Relations & Regulatory

Risk Management

 

 

 

Mr. Yates is Executive Vice President of Duke Energy and President of Duke Energy’s Carolinas Region. Previously, he served as Executive Vice President of Customer Operations for Duke Energy. Mr. Yates has more than 35 years of experience in the energy industry, including the areas of nuclear and fossil generation and energy delivery. Before the merger between Duke Energy and Progress Energy in July 2012, Mr. Yates served as President and Chief Executive Officer for Progress Energy Carolinas. Mr. Yates joined Progress Energy’s predecessor, Carolina Power & Light, in 1998. Before joining Progress Energy, he worked for PECO Energy for 16 years in several line operations and management positions. Mr. Yates serves on several community-based boards including Charlotte Center City Partners and Trees Charlotte.

 

We believe Mr. Yates’s qualifications to sit on our Board of Directors include the executive leadership and management experience he has acquired throughout his career in the energy industry.

 

                       

     

 

LOGO

    

R. David Yost

 

    

    

    

 

 

Director since 2012

 

Age 71

 

Other Public Company Boards

Bank of America

Johnson Controls International plc

Past five years: Exelis Inc.

  

 

 

Committees

Compensation

Corporate Responsibility (Chair)

 

Key Skills and Experience

Leadership

Financial

Industry

Corporate Governance & Responsibility

Risk Management

 

 

 

Mr. Yost was the President and Chief Executive Officer of AmerisourceBergen, a comprehensive pharmaceutical services provider, from 2001 until his retirement in 2011. Mr. Yost also held a variety of other positions with AmeriSource Health Corporation and its predecessors from 1974 to 2001, including Chairman, President and

Chief Executive Officer from 1997 to 2001. Mr. Yost is a graduate of the U.S. Air Force Academy and was previously a Captain in the United States Air Force. He also holds an M.B.A. from the University of California, Los Angeles. Mr. Yost serves on the Board of Directors of Johnson Controls International plc and Bank of America. Mr. Yost is a former director of Exelis Inc. Mr. Yost also serves on the U.S. Air Force Academy Endowment Board.

 

We believe Mr. Yost’s qualifications to sit on our Board of Directors and chair our Corporate Responsibility Committee include his extensive leadership experience gained as the chief executive of a large publicly traded company in the healthcare industry and as a director of other publicly traded companies.

 

 

 

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Table of Contents

 

 Executive Compensation

 

 

Item 2 — Advisory (Nonbinding) Vote to Approve Named Executive

Officer Compensation

Recognizing that executive compensation is an important matter for our stockholders, and in accordance with SEC rules, we are asking our stockholders to approve an advisory resolution on the compensation of our named executive officers as disclosed in this proxy statement.

This proposal, commonly known as a “say-on-pay” proposal, is not intended to address any specific item of compensation,

but rather the overall compensation of our named executive officers and our executive compensation philosophy, policies and practices as described in this proxy statement. Although the voting results are not binding, the Board and the Compensation Committee will take into account the results of the vote when considering future executive compensation arrangements. We

will conduct this annual advisory vote through our 2023 Annual Meeting of Stockholders, when the next advisory vote on the frequency of future say-on-pay votes will occur.

We encourage our stockholders to read the Compensation Discussion and Analysis, which immediately follows this proposal. The Compensation Discussion and Analysis describes our executive compensation program and related policies and practices and explains the decisions the Compensation Committee has made under this program and the factors considered in making those decisions. We also encourage our stockholders to review the 2018 Summary Compensation Table and the other compensation tables and accompanying narratives, which provide detailed information on the compensation of our named executive officers.

STOCKHOLDERS ARE BEING ASKED TO VOTE ON THE FOLLOWING RESOLUTION:

RESOLVED, that the stockholders of Marsh & McLennan Companies approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narratives.

The Board of Directors recommends that you vote FOR the approval of our named executive officer compensation on an advisory basis.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          23


Table of Contents

 

 Executive Compensation (Continued)

 

 

Compensation Discussion and Analysis

The following is a discussion and analysis of our compensation program for our senior executives, focusing on our key compensation principles, policies and practices.

This section describes the compensation decisions with respect to the individuals who served during 2018 as our President and Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers as of December 31, 2018, as listed below. These individuals are included in the “2018 Summary Compensation Table” on page 45.

 

 

Name   

Title

Daniel S. Glaser

 

 

  

President and Chief Executive Officer (“CEO”)

 

 

Mark C. McGivney

 

 

  

Chief Financial Officer

 

 

John Q. Doyle

 

 

  

President and Chief Executive Officer of Marsh LLC

 

 

Julio A. Portalatin

 

 

  

President and Chief Executive Officer of Mercer Consulting Group, Inc.

 

 

Peter C. Hearn

 

 

  

President and Chief Executive Officer of Guy Carpenter & Company, LLC

 

 

 

We refer to these individuals collectively in this Compensation Discussion and Analysis as our “named executive officers.” When we refer to our “senior executives” in this proxy statement, we mean our CEO, the chief executive officers of our four operating companies and certain leaders of our corporate staff. Background information regarding our senior executives is provided on our website at http://www.mmc.com/about-us/leadership.html.

 

 

 

 

2018 Highlights

 

  

 

FINANCIAL OBJECTIVES

 

LOGO

 

  In 2018, Marsh & McLennan Companies DELIVERED STRONG PERFORMANCE as we successfully executed on our long-term financial and strategic objectives.

 

  GAAP EPS INCREASED 13%, and we delivered 11%* GROWTH IN ADJUSTED EPS. This marks ANOTHER YEAR OF DOUBLE-DIGIT GROWTH following 15% adjusted EPS growth in 2017.

 

  We generated $15 BILLION OF REVENUE, an increase of 7% compared with 2017. We achieved 4.2% GROWTH in underlying revenue—significantly higher than the 3.5% growth we generated in 2017.

 

  We INCREASED ADJUSTED OPERATING INCOME* for both the Risk & Insurance Services and Consulting segments for the NINTH CONSECUTIVE YEAR, with our overall margin increasing for the eleventh consecutive year.

 

*  Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

 

 

ANNUAL COMMITMENTS

 

LOGO

 

 

  We increased our quarterly dividend from $0.375 to $0.415 per share beginning in the third quarter of 2018, resulting in an ANNUAL DIVIDEND INCREASE OF 10.5%, from $1.43 to $1.58. Our dividend has increased every year since 2010.

 

  We used approximately $675 million in cash to REPURCHASE APPROXIMATELY 8.2 MILLION SHARES, reducing our outstanding common stock by approximately 4.9 million shares on a net basis.

 

 

 

 

 

24          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

2018 Highlights (continued)

 

  

 

POSITIONING

FOR THE FUTURE

 

LOGO

 

  We DEPLOYED $1.1 BILLION OF CAPITAL ACROSS 23 TRANSACTIONS that were completed in 2018, representing another year of significant reinvestment in building our business through acquisitions.

 

  Our agreement to acquire JARDINE LLOYD THOMPSON PLC was the capstone of 2018 for us. This acquisition is the LARGEST ACQUISITION IN OUR 148-YEAR HISTORY and represents a meaningful step forward in our efforts to expand in higher-growth and higher-margin segments.

 

 

STOCK PERFORMANCE

 

LOGO

 

 

  Our total stockholder return (“TSR”) OUTPERFORMED THE S&P 500® INDEX BY 4.3 PERCENTAGE POINTS for 2018.

 

  Our FIVE-YEAR ANNUALIZED TSR OF 12.8% also outperformed the S&P 500® index TSR of 8.5% by 4.3 percentage points.

 

 

EXECUTIVE COMPENSATION

 

LOGO

 

 

  The Compensation Committee assessed our achievement against 2018 financial and strategic objectives and determined ABOVE-TARGET BONUSES for most of our named executive officers.

 

  We achieved THREE-YEAR ADJUSTED EPS GROWTH OF 12.3% for our 2016 performance stock unit awards.

 

  Our EQUITY RUN RATE* IN 2018 WAS 0.8%. Shares repurchased during the year more than offset the increase in shares attributable to the exercise of stock options and the distribution of shares for stock units from previously granted equity-based awards.

 

*  “Equity run rate” means the number of shares of our common stock underlying equity-based awards granted plus the number of shares of our common stock underlying equity-based awards assumed upon an acquisition (if any), divided by the weighted average number of shares of our common stock outstanding for the year.

 

 

SENIOR EXECUTIVE

CHANGES

 

LOGO

 

 

 

Effective March 1, 2019, Martine Ferland was appointed President and Chief Executive Officer of Mercer, replacing Julio A. Portalatin, who was appointed Vice Chairman of Marsh & McLennan Companies.

 

 

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          25


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary

 

  

OUR BUSINESS

The Company is a global professional services firm offering clients advice and solutions in risk, strategy and people. With over 65,000 colleagues worldwide and annual revenue of $15 billion, we provide analysis, advice and transactional capabilities to clients in more than 130 countries.

Our businesses include:

 

 

MARSH

 

     

 

GUY CARPENTER

 

     

 

MERCER

 

     

 

  OLIVER WYMAN GROUP  

 

Insurance broker,

intermediary and risk

advisor

 

   

Risk and reinsurance

specialist

   

HR and investment

related advice and

services

   

Management, economic

and brand consultancy

 

As a professional services firm, our product is the expertise and capabilities of our colleagues. Our long-term success depends on their skill, integrity and dedication. To achieve our business objectives, we have designed our executive compensation program to attract, motivate and retain highly talented individuals to lead the Company and our various businesses in ways that meet our clients’ needs and, in turn, promote the long-term interests of our stockholders.

OUR STRATEGY

We are the leading professional services firm in the areas of risk, strategy and people. Our purpose is to make

a meaningful difference in the moments that matter, and by doing so, create significant value for our clients, colleagues, stockholders and the broader community. We are focused on four imperatives — creating breakthrough impact for our clients, embracing innovation and the digital future, being a great place to work, and driving growth and creating value.

Our business strategy is designed to create exceptional value and superior returns for our stockholders:

 

 

REVENUE

Sustain long-term revenue and earnings growth

 

 

 

CAPITAL

Maintain low capital requirements

 

 

 

CASH FLOW

Generate high

levels of cash

 

 

 

RISK

Manage risk

intelligently

 

OUR FINANCIAL AND STRATEGIC OBJECTIVES AND 2018 PERFORMANCE

We continued to execute on our long-term financial and strategic objectives:

 

 

Deliver on financial objectives

 

 

 

Generate top line growth

through innovation and organic

investments

 

 

 

 

Make

Marsh & McLennan Companies

a great place to work

 

 

 

 

Focus on strategic priorities,

including mergers and

acquisitions, technology

and innovation

 

 

 

 

Execute a balanced capital

management strategy

 

 

 

Promote a high standard of ethical

behavior and social responsibility

throughout the Company

 

Our adjusted earnings per share (“EPS”) growth has averaged 13% since 2009. We are one of only 5% of S&P 500® companies with revenue over $5 billion that have grown adjusted EPS by at least 8% in each year since 2009.

 

 

 

26          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary (continued)

 

  

The strength of our financial performance and strategic accomplishments over the past five years is reflected in our total stockholder return. The following graph compares the annual cumulative stockholder return for the five-year period ended December 31, 2018 of Marsh & McLennan Companies common stock with the Standard & Poor’s 500® Stock Index, assuming an investment of $100 on December 31, 2013.

 

LOGO

2018 STOCKHOLDER ADVISORY VOTE ON NAMED EXECUTIVE

OFFICER COMPENSATION AND STOCKHOLDER ENGAGEMENT

 

LOGO

 

 

At our 2018 Annual Meeting of Stockholders, we held a nonbinding advisory vote with respect to the compensation of our named executive officers (commonly referred to as a “say-on-pay” vote). Approximately 95% of the votes cast on the say-on-pay proposal were voted in favor of our executive compensation policies and practices.

 

Following our 2018 Annual Meeting of Stockholders, members of our management, at the direction of the Compensation Committee, discussed our executive compensation policies and practices, as well as the results of our 2018 say-on-pay vote, with a number of our large institutional stockholders and the major proxy advisory firms. These discussions were favorable, consistent with our 95% approval rate in 2018.

 

The Compensation Committee is committed to ongoing engagement with our stockholders and the major proxy advisory firms and intends to continue these outreach efforts.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          27


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary (continued)

 

  

2018 AND 2019 ANNUAL TOTAL DIRECT COMPENSATION OF NAMED EXECUTIVE OFFICERS

The following table summarizes the decisions made by the Compensation Committee in February 2019 and February 2018 with respect to the annual total direct compensation of our named executive officers. The compensation decisions reflected here, and the rationale for such decisions, are discussed in “Executive Compensation Determinations” beginning on page 31. For Mr. Hearn, only February 2019 compensation decisions are shown because he was not a named executive officer in our 2018 proxy statement.

Mr. Portalatin completed service as President and CEO of Mercer and as an executive officer of the Company effective February 28, 2019 and transitioned into a Vice Chairman role. As a result, the Compensation Committee’s decision regarding Mr. Portalatin’s 2018 compensation was limited to his annual bonus award for the 2018 performance year.

 

 

  Name

 

  

 

Decision Date

 

    

 

Base Salary

 

    

 

Annual

Bonus Award

 

    

 

Annual LTI

Award

 

    

 

Total Direct

Compensation

 

 

 Mr. Glaser

     2/19/2019        $1,500,000        $4,500,000        $11,500,000        $17,500,000  
     2/21/2018        $1,500,000        $4,300,000        $11,000,000        $16,800,000  
    

 

 

 

 

 

 

Change

 

 

 

 

 

 

 

 

  

 

 

 

 

 

0.0%

 

 

 

 

 

 

  

 

 

 

 

 

+4.7%

 

 

 

 

 

 

  

 

 

 

 

 

+4.5%

 

 

 

 

 

 

  

 

 

 

 

 

+4.2%

 

 

 

 

 

 

 Mr. McGivney

     2/19/2019        $800,000        $1,750,000        $2,500,000        $5,050,000  
     2/21/2018        $750,000        $1,650,000        $2,250,000        $4,650,000  
    

 

 

 

 

 

 

Change

 

 

 

 

 

 

 

 

  

 

 

 

 

 

+6.7%

 

 

 

 

 

 

  

 

 

 

 

 

+6.1%

 

 

 

 

 

 

  

 

 

 

 

 

+11.1%

 

 

 

 

 

 

  

 

 

 

 

 

+8.6%

 

 

 

 

 

 

 Mr. Doyle

     2/19/2019        $1,000,000        $3,250,000        $2,800,000        $7,050,000  
     2/21/2018        $1,000,000        $3,000,000        $2,700,000        $6,700,000  
    

 

 

 

 

 

 

Change

 

 

 

 

 

 

 

 

  

 

 

 

 

 

0.0%

 

 

 

 

 

 

  

 

 

 

 

 

+8.3%

 

 

 

 

 

 

  

 

 

 

 

 

+3.7%

 

 

 

 

 

 

  

 

 

 

 

 

+5.2%

 

 

 

 

 

 

 Mr. Portalatin

     2/19/2019        N/A        $2,200,000        N/A        N/A  
     2/21/2018        $1,000,000        $2,525,000        $2,700,000        $6,225,000  
    

 

 

 

 

 

 

Change

 

 

 

 

 

 

 

 

  

 

 

 

 

 

N/A

 

 

 

 

 

 

  

 

 

 

 

 

-12.9%

 

 

 

 

 

 

  

 

 

 

 

 

N/A

 

 

 

 

 

 

  

 

 

 

 

 

N/A

 

 

 

 

 

 

 Mr. Hearn

  

 

 

 

 

 

 

2/19/2019

 

 

 

 

 

 

 

 

  

 

 

 

 

 

$800,000

 

 

 

 

 

 

  

 

 

 

 

 

$2,500,000

 

 

 

 

 

 

  

 

 

 

 

 

$1,750,000

 

 

 

 

 

 

  

 

 

 

 

 

$5,050,000

 

 

 

 

 

 

 

 

 

 

28          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

Executive Compensation Design, Elements and Process

Our executive compensation program is governed by four guiding principles:

 

  Align with stockholder value creation with a focus on balancing risk and reward in compensation programs, policies and practices

 

  Support a strong performance culture through short-term and long-term variable compensation, with the ability to differentiate among individuals based upon actual results

 

  Set target compensation at competitive levels in markets where we operate with flexibility to recognize different business models and markets for talent

 

  Maximize colleagues’ perceived value of our programs through transparent processes and communication

The principal elements of our executive compensation program are base salary, annual bonuses and annual LTI awards. The Compensation Committee believes that each compensation element, and all of these elements combined, are important to maintain an executive compensation program that is competitive, performance-based and stockholder-focused.

Our integrated compensation framework heavily weights variable compensation to reward achievements against pre-established, quantifiable financial performance objectives and individual strategic performance objectives. In addition, because a significant portion of variable compensation is delivered in the form of equity-based awards, the value ultimately realized by our senior executives from these awards depends on stockholder value creation as measured by the future performance of our stock price.

As of December 31, 2018, variable compensation represented about 89% of our CEO’s target total direct compensation and about 82% for our other named executive officers, as shown in the following chart.

 

 

LOGO

COMPETITIVENESS OF PAY

The Compensation Committee regularly reviews market data with the objective of understanding and evaluating the competitiveness of our executive compensation program and each senior executive’s total direct compensation and pay mix, taking into account the individual’s role, responsibilities and performance. The Compensation Committee

uses this information and exercises its judgment in determining individual compensation levels and seeks input from its independent compensation consultant prior to making compensation decisions for our senior executives. Market-based executive compensation data is used as a “market check” only and compensation levels for our senior executives are not set to correspond to any specific level of market competitiveness.

The Compensation Committee reviews executive compensation information for direct competitors as well as companies in the broader financial services and general industry sectors. Competitive analyses from these different perspectives recognize that the Company is diverse on an enterprise-wide basis and competes for executive talent in different businesses on an operating company basis.

Peer Group for Executive Compensation Purposes

In 2018, the Compensation Committee reviewed the executive compensation data disclosed in the publicly available filings of the companies that comprise our peer group for executive compensation purposes. The peer group is based

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          29


Table of Contents

 

 Executive Compensation (Continued)

 

 

on business lines, talent pool and company size, as reflected by revenue and market capitalization, and includes insurance, consulting and other business services companies, as listed in the table below. The Compensation Committee reviews the peer group periodically and makes adjustments that it deems are appropriate or necessary,

for example, as a result of business combinations and other changes. The Compensation Committee did not make changes to the peer group in 2018.

 

 

Marsh & McLennan Companies, Inc.
2018 Peer Group for Executive Compensation

 

 

Accenture plc

  

 

Automatic Data Processing, Inc.

  

 

The Travelers Companies, Inc.

Aon plc

  

Chubb Limited

  

Willis Towers Watson plc

Arthur J. Gallagher & Co.

 

         

Financial Services and General Industry Surveys

The Compensation Committee also reviewed executive compensation data drawn from two industry subsets (Financial Services and General Industry) of S&P 500® companies that participated in an executive compensation survey conducted by an independent compensation consulting firm. Each subset was refined based on revenue and market capitalization. For a list of the companies comprising these subsets, please refer to Exhibit B. The operating company CEO comparisons were based on subsidiaries or divisions of all companies that participated in the executive compensation survey (instead of only S&P 500® companies) in order to have a significant sample size for these particular comparisons.

EMPLOYMENT LETTERS

Each of our senior executives has an employment letter that sets forth his or her compensation arrangements and other terms and conditions of employment. These letters are discussed in “Employment Letters” on page 47.

BASE SALARY

Base salary is intended to provide a fixed level of compensation that is appropriate given a senior executive’s role in the organization, his or her skills and experience, the competitive market for his or her position and internal equity considerations. A senior executive’s base salary is set forth in his or her employment letter and may be adjusted when the Compensation Committee determines an adjustment is appropriate to reflect a change in these factors.

ANNUAL BONUS

Our annual bonus is a variable pay program intended to link the cash-based incentive compensation to:

 

    the Company’s financial performance,  

 

    each senior executive’s achievement of pre-established individual strategic objectives and  

 

    the Company’s relative competitive financial performance compared to our peer group and the S&P 500®.  

The Compensation Committee takes a holistic approach to assessing performance and determining the actual

bonus award for each senior executive. The Compensation Committee believes that annual bonus awards should

be based on the achievement of objective, measurable financial results and how those results are achieved. In

addition, the Compensation Committee believes it is important to measure individual executive performance against

his or her achievement toward strategic objectives and other Company priorities. After the end of the year, each

senior executive’s performance was assessed by Mr. Glaser and the Compensation Committee (and, in the case of Mr. Glaser’s performance, solely by the Compensation Committee).

A senior executive’s target annual bonus is set forth in his or her employment letter and may be adjusted when the Compensation Committee determines an adjustment is appropriate or necessary to reflect a change in his or her responsibilities, the competitive market for talent or internal equity considerations. The target annual bonuses for our named executive officers for 2018 are set forth in “Determination of 2018 Annual Bonuses” on page 36.

ANNUAL LTI AWARD

Annual LTI compensation is a variable pay program intended to align the financial interests of our senior executives with maximizing the return to our stockholders. Annual LTI compensation for our senior executives is delivered in a mix of equity-based awards consisting of stock options, which reward stock price appreciation and the creation of stockholder value; performance stock units (“PSUs”), which reward the achievement of specific Company financial objectives; and restricted stock units (“RSUs”), which further align the financial interests of our senior executives with our stockholders and also support our retention objectives.

 

 

 

30          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

The Compensation Committee reviews the mix of equity-based awards each year. In 2019, the Compensation Committee determined that the mix reflected in the table below is consistent with the objective of aligning the financial interests of our senior executives with maximizing stockholder value. The annual LTI compensation of our senior executives is delivered predominantly in stock options and PSU awards, the value of which is contingent on stock price appreciation or achieving specific Company financial objectives.

 

Proportion of Grant Date Fair Value

 

 

Stock Options

 

  

 

Performance Stock Units

 

 

 

Restricted Stock Units

 

 

50%

 

  

 

25%

 

 

 

25%

 

Executive Compensation Determinations

The Compensation Committee takes a total compensation approach in setting the pay of our senior executives and makes decisions regarding base salary, annual bonuses and LTI awards in February of each year. This approach enables the Compensation Committee to evaluate performance on a consistent basis each year and to consider the appropriate level of fixed and variable compensation within each senior executive’s total compensation package.

While the Compensation Committee recognizes that elements of compensation may be interrelated, it does not require or assume any fixed relationship among the various elements of compensation within the total direct compensation framework or between the compensation of our CEO and that of any other senior executive. In addition, accrued pension and amounts realized or realizable under previously granted equity-based awards did not influence the Compensation Committee’s decisions.

The Compensation Committee considers the recommendations of our CEO when determining the compensation of our other senior executives.

BASE SALARY

The Compensation Committee increased Mr. Glaser’s base salary from $1,400,000 to $1,500,000 effective April 1, 2018. Mr. Glaser’s increase was based on the competitive market and his long-term performance and contributions as CEO. This is the first increase in Mr. Glaser’s base salary since he was appointed CEO in 2013.

The Compensation Committee did not adjust the base salaries of our other named executive officers during 2018.

ANNUAL BONUS

The Compensation Committee determined the 2018 annual bonus awards for our named executive officers using the following framework:

 

 

LOGO

Each senior executive’s target bonus was allocated between financial and strategic performance according to weightings associated with his or her position. The Compensation Committee then assessed financial performance and each senior executive’s strategic performance and determined a payout level for each portion of the senior executive’s target annual bonus. The multiplier for competitive financial performance was determined and applied to the sum of the payout levels for financial and strategic performance for each senior executive. Using this result, the Compensation Committee then conducted a qualitative assessment to determine the actual bonus award for each senior executive. The Compensation Committee believes that the use of judgment in the qualitative assessment helps reward performance appropriately, particularly on a year-to-year basis.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          31


Table of Contents

 

 Executive Compensation (Continued)

 

 

The following table defines each financial performance measure used in the 2018 annual bonus framework:

 

 

Financial Performance Measure

  

 

Definition

 

Company or operating company

net operating income

 

Used in the 2018 financial

performance assessment for

our senior executives

 

  

 

Net operating income calculated in accordance with GAAP, adjusted for the impact of “noteworthy items” identified in Exhibit A to this proxy statement and further adjusted for the impact of currency exchange rate fluctuations and acquisitions and dispositions

Company earnings per share

 

Used in the 2018 multiplier

for competitive

financial performance

  

 

EPS from continuing operations calculated in accordance with GAAP, adjusted for the impact of “noteworthy items” identified in Exhibit A to this proxy statement

2018 Target Bonuses

In 2018, the Compensation Committee increased Mr. Glaser’s target bonus from $2,800,000 to $3,000,000. Mr. Glaser’s increase was based on the competitive market and his long-term performance and contributions as CEO. The Compensation Committee did not adjust the target bonuses for our other named executive officers in 2018.

Financial and Strategic Performance Measures

The Compensation Committee selected the following measures and weightings for the 2018 annual bonus awards:

 

     

 

Financial Performance

 

  

 

Strategic Performance

 

 

Senior Executive

 

  

 

Weighting

 

    

 

Measure

 

  

 

Weighting

 

  

 

Measure

 

 

Company CEO

 

  

 

 

 

 

80%

 

 

 

 

  

Company

net operating income

  

 

20%

 

   Individual objectives

established for each senior

executive

 

Other Corporate

Senior Executives

 

  

 

 

 

 

70%

 

 

 

 

  

 

30%

 

 

Operating Company

Chief Executive Officers

 

  

 

 

 

 

80%

 

 

 

 

  

Operating company

net operating income

 

  

 

20%

 

The financial performance factor ranged from 0% to 150% of the target level as indicated in the following table:

 

  Performance Level

 

  

 

Performance

as a %

of Target

 

      

 

Financial

Performance

Factor

 

 

 

 Maximum

 

  

 

 

 

 

³110%

 

 

 

 

    

 

 

 

 

150%

 

 

 

 

 

 Target

 

  

 

 

 

 

100%

 

 

 

 

    

 

 

 

 

100%

 

 

 

 

 

 Threshold

 

  

 

 

 

 

90%

 

 

 

 

    

 

 

 

 

50%

 

 

 

 

 

 Below Threshold

 

  

 

 

 

 

<90%

 

 

 

 

    

 

 

 

 

<50%

 

 

 

 

Note: Interpolation is used to determine the performance factor for performance as a percentage of target between threshold/target or target/maximum. In the event of performance below threshold, the Compensation Committee would exercise its discretion to determine a financial performance factor from 0% up to 50%.

 

 

 

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Table of Contents

 

 Executive Compensation (Continued)

 

 

2018 Financial Performance Measure

For 2018, the financial performance measure for all senior executives was Company or operating company net operating income, as applicable, as modified for executive compensation purposes. The Compensation Committee set challenging targets for our named executive officers to align with our 2018 objective of driving strong earnings growth across the Company.

Performance targets for 2018 were set above the targeted and actual performance for 2017. Performance targets were based on threshold, target and maximum levels in dollars rather than growth rates. Target and actual results in the table below are expressed as a percentage of prior-year results.

 

Name

 

 

Measure

 

 

 

2018 Actual

Growth as % of

Prior-Year Results

 

   

 

2018 Target

Growth as % of

Prior-Year Results

 

   

2018 Actual

as % of Target

 

 

 

Mr. Glaser

 

  Company net operating income     108.6%       108.8%       99.8%  

 

Mr. McGivney

 

 

Mr. Doyle

 

 

Marsh net operating income

 

   

 

111.0%

 

 

 

   

 

109.2%

 

 

 

   

 

101.7%

 

 

 

 

Mr. Portalatin

 

 

Mercer net operating income

 

   

 

102.5%

 

 

 

   

 

109.5%

 

 

 

   

 

93.6%

 

 

 

 

Mr. Hearn

 

 

Guy Carpenter net operating income

 

   

 

114.5%

 

 

 

   

 

105.6%

 

 

 

   

 

108.4%

 

 

 

2018 Strategic Performance Measure

At the beginning of 2018, the Compensation Committee reviewed strategic objectives relating to operational performance, risk management and human capital for each named executive officer. At the beginning of 2019, the Compensation Committee reviewed the strategic accomplishments for each named executive officer for 2018. The Compensation Committee and Mr. Glaser (and, in the case of Mr. Glaser, solely the Compensation Committee) assessed each named executive officer’s strategic performance as “above target” for the year and determined a payout factor for 2018 strategic performance. The Compensation Committee considered the following in its assessment of each named executive officer’s performance:

 

 

Name

 

  Description

 

Mr. Glaser

 

 

  MMC’s underlying revenue growth of 4.2%, which is significantly higher than the 3.5% growth generated in 2017

  Delivered strong adjusted EPS growth of 11.0% and adjusted net operating income growth of 8%

  Led the Jardine Lloyd Thompson Group plc transaction

  Mr. Glaser’s continued leadership of a dynamic and effective leadership team, including successful succession planning which led to the appointment of Martine Ferland as Mercer’s new president and CEO

 

 

 

Mr. McGivney

 

 

  Effective oversight of the Company’s near-term financial plan and continued focus on our long-term growth strategy

  Development and execution of our capital management and financing strategies, including achievement of our two capital commitments to stockholders with a double-digit increase in our dividends per share and reduction in our total shares outstanding

  Mr. McGivney’s key role in our corporate development initiatives, including successfully securing the financing required for the Jardine Lloyd Thompson Group plc transaction

 

 

 

Mr. Doyle

 

 

  Marsh’s underlying revenue growth of 4.3%, the best result since 2014, leading to $6.9 billion in revenue, with $1.4 billion in new business, which surpassed last year’s record

  Enhanced Marsh’s portfolio of businesses through strategic acquisitions, including Wortham Insurance, one of the largest independent brokerage firms in the United States, and Marsh & McLennan Agency’s acquisition of seven firms in 2018

  Mr. Doyle’s leadership role in continuing to progress Marsh’s innovation agenda, including the launch of Bluestream, a cloud-based digital broking platform that gives our affinity clients a streamlined way to offer insurance products and services to their customers, contractors and employees

 

 

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          33


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

Name

 

  Description

 

Mr. Portalatin

 

 

 

  Mercer’s achievement of 3% underlying revenue growth despite a 4% decline in the defined benefit administration business

  Effective execution of Mercer’s digital strategy, including the strategic alliance with Morningstar, which provides digital subscription access to Mercer’s proprietary investment manager research and opens up a new distribution outlet for Mercer

  Mr. Portalatin’s simplification of Mercer’s organization by consolidating geographic regions to align more closely with the regional structures in place across Marsh & McLennan Companies’ other businesses, streamlining its operating model and enabling better execution

 

 

Mr. Hearn

 

 

 

  Guy Carpenter’s delivery of strong underlying revenue growth of 7%, the best result since 2009

  Achieved strong growth in new business

  Mr. Hearn’s role in leading the launch of GC Genesis, a new proprietary advisory business that helps insurer clients find insurtech opportunities to enhance their operations and technology strategies

 

 

 

*

Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

2018 Multiplier for Competitive Financial Performance

Overview

The multiplier for competitive financial performance was intended to calibrate our performance on a relative basis by comparing adjusted EPS growth for the Company with adjusted EPS growth of our peer group companies and the S&P 500®. The effectiveness of the calibration of the Company’s performance versus the external market depends on the consistency and comparability of all companies’ adjusted EPS results for purposes of measuring growth.

Over the course of 2017 and 2018, the Compensation Committee reviewed adjusted EPS growth projections for the comparator group and identified challenges in comparing results for certain peer group companies and the S&P 500®. Based on these reviews, the Compensation Committee anticipated that the multiplier may not accurately reflect the Company’s competitive financial performance for 2018.

The multiplier for competitive financial performance in 2018 was calculated and applied in a manner consistent with past practice. However, due to anomalies in results for peer group companies and the S&P 500® in 2017 and 2018, which are described below, the Compensation Committee does not believe that the calculated multiplier was indicative of the Company’s competitive financial performance for 2018.

Multiplier Framework

Within the comparator group, the S&P 500® was weighted most heavily at 30% as it represents the broadest market comparison. Aon and Willis Towers Watson were weighted at 25% and 20%, respectively, as they are direct competitors of the Company and have divisions that compete directly with our Risk & Insurance Services and Consulting segments. The five additional companies listed in the table below were each equally weighted at 5%.

 

 

  Component

 

  

 

Weighting

 

 

 

 S&P 500®

 

  

 

 

 

 

30%

 

 

 

 

 

 Aon plc

 

  

 

 

 

 

25%

 

 

 

 

 

 Willis Towers Watson plc

 

  

 

 

 

 

20%

 

 

 

 

 

 Accenture plc

 

  

 

 

 

 

5%

 

 

 

 

 

 Arthur J. Gallagher & Co.

 

  

 

 

 

 

5%

 

 

 

 

 

 Automatic Data Processing, Inc.

 

  

 

 

 

 

5%

 

 

 

 

 

 Chubb Limited

 

  

 

 

 

 

5%

 

 

 

 

 

 The Travelers Companies, Inc.

 

  

 

 

 

 

5%

 

 

 

 

 

 

 

34          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

The multiplier for competitive financial performance uses our adjusted EPS growth as reported by the Company and by our peer group in press releases for fourth quarter earnings, as well as an estimate of 2018 EPS growth for the S&P 500® as available from FactSet Research Systems Inc. These publicly reported results were selected based on their availability and comparability. Adjusted EPS growth is assessed on a percentile basis with the weightings in the preceding table. The following table shows the threshold, target and maximum multiplier based on percentile ranking.

 

 

  Performance Level

 

    

 

Actual Performance

 

    

 

Multiplier

 

 

 

 Maximum

 

    

 

75th percentile or higher

 

    

 

 

 

 

1.30x

 

 

 

 

 

 Target

 

    

 

50th percentile

 

    

 

 

 

 

1.00x

 

 

 

 

 

 Threshold

 

    

 

25th percentile or lower

 

    

 

 

 

 

0.70x

 

 

 

 

Note: Interpolation is used to determine the multiplier for a percentile ranking between threshold/target or target/maximum.

Using the framework described above, our adjusted EPS growth achieved a threshold ranking on a weighted basis, which resulted in a multiplier of 0.70x. Final results for the multiplier were reviewed by Pay Governance LLC, the Compensation Committee’s independent compensation consultant. Despite the Compensation Committee’s belief that the calculated multiplier was not indicative of the Company’s competitive financial performance for 2018, it was applied to the sum of the bonus payout levels for 2018 Financial Performance and 2018 Strategic Performance for each named executive officer.

The Compensation Committee’s Review of the 2018 Multiplier

In its review of adjusted EPS growth for the 2018 fiscal year as reported by the Company and by our peer group, as well as an estimate of 2018 EPS growth for the S&P 500®; the Compensation Committee identified significant challenges in using this data to assess the Company’s relative performance for 2018.

 

    The Compensation Committee recognized that the reported results were not directly comparable due to tax reform, mergers and acquisition transactions and above-normal catastrophe losses for insurance carriers in 2017.  

 

    The Compensation Committee also recognized the differential impact of the new revenue recognition standard on reported results and noted meaningful differences due to significant currency exchange impact at certain companies.  

Considering that the 2018 relative performance assessment was impacted by these anomalies, the Compensation Committee reviewed an analysis of 2016 to 2018 growth rates to enhance comparability of performance. The 2016-2018 analysis showed that the Company outperformed six of the eight components in the comparator group. The Compensation Committee believed that this two-year analysis was more reflective of the Company’s relative performance in 2018.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          35


Table of Contents

 

 Executive Compensation (Continued)

 

 

Qualitative Assessment

The Compensation Committee believes that the use of judgment in making final bonus award decisions helps reward performance appropriately on a year-to-year basis and also on an internal equity basis among senior executives. In addition to performance as measured against the previously described financial and strategic objectives, the Compensation Committee also assessed how these objectives were achieved and considered each senior executive’s current-year performance and bonus award vis-à-vis his or her prior-year performance and bonus award; compensation relative to peers at direct competitors; and his or her total direct compensation.

 

Consistently strong year-over-year financial results considered in assessing 2018 performance

 

 

 

Factors considered in determining 2018 bonus awards for the named executive officers

 

  Increased consolidated revenue by 7%

 

  Double-digit adjusted EPS growth and margin improvement by 30 basis points

 

  Fulfilled our capital commitment to stockholders, returning nearly $1.5 billion in dividends and share repurchases

 

  Outperformed the TSR for the S&P 500® index by 4.3 percentage points

 

 

  Strong overall execution delivered in a challenging macroeconomic environment

 

  Positioned the Company for continued long-term growth through strategic acquisitions and development of new technologies

 

  Anomalies in comparing the Company’s strong 2018 performance against our peer group companies and the S&P 500®

 

Using its assessment of the 2018 financial and strategic performance factors and the Company’s competitive financial performance as its basis, the Compensation Committee determined the 2018 bonus award for each named executive officer in the manner described above.

Determination of 2018 Annual Bonuses

The actual annual bonuses paid to our named executive officers for 2018 were as follows.

 

  Name

 

  

2018 Target

Bonus Award

 

    

 

2018 Bonus

as a % of

Target

 

           

2017 Actual

Bonus

 

    

2018 Actual

Bonus

 

    

% Change

 

 

 

Mr. Glaser

 

  

 

$

 

 

3,000,000

 

 

 

 

  

 

 

 

 

150%

 

 

 

 

          

 

$

 

 

4,300,000

 

 

 

 

  

 

$

 

 

4,500,000

 

 

 

 

  

 

 

 

 

+4.7%

 

 

 

 

 

Mr. McGivney

 

  

 

 

 

 

1,200,000

 

 

 

 

  

 

 

 

 

146%

 

 

 

 

          

 

 

 

 

1,650,000

 

 

 

 

  

 

 

 

 

1,750,000

 

 

 

 

  

 

 

 

 

+6.1%

 

 

 

 

 

Mr. Doyle

 

  

 

 

 

 

2,250,000

 

 

 

 

  

 

 

 

 

144%

 

 

 

 

          

 

 

 

 

3,000,000

 

 

 

 

  

 

 

 

 

3,250,000

 

 

 

 

  

 

 

 

 

+8.3%

 

 

 

 

 

Mr. Portalatin

  

 

 

 

2,250,000

 

 

  

 

 

 

98%

 

 

          

 

 

 

2,525,000

 

 

  

 

 

 

2,200,000

 

 

  

 

 

 

-12.9%

 

 

 

 

Mr. Hearn

  

 

 

 

 

 

1,500,000

 

 

 

  

 

 

 

 

 

167%

 

 

 

          

 

 

 

 

 

N/A

 

 

 

  

 

 

 

 

 

2,500,000

 

 

 

  

 

 

 

 

 

N/A

 

 

 

 

 

 

36          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

ANNUAL LTI AWARDS

The annual equity-based awards granted to our senior executives are determined by the Compensation Committee as part of its annual total compensation review. In determining the awards, the Compensation Committee considers the senior executive’s performance and his or her expected future contributions to the Company’s performance along with external market competitiveness, internal equity comparisons and the target LTI award set forth in the senior executive’s employment letter. Mr. Glaser also provides LTI award recommendations for senior executives other than himself.

The grant date fair values of the annual LTI awards granted to our named executive officers in February 2019 are shown in the following table. They are not reflected in the “2018 Summary Compensation Table” on page 45 because the awards were made after the end of the 2018 fiscal year. Mr. Portalatin, who completed service as President and CEO of Mercer effective February 28, 2019, was not granted an LTI award in February 2019.

 

       

 

Grant Date Fair Value of

Annual LTI Awards Granted in 2019

 

 
       

 

Stock

Options

 

      

Performance

Stock Units

 

      

Restricted

Stock Units

 

      

Total

 

 

 

Mr. Glaser

 

    

 

 

$

 

 

5,750,000

 

 

 

    

 

 

$

 

 

2,875,000

 

 

 

    

 

 

$

 

 

2,875,000

 

 

 

    

 

 

$

 

 

11,500,000

 

 

 

Mr. McGivney

 

    

 

 

 

1,250,000

 

 

    

 

 

 

625,000

 

 

    

 

 

 

625,000

 

 

    

 

 

 

2,500,000

 

 

Mr. Doyle

 

    

 

 

 

1,400,000

 

 

    

 

 

 

700,000

 

 

    

 

 

 

700,000

 

 

    

 

 

 

2,800,000

 

 

Mr. Portalatin

 

    

 

 

 

N/A

 

 

    

 

 

 

N/A

 

 

    

 

 

 

N/A

 

 

    

 

 

 

N/A

 

 

Mr. Hearn

    

 

 

 

875,000

 

 

    

 

 

 

437,500

 

 

    

 

 

 

437,500

 

 

    

 

 

 

1,750,000

 

 

The value ultimately realized from these awards is contingent on the named executive officer’s continued service, except in certain circumstances such as retirement. The value also depends on the future performance of our stock price and, for PSU awards, achieving specific Company financial objectives. The terms and conditions of these awards are described in the narrative following the “2018 Grants of Plan-Based Awards Table” on page 48.

 

PSU Awards

The performance measure for PSU awards, which represent 25% of the grant date fair value of LTI compensation for our senior executives, is adjusted EPS growth as modified for executive compensation purposes and measured on a three-year annualized growth rate basis. Depending on our actual financial performance results, 0% to 200% of the number of PSUs granted is delivered in shares of our common stock. The following tables provide the payout (as a percentage of target) for maximum, target and threshold performance levels for the 2019 and 2016 PSU awards, respectively. The Compensation Committee sets the performance levels after reviewing our financial strategy, the design of PSU awards at peer group companies and historical EPS growth data for the S&P 500®. At the time of setting the target and determining the payouts at varying levels of performance for these awards, the Compensation Committee believed that achievement of the target for adjusted EPS growth was a challenging goal.

     
 

    

 

 

Adjusted EPS as modified for executive compensation purposes is defined as GAAP earnings per share, adjusted for the impact of “noteworthy items” identified in Exhibit A and modified to exclude (i) the impact of currency exchange rate fluctuations, (ii) the variation between actual and budgeted results for Marsh & McLennan Risk Capital Holdings, Ltd. (the legal entity through which the Company owns interests in private equity funds and other investments), and (iii) the costs related to the early extinguishment of debt.

 
     

Performance and Payout Levels for Our 2019 PSU Awards

 

     

Payout

(as a % of Target)

 

    

 

2019

PSU Awards

 

 

Performance Level

 

  

 

Adjusted EPS Growth

 

 

 

 

Maximum

 

    

 

200%

 

 

 

    

 

³12%

 

 

 

 

Target

 

    

 

100%

 

 

 

    

 

8%

 

 

 

 

Threshold

 

    

 

50%

 

 

 

    

 

4%

 

 

 

 

Below Threshold

 

    

 

0%

 

 

 

    

 

<4%

 

 

 

Note: Interpolation is used to determine the payout (as a percentage of target) for a performance result between threshold/target or target/maximum.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          37


Table of Contents

 

 Executive Compensation (Continued)

 

 

Performance Results for Our 2016 PSU Awards

The following chart shows the threshold, target and maximum performance levels, with corresponding payouts as a percentage of target, for the 2016 PSU awards granted to our senior executives. The chart also shows our actual EPS growth for the three-year performance period (2016-2018) applicable to the determination of the number of shares of our common stock earned for these awards.

 

 

    

          
          

LOGO

 

 
      Performance
  Level

 

 

Annualized

Adjusted

EPS Growth

 

    

 

Payout    

(as a % of    
Target)
    

 

   
 

 

Maximum

 

 

 

 

³15%

 

    

 

200%    

 

 
 

 

Target

 

 

 

 

13%

 

    

 

100%    

 

 
 

 

Threshold

 

 

 

 

3%

 

    

 

50%    

 

 
 

 

Below Threshold

 

 

 

 

<3%

 

    

 

0%    

 

 
 

 

Note: Interpolation is used to determine the payout (as a percentage of target) for a performance result between threshold/target or target/maximum.

 
          
          
          
          
          
          
 

  Performance level

      
 

🌑  Payout of 2016 PSU Award

 
   
          

 

Summary of PSU Awards Granted from 2016 through 2019

The table below summarizes the three-year performance periods for PSU awards granted from 2016 through 2019, including the payout at 97% of target for our 2016 PSU award based on 12.3% annualized adjusted EPS growth.

 

                                                                             
                Adjusted EPS Growth     Results through 2018  
Award   Status     Completed
Years
  2016     2017     2018     2019     2020     2021     Adjusted
EPS Growth
    Performance
Factor
 

 

                           

 

2016 PSU Award

 

 

    Completed    

3 of 3

    12.8%       14.0%       10.2%             12.3%       97%  

 

2017 PSU Award

 

 

    In Progress    

2 of 3

      14.0%       10.2%       TBD           12.1%       200%  

 

2018 PSU Award

 

 

    In Progress    

1 of 3

        10.2%       TBD       TBD         10.2%       155%  

 

2019 PSU Award

 

 

    In Progress    

None

          TBD       TBD       TBD       TBD       TBD  

 

 

 

38          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

Changes for 2019

For 2019, we made certain changes with respect to executive compensation and our annual bonus framework, as discussed below.

SENIOR EXECUTIVE COMPENSATION ACTIONS AND DECISIONS

Mr. Glaser. The Compensation Committee increased Mr. Glaser’s target annual bonus from $3,000,000 to $3,750,000, effective for the 2019 performance year and his target LTI award from $9,500,000 to $11,000,000, effective for the February 2019 grant. Mr. Glaser’s increases were made taking into account the competitive market, internal equity and his long-term performance and contributions as President and CEO of the Company.

Mr. McGivney. The Compensation Committee increased Mr. McGivney’s annual base salary from $750,000 to $800,000 effective April 1, 2019, his target annual bonus from $1,200,000 to $1,300,000, effective for the 2019 performance year, and his target LTI award from $2,000,000 to $2,600,000, effective for the February 2019 grant. Mr. McGivney’s increases were made taking into account the competitive market, internal equity and his long-term performance and contributions as Chief Financial Officer of the Company.

Mr. Portalatin. On January 16, 2019, we announced that Mr. Portalatin would step down from the role of President and CEO of Mercer and would be appointed Vice Chairman of the Company effective March 1, 2019. Mr. Portalatin’s compensation for his new role was set as follows:

 

    Annual base salary of $500,000  

 

    Eligible for an annual bonus with a target of $1,000,000 commencing with the 2019 performance year (awarded in 2020)  

 

    Not eligible for any additional awards under the Company’s long-term incentive program  

 

    Not eligible for any severance benefits upon the conclusion of his employment  

 

    Continue to be eligible to participate in the Company’s employee benefit plans and programs on terms and conditions as are generally provided to similarly situated employees of the Company, as in effect from time to time  

While employed by the Company and for 12 months following his termination of employment, Mr. Portalatin will be subject to certain restrictive covenants. Mr. Portalatin’s employment as Vice Chairman of the Company was conditioned on his entry into a waiver and release in connection with a letter agreement documenting the terms of his employment and at the termination of his employment.

ANNUAL BONUS FRAMEWORK

The Compensation Committee made two changes to the annual bonus framework for 2019:

 

    In light of challenges in assessing competitive financial performance using adjusted EPS growth across peer companies and the S&P 500®, the Compensation Committee will use a multiplier based on the Company’s annual adjusted EPS growth compared to our target growth.  

 

    The Compensation Committee will assess the Company’s relative financial performance, including for adjusted EPS growth and total stockholder return against peer companies and the S&P 500®, as part of its qualitative assessment before determining final bonus awards.  

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          39


Table of Contents

 

 Executive Compensation (Continued)

 

 

Benefit Plans and Other Programs

RETIREMENT AND DEFERRED COMPENSATION PLANS

We offer retirement and deferred compensation plans, in which all of our senior executives are eligible to participate, to maintain a competitive compensation program.

We maintain a defined contribution retirement program in the U.S. consisting of the Supplemental Savings & Investment Plan (“SSIP”), an unfunded nonqualified defined contribution retirement plan that is coordinated with our 401(k) Savings & Investment Plan. Additional information about the SSIP, including individual amounts deferred by our named executive officers, Company matching credits and earnings during 2018, as well as account balances as of the end of 2018, is presented in “Nonqualified Deferred Compensation Table” on page 55. Earnings with respect to all of our nonqualified defined contribution plans are based upon actual market performance, and preferential or above-market earnings are not offered.

We discontinued future service accruals in our U.S. defined benefit retirement program effective December 31, 2016. The features of our U.S. retirement program, including the present value of the accumulated pension benefits for our named executive officers as of the end of 2018, are presented in further detail in “Defined Benefit Retirement Program” on page 53. We do not have individually-designed defined benefit arrangements for any named executive officer.

SEVERANCE ARRANGEMENTS

Severance payments and benefits for our senior executives, other than Mr. Portalatin in his role as Vice Chairman of the Company effective March 1, 2019, are provided under our Senior Executive Severance Pay Plan, which provides for severance payments in the event of an involuntary termination of employment without cause (as defined in the plan) in an amount equal to the sum of the senior executive’s then-current base salary and average annual bonus award over the three prior years, plus an amount equal to a pro rata bonus for the year of termination.

While compensation decisions regarding our senior executives affect the potential payments under these arrangements, the existence of these severance arrangements did not affect the Compensation Committee’s decisions with respect to other elements of compensation for our named executive officers because these severance arrangements are contingent in nature and may never be triggered.

The terms of the Senior Executive Severance Pay Plan are discussed more fully in “Termination of Employment” on page 58. The amount of the estimated payments and benefits payable to our named executive officers, assuming a termination of employment as of the last business day of 2018, is presented in “Potential Payments Upon Termination or Change in Control” on page 56.

CHANGE-IN-CONTROL ARRANGEMENTS

Change-in-control payments and benefits are provided to our senior executives through our equity-based compensation plans and the Senior Executive Severance Pay Plan, as applicable. These arrangements are intended to retain our senior executives and provide continuity of management in the event of an actual or potential change in control of the Company. Consistent with this objective, the terms of our equity-based awards contain a “double-trigger” vesting provision, which requires both a change in control of the Company and a subsequent specified termination of employment for vesting to be accelerated. The Senior Executive Severance Pay Plan also includes a “double-trigger” change-in-control provision rather than providing severance payments and benefits solely on the basis of a change in control of the Company. We believe that requiring a “double trigger,” rather than providing severance payments (and accelerated vesting of equity-based awards) solely on the basis of a change in control, is more consistent with the purpose of encouraging the continued employment of our senior executives following a change in control of the Company.

We do not provide any excise tax payments, reimbursements or “gross ups” in connection with a change in control of the Company to any of our senior executives under any plan or arrangement.

The amount of the estimated payments and benefits payable to our named executive officers, assuming a change in control of the Company and subsequent specified termination of employment as of the last business day of 2018, is presented in “Potential Payments Upon Termination or Change in Control” on page 56.

 

 

 

40          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

OTHER BENEFITS AND PERQUISITES

Our senior executives are eligible to participate in our health and welfare benefit programs on the same basis as our other eligible employees. We also provide certain perquisites and other personal benefits to our senior executives. In general, the perquisites or other personal benefits provided to our senior executives include (i) the cost of financial counseling and certain income tax return preparation and (ii) from time to time, relocation or housing costs associated with hiring a newly recruited or promoted senior executive.

In addition, the Compensation Committee has determined to provide Mr. Glaser access to a car and driver for business and commuting purposes and to corporate aircraft, in which we maintain fractional interests, for business and personal travel. Such personal air travel is limited to an amount not to exceed $130,000 per calendar year as determined based on the aggregate incremental cost of such travel to the Company. The imputed income attributable to Mr. Glaser’s personal use of corporate aircraft and a car and driver was taxable income to Mr. Glaser. The taxes associated with this income were not reimbursed or paid by the Company.

The incremental cost of providing perquisites and other personal benefits during 2018 to our named executive officers is presented in the footnotes to the “All Other Compensation” column of the “2018 Summary Compensation Table” on page 45.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          41


Table of Contents

 

 Executive Compensation (Continued)

 

 

Risk and Reward Features of Executive Compensation Program

The Compensation Committee strives to maintain an appropriate balance between risk and reward in support of our overall business strategy. Our executive compensation principles, policies and practices are designed to encourage an appropriate level of risk-taking but not to encourage our senior executives to take excessive or unnecessary risks. To achieve this balance, we maintain the following policies and practices:

 

 

  Feature

 

  

 

Description

 

 

Balanced Total

Compensation

Approach

 

  

 

The mix of base salary, annual bonus opportunity and LTI awards appropriately balances the shorter-term and longer-term aspects of each senior executive’s responsibilities and performance, without undue emphasis on any single element of compensation.

 

 

Performance-Based

Annual Bonus Program

 

  

 

Awards to senior executives are made based on both financial performance measures, which relate to fiscal-year performance, and strategic performance objectives, which may relate to longer-term and qualitative objectives. All bonus decisions for our senior executives are made by the Compensation Committee. Bonuses are individually determined and are limited to a maximum of 200% of pre-established target levels. We do not guarantee annual bonuses for our senior executives, except in special situations such as the initial bonus award after a senior executive’s hire if the guarantee is deemed necessary to attract a candidate to join the Company.

 

 

Stockholder-Focused

LTI Program

 

  

 

Equity-based awards to our senior executives are granted annually on a discretionary basis by the Compensation Committee taking into consideration each individual’s past performance and expected future contributions. Awards are made in a combination of stock options, RSU awards and PSU awards to align the financial interests of our senior executives with maximizing our return to stockholders. PSU awards are earned based on our achievement against financial performance objectives, as determined by the Compensation Committee, over a three-year performance period.

 

All equity-based awards are subject to multi-year vesting requirements or performance periods with complete forfeiture of unvested awards upon a voluntary termination of employment by a senior executive (other than by reason of retirement) or termination of employment for cause. None of our equity-based awards are scheduled to begin vesting until after one year following their grant. In addition, the terms of our outstanding and unvested equity-based awards contain a “double-trigger” vesting provision in the event of a change in control of the Company. We do not provide any excise tax payments, reimbursements or “gross ups” in connection with a change in control of the Company to any of our senior executives under any plan or arrangement.

 

 

Executive Stock Ownership Guidelines

  

 

Our senior executives are required to acquire and hold shares or stock units of our common stock with an aggregate value at least equal to a specified multiple of their base salary. Our senior executives may not sell shares acquired in connection with the distribution of stock units or exercise of stock options until and unless the specified multiple of base salary is reached and maintained.

 

Prohibition Against Speculative Activities, Hedging or Pledging of Company Stock

 

  

 

We prohibit our employees, including our senior executives, from engaging in speculative or hedging activities (including short sales, purchases or sales of puts or calls and trading on a short-term basis) in our common stock. We prohibit our senior executives from pledging our securities as collateral for a loan or for any other purpose.

 

 

 

 

42          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

  Feature

 

  

 

Description

 

 

Compensation Recovery (“Clawback”) Policies

  

 

We may, to the extent permitted by applicable law, cancel or require reimbursement of any annual bonus awards received by a senior executive if and to the extent that: (i) the amount of the award was based on the achievement of specified consolidated, segment or operating company financial results, and we subsequently restate those financial results; (ii) in the Compensation Committee’s judgment, the senior executive engaged in intentional misconduct that contributed to the need for the restatement; and (iii) the senior executive’s award would have been lower if the financial results in question had been properly reported. In such case, we will seek to recover from the senior executive the amount by which the actual annual bonus award paid for the relevant period exceeded the amount that would have been paid based on the restated financial results. The policy provides that we will not seek to recover compensation paid more than three years prior to the date the applicable restatement is disclosed. Also, our 2011 Incentive and Stock Award Plan allows us to “claw back” outstanding or already-settled equity-based awards.

 

 

Severance Payments

  

 

Severance protections for our senior executives are set at a uniform level equal to his or her base salary and three-year average annual bonus award (a “1x multiple”). In addition, without stockholder approval, we will not enter into a severance agreement with a senior executive that provides for any cash severance payment that exceeds 2.99 times the sum of his or her base salary and three-year average annual bonus award.

 

In light of the above, and based on management’s annual review and analysis focused on the incentive compensation programs covering our general employee population, we believe our compensation policies and practices do not encourage excessive or inappropriate risk-taking and that the risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company.

Stock Ownership Guidelines

We maintain stock ownership guidelines for our senior executives that are intended to align the financial interests of our senior executives with our stockholders by requiring them to acquire and maintain a meaningful ownership interest in our common stock. These guidelines are intended to take into account an individual’s needs for portfolio diversification, while maintaining an ownership interest at levels sufficient to assure our stockholders of management’s commitment to long-term value creation. Our senior executives are required, over a five-year period, to acquire and hold shares or stock units of our common stock with an aggregate value at least equal to a specified multiple of their base salary. The current multiples for our named executive officers are as follows:

 

  Named Executive Officer

 

  

 

Ownership Level

(as a multiple of base salary)

 

 

 

 CEO

 

  

 

 

 

 

6x

 

 

 

 

 

 Other named executive officers

 

  

 

 

 

 

3x

 

 

 

 

As of February 28, 2019, all of our named executive officers exceeded their required ownership level under our stock ownership guidelines.

Additional information concerning our stock ownership guidelines is available on our website under:

http://www.mmc.com/about/SeniorExecutiveStockOwnershipGuidelines2014.pdf.

HOLDING REQUIREMENT FOR EQUITY-BASED AWARDS

Under our stock ownership guidelines, our senior executives are required to hold shares of our common stock acquired in connection with the distribution of stock units or exercise of stock options (net of any tax withholding and, in the case of stock options, the exercise price) until the required multiple of base salary is reached. In addition, our senior executives may not sell any shares of our common stock, however acquired, unless their ownership interest after such sale is at or above the required multiple of base salary stipulated under our stock ownership guidelines.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement          43


Table of Contents

 

 Executive Compensation (Continued)

 

 

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code generally disallows public companies a federal income tax deduction for compensation in excess of $1 million that is paid to a named executive officer in any taxable year. Given the recent changes to Section 162(m), the incentive compensation and base salary over $1 million paid to our named executive officers for 2018 generally will not be tax deductible. The Compensation Committee reserves the right to award compensation that is not tax deductible.

We also structure compensation in a manner intended to avoid the incurrence of any additional tax, interest or penalties under Section 409A of the Internal Revenue Code governing the provision of nonqualified deferred compensation to our service providers.

We account for stock-based compensation in accordance with FASB ASC Topic 718, which requires us to recognize compensation expense relating to share-based payments (such as stock options, PSU awards and RSU awards) in our financial statements. The recognition of this expense has not caused us to limit or otherwise significantly alter the equity- based compensation element of our executive compensation program. This is because we believe equity-based compensation is a necessary component of a competitive executive compensation program and fulfills important program objectives. The Compensation Committee considers the potential impact of FASB ASC Topic 718 on any proposed change to the equity-based compensation element of our program.

Additional Considerations

This Compensation Discussion and Analysis includes statements regarding the use of various performance measures and related target levels in the limited context of our executive compensation program. These target levels are not intended to be statements of management’s expectations of our future financial results or other guidance. Investors should not apply these target levels in any other context.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis, as well as the accompanying compensation tables and related narratives. Based on that review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS

 

Steven A. Mills (Chair)   Deborah C. Hopkins
Oscar Fanjul   Morton O. Schapiro
H. Edward Hanway   R. David Yost

 

 

 

44          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2019 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

Compensation of Executive Officers

2018 Summary Compensation Table

The following table provides information regarding the compensation of our President and Chief Executive Officer, Chief Financial Officer and our three other most highly-compensated executive officers who were executive officers as of December 31, 2018.

 

                   
  Name & Principal Position (1)    Year    

Salary

($)

   

Bonus

($)

   

Stock
Awards

($) (2)

   

Option
Awards

($) (2)

    Non-Equity
Incentive Plan
Compensation
($) (3)
   

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($) (4)

    All Other
Compensation
($) (5)
   

Total

($) (6)

 

 

  Daniel S. Glaser

     2018       1,475,000             5,500,136       5,500,004       4,500,000       —         306,779       17,281,919  

  President and CEO, Marsh &

  McLennan Companies, Inc.

 

     2017       1,400,000             5,250,130       5,250,003       4,300,000       555,967       257,116       17,013,216  
     2016       1,400,000             4,800,052       4,800,001       4,100,000       473,344       176,543       15,749,939  

 

  Mark C. McGivney

     2018       750,000             1,125,108       1,125,018       1,750,000       —         64,976       4,815,102  

  Chief Financial Officer, Marsh

  & McLennan Companies, Inc.

 

     2017       750,000             875,120       875,008       1,650,000       210,841       65,137       4,426,106  
     2016       750,000             750,040       750,001       1,500,000       177,461       34,565       3,962,067  

 

  John Q. Doyle

     2018       1,000,000             1,350,162       1,350,003       3,250,000       —         72,915       7,023,080  

  President and Chief Executive

  Officer, Marsh LLC

 

     2017       883,333             2,000,211       1,000,011       3,000,000       —         45,899       6,929,455  
                                                                        

 

  Julio A. Portalatin

     2018       1,000,000             1,350,162       1,350,003       2,200,000       —         83,366       5,983,531  

  President and Chief Executive

  Officer, Mercer Consulting Group Inc.

 

 

     2017       941,667             2,325,197       1,325,008       2,525,000       212,635       71,774       7,401,281  
     2016       900,000             1,200,042       1,200,009       2,800,000       249,608       37,768       6,387,427  

 

  Peter C. Hearn

     2018       800,000             800,066       800,005       2,500,000       —         171,673       5,071,744  

  President and Chief Executive

  Officer, Guy Carpenter &

  Company, LLC